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
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.
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).
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.
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.
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.
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
Approaches Won't Work
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
Agreements, PEG and Other Public Interest Concerns
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.
Playing Field: Developing New Regulatory Approaches
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.
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
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.
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
Your League will
continue to keep you informed as the issue develops.
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
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.
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
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
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,