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Changing channels

What does a state cable franchise mean for TV watchers?

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New year, new rules. As of Jan. 1, if a company wants to provide cable TV service to any city or county in North Carolina, it must file an application with Secretary of State Elaine Marshall's office rather than negotiate with local officials.

The change was approved by the General Assembly last year after intensive lobbying by phone companies. Having already entered the Internet game, those companies want to expand into cable TV (which, more and more, is being delivered via the Internet). But they want to do so on their own terms—and in their own sweet time.

Three weeks into the New Year, one of the most vocal proponents of the state franchise has yet to throw its hat in the ring. BellSouth (now known as AT&T North Carolina, after an $86 billion merger approved at the end of last year) convinced legislators that the new rules were necessary in order to make it easier and more expedient for competitors to enter the game.

There's no rush by new service providers—yet. Of the 29 applications filed with the Secretary of State's office so far, 27 have come from Time Warner Cable.

Clifton Metcalf, a spokesperson for AT&T North Carolina, wouldn't say when or if the company plans to apply for a state franchise any time soon. "But we certainly look forward to offering video to our customers here in North Carolina, just [as] customers in Texas and other states enjoy the opportunity to receive our 'U-verse' service," the name for AT&T's all-in-one Internet and entertainment offerings.

But let's back up. How does this new cable licensing system work? How is it going to affect North Carolina's local governments? And how is it going to affect consumers?

The short answer is: Nobody knows yet. The rules are complicated, the process brand new. Local communities that have long-standing relationships with cable providers are being cut out of the loop, while state government officials are being saddled with another administrative role—one they neither asked for nor designed.

For instance, according to the rules, any local agreements remain in place until the expiration dates spelled out in those agreements. Once they expire, the company files its new application to the state. However, if a new player comes on the scene and files an application with the state for a competing service, the old local agreement automatically expires. Got it?

So of those 27 applications from Time Warner, are any of them in communities that already have valid franchise agreements in place? The Secretary of State's office doesn't have that information; they'll have to research it, or else take Time Warner's word.

That research might not be easy. In Fuquay-Varina, Town Manger Andy Hedrick is unsure where things stand. He doesn't know if the town's agreement with Time Warner has expired because no one can find the original agreement. "Our legal paperwork probably isn't as it should be," Hedrick admits. He says Fuquay-Varina's relationship with Time Warner has always been a good one. "The phone companies have not wanted to do what Time Warner has wanted to do," Hedrick points out. "They convinced the General Assembly that they needed this new system."

"For us, this is such an unfunded mandate," says George Jeter, a spokesperson for the Secretary of State's office. "Our role is simply to accept these [applications], look at the technical aspects of it and file them if the technical aspects are OK. We weren't involved in the drafting of the bill," he says.

What little prerogative Marshall's office has exercised has already come under fire at a recent hearing on the new rules. The instructions for applicants include a full page on how to file a map of the service area "sufficiently detailed so that one can determine whether a location is in the service area."

Even that basic requirement is being challenged—companies want to reserve the right to be vague about which neighborhoods will be served and which won't. In the past, municipalities have used their negotiating power to make sure cable companies didn't cherry-pick affluent neighborhoods.

"I don't think people were expecting us to do anything other than filings," Jeter says. "Basically, the standard most of the speakers [at the hearing] wanted was, you'll take whatever map we give you, so I think there's been some hard feelings about the map."

Hedrick estimates service will be "probably the same," for the average resident, "or that's what I've been led to believe."

But Durham Deputy County Manager Lowell Siler says "there's some anxiety about just how this will affect subscribers in Durham County" among members of the joint city-county cable board. Time Warner's franchise with the county expired, and so it will be among the first communities in the state to switch to a state-issued agreement. Siler says he doesn't know if the new arrangement will change anything in practical terms—if it will be difficult to introduce another public access, government or education channel, for instance, or exactly how much revenue to expect.

Siler's office used to handle about one or two cable-related complaints a month from citizens. Most were about billing or about the lack of availability of cable in sparsely populated areas. Complaints about state-issued franchises will go to the Consumer Protection Division of the Attorney General's office (which, like the Secretary of State's office, had no hand in writing the law). Siler says he would rather have held on to that responsibility. "I thought we could probably have a little more impact and influence on being able to resolve the problem when things were handled locally, and I think citizens preferred having someone they could contact locally about those issues."

The Attorney General's office has received only one complaint so far, according to spokesperson Jennifer Canada. "What's tricky about this is, we are only allowed to receive complaints about state issued franchises," she says. There haven't been any of those issued yet. "So it looks like we're going to have to refer them back to their local government." Once they do start fielding complaints, the AG's office will act as a mediator between the company and the consumer, Canada says. And if mediation doesn't work, the recourse is to take the company to court.

A note on net neutrality

While the AT&T-BellSouth merger makes AT&T the largest phone company in existence once again, as it was before the FCC broke it up into "Baby Bells" in the '80s, the news isn't all bad. Consumer groups who opposed the merger are celebrating AT&T's concession to abide by net neutrality principles—to leave the Internet Protocol as is and not to pursue a preferential 'Net connection for sites willing to pay—for two years.

Net neutrality is making a stand in Congress in 2007. Sen. Byron Dorgan (D-N.D.) and Sen. Olympia Snowe (R-Maine) introduced the Internet Freedom Preservation Act last week. After last year's "series of tubes" gaffe by Sen. Ted Stevens (R-Alaska) got the nation's attention (sinking the Communications, Consumer's Choice, and Broadband Deployment Act he sponsored, which would have created a national cable franchise agreement, among other things), net neutrality advocates are hopeful that they can set the agenda this time—and win.

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