For more than a decade Americans have been promised convergence—video, voice, data, and next-generation communications services, all integrated into seamless packages. But for many Americans these services have become available only from one company, the cable company, and at ever-escalating prices. It’s time for cable companies to face competition.
The House is set to enact a bill that would go a long way toward making this vision a reality, but far more complex and contentious Senate legislation introduced last week by Ted Stevens (R., Alaska) puts the chances of enacting anything this year in doubt.
The primary roadblock to convergence is the franchising process, an antiquated process that dates back to a time when towns granted exclusive franchises to cable companies in return for various public-interest concessions, including fees, institutional networks, and build-out requirements. This process no longer makes sense in the extremely competitive communications landscape of the 21st century.
With cable companies aggressively moving into the voice arena, phone companies need to strike back by offering video services to remain viable. But they cannot do so economically if they must negotiate expensive franchise agreements on a town-by-town basis. Because video is the highest-value communications service, its revenues are critical to making large-scale infrastructure investments viable. We need those investments to compete and win in the global economy.
Verizon is in the process of rolling out its television service one town at a time as it negotiates franchise agreements. Where they have succeeded, the gains for consumers have been immediate and dramatic. In Keller, Texas, the first place Verizon offered TV service, the incumbent cable company immediately cut its package price for TV and Internet in half in order to compete.
The Free Enterprise Fund recently commissioned a poll conducted by McLaughlin & Associates that asked voters nationally whether they would like Congress to pass a national franchising law that would allow all Americans to have the same choice as those in Keller, Texas. The result was stunning: 68 percent of voters support such a law, versus only 15 percent who were opposed. Those under 40, a group most attuned to technology issues, favored national franchising by a 77 to 13 margin.
House legislation sponsored by Joe Barton (R., Tex.) and Bobby Rush (D., Ill.) takes a sensible approach that would cut right to the heart of the issue by establishing a process that would allow phone companies — and cable companies once they face competition — to bypass the expensive and time-consuming local-franchising process entirely. Under Barton-Rush, carriers would be able to offer video service under national franchises, while continuing to pay local franchise fees and carry relevant public-interest programs.
The Stevens bill in the Senate, meanwhile, would keep the local-franchising process in place but would dramatically streamline it by creating a standard application form and a 30-day limit for local-franchising authorities to act. In the event that the 30-day clock runs out, a franchise would be automatically granted under terms specified in the bill.
Any simplification would be a dramatic improvement over what exists now, and either the House’s national-franchising approach or the Senate’s streamlining approach would open the door to video choice and convergence for millions of Americans.
Unfortunately, there is a real risk that some of the more contentious issues in the 135-page Senate bill will prevent any action on communications legislation in Congress this year, derailing the push for video-franchise reform. If that happens, there will be millions of angry voters wondering why Congress failed to solve this problem.
– Mr. Kerpen is policy director for the Free Enterprise Fund.