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Do Local Franchise Agreements Really Slow Down TelcoTV?
'Franchising is not holding us back' says exec.
by Karl Bode 03:09PM Thursday Sep 28 2006
Telcos have been spending millions ($19.7 million in 3 months in California alone) to kill off the current local video franchise system. Verizon and AT&T lobbyists' have been arguing for the past year that the existing system slows deployment and stifles competition, and should be replaced with a state-level or federal system. Critics suggest that the telcos primary goal is to avoid the deployment watermarks and other community improvements that frequently come with local franchises (while getting fewer politicians to lobby as a side perk).

Yet yesterday Verizon admitted that the existing franchise process actually isn't treating them too badly. "Franchising is not holding us back," said Virginia Ruesterholz, president of Verizon Telecom. "I really don’t see that as a necessity, to have nationwide relief on that." Despite the telco's dislike of the process, Verizon now has 161 video franchises covering 3.3 million homes, and hopes to have 175,000 video customers by year’s end.

While Verizon has disliked the system but deployed anyway, AT&T has instead denied that local franchises apply to their TV service, and have sued any town and city that suggests otherwise. Read our recent interview with Peter Collins, a Geneva, Illinois IS manager on the receiving end of one such lawsuit.

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Rick
Premium,MVM
join:2001-02-06
Waterbury, CT

1 recommendation

It's amazing isn't it when you do something right the first

time.

Honestly, when you look at Verizon vs. AT&T, what you see is a tale of two companies.

One, who wasn't afraid to tackle the big issues head on, and do it right the first time versus...whatever it is the other is trying to do.

It couldn't be easy for Verizon to have bitten the multi billion dollar bullet and made the decision to move ahead with Fios.
But they did. And, they did it despite enormous shareholder pressure as well. And being a public company, that certainly amounts to a whole lot of heat on upper management.

They didn't stop there either. They recognized and respected the current franchise agreements and laws that presently govern this type of thing. AND, even if there are questions and arguments as to why they should or should not apply to IPTV..they have gone ahead and done things right the first time, instead of trying to LEGAL maneuver themselves around it.

And, what is the result? Have you seen the Verizon fiber rollout map lately? Read the exciting verizon fios forum?
SEEN the kind of competition this is creating and how it's really forcing a firm response from the cable co's in the areas where they now compete?

It is tremendous and really is showing how their initiative in moving ahead right the first time is really paying off for them.

KUDOS TO VERIZON..to their management..and to their shareholders who ultimately will reap the rewards of this.

On the other hand..AT&T.

I'm sorry, but they're a disgrace of a company at this point in my view.

They are trying to cheap themselves out of the real solution to this..Sue their way into communities by ignoring the existing franchise laws that are in effect..

and generally it would appear..not succeeding very well at all.

Honestly, I think there is a real lesson in all of this..that extends out to many other things that one may encounter in life.

And that lesson is..even if it's hard..even if that road seems longer and more expensive..and even despite the criticisms of whomever...

Do it right the first time around.

Then there might not have to be a second time.
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FFH
Premium
join:2002-03-03
Tavistock NJ
kudos:5

2 edits

Re: It's amazing isn't it when you do something right the first

said by Rick:

They recognized and respected the current franchise agreements and laws that presently govern this type of thing. AND, even if there are questions and arguments as to why they should or should not apply to IPTV..they have gone ahead and done things right the first time, instead of trying to LEGAL maneuver themselves around it.
While I like Verizon and their Fios rollout, they are not in favor of local franchising. They have lobbied VERY heavily to kill it off in all the states where they do business. And they have succeeded in NJ after spending millions. The only difference they have from AT&T in this regard is that they are moving ahead while the lobbying continues. AT&T has decided to wait until the lobbying is successful and is using lawsuits in the interim. So, Verizon is spending their money to pay off the local franchise authorities for town by town approvals while AT&T fights them in court. Whose method works best can only be known in the long term. But, Verizon's method is definitely working for them in the short term.

You also have to keep in mind who the audience was for the statement that they can continue moving ahead without state or national franchise laws - Wall St and the shareholders. They are just trying to convince those who supply their funding that the money spent on Fios will still get a return on investment no matter what.

Financial analyst on issue:
When Verizon reported having achieved 10% penetration of its video markets after six months in the second quarter, research analysis firm Ovum-RHK suggested those numbers could go much higher if federal franchising becomes a reality.
The above is why the Verizon Spokesperson said this:
“Franchising is not holding us back,” said Virginia Ruesterholz, president of Verizon Telecom. “I really don’t see that as a necessity, to have nationwide relief on that.”
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jslik
That just happened
Premium
join:2006-03-17

Re: It's amazing isn't it when you do something right the first

said by FFH:

"While I like Verizon and their Fios rollout, they are not in favor of local franchising."
They may not be in favor of local franchising, but as the article said, they don't believe it is the great "barrier" as it has been described.

