Month: May 2006

Montgomery’s franchise bill is scheduled to come before the house tomorrow. Whether it will actually come up is something known only to the gods of legislature.

But this is one bill which should not pass:

Under the heading of “5. House Bills on Third Reading and Final Passage” we find:

HB699

MONTGOMERY

COMMERCE – Creates the Competitive Cable and Video Services Act

Letting this bill become law will be a disaster for this state and particularly for its local communities. Take a look at the yesterday’s analysis for an elaboration of why it will be a disaster–and for what you can do about it.

John Hill had a brief bit in the Advertiser this morning on the approval by the House Commerce Committee of BellSouth’s state-wide franchise bill.

It pretty much continues what I feel is a mischaracterization of the immediate battle (as I said in response to an earlier story) in that it pitches the battle as one between BellSouth and Cox. But it is the local communities’ ox who is getting gored as the state usurps local property rights in order to give BellSouth/AT&T what it most desires: freedom from the obligation to serve the whole community in return for using the rights-of-way that are owned by the people. Hill does not, in fact, repeat any of the arguments of the Louisiana Municipal Association or the Police Juries–both of whom emphasized local control and the injustice of forbidding local municipalities to continue their practice of requiring the whole community be served.

Similarly absent was mention of amendments offered by the local governments which would have given BellSouth/AT&T what they claimed they wanted: fast, hassle-free granting of a franchise and a “level playing field.” The local’s solution: they’d back a law gauranteeing a 60 day turn around with no negotiations and a mere exchange of two letters if BellSouth would adopt the same franchise so arduously negotiated with the cable companies. What could be more fair? BellSouth, however, was uninterested–but the committee was not. The suggestions were made an amendments by Rep. Frist and quickly gained healthy support even though most of the members had not see them prior to the hearing: it went down by a vote of only 11 to 7 and the chair, Pinac, and the bill’s sponsor were both clearly upset by how quickly the alternative gained support. A little more thorough preparation by local government might well have killed the bill then and and there.

The story closes with a few inaccuracies. It says:

Mike Stagg of Lafayette, an independent information technology consultant, said BellSouth, which will merge with AT&T in six months, warned that there could be a loss of franchise fees to local governments.

In amendments adopted by the committee, Bell agreed to pay local governments the same rate of franchise fees that are now being paid by cable operators under their franchise agreements.

In fact Mike, in the fieriest testimony of the day did not say that “there could be a loss of franchise fees.” He said there would be. More emphatically he said that local governments would never see a penny from AT&T since AT&T is emphatic that its service is not a cable service and is not franchiseable under Federal law and regulation. The key definition here is the definition of a cable service as being “one-way” in federal regulations. In John Hill’s own recent story BellSouth representatives are emphatic that their IPTV service is “two-way.” Softening this claim most likely means that Hill has been talking to BellSouth/AT&T or simply can’t believe such an outrageous bait and switch can be underway. He’d be well served to google up AT&T’s recent lawsuits –in the last couple of weeks!–in California and in Illinois where they are claiming exemptions from franchises on EXACTLY the basis that their service is not “one-way” and not a cable service but an information service. The characterization of their service as not like a cable service because it is “two-way” was made most recently in Hill’s previous story on the issue.

And, just to set the record straight: BellSouth came in offering the same percentage of franchise fees that local governments had already. That did not change with the amendments. They did include a few more things (pretty minor) in the list of those things that made up the base for the rate. Again, this seems discomforting evidence that Hill is taking too seriously the way BellSouth reps are characterizing the bill and its consequences.

Lagniappe: Just keeping score: Representative Trahan of Lafayette voted with BellSouth on this bill. Trahan has been a bit of a weak reed on the Lafayette delegation in regards to telecom issues since they first started to blow up and this issue was no exception. This bill will damage his constituents should it pass. Some representatives will be able to claim ignorance when this law sucks revenue out of local communities but any Lafayette rep should have been attending closely enough to what has happened in the city to understand that BellSouth’s motives are questionable.

