States Take the Lead on Video Franchise Reform

IPI's Bartlett Cleland says triple-play prices in Texas have gone down about 25 percent.

Most states wrapped up legislative work in the early summer, and by that time, 14 more had followed Texas in passing video franchise reform laws.

The changes promise to give consumers more choices at lower prices and spur broadband investment in America, say some industry analysts. Even some cable representatives are happy with the updates.

“We believe state legislators have taken our concerns into account as they’ve worked to fashion state franchising solutions,” says Rob Stoddard, a spokesman for the National Cable & Telecommunications Association. The group hopes consumers will see more choices as the country reaps the benefits of more network investment. “As long as all competitors are treated equally, we think that’s likely to be the result,” Stoddard says.

Nonetheless, because the rules are brand new, the full effects of franchise reform remain unknown.

“It’s still too early to tell,” says Bartlett Cleland, director of the Center for Technology Freedom within the Institute for Policy Innovation (IPI). IPI is a conservative, free-market think tank in Dallas that says it’s not directly connected to the telco industry. Cleland adds, “the people who won big-time were the consumers.”

Federal agencies and many analysts so far agree. In May, the Department of Justice said it supports statewide franchises for their promise to increase competition and lower prices. And the Brookings Institution, typically a more left-leaning think tank, in a June report said state video franchises appear to be contributing to broadband investment and competition.

Cleland couldn’t be happier. Since Texas in 2005 became the first state to pass video franchise reform, triple-play prices have fallen by about 25 percent, he says. The law, Cleland says, “kicked off all kinds of things, including continued reduction in price, a better product and new products.”

Statewide franchises translate into lower prices by allowing competitors to enter markets faster and more easily than they would have under old laws.

The benefits of new franchise rules in additional states are obvious, Cleland says. He points to AT&T Inc.’s planned $335 million investment in Missouri, as well as Verizon Communications Inc.’s intent to pump $500 million into its fiber-optic network in Florida.

There isn’t universal consensus on the positives of video franchise reform, however.

In Michigan, consumer activists say a community media center had to reduce its hours because statewide franchising reform bills cut or eliminated money for public, education and governmental channels and facilities. SaveAccess.org., a group promoting local control, called the changes at the Grand Rapids Media Center “a harbinger of more bad days to come.”

Cable incumbents in Texas remain excluded from taking advantage of the state’s new franchise terms. In that state, legacy providers still operate under old agreements and it’s unknown whether legislators there will address the perceived imbalance. “We think competitors should be placed on a level playing field — not one provider laboring under one set of circumstances while another gets a ‘better’ deal,” says Cleland.

Lawmakers in states including Indiana and Virginia since have ensured incumbents can get in on updated processes.

Industry experts predict video franchise reform will remain a hot topic. Most legislatures had adjourned by late June but Cleland, for one, expects the states that haven’t passed reform to pursue the issue. They’ll “be very hard-pressed not to reform their state,” he says. “You’ve got too many big states where it’s all going well and consumers are winning.”

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