Compromise AT&T bill said to benefit consumers

Tennesseans looking for an alternative to cable television service could get their wish as compromise legislation was unveiled in the state Legislature Monday that telephone giant AT&T says it needs to offer television services.

At its bare bones, the legislation allows AT&T to get a statewide television franchise. Currently, those franchises are agreed to at the local level.

But effectively, the compromise bill’s passage would pave the way for AT&T to offer television services and compete with cable.

The compromise bill culminates 14 weeks of negotiations among lobbyists and lawyers for AT&T, the cable industry, and local government organizations as well as involved lawmakers.

Those lawmakers, who presented the bill at a mid-afternoon press conference on Capitol Hill, all stressed that it was legislation that would benefit the consumer.

“The bill creates a climate for competition here in Tennessee,” said House Speaker Jimmy Naifeh (D-Covington), who led the compromise effort. “More competition means better services and faster deployment of these services to areas that are currently underserved.”

Naifeh cautioned though that the bill was not a “silver bullet” and, if the legislation becomes law, Tennesseans shouldn’t expect a lower cable bill in their mailboxes.

While acknowledging prices wouldn’t decline, allowing competition between AT&T and cable companies like Comcast may hold cable price increases in check, said Rep. Charles Curtiss (D-Sparta), one of the legislation’s sponsors.

“I think (prices) will escalate in a slower rate than they have in the past 10 years,” Curtiss said.

Lawmakers said that each side didn’t get everything they wanted, but Curtiss said the cable industry lost out the most.

AT&T, who lost a bitter lobbying fight last year to pass the legislation, may have come out the victor.

The company would not say, however, when it expected to start offering its U-verse package. The bill requires services to be offered within two years of an agreement for a statewide franchise.

‘A long road’

Going into the negotiations, one of the biggest roadblocks was where and to what customers a statewide franchise holder would be required to offer television services. Local franchise agreements often require providers to “build out” to a certain portion of the population.

Under the deal cut in the bill, AT&T would be able to get a statewide franchise, but would be required to offer its U-verse television product to at least roughly 600,000 Tennessee households by three and a half years from the time the franchise agreement is struck.

“So it’s going to be a long road,” Curtiss said. “But a decade from now, I think we’ll be able to look back and say we made a significant difference.”

Of the households offered services, 25 percent would have to be low-income, which is specified at less than $35,000 annually.

Violating the so-called build-out requirement would cause AT&T to be fined up to $10,000 per day, up to a maximum $2 million.

Those penalties also extend to customers who are being discriminated against, up to $5,000 for each violation.

Rural incentive

Another goal of the legislation was to expand broadband Internet access to rural Tennessee for economic development purposes.

While AT&T would be required to offer its television service to roughly 600,000 households, that number could be lower if the telecom giant offers broadband Internet to rural Tennessee.

Under the legislation, AT&T was offered an incentive to expand into rural areas. The telecom giant could offer its television service to fewer households — thereby reducing its expenditures in urban areas — if it offers Internet to underserved, rural parts of Tennessee.

“Will that work? It remains to be seen,” said state Comptroller John Morgan, who was a key figure in designing the rural incentive. “I hope it does.”

AT&T’s 2007 defeat

AT&T praised Naifeh and the legislative leaders and said it would support the bill’s passage.

“While there are items in this bill that we do not think are necessary, we support the compromise legislation,” said Bob Corney, an AT&T spokesman. “We know that competition benefits Tennessee consumers and we look forward to being able to compete for Tennessee customers.”

The cable industry said it “stood firm” in the negotiations to make sure that cable companies like Comcast and Charter were “treated fairly.”

The industry still contended though that if AT&T wanted to compete today, they could go through the local level like Comcast and Charter do.

“This new policy streamlines the franchise process, but it remains to be seen whether new entrants will compete in Tennessee,” said Stacey Briggs, executive director of the Tennessee Cable Telecommunications Association.

The bill’s rollout comes about a year after AT&T endured a stinging defeat at the hands of the cable industry and local governments.

In 2007, AT&T lobbied extensively to pass a bill allowing for a statewide television franchise.

AT&T’s move, however, brought vigorous opposition from the cable industry, who said its business model was threatened, and organizations representing local governments, who were concerned with losing revenues and control.

In the end last year, AT&T’s effort failed, but not after up to $11 million was spent among the telecom giant, the cable industry and local governments on lobbyists and public relations campaigns.

Determined to not watch the same spectacle this year, Naifeh spearheaded talks between AT&T and the cable industry and local government organizations starting late last year.

The compromise bill rolled out yesterday was the byproduct of those negotiations.

“Consumers have won in all of the time spent in this negotiation,” said Rep. Steve McDaniel (R-Parkers Crossroads). “This is about consumers having choice.”

The bill is expected to be debated for the first time Tuesday in front of the House Commerce Committee.