“Noble” Ellington, the man who introduced the Local Government Fair Comptetion Act for the incumbent telecom providers will be sheparding a new bill for them this year. It amounts to a “repeal” of the Act for private corporations only. Public property could be used, and the risks of public indebtedness may be freely taken on by local governments–if and only if its new property were to be used for services offered by private, profit-making enterprises. (Is this the free enterprise ethic these guys touted during Lafayette’s referendum…it really doesn’t sound familiar.) Due to be heard in the Senate Commerce Committee, it’s an ammendment to the (un)Fair Act, the second proposed by the corporations since that bill became law. Like the first ammendment this one is meant to “fix” a portion of that (un)Fair Competition Act that wasn’t working out to the advantage of BellSouth and Cox. There’s the old story and the new story, but it’ s the same song.

You can see the ugliness by streaming video by clicking through the Senate Commerce Committee’s link on the legislative front page at 9:30 this morning. It’s a bit down the published agenda but might be moved up…

Old Story:
The first time BellSouth and Cox returned to the well was with the infamous Broome Bill, which tried to fine Lafayette to the tune of 900, 000 dollars a year if the city actually had the nerve to build a fiber optic network of its own. (Read all about it.) The issue then was that BellSouth and Cox had only belatedly realized that taxes they’d had imposed on LUS would not have the intended effect of driving up prices for LUS customers (which purpose is central to the law) since LUS was already paying more in “in lieu of tax”–which they could count against the new taxes BS and Cox thought they’d imposed. Oh oh..no competitive advantage. Whoopsiee. So they tried another way: they’d void Cox’s contract and make LUS pay the monies that contract said they owed the city-parish for 10 years. Really. You can’t make this level of arrogance up.

A firestorm of protest from Lafayette and municipalities state-wide beat back the worst portions of the bill and an embarassed Broome backed off much of the bill. BellSouth and Cox had to settle for tacking a new referendum requirement onto the bill.

New Story:
This year the issue is a little different…then it was about stopping municipalities from getting into “their” business in any way. This year they’ve realized that they earlier cut off their nose to spite their face. They put such heavy restrictions on municipalities that they would never be able to take advantage of Louisiana cities–and that was never the point.

Let me explain: the original bill contained no exceptions for “public-private” partnerships. In fact it contained a raft of hedges against using private companies as cover for public ownership of the infrastructure. Times change. Suddenly and unexpectedly, Earthlink, Google and others are rushing into “public-private” ownership structures of various sorts with municipalities like Philadelphia and San Francisco all across the nation. It’s starting to look like their competition will help fund municipal networks. At the same time they lost in Lafayette and are faced with a purely public competitor there whose network will be vastly superior to both BellSouth and Cox’s.

Public-private cooperation suddenly doesn’t seem like such a bad idea. Half a pie is better than being cut out of the deal altogther. BellSouth, for sure, has a long history of using public monies to build its networks and then extracting monopoly rents. It may have forgotten that lesson for awhile. Similarly Cox and the cable companies have a lot of experience in “partnerships” with communities that essentially lead to monopolies for cable. It too may have had a little senior moment.

BellSouth and Cox have both made wistful remarks about offering to “help” New Orleans with it WiFi network. Surely they meant they wished they were the ones inside the exclusive deal New Orleans appears to be cutting with Earthlink. However, under their own law that would be illegal. But it would be just too obvious to “repeal” the portions of their law that were suddenly inconvient while they had an offer on the table.

So, having read the tea leaves a little better BS and Cox are seeking to repeal the parts of their law that would keep them from joining into entering into exclusive deals with local governments to exclude their fellow private “free marketers.” Irony, apparently, knows no bounds. The new law would make such public-private partnerships exempt from the draconian restrictions of the Local Government Fair Competiton Act; making it almost impossible for local governments to go it alone without “sharing” their resources with companies that would use public property to profit off the owners of that property.

