407 West State Street, Trenton, NJ 08618  (609)695-3481
 NJLM logo 

William G. Dressel Jr, Executive Director - Michael J. Darcey, CAE, Asst Executive Director

Statewide Cable Franchising Will
Eliminate Role for Local Governments


Karen Alexander
President, New Jersey Cable
Telecommunications Association

Technological change has all but eliminated the historic barriers between cable and telephone service providers.  Today’s cable and telephone companies vigorously compete for customers to take their “triple play” of voice, video and high-speed Internet services.   But just as competition is on the rise, Verizon seeks to have the state Legislature create special franchising rules that will cut local governments out, and allow Verizon to serve only the communities it deems most attractive.  If the company gets its way, the likely result is that you and many New Jersey consumers will be left out.

Competition Competition is part of the cable industry’s everyday existence.  We compete with Verizon and others for Internet and telephone customers, against Dish Network and DirecTV for video customers and, a little known fact—with Verizon for video customers (it markets a bundled package of DirecTV satellite dish service with its telephone and DSL services).   We will fight even more vigorously for video customers as Verizon enters the market, but it needs to be on a level playing field.

Verizon touts the benefits of its fiber upgrades.  The cable industry has already upgraded to fiber and contributes to the state’s economy in many ways: about 7,500 jobs, $30 million in local and state franchise fees and $13 million in state taxes, among other contributions.   Cable responded early to the incentives of the 1996 federal Telecommunications Act to spur technology investment, competition and to upgraded to fiber optics to enable two-way digital communications.  That commitment infused more than $3 billion in private risk capital in New Jersey to offer value-added products—video-on-demand, digital video recorders, HDTV, faster Internet speeds, and other new offerings.  Fiber optic networks are not new.


The question for local governments is whether statewide franchising will help or hurt your city or town.  In our view, the picture is clear.


 

Instead of acting to upgrade early as cable did, Verizon has chosen a different path and now argues that a statewide franchise is needed in order to increase cable television competition.  The truth is, Verizon can bring its competitive services to New Jersey under the existing local franchising framework, it just doesn’t want to. 

Local Franchising Is Not a Barrier to Entry From the Highlands to the Pinelands, and the Delaware River to the Jersey Shore, New Jersey’s municipalities are anything but homogenous.  A statewide franchise, however, would eliminate each municipality’s ability to negotiate the franchise that best serves its needs.

It is becoming increasingly clear that Verizon does not view localism and developing a partnership with local communities as having value.  Verizon Communications, Inc. chairman and CEO Ivan Seidenberg made the company’s view of New Jersey local governments and local franchising crystal clear when on July 22 the Star Ledger reported him to have said after a July 21 speech:  “We don’t want to have to go through 18 to 24 months of Mickey Mouse procedures to get a franchise.”  In another quote, carried by the Bergen Record on July 22, Seidenberg was reported to have described the local franchising process as“a march through purgatory.”  Given that view, it is not hard to imagine that Verizon’s push for statewide franchising legislation may be more about wrenching control from local government than speeding competition. 

It has been long established that municipalities are in the best position to effectively manage rights of way issues to protect the public’s safety and to ensure that communities’ aesthetics are not unreasonably disturbed.  Yet, if Verizon has its way, that control will be lost.  For example, in explaining why Verizon was installing boxes the size of small refrigerators low on telephone poles in New England, a spokesman said “what we’re trying to do is minimize wherever possible, those occasions where we have to place those boxes high . . . we have a limited number of bucket trucks; that’s at the heart of it.” (“Boxy Look is Called an Eyesore,” Boston Globe, 12/23/04). Not surprisingly, according to the same Verizon spokesman “aesthetics is not a factor in the decision.”  While it may not be a factor for Verizon as its places its facilities in municipal rights of way, aesthetics is clearly an issue for many local governments.

In Verizon’s plan, municipalities will have no say over how quickly residents in their community will receive Verizon’s new services; when construction will begin and end; to what extent services will be provided to schools, libraries and municipal buildings; how many public, educational and governmental (PEG) access channels will be available; and whether equipment, facilities and financial support will be provided to support local PEG programming.  These are not insignificant decisions and contributions—every year, the cable industry spends nearly $4.5 million for PEG and other in-kind community contributions. If Verizon has its way, it will make no similar commitment.


