AT&T Fight to Escape Video Franchising Gains Ground in Conn., Okla.

The Conn. Dept. of Public Utility Control, which controls video franchising in the state, proposed an order that would declare AT&T’s IP video offering an Internet application fundamentally the same as Internet telephony and not cable service. “There is no difference between bytes traveling over the Internet to become video or to become voice,” said DPUC Vice Chmn. Jack Goldberg: “A byte is a byte is a byte.” He said VoIP isn’t regulated, so Internet video isn’t subject to regulation, either. The Conn. decision in case 05-06-12 is a proposed order that’s subject to comment and exceptions. The DPUC scheduled its final vote on adoption June 7.

The DPUC said it analyzed state and federal law definitions of what constitutes cable service and concluded AT&T’s IPTV offering doesn’t fit them. The DPUC said cable is a one-to-many network where all programming is available to all subscribers at all times in a one-way linear stream. The AT&T system, the agency said, requires 2-way interaction for delivery of each video program, so it’s a 2-way, on- demand network that resembles a phone network. It said the on-demand services of cable companies are “ancillary to their primary one-way transmission of linear video programming.”

The DPUC said opponents’ fears -- that AT&T will redline all but the most affluent markets and won’t provide public access channels -- are unfounded. It said AT&T has DSL available on 90% of lines, and said the company’s node-by- node rollout of DSL “belies the idea of redlining.” It also said AT&T committed to meeting certain elements of the existing cable regulatory structure including customer service requirements, provision of public, educational and govt. access channels, emergency alert service, closed captioning and extending service to everyone without regard to income. The DPUC’s Goldberg said the agency “is committed to public access and the company’s commitments were critical to our approval.”

The Conn. DPUC said its decision doesn’t apply to Verizon, which serves the Greenwich area in the southwestern corner of the state, because Verizon has already agreed that its video offering is cable service that’s subject to franchising requirements.

AT&T said the draft decision, if adopted, would represent a major step forward for video competition in Conn. AT&T said its plans call for making IP video available to most Conn. households within 3 years. It said the decision “is right on the facts, it’s right on the law, and it’s going to give people a choice.”

But Conn. Attorney Gen. Richard Blumenthal (D) and the Conn. Office of Consumer Counsel said the DPUC decision would harm consumers by exempting AT&T from franchise obligations. They said company promises aren’t the same as franchise obligations. The New England Cable & Telecom Assn. said the DPUC decision would “exempt a single corporation [AT&T] from the consumer protections, financial obligations and civic responsibilities” required of all other video service providers.

Hartford state Sen. John Fonfara (D), chmn. of the Senate’s Energy & Technology Committee, said he would prefer that AT&T obtain a state franchise spelling out its legal obligations and indicated the legislature may weigh in on this issue. Legislation to clarify video franchising requirements for new video entrants failed in the 2006 session.

Meanwhile, Okla. Attorney General Drew Edmondson (D) concluded that AT&T’s IP video services aren’t subject to municipal franchising. He said a telephone line “does not cease to be a telephone line because it’s used to transmit video service in addition to voice service.” He said a company having statewide authority to install phone lines in the public rights of way “need not obtain a separate municipal franchise to provide additional services, including video programming, over its telephone lines.”

Edmondson issued his opinion at the request of Tulsa state Rep. Dennis Adkins (R), who sits on several House committees with jurisdiction over telecom and utility matters. Adkins asked whether phone companies planning video entry would have to obtain local franchises the same as cable companies. Edmondson’s opinion has the force of law in Okla. unless enjoined and overturned by a state court.

Cox, a major Okla. cable provider, said it’s reviewing the opinion. Cox said if the opinion “serves as a catalyst for re-examination of the regulatory burdens imposed on video services generally, and promotes fair and equitable competition, we are all for it.” Cox said it pays $14 million in franchise fees to Okla. municipalities each year, provides free service to 160 local govt. buildings, and has invested $500 million since 2000 to upgrade its infrastructure. Cox said it will “evaluate” current commitments as it studies how the AG opinion could affect its business. Cox has 38 municipal video franchises in Okla., most in the Tulsa and Oklahoma City areas.

AT&T said the AG’s opinion doesn’t give it a free video ride. It said it pays municipalities a percentage of base phone revenue for local rights of way management and expects that when phone lines are used for video service, it will pay cities “some percentage” for ROW management, same as it does with telephone services.