State Senate Committee OKs Cable Oversight Bill

By Marc Lifsher and James S. Granelli

June 30, 2006 12 AM PT

Times Staff Writers

SACRAMENTO — A key Senate committee Thursday endorsed a bill that would shift oversight of cable providers away from cities and counties and clear the way for telephone companies to offer television services.

Despite objections that the legislation was rushed, the Energy, Utilities and Telecommunications Committee unanimously approved the bill sought by AT&T; Inc. and Verizon Communications Inc. that backers said would spur competition, lower prices and speed the adoption of new technology.

The bill would make it easier for phone companies to compete against cable providers by saving them the hassle of negotiating hundreds of local government franchises as they roll out video services. Cable companies objected to that special treatment but lent their support earlier this week after a deal granted them the same option.

“What I’m fighting to do is to lower people’s cable bills, improve the quality of service and grow the number of options they now get,” said Assembly Speaker Fabian Nunez (D-Los Angeles), who is pushing the bill through the Legislature.

Thursday’s committee vote followed an intense round of negotiations between state lawmakers, local government officials and cable and telephone executives. More fine-tuning of the bill is likely before the full Senate considers it in August.

After the committee’s bipartisan 9-0 vote, it is expected to pass.

Its reach, though, might be limited by an overhaul of federal telecommunications rules working its way through Congress. That legislation could consolidate oversight of pay-television services with the Federal Communications Commission.

In either case, local politicians are unhappy about surrendering control to state or federal regulators.

“My City Council is very accountable because they’re neighbors with everyone,” said Helen Goss, cable franchise director for West Hollywood. “They see each other at the store. When you have a remote agency, it’s going to be harder for the average consumer to make an impact.”

Local governments are well-suited to taking care of local interests, she said. In her city a substantial number of residents are elderly on fixed incomes, and about 12% are Russian emigres. So the city hammered out provisions for Adelphia Communications Inc. to give the elderly a 28-channel package that included basic over-the-air stations, CNN and a few others for $12 a month.

The contract also requires the cable company to provide Russian-speaking customer service representatives.

“If you’re a statewide franchising authority, providing Russian-speaking personnel is not at the top of your list,” Goss said.

Some state lawmakers said they were worried that phone companies could walk away from commitments to make new video services available to poor neighborhoods.

“We recognize that technology is changing very rapidly in video and Internet competition, and we have to figure out the best way to get those services to consumers,” said Sen. Martha Escutia (D-Whittier), the committee’s chairwoman.

Escutia said that the Legislature made considerable progress this week creating the new regulatory scheme during hours of committee hearings and days of closed-door dickering. Nevertheless, some critics likened the current rush to revamp TV delivery systems to California’s hurried deregulation of its electricity market in 1996.

In a series of complicated amendments, the committee:

* Designated the California Public Utilities Commission to regulate providers of bundled video, Internet and phone services under a statewide franchise.

* Allowed cable companies to opt out of local regulation when faced with imminent video competition from phone companies.

* Protected franchise fee revenue for local governments and gave them responsibility for handling customer complaints of poor service.

* Set standards to ensure telephone companies make efforts to expand their networks to all parts of a service area and provide high-tech services to both low-income and affluent neighborhoods.

Giving control of video franchising to the PUC surprised those at the agency.

“The PUC did not seek this,” Commissioner Rachelle Chong said.

But Chong conceded that her agency, which already oversees electric, telecommunications and other services, was a logical choice as a statewide regulator. The mechanics of that transition -- including how much it might cost -- will be considered by the Senate Appropriations Committee in August.

AT&T;, the state’s dominant phone company, and Verizon, the second-largest, were pleased with the vote.

“I’m not sure the PUC is the best agency to be granting franchises,” said Timothy J. McCallion, Verizon’s California president. “But there are compromises you make in the legislative process.”

Verizon, which is taking the slower, more expensive route of laying fiber-optic cable to every home, committed to making fiber available to 25% of its California customers in two years. AT&T;, which can install its hybrid fiber-copper wire system more quickly, committed to building 35% of its network in three years and half of it in five years.

AT&T; has not said where it plans to roll out video because it does not want cable companies to lock customers into long-term contracts before the phone company has upgraded its local network.

In both cases, a quarter of the households must be in low-income neighborhoods in the first phase, and at least 30% in the second phase.

For Verizon, low-income neighborhoods make up only about 30% of its territory, which consists mostly of affluent Southern California beach communities. The job will be tougher for AT&T;, which covers more than three-quarters of the state.

“The provisions of this bill, certainly on commitments, is the strongest in the nation,” said Kenneth McNeely, AT&T;’s California president. “And no other state I know of has a commitment to serve low-income households.”

Having the phone companies compete in a market already shared by cable and satellite-dish systems should be beneficial to customers, said Jeffrey I. Cole, director of the Center for the Digital Future at the University of Southern California.

“Having three competitors is good for the consumer,” he said. “It provides real potential for price drops and for advanced new features.”