Every year the cable industry spends nearly $4.5 million for PEG and other in-kind community contributions. If Verizon has its way, it will make no similar commitment.


 

Despite Verizon’s claims to the contrary, local franchising is not a barrier to entry.  Both federal law and the NJ Cable Television Act enable multiple companies to seek local franchises.  In fact, by law, they cannot be exclusive.  What’s more, Verizon has said it has hundreds of local franchise applications pending around the country, and has received local approvals in states such as California, Virginia, and Texas.  In these states, as well as in neighboring New York and Pennsylvania where Verizon also is pursuing local franchises, consumers receive the benefit of both competition and localism—why should New Jersey consumers accept less?

In a community that is highly motivated to make competitive video services available to its residents, the franchising process will likely take very little time.  Thus, Verizon’s claim that it will take years is not supportable; it presumes that a franchise agreement can only be pursued one town at a time, which is simply not true.   Yet, its interest in even starting the process is questionable.  A number of mayors have reported that they have asked Verizon to come in and talk with them, but have apparently been put off or ignored.  So, who is delaying who?    It is hard to take seriously a claim that New Jersey franchising will take too long from a company that has never applied for one.

Conclusion Verizon is building its fiber network and if it so chose, could be in the video market ready to compete without any special favors from the Legislature.  Instead it seeks to rely on government assistance to minimize the risk of its new venture—an odd approach for a company that claims to support competition in a free market.  Verizon is not a new entrant that needs a helping hand from government.  It is a $70 billion (and growing) company with business relationships with more New Jersey households than all New Jersey cable companies combined.  

Tilting the playing field in favor of Verizon clearly could have negative implications for cable companies.  However, it’s also clear that we’re not the only ones at risk.     

The question for local governments is whether statewide franchising will hel NJLM - Statewide Cable Franchising

407 West State Street, Trenton, NJ 08618  (609)695-3481
 NJLM logo 

William G. Dressel Jr, Executive Director - Michael J. Darcey, CAE, Asst Executive Director

Statewide Cable Franchising Will
Eliminate Role for Local Governments


Karen Alexander
President, New Jersey Cable
Telecommunications Association

Technological change has all but eliminated the historic barriers between cable and telephone service providers.  Today’s cable and telephone companies vigorously compete for customers to take their “triple play” of voice, video and high-speed Internet services.   But just as competition is on the rise, Verizon seeks to have the state Legislature create special franchising rules that will cut local governments out, and allow Verizon to serve only the communities it deems most attractive.  If the company gets its way, the likely result is that you and many New Jersey consumers will be left out.

Competition Competition is part of the cable industry’s everyday existence.  We compete with Verizon and others for Internet and telephone customers, against Dish Network and DirecTV for video customers and, a little known fact—with Verizon for video customers (it markets a bundled package of DirecTV satellite dish service with its telephone and DSL services).   We will fight even more vigorously for video customers as Verizon enters the market, but it needs to be on a level playing field.

Verizon touts the benefits of its fiber upgrades.  The cable industry has already upgraded to fiber and contributes to the state’s economy in many ways: about 7,500 jobs, $30 million in local and state franchise fees and $13 million in state taxes, among other contributions.   Cable responded early to the incentives of the 1996 federal Telecommunications Act to spur technology investment, competition and to upgraded to fiber optics to enable two-way digital communications.  That commitment infused more than $3 billion in private risk capital in New Jersey to offer value-added products—video-on-demand, digital video recorders, HDTV, faster Internet speeds, and other new offerings.  Fiber optic networks are not new.


The question for local governments is whether statewide franchising will help or hurt your city or town.  In our view, the picture is clear.


 

Instead of acting to upgrade early as cable did, Verizon has chosen a different path and now argues that a statewide franchise is needed in order to increase cable television competition.  The truth is, Verizon can bring its competitive services to New Jersey under the existing local franchising framework, it just doesn’t want to. 