Here’s my guess: this “little” change passes with very little debate. BellSouth and Cox use its passage to beat back New Orleans’ attempt at limited repeal of the (un)Fair acts wireless provisions, saying there is no longer any reason that New Orleans can’t take Earthlink up on their offer–or accept deals that they, together or seperately propose. Earthlink has already indicated it doesn’t want to invest 10-15 million in an investment that is dependent on a struggling New Orleans adminstration winning a referendum vote while BellSouth and Cox are waging a public relations war against it. If I were Earthlink I’d back off my very generous offer which leaves ownership of the free, ad-supported network in the hands of New Orleans. Suddenly, like white knights come to the rescue one or both of the incumbents come forward and offer to take over (emphasis on take) the current network and provide the public with a “reasonably” priced network that would, by dent of the (un)Fair Competition Acts restrictions, never be powerful enought to compete with their own offering by supporting VOIP or streaming video. WiFi remains a neutered technology in Louisiana and a publicly developed network’s resources are turned into a nice, if minor, revenue stream for the incumbent/s.

BellSouth and Cox must be very happy that Lafayette’s bills that would have repealed the act entirely aren’t on the table while they go back to repeal the portions they don’t care for.

It’s the same song:
Old story or new, its all the same song: The Local Government (un)Fair Competition Act is a vehicle for the incumbents to work state law to their advantage. The legislature has time and again rolled over to these corporations in the same way that has proven embarrassing to the state for generations–most recently with the House Commerce Committee’s vote to send BellSouth’s state-wide video franchise to floor over the strenuous objection of both the cable industry, the Louisiana Municipal Assocition and the Louisiana Police Juries Association.

The Local Government Fair Competition Act must be repealed.

(It doesn’t have to be this way. We could stand up to these guys and make our own decisions about what is best for our local communities. Today’s story on how quickly even huge energy corporations fold when the state stands up to them should be a lesson. ATT/BellSouth is going to build its network in Louisiana whether or not we hand them extra profit, public resources, and shut out local governments. The only question is how much we are going to let them take us for.)

If you want to know how to defeat the BellSouth/AT&T you need look no further than Florida. A bill which breezed through the Florida house with little opposition wasn’t able to get reported out of committee in the Senate. The bill’s “author”

…attributed the failure of the bill to grassroots lobbying by the cable industry, with local system managers visiting senators, known to be undecided, when they returned to their districts; all-out opposition from local and county officials and groups like the state National Association for the Advancement of Colored People; and cable’s anti-bill advertising.

BellSouth can be beat. A coalition of cable, vocal opposition from local officials, and opposition from the state’s black and rural caucuses should do it.

Building that coalition and holding it together will be the trick. Interested?

Despite the combined efforts of the cable industry, the police jurors, and local municipalities BellSouth prevailed today in the house commerce committee. A heavily amended state-wide franchise bill passed by a vote of, I believe, 13 to 9 13 to 5.

While it had been reported that Montgomery’s bill, HB 699, was to be considered this morning it didn’t appear on the agenda until a few moments before the committee convened. 699 was quickly moved to the first slot of the day and testimony on it lasted most of the morning. New Orleans’ wireless bills, which had been on the agenda were withdrawn from consideration, presumably to make way for the last-minute appearance of the franchise bill.

The session, which should show up in the house archives, was worth watching. In a nutshell: BellSouth and Montgomery said it was all about faster competition and getting a better price for the little guys. Cox said it was about unfair competition. The locals said it was all about stripping local communities of their rights. The most interesting speakers were near the end and Mike Stagg, a writer on this site, laid out the ugly truth is that this law is destined to be a huge ripoff that leaves local communities without promised income or control of their own property.

I’m very interested in following up on the “new” bill. A huge set of bills were offered and accepted with little comment by Montgomery, BellSouth’s front man on the bill. They were all said to be amendments put forward to convince local governments to back off the bill. That didn’t work and local governments remain adamantly opposed, so the new shape of the bill will likely call for a review. Tune in.

BellSouth is working a scam in the Louisiana Legislature on behalf of its once and future owner, AT&T.

It centers on bills (HB 699 and SB 386) that purport to bring cable competition into Louisiana via a statewide video franchise. There are huge problems with the bills, not the least of which deal with the state giving away local rights of way and relieving the largest telecommunications company in America (AT&T) of any obligation to buildout its network to entire communities (not just, say, gated neighborhoods).

These are real and legitimate problems that local government leaders from across the state recognize and which AT&T (through its surrogate BellSouth) has refused to ‘compromise’ on.