Whose method works best can only be known in the long term. But, Verizon's method is definitely working for them in the short term.
Verizon is going to be years ahead of AT&T on this issue. AT&T thinks that they'll get something in a federal bill, but even the latest bill in the Senate would subject AT&T to the same conditions as everyone else, so this 'shock and awe' legal approach will not work, long term.

broadbander8
Premium
join:2005-07-21
Brooklyn, NY
We should also keep in mind that BBR seems particularly kind when dealing with many Verizon releases. I'm not implying biased. But somebody might have a little softspot. In a hall of scourges, one must pick a head regardless.
Ulmo

join:2005-09-22
Aptos, CA

Re: It's amazing isn't it when you do something right the first

said by broadbander8:

We should also keep in mind that BBR seems particularly kind when dealing with many Verizon releases. I'm not implying biased. But somebody might have a little softspot. In a hall of scourges, one must pick a head regardless.
I think some cheerleading is appropriate here, for obvious reasons. Verizon has no pure past, I point out hurredly. Within the last decade they still were known as the worst telephone company in the country to many (NYNEX, etc.). However, they changed directions many years ago, and obviously the relative quality of their approach right now compared to other large companies in this country is something worth celebrating by itself.

Rick
Premium,MVM
join:2001-02-06
Waterbury, CT

1 recommendation

said by FFH:

While I like Verizon and their Fios rollout, they are not in favor of local franchising.
Undoubtedly they don't like it. They must HATE it.
Imagine doing what they had to do and looking at they system as it now exists and realizing how many communities they would have to negotiate with.

But, the main point is this. They HAVE proceeded that way and have respected the process in the meantime. It's perfectly fine to not like something and to try to change it using whatever legal channels there may be as long as one recognizes in the meantime that the current system should be upheld and respected.

That is the difference here that I am talking about between them and AT&T as I see it.
AT&T simply doesn't acknowledge at all that there is a system that applies to them.

To me, it's as if you or I not liking a 55mph speed limit..
and just deciding it's perfectly ok for us to do 70 instead because of that.

What verizon is doing is saying they don't like the 55MPH speed limit but will abide by it WHILE proceeding with trying to change it.

There's a big and fundamental difference there in my view.

Personally, while i'm opposed to a national franchise type of law because anything the federal government gets into on that scale usually winds up screwed up..I am in favor of a statewide one. These laws shouldn't be such a burden as to stifle competition. But, on the other hand, then fair should be fair and the cable companies agreements should be modified as well to reflect that as well.

In all honesty, I'm seriously at the point of questioning whether AT&T is going to make it in the long run.
Not only are they so far behind the 8 ball, they don't even seem to be able to realize it.

I think the cable co's next move is going to be to try to mainstream voip in a big way. With their video and hsi offerings..they can package it to be essentially free if someone takes the other from them.

Comcast now, with their 99.00 digital/hsi/voip package is the future of what this is going to be all about.

How can AT&T compete with that? I really don't think they can.

It's going to be hard enough for the telcos to try to switch people over to iptv and the telco's triple play programs..never mind the one that today is perceived as being as weak as many see uverse to be.

Verizon, on the other hand, stands a real good chance of pulling it off because they have the perception in their court by many that fiber to the home is better than anything cable has to offer.

It should be interesting to watch how it all plays out.
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jslik
That just happened
Premium
join:2006-03-17

Money Quote

"Franchising is not holding us back"

I'm sure we'll see the slew of our usual (pro-Verizon) suspects saying that now Verizon is full of it.

When the company is saying that franchising isn't the problem, one would think that the debate would be over.

richardpor
Fur it up

join:2003-04-19
Portland, OR

1 recommendation

The critics got it

These side agreements are the very reason why I feel local franchising agreements needs to go. The Wall Street Journal had documented how exorbitant the side deals can get like paying for landscaping on city property or fiber optic networks for all traffic signals. Of course there is the obligatory public assess channels. If this were the mafia, franchising agreements will be called racketeering.

Another problem with franchising is channels availability. Franchising decide what channels one will have. For example, Bravo is on extended cable in Tacoma but only on the digital tier here in Hillsboro / Beaverton. In addition, I called Customer support about my bill. I remarked I couldn’t get Anime Channels and Selects VOD selections. The customer rep told me his story that the selection are available in Spokane but are blocked because franchising agreements.

marigolds
Gainfully employed, finally
Premium,MVM
join:2002-05-13
Saint Louis, MO
kudos:2

Re: The critics got it

said by richardpor:

Another problem with franchising is channels availability. Franchising decide what channels one will have. For example, Bravo is on extended cable in Tacoma but only on the digital tier here in Hillsboro / Beaverton. In addition, I called Customer support about my bill. I remarked I couldn’t get Anime Channels and Selects VOD selections. The customer rep told me his story that the selection are available in Spokane but are blocked because franchising agreements.
Franchising has no control over the extended basic tier, only the broadcast basic tier. Franchise agreements are specifically banned by federal law from placing any controls on any tier above broadcast basic.
Content providers and the cable companies control the extended basic tier (i.e. the contract agreements with the channels themselves are the main factor).

