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
NJLM - How the Telecommunications Revolution Will Affect Your City

January 2006

How the Telecommunications Revolution Will Affect Your City

There's a revolution under way in the area of telecommunications - on cable and satellite, over broadband and "wi-fi" (wireless) Internet, and via telephone lines and cellular phones. It's happening right now in cities throughout the nation - including yours.

This revolution is generating tremendous pressure on government to radically change state and federal laws affecting the telecom industry. How it all shakes out could dramatically affect your city's franchise fees and its ability to ensure public access to vital information services, public safety and economic development.

Technological advances have made it possible for cable, telephone, Internet providers, electric utilities and other companies to expand the range of telecom services they can offer consumers. These new opportunities for consolidating services will displace the multiple subscriptions many of us have for cable or satellite TV, "land-line" and/or cell phone service, and broadband and/or wireless Internet service for our home computers, laptops or personal digital assistants (handheld electronic devices, such as a Blackberry or PalmPilot, that enable the user to send and receive e-mail, access the Internet and perform other computer functions).

The companies that provide these services want your business, more of it or even all of it. Cable and satellite TV companies now offer high-speed Internet service, competing with the broadband service offered by telephone companies. They also want to provide telephone service through something called VoIP (voice over Internet protocol). Even electric utilities are getting into the act, offering Internet access and VoIP over electric infrastructure that's already in place.

Vonage is one example of a new type of company offering VoIP phone service. Vonage can provide very low-cost phone service because it transmits calls over the Internet virtually for free. With this service, voice phone calls are converted to data that travel over the Internet, much like e-mail. Messages are reconverted to voice signals before being switched to the "regular" telephone network.

Phone companies are also expanding beyond their traditional services. Cell phones already offer text messaging and video transmittals. Now, phone companies such as SBC and Verizon are aggressively marketing Internet services, including video programming that would compete with cable and satellite television. Currently, Verizon has two cable franchises to provide video services in California and is working on more.

"Bundled services" - obtaining all or most of your telecom services from only one or two companies - has substantial appeal. It would simplify life for many people, provided that consumer protections were in place.

But who would ensure that those protections are there? Imagine depending on one company for land-line and cell phone service, video and Internet service if that company was not responsive to consumer concerns about access, billing and service issues.

How will these companies be regulated? Who will protect consumer interests? The answers are not at all clear.

Key Issues for Municipalities

For municipalities, the convergence of telecom technologies poses both fiscal challenges and concerns about preserving local control and protecting citizens' interests. Two key areas of concern are cities' ability to continue to enter into franchise agreements with service providers and to charge franchise fees.

Current Regulatory Approaches Won't Work

Governmental regulatory frameworks are outdated. Cable, telephone and Internet services now use the same infrastructure or similar delivery methods. Yet our regulatory systems make distinctions between types of service. For example, both a cable company and a land-line telephone company provide Internet service, but cable is regulated differently than telephone, which in turn is regulated differently than the Internet.

As telecom services converge, the traditional methods of categorizing services for regulatory and taxing purposes no longer make sense. In the modern digital world, all telecom services are simply bits and bytes flowing over lines and through the air. It is becoming increasingly difficult to determine whether a particular service is cable, telephone, Internet or some other service.

Franchise Agreements, PEG and Other Public Interest Concerns

Local governments currently have the ability to negotiate renewable franchise agreements with video (cable) providers. These agreements require franchise fees for using public rights-of-way, but they also provide the means by which municipalities are able to mandate specific service levels; guarantee access to and funding for public, educational and governmental (PEG) access television; and secure cable providers' support for these efforts.
Cities' continued ability to enter into franchise agreements with service providers that include these protections and revenues is currently in question as a result of the pressure to change existing approaches to regulating telecom services.

The cable industry argues that there should be a level playing field among all video providers, including phone and Internet access companies. But while these non-cable newcomers are pushing to obtain franchise rights to the public right-of-way so that they can gain customer access and deliver video services along with their existing voice or data services, they don't necessarily believe they should be subject to the same franchise requirements that currently apply to cable, including specific standards for service coverage. The newcomers are creating pressure on the traditional franchise agreement system to change and accommodate their needs.

Leveling the Playing Field: Developing New Regulatory Approaches

As discussions continue at the state and federal levels over new regulatory approaches, there is still much that divides local government from the telecom industry as a whole.

Local governments are concerned about preserving local control over public rights-of-way, which pose numerous safety issues if overcrowded and not properly managed. Cities are also concerned about continuing vital local services, such as PEG and protecting an increasingly important source of revenue from franchise agreements.

Various sectors of the telecom industry have differing, sometimes contradictory, perspectives - determined largely by their current infrastructure investments and how they can best use those to leverage market advantage. The cable industry, for example, asserts that the local franchising system works, and telephone companies that now want to provide Internet and video service should also be subject to local franchising requirements. In contrast, the telephone companies say that their main concern is speed to market, and within this context argue that local franchise agreements are too complex, take too much time to negotiate and need to be standardized. At the same time, their federal legislative proposals indicate a strong desire to avoid most public interest obligations in order to cut costs.