But, AT&T’s contempt for our state comes screaming through in that portion of HB 699 (the first try to get this franchise thing done) that deals with the definition of gross revenues. The bill ostensibly would create a mechanism for collecting and distributing proceeds from a five percent state video franchise fee. The gross revenues section (page 3, line 21) defines the term by enumerating exceptions.

The key section is actually starts on page 4, line 4:

4 (g) Any revenues from services provided over the cable system that are not
5 classified as cable services including without limitation revenue received from
6 telecommunications services, information services, Internet access services,
7 advertising services, and home shopping services. (emphasis added).

There are the critical words: information services.

Anyone who has followed telecommunications since the passage of the Telecommunications Act of 1996 knows that information services are a separate and distinct class of service which have been the source of intense litigation and rule making by cable and telephone companies during that time. Essentially, the Federal Communications Commission has ruled that providers of information services are exempt from some of the network regulations that apply to telecommunications service providers.

It was the classification of cable modem services as an information service which gave cable companies the right to shut independent Internet service providers (ISPs) from their networks. Last year, the FCC classified telephone companies digital subscriber lines (DSL) to be an information service, thus giving phone companies the right to shut out competitors from their DSL-ready networks.

The information services category is particularly relevant to these Louisiana bills because of the type of service AT&T/BellSouth propose to roll out in this and the other 21 states in their soon-to-be combined market. AT&T is rolling out something called Internet Protocol Television (IPTV) which, the company argues, is a two-way communications system and is, in fact, an information service.

How do we know this? We know this through the lawsuits that AT&T has filed against communities in Illinois, California and Michigan that have tried to collect a cable franchise fee from the company when it tried to introduce its new IPTV service.

AT&T, in court filings, claims that IPTV is not subject to franchise fees because it is an information service.

BellSouth, in meetings with Legislators and with local government leaders, has offered to scrap the entire state regulatory regime and it has offered what it claims to be a compromise on the issue of whether IPTV is a cable or “video” service. BellSouth has offered to allow both cable and “video” services to be covered by the new franchise law.

This is no compromise at all, but a deliberate attempt to deceive Legislators, local leaders and the public about the true nature of this legislation.

I can find no more suitable word for it than contempt.

Why do I believe it exhibits contempt? Because BellSouth was an active participant in the FCC rule making process that resulted in DSL being classified as an information service. Video service has nothing to do with information service.

By insisting that revenues from information services be exempted from the new video franchise regime, BellSouth is setting the stage for two things: 1) for local governments to lose local franchise fee revenue on every customer AT&T (which will actually be the company to deploy the service) IPTV wins; and 2) AT&T will have the legal standing to refuse to pay ANY franchise fees anywhere in Louisiana based on the language in this bill which exempts revenue from information services from the statewide video franchise regime.

BellSouth’s legal staff and lobbyists are insisting on this information service exemption from gross revenues knowing full well the implications it will have on local governments, yet still they push the phony compromise of including video services under the franchise piece.

It is contemptuous because BellSouth’s lobbyists and lawyers know full well AT&T’s intentions and that it will be AT&T (not BellSouth) that moves to take advantage of the new act should it become law.

How do we know this? We know this because BellSouth insisted that Lafayette and LUS not oppose the AT&T/BellSouth merger as a condition for BellSouth dropping its most recent lawsuit against the LUS fiber project. Getting this merger approved quickly is a top priority of both AT&T and BellSouth. The sooner that merger is approved, the sooner AT&T will be officially calling the telecom shots in this state. It will be AT&T that moves to deploy IPTV in Louisiana, not BellSouth. And, AT&T insists this is an information service that is not subject to franchise agreements.

BellSouth knows this but continues to try to deceive the Legislature and the public.

Their contempt for Louisiana does not end there.

Another layer of contempt grows out of the fact that BellSouth’s lobbying team is putting on their best “good ole boy” front on this cynical transfer of wealth from communities to AT&T. That is, by having BellSouth’s well known fleet of lobbyists argue for these bills, it has the effect of masking the magnitude of the changes that would result from passage of this legislation. Hey, would ole George, or Tommy or Danny try to screw us? Well, they might well be watering hole buddies of a number of legislators, but they are also trying to either save their jobs by producing for their new masters, or they’re trying to go out on the high note of victory — regardless of the impact of this legislation on the state or its communities.

