Statewide Franchise Bill Advances

The Commerce, Consumer Protection and International Affairs Committee of the Louisiana Senate approved an amended version of HB 699 on Wednesday while, in the process, making a bad bill even worse.

I attended the meeting and testified in opposition to the bill, along with a number of representatives from local governments across the state. I’m sure there will be press reports on this action available in a bit, but here are my impressions of what is taking place.

For starters, the committee met in Room C on the Senate side of the basement of the Capitol. Interestingly, there are no web cameras or other means of making what transpired there accessible to the public.

The committee, under the leadership of chairman Senator Ken Hollis (R-Metairie), operates in significantly different fashion than the House Commerce Committee, which approved the original version of the bill a couple of weeks ago. The meeting began with Hollis submitting an amendment to the bill that was not read or otherwise identified or explained for those attending.

That single amendment fundamentally changed the bill by giving incumbent cable companies the right to “opt in” to the statewide franchise agreement — an possibility that lobbyists with the Louisiana Municipal Association and the Police Jury Association of Louisiana said would be subject to a court challenge based on the notion that cable franchise agreements are contractual agreements between local governments and cable companies. Nonetheless, there it is now in the bill and the representatives of the cable industry were conspicuously silent on the bill in this committee after having been vocal opponents of it in the House Commerce Committee.

The only public mention of what the seemingly innocuous amendment did was to mention that it included a “severability” clause, meaning that if courts ruled any portion of the act unconstitutional that only that specific section of the act would die — the rest of it would not be affected by the decision.

Senator Mike Michot (R-Lafayette) tried to amend the bill to give local governments control over access to rights of way. That amendment failed when the committee members present (Senator Clo Fontenot was conveniently absent for the debate and votes on this bill) voted 3-3 on the measure. Ties count as losses in the Legislature.

The vote came despite a thinly veiled threat delivered by Newman Towbridge of the Louisiana Landowners Association to sue the state of Louisiana for awarding BellSouth/AT&T more freedom to operate in rights of way than the law allows. Towbridge backed Michot’s amendment (which is not currently available on the Legislative website) which Hollis said would “gut the bill.”

Hollis also chastised representatives of local government for not compromising on key elements of the bill, particularly buildout obligations that are in current franchise agreements and rights of way control issues.

The genuis of the BellSouth lobbying effort was revealed in Hollis’s comment. The original bill was a Rube Goldberg contraption that proposed to create a new state bureaucracy to award statewide franchise certificates and to process the fees that would have then been paid to local governments. All of that was fluff to be tossed over board to give the impression that BellSouth/AT&T were being reasonable and amenable to compromise. This successfully concealed the issues that they were NOT willing to compromise on at any level, which were the buildout obligation and unfettered access to rights of way.

The local government folks immediately recognized the threat to their revenue base that the proposals constituted and, with the buildout and rights of way issues, drew their line in the sand at standing firm on those issues.

The result was that local governments appeared to be intransigent while the phone company (which had every bit as rigid positions on the buildout and rights of way issues) posed as the reasonable party.

So, BellSouth/AT&T went into the fray with the idea of fixing a perception of local governments as excessively rigid and using that to their advantage in the Legislative process which is fundamentally based on the idea of compromise. Local government’s clear appreciation of the issues (aided in fair measure by John St. Julien and I) actually worked against our side in the process. The locals were not going to budge on the critical issues, which the phone company also happened to have identified as the critical issues.

What is somewhat astonishing about the process is that legislators in the House and the Senate clearly gave more credence to what BellSouth/AT&T lobbyists were saying about the bill and its impact than they did to the mayors, council members, and parish government representatives who were fighting the bill.

There was also a fairly amazing bit of cynicism behind the BellSouth/AT&T effort. For starters, BellSouth has the largest lobbying contingent in the Legislature, something like 18 paid lobbyists. Collectively, those lobbyists have something close to a century of relationships with legislators, and they played every one of those relationships to the hilt in behalf of this bill. The cynicism comes from the fact that a fair number of those lobbyists are either retiring or moving on to work for other companies.

That is, they drew on their reservoir of good will with legislators to provide them assurances about the impact of this law knowing full well that they will have little or no ability to make good on those assurances or to be held accountable for them. AT&T will be the company that uses this bill after its buyout of BellSouth closes in late summer.

This is an essential point and one that John and I made successfully to the local government reps, but to which the legislators (many of whom are term-limited and so, too, will not be held accountable for the results of this legislation) were not responsive.

The point is crucial because it is highly likely that AT&T will not pay any money to local governments in the form of franchise fees under this or any other regime. AT&T has been claiming in courts and jurisdictions across the country that it’s Operation Lightspeed will not deliver cable television, but will be Internet Protocol Television (IPTV). In lawsuits brought against local governments in some cases and by local governments in others, AT&T claims that because the service is Internet Protocol-based, Operation Lightspeed is an information service. Because it is an information service, AT&T argues, it is not subject either to franchise fees or to taxation. AT&T has made these claims in courts in California and Illinois.

By specifically exempting information services from the gross revenues covered by the bill, BellSouth has (with the Legislature’s consent) given A&T the legal basis to both avoid the franchise fee regime this bill will create, but also to avoid any other kinds of taxes or fees that are imposed on traditional cable services.

This is the point I testified on in both the House and Senate Commerce committees to little or no effect.

There was another fundamental piece of deception in the bill and its lobbying that concealed the ultimate impact of the bill. That was accomplished by casting the bill as a recipe for bringing competition to the cable industry. It might, in some limited way in some limited parts of Louisiana, do that.

But, more fundamentally, what the bill will do is legitimize network red-lining and enshrine in Louisiana law the legality of the digital divide. That is, by enabling BellSouth/AT&T and possibly other companies the right to pick and choose the neighborhoods where they will offer their network assets, this act gives the endorsement of law to the permanent creation of digital haves and have nots in our state. It’s not about cable tv, it is about connectivity.

Under the provisions of this bill, BellSouth/AT&T will not bring broadband services any place where they are not currently available. That is, the company will deploy where they currently have sufficient network resources. They will not expand their broadband foot print (unless it’s to bring in a gated community), but will work on capturing video business from those customers within their existing market base.

HB 699 declares that creating the digital divide is the official policy of the State of Louisiana. The reason for the existence of the Louisiana Broadband Council (that is, to close the digital divide) is now moot. Its continued existence would be a mockery and insult to the people of the state. This bill says it is the policy of Louisiana to re-enforce and amplify the effects of the divide. Will someone please tell the Governor this before she signs this bill? Probably not.

It had been a while since I’d been involved with the effort to pass or prevent passage of legislation in Baton Rouge. It has been a sobering experience. If you want to understand why Louisiana has been and remains such a backwards state, go watch your Legislature in action.

They routinely vote on matters about which they have no knowledge or expertise, nor is there any evidence of any level of knowledge or expertise on matters other than language at the staff level. They are completely at the mercy of the information provided them by lobbyists representing special interest groups.

If we, in fact, get the government we deserve, then it is an indictment of ourselves as citizens. We ought to demand better — at least, better informed legislators and the creation of knowledge bases within the Legislature that can help lawmakers evaluate the claims and promises being made to them.

Right now, it is garbage in and garbage out. HB 699 is the latest proof.

Because of the alternating cycle of ‘fiscal/general’ legislative sessions, it looks like we’ll be stuck with this bill for at least two years. That means that repealing this act and, just as importantly, repealing the Fair Competition Act will have to wait until 2008.

It’s time to start planning for this fight now.