AT&T, Naperville, Ill., Reach IPTV Impasse

In a situation that likely illustrates the video franchising process at the municipal level, numerous months of talks to bring IPTV services from AT&T Inc. to residents in Naperville, Ill., have ceased, with neither side close to satisfied.

What’s really at stake for the individual cities and towns, as is being claimed by the city, is that the carrier seeks to cherry-pick where it deploys its U-verse bundle, focusing first and foremost on upscale communities likely to spend the most on its services.

"AT&T wants to hand pick their customers, rather than providing service to the entire community,” said Terry Miller, Naperville's senior assistant city attorney. “If they want to be treated like a public utility, they have to serve everybody. What it comes down to is that AT&T wants to compete on its own terms by asking our state legislators to grant them favoritism over existing cable companies."

So, the city said, AT&T is seeking to bypass Naperville by pushing for legislation that would grant it the ability to land a statewide franchise. But being bypassed service-delivery wise is what seems to anger the city most. It said it isn’t on the carrier’s deployment list, despite its best efforts.

In a rare appeal to legislators considering the bill in Illinois, the city issued a press release urging the legislation’s defeat. Naperville said nearly half a year of discussions in 2006 to get AT&T to bring U-verse to its residents failed.

After months of negotiating with city officials, an AT&T spokesman said, “at the last hour, the Naperville City Council voted to include what they knew to be a requirement that prevented us from reaching a competitive local video agreement.”

“The city council voted to require the inclusion of a mandatory build-out provision in their agreement with AT&T, when it was clear from the start that it would be a deal breaker,” the AT&T spokesman explained. “Requiring new competitors to build their networks everywhere immediately will likely mean they cannot afford to build their networks anywhere.”

The FCC agreed in a Dec. 20 decision that build-out requirements are actually counterproductive to encouraging competition in the video market.

“It was unfortunate that AT&T invested five months of time and resources in negotiations, when, at the end of the day, (Naperville) inserted the build-out requirement they knew would end our discussions,” the spokesman said. “AT&T was willing to invest millions of dollars in Naperville with the hope of winning customers. That competition would have only benefited the Naperville consumers.”

AT&T is behind the eight ball in this and similar situations across the country as it and other telcos such as Verizon fight an uphill battle against cable operator incumbents to deploy their IPTV services to a broader base.

“The 28th most profitable company in the Fortune 500 should not need special treatment. AT&T is able to compete in the marketplace without favoritism; they just don't want to do so," stated Naperville City Manager Peter Burchard, in prepared comments. "For years, cable companies have entered into franchise agreements with municipalities. However, AT&T does not want to compete on the same terms as cable companies and claims that individual franchise agreements are too burdensome."

As noted by the FCC, the video franchising battle has raged on – in many cases with state regulators allowing telcos to file for a statewide franchise in a set period, as is the case with New Jersey’s 90-day rule.

While AT&T missed its U-verse deployment mark for 2006 by four markets, and just added two in Wisconsin last week and the Dallas-Fort Worth area this week, it has managed to deploy the package in parts of six states.

New video service entrants hope a recently issued FCC order at least applies some uniformity and limitation to the process of acquiring franchises at the municipal level.

The plight of new entrants is hardly new or limited to Tier 1 telcos such as AT&T and Verizon. Rural telcos have complained about what they call extras that are tacked on as conditions for receiving franchise approval.

AT&T, Inc. www.att.com  

City of Naperville, Ill. www.naperville.il.us  

FCC www.fcc.gov  

Verizon Communications Inc. www.verizon.com

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