Profoundly cynical. But, their contempt does not end there.

The company has members appointed by the Governor to the Broadband Council, the body whose task it is to bridge the digital divide in this state. Yet here are representatives of that same company (in fact, the same people!) arguing that the Legislature should authorize AT&T and other companies to make the digital divide permanent by relieving them of the responsibility of bringing their new networks and services to every resident of every community they want to serve.

That’s right! Members of the Broadband Council arguing for the right to make the digital divide in Louisiana permanent! They want legislative approval to leave rural communities on the far side of the digital divide. They want legislative approval to leave poor and middle class neighborhoods in any community on the far side of the digital divide.

AT&T’s contempt for Louisiana is matched only by the cynicism behind the efforts of BellSouth’s lobbyists and attorney’s to somehow convince legislators, the public and the Governor that these bills (which serve only the interests of AT&T) are good for Louisiana.

These bills are anti-Louisiana bills. They are anti-rural Louisiana. They are anti-urban Louisiana. They are anti-local government.

Representative Montgomery and Senator Ellington should be ashamed of themselves for doing the bidding of AT&T with these bills.

Update: The wireless bills were not heard today after all. Instead the franchise bill appeared on the calendar right at 9:00 and was heard first. It passed out of committee by a vote of 13 to 9 if I heard my jerky video stream correctly.

—————

Two wireless bills sponsored by LaFonta of New Orleans are going to be heard today in the house commerce committe hearing today that starts at 9:00. The agenda shows them somewhere in the middle of day’s business.

These bills, HB 1174 and HB 1188 would allow Louisiana’s local governments to build wireless networks which would be illegal under the regime established by Local Government (un)Fair Competition Act. That act, BellSouth and Cox’s response Lafayette’s fiber plan, had the draconian and perhaps unanticipated effect of making it illegal for New Orleans to use its wireless security network to provide free wifi access to its citizens in the post-Katrina era. New Orleans went ahead and did it anyway, despite continued opposition from BellSouth, but it can only continue to do so as long as a state of emergency stays in place.

That (un)Fair competiton act is bad legislation all around and Lafayette was leading a fight for its repeal when it cut a deal to withdraw its bills in return for BellSouth and Cox withdrawing a lawsuit that would have further blocked the city issueing bonds to support the fiber plan ratified by last July’s referendum.

With Lafayette’s bills gone New Orleans has moved on more limited bills which would exempt all wireless networks from the restrictions of the (un) Fair Act.

New Orleans deserves support–particularly from Lafayette residents who both understand what its like to have the big boys breathing down your neck while you try to do the right thing. People statewide need to understand that New Orleans difficulties are only the needed excuse to strike this portion of a bad law that limits the rights of citizens in Louisiana to do what other communities across the country are doing right now.

Wireless municipal networks are spreading like wildfire with cities from Philadelphia to San Francisco adopting city-wide plans. Louisiana does not want to be shut out. Earthlink, who has promised 10-15 million dollars in new investment to expand New Orleans system, is a major player in many of these plans and has proposed an extraordinarily generous system for New Orleans–if its planned system can be made legal. For the legislature to pass laws that destroy the possibility of such investment is revealed as the height of foolishness in the wake of last years hurricanes.

Louisiana does not need its legislature to continue to rubber-stamp the desires of a handful of out of state telecom corporations whose self-interest is unrestrained by an sense of fair play or decency in the wake of Katrina.

If you’d like to see how this hearing goes you can watch it on streaming video–this is real reality TV. You can link to video stream a few minutes before nine from the legislative front page. If you can catch the first few minutes of the session the when changes to the agenda are being announced you’ll have a better sense of when the fun parts will start.

In a recent post I promised a review of the Bait and Switch that BellSouth (soon to be AT&T) is attempting to pull on Louisiana. It’s a story that takes a bit to unfold. You need to know what it is that Bellsouth is trying to sell to the public and the communities (the bait) and something of what it is really up to before you get to the final quick switcheroo.