What Will The State Legislature Do?

There are currently 2 bills pending, A-804 and S-192. These bills are works in progress and the League continues to give input to the sponsors and interested members of the industry.

There seems to be support in the legislature for a system-wide franchise, however there are many views on how to reconcile the related issues.

Your League will continue to keep you informed as the issue develops.

What Will Congress Do?

While state legislatures and state regulatory agencies throughout the nation are grappling with these regulatory issues, the biggest obstacle could well be Congress, which has shown a strong preference over many years to protect the Internet from taxation by federal, state or local governments. Some influential congressional leaders and many telecom industry representatives are very interested in amending the 1996 Telecom Act by expanding the provisions preventing Internet sales taxation to include some aspects of the converging telecom industry, and by extending the exemptions that currently exist on satellite providers.
However, other members of Congress have shown an interest in the regulatory solutions that states are considering. If New Jersey (or any other state) can construct a regulatory scheme that makes sense for the state, it may influence congressional debates on the issue.

On the other hand, Congress could exercise its authority to entirely pre-empt state and local laws in this field. It is simply too early to predict how everything will ultimately shake out. But one thing is already clear: Local governments will have a major battle on their hands at the federal level.

What Cities Need to Do

The best thing for city officials to do at this point is to become educated about the telecom issue and understand how it could affect your community, including its public broadcasting opportunities and your ability to control local rights-of-way, protect much-needed local revenues and ensure that telecom services are available to all residents in a way that makes sense for them. The digital divide will only get wider if concerted efforts are not made to preserve and protect consumer choices, at the same time that the range of those choices is broadened.

The telecom issue is heating up quickly at the state and national levels. Cities should prepare themselves now and get ready to contact their legislators and congressional representatives about specific proposals, providing detailed information about how the city's finances and services will be affected by them.

However, even as legislation is emerging in the state Capitol or Congress, telecom companies will be pressing local officials to allow access to their communities. Cities should examine their current ordinances relating to rights-of-way and franchises and how the installation of telecom infrastructure can be carried out in ways that best serve the city.
Major changes are coming. Devote time to understanding this issue and how it could affect your city's interests - because the way you prepare and respond will have long-lasting impacts on services and revenues that affect your community's quality of life.

Sections of this article are reprinted with permission from Western City, the monthly magazine of the League of California Cities. Copyright 2005. All rights reserved. For more information, visit: www.westerncity.com
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

January 2006

How the Telecommunications Revolution Will Affect Your City

There's a revolution under way in the area of telecommunications - on cable and satellite, over broadband and "wi-fi" (wireless) Internet, and via telephone lines and cellular phones. It's happening right now in cities throughout the nation - including yours.

This revolution is generating tremendous pressure on government to radically change state and federal laws affecting the telecom industry. How it all shakes out could dramatically affect your city's franchise fees and its ability to ensure public access to vital information services, public safety and economic development.

Technological advances have made it possible for cable, telephone, Internet providers, electric utilities and other companies to expand the range of telecom services they can offer consumers. These new opportunities for consolidating services will displace the multiple subscriptions many of us have for cable or satellite TV, "land-line" and/or cell phone service, and broadband and/or wireless Internet service for our home computers, laptops or personal digital assistants (handheld electronic devices, such as a Blackberry or PalmPilot, that enable the user to send and receive e-mail, access the Internet and perform other computer functions).

The companies that provide these services want your business, more of it or even all of it. Cable and satellite TV companies now offer high-speed Internet service, competing with the broadband service offered by telephone companies. They also want to provide telephone service through something called VoIP (voice over Internet protocol). Even electric utilities are getting into the act, offering Internet access and VoIP over electric infrastructure that's already in place.

Vonage is one example of a new type of company offering VoIP phone service. Vonage can provide very low-cost phone service because it transmits calls over the Internet virtually for free. With this service, voice phone calls are converted to data that travel over the Internet, much like e-mail. Messages are reconverted to voice signals before being switched to the "regular" telephone network.

Phone companies are also expanding beyond their traditional services. Cell phones already offer text messaging and video transmittals. Now, phone companies such as SBC and Verizon are aggressively marketing Internet services, including video programming that would compete with cable and satellite television. Currently, Verizon has two cable franchises to provide video services in California and is working on more.

"Bundled services" - obtaining all or most of your telecom services from only one or two companies - has substantial appeal. It would simplify life for many people, provided that consumer protections were in place.

But who would ensure that those protections are there? Imagine depending on one company for land-line and cell phone service, video and Internet service if that company was not responsive to consumer concerns about access, billing and service issues.

How will these companies be regulated? Who will protect consumer interests? The answers are not at all clear.

Key Issues for Municipalities

For municipalities, the convergence of telecom technologies poses both fiscal challenges and concerns about preserving local control and protecting citizens' interests. Two key areas of concern are cities' ability to continue to enter into franchise agreements with service providers and to charge franchise fees.