The CSR gave you a line of BS.
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ctceo
Premium
join:2001-04-26
South Bend, IN
Reviews:
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Only thing

The only thing holding them back is themselves. The technology is there, the infrastructure is there (even in standard ADSL 1536/384 DSL areas), the contracts with the channel execs and ownership companies is there, and the switch to turn it on is there, someone just put some red tape on it.

MadMANN3
Premium
join:2005-08-19
kudos:2

HELLO!!?

"Franchising is not holding us back," said Virginia Ruesterholz, president of Verizon Telecom. "I really don’t see that as a necessity, to have nationwide relief on that."
This statement could not be any more true.
In fact, it is probably the first completely accurate statement made by a Verizon higher-up.

So WHY OH WHY are they still trying to change the laws on the state level? Just like I have argued in the past, it is because they want to just gorilla their way through, build where they want and leave less valuable areas out of the picture.

If they are really serious about this statement, it would behoove them to drop all of lobbying, stop wasting time & money (their own $$ AND taxpayers, BTW), keep negotiating locally, and just build their systems with the same rules that cable and other telcos have abided by for years.
Ahrenl

join:2004-10-26
North Andover, MA

Re: HELLO!!?

They have a fiduciary responsibility to their stakeholders to do anything within the law to increase profits, of which state or national franchising would undoubtedly. Until that time, they are following current law. It's perfectly reasonable, and ridiculous to complain about. They can still "redline" with local franchising, they just have to cut out whole towns, instead of the unprofitable parts, so all it does it make bigger holes. Since they're building the entire network with 100% private investment, they can darn well do as they please, and, in fact, if I were a shareholder, I'd be pissed if they were wasting money they could be dividending back to me building fiber networks where people can't afford to use them.

MadMANN3
Premium
join:2005-08-19
kudos:2

Re: HELLO!!?

said by Ahrenl:

Since they're building the entire network with 100% private investment, they can darn well do as they please, and, in fact, if I were a shareholder, I'd be pissed if they were wasting money they could be dividending back to me building fiber networks where people can't afford to use them.
That statement right there proves that local franchising needs to stay. There are a lot of areas that cable cos HAD to build to and "waste money" on because the locals made it so that if they wanted to build their system in their area, they had to service the lower class and rural customers as well.

Don't you think that companies like Adelphia, Time Warner, or Comcast have stockholders to cater to as well? But they already built their systems according to those laws. How is it fair that another company can come in and just say, "Well, we are not going to service this lower class area because they obviously aren't going to pay their bill." That's called cherry-picking and it was illegal for all of the other companies to do it, so why should it be legal for Verizon? They are asking for special treatment so they can just come in and build to the parts of the communities that THEY think should have it.

By the way, these are the same laws that, when they were Bell Atlantic, they tried to keep on the books because it served their own interests at the time. They actually tried to keep telephone competition out of their areas.

So now the tide has turned and they have changed their tune to satisfy their own wants. If they want to build their system to provide competition, then let them. But keep a level playing field and do it under the same laws that every other company had to adhere to.

If want to talk about being pissed as a stockholder, try to be a Pennsylvania taxpayer who got robbed by this very company when my state granted them a couple of hundred million dollars in grants and tax breaks so they would agree to build this exact service ten+ years ago, only for them to not deliver the goods. If anything, they should be forced to rebate every taxpayer in the state that STOLEN money before they are allowed to build one strand in PA.
Ahrenl

join:2004-10-26
North Andover, MA

Re: HELLO!!?

Sorry for being so tardy in my reply.

I wasn't arguing weather local franchising should stay, just that it is the companies duty to fight anything that erodes their profit stream.

"Cherry-picking" is NOT illegal. It is just a breach of local franchising contracts, which have repercussions.

Frankly the difference for the Fiber build out is that it is a premium service that has a lower cost service (DSL), that is in place, which is more likely to be used by those who are ultra price sensitive. Now if local communities want to try and force these companies to build out to these people, who may not be able to afford it, anyway; well then Verizon will need to perform a cost-benefit analysis to determine if it's financially worth it to service the entire area at all. Being someone who can afford it, and living in a relatively affluent area, I'd be really pissed if Verizon skipped my area because the local government decided that the mandated low-income housing area needed to be served, even though they can't afford digital cable, forget internet.