The story BellSouth tells:

BellSouth tells a very attactive story about this bill. They tell us (and legislators not in on the game) that it is all about enabling them to compete on an level playing field with cable companies, who they imply, are engaged in a subtle collusion with local governments to exclude their competition. They are simply asking for a little relief and are willing to pay local governments for the use of their property. Voting for the bill is supposed to be a vote for competition and cable and local objections are only sour grapes. You are intended to visualize BellSouth as riding to the rescue on a white horse. However, there is a more complicated story in which it is pretty hard to see BellSouth as wearing the white hat.

A fuller story:

Bellsouth, in pursuit of competitive advantage over the cable companies in the coming war over video and broadband customers is trying to enlist the state legislature to create a special competitive advantage for its new cable services. They’d like to be able to compete with the cable companies only in the most profitable neighborhoods. BellSouth/AT&T want high-value, highly profitable, cable customers. None of those low-value cheapo basic cable types. Trouble is, local governments won’t write a contract to allow BellSouth to use publicly-owned rights of way property–without which they can’t offer cable services–without including a provision that requires the phone company to offer the same service at the same price to everyone in town. Cable companies have all signed such franchise agreements and are contractually obligated to equitable service: they have to offer the service to all and to offer it for the same price throughout the local community.

Were BellSouth to receive such a gift from the state legislature it would not only be in a position to reap unusually high profits by competing only in the “sweet spots” in a town (aka the richer, newer neighborhoods) it would also force the cable companies to either forgo competing for their best cusotmers or offer the same low prices to its whole, mostly less proftiable, customer base in the community. BellSouth would reap a higher profit from each of its customers than cable would–and could use that disparity to drive cable out the “best” areas.

If that sounds unfair and bloodthirsty rest assured that it is. It uses the power of the state to put its only real competitor at a major disadvantage.

All that stands in their way is the local governments which own the property to which they must have access. (Well they could try negotiating a separate contract with each landowner to pass over their property but, however much juicy new business that would mean for Louisiana’s landmen, rest assured that telecom companies know they have always gotten a better deal from local governments.) Since local governments stubbornly refuse to compromise away their franchise’s “build out” requirements ithat all citzens be served equally local governments need to be eliminated from the equation. They need to get the state to forbid local governments from making such frustratingly equitable requirements. That beneath all the stage dressing is what HB 699 and SB 386 would do. (The specific clause lies at §1363, Prohibition against build-out requirements)

Local governments are simply in the way and the local property rights of the communities is at risk because of it. Rest assured that were BellSouth suggesting that private individual’s property rights could be redefined by state law to prevent owners from writing contracts that BellSouth didn’t like they’d be faced with a firestorm of opposition about “expropriation” and legal “takings.” The principle is no different.

Ok, that’s the background for the story…So far it’s a pretty straightforward story of misrepresenting your purposes in an attempt to get what you want. Anyone with children (or who’s been a child) knows the tale. But the next step in the story is a good bit uglier, it is what parents call a lie: making a promise that you have every intention of not keeping. BellSouth is promising local communities something it has no intention of delivering. Communities are supposed to get a new revenue stream; they’re being promised that they won’t lose vital income that is crucial to keeping the sidewalks repaired. But BellSouth/AT&T has no intention of paying them a cent. We’re all being played for fools.

BellSouth’s Bait and Switch

Let’s trace out the sneaky logic of the HB 699:

1) In one place the bill would exempt any “certificate holder” from build out requirements that municipalities typically use to ensure that all citizens are offered service.

2) Elsewhere the bill provides that non-cable service providers who offer video services that are not covered in the act may become a “certificate holder” and that doing so does not make them a cable service provider. (Start paying attention now, the curve ball is coming.)

3) Federal law and HB 699 share the same definition of cable services, in particular, cable services are said to be “one-way systems.” (Be patient.)

4) AT&T (which is buying BellSouth) has always held that its IPTV video system is not a cable system, in part because it is “two way.” It tells the feds that when they ask and they even tell local reporter John Hill that their service is not cable because their service is two-way. (Can you see it coming?)