Current Regulatory Approaches Won't Work

Governmental regulatory frameworks are outdated. Cable, telephone and Internet services now use the same infrastructure or similar delivery methods. Yet our regulatory systems make distinctions between types of service. For example, both a cable company and a land-line telephone company provide Internet service, but cable is regulated differently than telephone, which in turn is regulated differently than the Internet.

As telecom services converge, the traditional methods of categorizing services for regulatory and taxing purposes no longer make sense. In the modern digital world, all telecom services are simply bits and bytes flowing over lines and through the air. It is becoming increasingly difficult to determine whether a particular service is cable, telephone, Internet or some other service.

Franchise Agreements, PEG and Other Public Interest Concerns

Local governments currently have the ability to negotiate renewable franchise agreements with video (cable) providers. These agreements require franchise fees for using public rights-of-way, but they also provide the means by which municipalities are able to mandate specific service levels; guarantee access to and funding for public, educational and governmental (PEG) access television; and secure cable providers' support for these efforts.
Cities' continued ability to enter into franchise agreements with service providers that include these protections and revenues is currently in question as a result of the pressure to change existing approaches to regulating telecom services.

The cable industry argues that there should be a level playing field among all video providers, including phone and Internet access companies. But while these non-cable newcomers are pushing to obtain franchise rights to the public right-of-way so that they can gain customer access and deliver video services along with their existing voice or data services, they don't necessarily believe they should be subject to the same franchise requirements that currently apply to cable, including specific standards for service coverage. The newcomers are creating pressure on the traditional franchise agreement system to change and accommodate their needs.

Leveling the Playing Field: Developing New Regulatory Approaches

As discussions continue at the state and federal levels over new regulatory approaches, there is still much that divides local government from the telecom industry as a whole.

Local governments are concerned about preserving local control over public rights-of-way, which pose numerous safety issues if overcrowded and not properly managed. Cities are also concerned about continuing vital local services, such as PEG and protecting an increasingly important source of revenue from franchise agreements.

Various sectors of the telecom industry have differing, sometimes contradictory, perspectives - determined largely by their current infrastructure investments and how they can best use those to leverage market advantage. The cable industry, for example, asserts that the local franchising system works, and telephone companies that now want to provide Internet and video service should also be subject to local franchising requirements. In contrast, the telephone companies say that their main concern is speed to market, and within this context argue that local franchise agreements are too complex, take too much time to negotiate and need to be standardized. At the same time, their federal legislative proposals indicate a strong desire to avoid most public interest obligations in order to cut costs.

What Will The State Legislature Do?

There are currently 2 bills pending, A-804 and S-192. These bills are works in progress and the League continues to give input to the sponsors and interested members of the industry.

There seems to be support in the legislature for a system-wide franchise, however there are many views on how to reconcile the related issues.

Your League will continue to keep you informed as the issue develops.

What Will Congress Do?

While state legislatures and state regulatory agencies throughout the nation are grappling with these regulatory issues, the biggest obstacle could well be Congress, which has shown a strong preference over many years to protect the Internet from taxation by federal, state or local governments. Some influential congressional leaders and many telecom industry representatives are very interested in amending the 1996 Telecom Act by expanding the provisions preventing Internet sales taxation to include some aspects of the converging telecom industry, and by extending the exemptions that currently exist on satellite providers.
However, other members of Congress have shown an interest in the regulatory solutions that states are considering. If New Jersey (or any other state) can construct a regulatory scheme that makes sense for the state, it may influence congressional debates on the issue.

On the other hand, Congress could exercise its authority to entirely pre-empt state and local laws in this field. It is simply too early to predict how everything will ultimately shake out. But one thing is already clear: Local governments will have a major battle on their hands at the federal level.

What Cities Need to Do

The best thing for city officials to do at this point is to become educated about the telecom issue and understand how it could affect your community, including its public broadcasting opportunities and your ability to control local rights-of-way, protect much-needed local revenues and ensure that telecom services are available to all residents in a way that makes sense for them. The digital divide will only get wider if concerted efforts are not made to preserve and protect consumer choices, at the same time that the range of those choices is broadened.

The telecom issue is heating up quickly at the state and national levels. Cities should prepare themselves now and get ready to contact their legislators and congressional representatives about specific proposals, providing detailed information about how the city's finances and services will be affected by them.

However, even as legislation is emerging in the state Capitol or Congress, telecom companies will be pressing local officials to allow access to their communities. Cities should examine their current ordinances relating to rights-of-way and franchises and how the installation of telecom infrastructure can be carried out in ways that best serve the city.
Major changes are coming. Devote time to understanding this issue and how it could affect your city's interests - because the way you prepare and respond will have long-lasting impacts on services and revenues that affect your community's quality of life.

Sections of this article are reprinted with permission from Western City, the monthly magazine of the League of California Cities. Copyright 2005. All rights reserved. For more information, visit: www.westerncity.com

 

 

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