Chance for cable TV competition 

A welcome new area of competitive price cutting is about to open up for Californians as AT&T files for statewide approval to offer cable television access in rivalry with dominant Comcast. Basic- and expanded-cable fees average 16 percent lower in competitive markets, according to a 2006 UC Berkeley study.

When in 2005 Texas became the first state to ease video competition, AT&T and Verizon were able to file directly for statewide marketing approval that produced quick results for consumers. Verizon rolled out a fiber-optic video service in three Dallas suburbs and the established regional cable provider immediately dropped prices.

Verizon offered 180 video and music channels for $43.95 a month and a 35-channel plan for $12.95 monthly. The incumbent company responded by bundling 240 channels and fast Internet service for $50 a month, almost one-third less than what it had been charging for television alone.

Bank of America conducted a Texas research survey in which callers phoned cable companies and claimed to be considering a switch to a competing provider. Invariably the companies offered price reductions right over the phone, resulting in what B of A labeled "thinly advertised, yet highly competitive price responses."

After some months of fierce behind-the-scenes maneuvering by opposing lobbyist forces, the Video Competition Act of 2006 sailed through the Legislature and was enthusiastically signed by Gov. Arnold Schwarzenegger. The phone companies that originally sponsored the bill tried to write in a provision forcing the existing cable providers to continue negotiating service deals with every local government instead of just filing for a single statewide permit.

When the dust settled after that battle, the cable companies were also allowed a switch to statewide franchising once the phone companies actually commenced TV service. The previously implacable opposition from Comcast, et al., was immediately transformed into active support.

The only remaining resistance came from local governments, which despaired of losing perks such as regulating free community TV channels, negotiating free cable service for public buildings and easily issuing public alerts. However, the record shows that local city attorneys were routinely rolled over by the big cable companies’ high-priced legal staffs during bargaining on major issues such as customer service improvements and lower prices.

The blunt truth is that local control of cable TV franchises had become a significant impediment to upgrading broadband access in California. Multiple negotiations were costly and time consuming for businesses, while not particularly beneficial to consumers.

Now AT&T has already promised a $1 billion investment to rapidly expand its home broadband fiber-optic network throughout California. This will benefit telephone and Internet users even if they remain customers of competing video services.

The AT&T Foundation is also establishing a $100 million national grant program providing low-income households with two years of free high-speed broadband Internet and inexpensive computers, which should go far toward easing residual fears that California’s new cable corporations will be uninterested in serving lower-income neighborhoods.

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Staff Report

Staff Report

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A daily newspaper covering San Francisco, San Mateo County and serving Alameda, Marin and Santa Clara counties.
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