5) BellSouth’s proposed law defines the gross revenues franchise fees are based on in terms of “cable services.” So only “cable services” will owe any franchise fees. (Here it comes)

6) BellSouth doesn’t intend to offer any of those old “one-way” cable services. It is going to offer its snazzy new “two-way” IPTV instead. BellSouth does owe anyone anything. (Bam!)

7) But thats not all…reach back to #1 on this list: even if it’s not offering a cable service BellSouth can have a “certificate” that will exempt it from build-out requirements. (Home Run! BellSouthAT&T strips local communities of their right to control their own property and doesn’t even have to pay for them anything for using it.)

Tbat is a real switcheroo.

John Hill, Gannett political writer, runs a story on the front page of the Advertiser this morning that paints the upcoming set of bills being introduced by Montgomery in the Louisiana House and Ellington in the Senate as a three-cornered debate between BellSouth, the cable companies, and local governments.

Here’s how he characterizes the situation:

South Central Bell wants to offer on-demand digital television services statewide without having to negotiate individual franchise agreements with governments.

Louisiana’s cable television operators – the big ones are Cox and Time-Warner – are fighting a bill that would allow South Central Bell that freedom…

Now, aside from the fact that BellSouth hasn’t been known as South Central Bell in decades, that intro sets the conflict up as a classic battle between huge corporations. The story goes on to endorse the claim that the fundamental issue is competition: whether BellSouth will be allowed to facilitate its competition with Cox, Time Warner and others by gaining the right to an easy, fast state-wide franchise. Based on that framing the story goes on to give brief position statements by each of the two corporations and a final bit by local government officials concerned about the loss of their authority.

Trouble is, as someone who has been reporting on the legislature for long enough to recall the time that the dominant political player in the state legislature was called “South Central Bell” instead of BellSouth ought to recognize, that’s not the most accurate way to frame the story. The story needs to start from the presumption that BellSouth is playing for advantage on its best field: the legislature.

Here’s what needs to be the starting points for analysis:
1)There is absolutely nothing stopping BellSouth/AT&T from competing with the cable companies right now.
2) BellSouth has more influence in the state legislature than any other corporation.
3) BellSouth, aka South Central Bell, has always used the state legislature and the Public Service Commission to enhance its profit margin. (The most notable recent example being the now infamous anti-Lafayette law, the “Local Government Fair Competition Act.”)

Once you understand that background clearly the real question must be: “What advantage does BellSouth seek to gain over its adversaries by using the legislature?”

The answer lies in an obscure but vitally important issue to local communities: “build out requirements.” That’s the pivot point upon which the entire story turns. BellSouth wants to eliminate the local franchise because local governments would require them (as they currently require cable companies) to “build out” service to the entire community as part of the lease they sign to rent the public rights-of-way which they must have to string their wires.

BellSouth would much rather build out to only the most wealthy and profitable areas of each town. That would offer them a huge competitive advantage over their cable competition. Any retailer understands the difference between high-margin and low-margin products. Right now the cable companies have to service areas that make lots of profit (and we do mean lots) and areas which are much less profitable. People who take only basic cable aren’t very profitable. People who take tons of extra channels, all the premium channels, hit pay-per-view regularly, and might even sign up for the new Voice Over Internet Protocol phone services are hugely profitable.

BellSouth only wants to serve those profitable ones. The prefer the new, wealthy, densely packed, areas. In Lafayette, for instance, think: River Ranch. They’d like to offer those folks the more profitable, advanced service. They are much less eager to offer the older, poorer neighborhoods off Willow street on the north side the same level of service. If they succeed in the state legislature any price drop they offer to win customers away from cable will effect only the wealthy areas they serve. The cable companies, bound by current contracts to serve all equally, will have to cut prices to everyone in order to match the prices that BellSouth is offering in only a small fraction of the community. This is what BellSouth calls “competition,” and, yes; they love that sort of competition.

In order to get to that sweet spot they’ll have to take local governments out of the equation. That’s where going to the state legislature for “relief” comes in. Local politics will make it impossible for the mayors and councilmen to accept a contract for an outside corporation to rent the community’s property without requiring that all of that community’s people be served. Issues of class and race, and the resentments associated with that history make it impossible for any city to allow a new, more advanced and cheaper service to offered to only the most privileged parts of the community. That raw political fact is not going to change and BellSouth/AT&T recognizes that.

