Got an interesting essay in my inbox this morning from ThinkEquity Partners LLC, an investment bank. The company’s telecom analysts, like many people, are thinking about how a new president – blue or red – should approach communications policy. The most interesting argument? That the new president should repeal all levels of video franchising.

Franchising, write Anton Wahlman, Eric Kainer and Robert Ferguson, “means that a company such as Comcast or AT&T cannot just decide to offer service to customers, but that it needs to apply for a special government permit from a local or state government. In our opinion, if this sounds a lot like Al Capone and other general mafia methods, you are onto the truth. In a place such as New York City, Verizon wants to offer TV service, but it is not allowed to do so until the NYC government gives its blessing, which comes only after Verizon pays a fee and rolls out service precisely according to the wishes of local politicians.”

It’s true that bureaucracy murders creativity. And I don’t mean to say that some franchising requirements aren’t over the top. Or that somebody’s pocketbook isn’t getting a little extra padding thanks to franchising rules. So I agree that some demands likely should be loosened. But not all, because all-or-nothing approaches result in extreme thinking and behavior.

It’s also important not to overlook the question of a president erasing all franchising authority. The ThinkEquity analysts call for “the repeal of franchising authority by all levels of local, state and federal governments.” Uh oh. What happened to states’ rights in that proclamation?

Another reason the analysts push for eradication of franchising laws is that companies such as Google and Apple are innovating at incredible rates. They say wireless and wireline corporations aren’t keeping up because they face more regulatory hurdles. But is it just regulation that keeps the cable and phone companies from innovating like Google and Apple? I tend to think not. I think there’s a lot to be said for mindset. Comcast, AT&T and Verizon to use the above examples, are part of the old guard, traditionally focused on one or two lines of business. Yes, they’re branching out, but slowly. To be sure, it’s still not clear that FiOS and U-verse television services aren’t just “me too” telco versions of cable offerings.

Apple and Google, on the other hand, emphasize and reward fresh thinking and creativity. That’s why we see touch-screen phones from Apple and seemingly bizarre business model changes from Google (pursuing green energy and 700MHz spectrum, developing rival Microsoft Office software).

Granted, regulation always catches up with innovation. It’s like the dark spectre around the corner, waiting. So, sometime soon, Google and Apple will find themselves under regulators’ thumbs (Google’s already facing this with the DoubleClick regulatory approvals), yet my guess is they’ll start innovating on other planes. It’s all about thinking faster and smarter than the bureaucrats and politicians (which, really, isn’t so tough to do). So, Mr. or Ms. President, yes, please pay attention to communications policy, but don’t do away with states’ rights or wipe out safeguards that protect consumers.

Oops. Does that plea reek of Mafioso thinking?

User Comments !

At one point I may have agreed with you.  However after watching AT&T try to ram statewide franchising down the throats of municipalities in Illinois last year, eliminating local control over rights of ways, street corners, and people's backyards, I found there is a definite need for responsive local govenrment oversight of the process.  In addition, franchising helps guarantee valuable (to the consumer and not necessarily to the provider) options such as local access and government programming. 

It does work both ways. The access to utility easements franchising provides enables service providers to implement their product without the need to negotiate property access with every individual land owner.

Franchising is not (and should not be) extortion, but rather it can be a fair means to allocate public resources to the private sector while protecting the "little guy."

Posted by: Bob | February 08 2008 07:28:18