Local Franchising Is Not a Barrier to Entry From the Highlands to the Pinelands, and the Delaware River to the Jersey Shore, New Jersey’s municipalities are anything but homogenous.  A statewide franchise, however, would eliminate each municipality’s ability to negotiate the franchise that best serves its needs.

It is becoming increasingly clear that Verizon does not view localism and developing a partnership with local communities as having value.  Verizon Communications, Inc. chairman and CEO Ivan Seidenberg made the company’s view of New Jersey local governments and local franchising crystal clear when on July 22 the Star Ledger reported him to have said after a July 21 speech:  “We don’t want to have to go through 18 to 24 months of Mickey Mouse procedures to get a franchise.”  In another quote, carried by the Bergen Record on July 22, Seidenberg was reported to have described the local franchising process as“a march through purgatory.”  Given that view, it is not hard to imagine that Verizon’s push for statewide franchising legislation may be more about wrenching control from local government than speeding competition. 

It has been long established that municipalities are in the best position to effectively manage rights of way issues to protect the public’s safety and to ensure that communities’ aesthetics are not unreasonably disturbed.  Yet, if Verizon has its way, that control will be lost.  For example, in explaining why Verizon was installing boxes the size of small refrigerators low on telephone poles in New England, a spokesman said “what we’re trying to do is minimize wherever possible, those occasions where we have to place those boxes high . . . we have a limited number of bucket trucks; that’s at the heart of it.” (“Boxy Look is Called an Eyesore,” Boston Globe, 12/23/04). Not surprisingly, according to the same Verizon spokesman “aesthetics is not a factor in the decision.”  While it may not be a factor for Verizon as its places its facilities in municipal rights of way, aesthetics is clearly an issue for many local governments.

In Verizon’s plan, municipalities will have no say over how quickly residents in their community will receive Verizon’s new services; when construction will begin and end; to what extent services will be provided to schools, libraries and municipal buildings; how many public, educational and governmental (PEG) access channels will be available; and whether equipment, facilities and financial support will be provided to support local PEG programming.  These are not insignificant decisions and contributions—every year, the cable industry spends nearly $4.5 million for PEG and other in-kind community contributions. If Verizon has its way, it will make no similar commitment.


Every year the cable industry spends nearly $4.5 million for PEG and other in-kind community contributions. If Verizon has its way, it will make no similar commitment.


 

Despite Verizon’s claims to the contrary, local franchising is not a barrier to entry.  Both federal law and the NJ Cable Television Act enable multiple companies to seek local franchises.  In fact, by law, they cannot be exclusive.  What’s more, Verizon has said it has hundreds of local franchise applications pending around the country, and has received local approvals in states such as California, Virginia, and Texas.  In these states, as well as in neighboring New York and Pennsylvania where Verizon also is pursuing local franchises, consumers receive the benefit of both competition and localism—why should New Jersey consumers accept less?

In a community that is highly motivated to make competitive video services available to its residents, the franchising process will likely take very little time.  Thus, Verizon’s claim that it will take years is not supportable; it presumes that a franchise agreement can only be pursued one town at a time, which is simply not true.   Yet, its interest in even starting the process is questionable.  A number of mayors have reported that they have asked Verizon to come in and talk with them, but have apparently been put off or ignored.  So, who is delaying who?    It is hard to take seriously a claim that New Jersey franchising will take too long from a company that has never applied for one.

Conclusion Verizon is building its fiber network and if it so chose, could be in the video market ready to compete without any special favors from the Legislature.  Instead it seeks to rely on government assistance to minimize the risk of its new venture—an odd approach for a company that claims to support competition in a free market.  Verizon is not a new entrant that needs a helping hand from government.  It is a $70 billion (and growing) company with business relationships with more New Jersey households than all New Jersey cable companies combined.  

Tilting the playing field in favor of Verizon clearly could have negative implications for cable companies.  However, it’s also clear that we’re not the only ones at risk.     

The question for local governments is whether statewide franchising will help or hurt your city or town.  In our view, the picture is clear.

 

 

 

Article in October 2005, New Jersey Municipalities