Bellsouth’s ruthless solution is to have the state step in and limit the contracts local governments can make with telecommunications companies (and only telecommunications companies) to outlaw build-out requirements. Frankly, this amounts to a substantial “taking” of the property rights of the local owners.

So that’s what you need to understand as you read John Hill’s reporting. The real battle is between BellSouth and local communities. The cable companies are the ultimate target but it is Louisiana cities and towns that must be run over to get to the point where it is possible to disadvantage the cable companies. Reading Hill’s article with this framing in mind the reshapes the story into a very interesting set of details about the strategic positions and the way the participants want to frame the nature of the battle. Well worth your read.

Langiappe:
Here’s a little extra spice for the story. The players have a real history and you can figure out who is acting on whose behalf by who they’ve supported in the past. Montgomery and Ellington have carried water for BellSouth many times, a fact that is widely understood in the halls of the legislature. Ellington, for instance, gutted a rural broadband bill he had sponsored and substituted the BellSouth attack on Lafayette that eventually emerged from the sausage grinder as the Local Government Fair Competition Act. If you see Ellington’s name on a bill you should think “Phone Company.” The back and forth of amendments offered and rejected often tells a clearer story of what the bill is really about than the text of the bill itself. For instance, representatives of local governments offered an amendment that would have guaranteed BellSouth a franchise in 90 days from any municipality where they wanted to compete with cable. BellSouth rejected it. Trouble was, it achieved that end by the simple expedient of offering BellSouth a truly level playing field: BellSouth would have simply agreed to the same contract already negotiated by the cable companies locally. (They could have chosen to negotiate their own, separate agreement.) What could be fairer competition? By rejecting that solution out of hand BS was making it clear that ease, a level playing field, and the rapidity of achieving the go-ahead to compete were not really their most important issues, no matter how they played their rhetoric to the public. BellSouth, for its part, offered the cable companies an amendment which would allow them to invalidate their current franchise contracts with cities. Supposedly this would level the playing field an allow the cable companies to join BellSouth in abandoning marginally profitable areas. Cable was tempted but its legal eagles apparently let them know that an amendment that was so blatantly unconstitutional would be severed from the law and struck down. (Clever BS lawyers!) Speaking of clever BS lawyers, the intricate language of the bill makes it possible for BellSouth to get out of both build out requirements and avoid paying any franchise fees to local governments by differently defining who can get a certificate that exempts them from build out requirements and who has to pay fees for offering cable services. It’s a huge bait and switch. (This deserves a post of its own. More later.)

Eyes on the prize folks: the issue is build out requirements and the law takes aim at the local control of local property that makes build out requirements a political necessity.

A not-to-coherent letter to the editor today appears to be concerned about the recent deal cut between Lafayette and the BellSouth/ATT-Cox alliance. That’s worth being concerned about. But the letter writer appears to be most worried that the Big Bad Lafayette Utilities System, master of a local electrical utility, the waters works, and the sewer system inside the city limits of Lafayette, Louisiana somehow was in a position to “blackmail” BellSouth, a multinational telephone and wireless company with huge political and economic clout.

Get real.

The attempt to raise a purely ideological panic about a small publicly-owned local Acadian utility having some sort of unfair advantage over a corporation of the size and power of BellSouth or Cox can’t be made to seem sensible–which is probably why the letter reads so ambiguously.

A little history should suffice to make the real situation apparent. BellSouth and Cox had used their enormous economic and political clout to come within a hairsbreadth of forbidding Lafayette to use it public utility to provide a little competition with two monopoly corporations. BellSouth was a monopoly in land line phone service at the time and widely understood to be the most politically powerful corporation in the state. Cox has a monopoly over an unnaturally profitable cable service and was bitterly opposed to losing it.

The idea that coming down on the side of multinational media conglomerates in opposition to a local public utility is somehow a conservative position is just whacky. The time is long over when anyone in Lafayette should be taken seriously when putting forward such a position.