Is there hope for pay-tv competition in Philadelphia?

Monopolia Comcasticus has dealt our campaign another blow. Comcast and Time Warner have effectively knocked satellite television out of the game by outbidding them in an auction for the largest chunk of our airwaves ever put up for sale.

It foils our plan because we were hoping that a satellite provider with SportsNet could be a viable option for television service in Philly. But a TV or “video service” provider without a broadband option with which to bundle and augment the TV is not viable in this day and age, so industry thinking goes.

DirecTV was hoping to use the new spectrum for wireless broadband. Without it, DirecTV’s owner, Rupert Murdoch has taken to calling the going-nowhere property a “turd bird.”

The Comcast-Time Warner venture, under the name SpectrumCo, spent $2,377,609,000 to foil our and DirecTV’s plans [pdf]. My bumper sticker-bar crawl pledge must have really spooked the big C!

The top bidders were T-Mobile and Verizon Wireless, which spent about $4 billion and $3 billion respectively. They say they’ll use the spectrum to send broadband video to your phones.

100 other companies won licenses for different parts of the spectrum in different parts of the country, but don’t think we’re about to see 100 flowers bloom. As I have done many times before, I refer you to the always-on-point Harold Feld for his analysis of the auction. (Here are the complete results.)

So where does this leave us? RCN, whose one-time offer to compete with Comcast was laughed out of City Hall, is out of the question. They’ve now been laughed completely out of business, unable to stand up to their larger competitors.

We are on our way to a towering duopoly. Thanks in large part to the FCC and Congress, we are being pushed into choosing the video-voice-data bundle from the formerly-just-voice (Verizon) or the formerly-just-video (Comcast).

Under current law, Verizon needs to strike a deal, called a franchise, with City Council to offer video service in the city. They’re trying to change that law in Harrisburg to let them get once franchise for the whole state, as well as through the Senate Bill 2686 that Free The Flyers is aiming at and that would give them a national franchise.

I wrote about the prospect of “state franchising” in April, when I posted my testimony to the House Policy Committee on the matter. (See the agenda from that hearing.) That testimony included a request to close the Comcast Loophole. The State Senate is also considering the matter. (Senate Bill 1247, House Bill 2880.)

You can get regular updates on these bills from Free Press. The House Consumer Affairs Committee held a hearing on SB 1247 today at 9:00 am in Bethelehem’s Town Hall. The State Senate Communications and Technology Committee held a hearing in Media, PA, on August 8.

The way state franchising generally breaks down, the phone companies and alleged free marketeers support it, while the cable companies, local governments (who would lose their franchising authority), and consumers generally oppose it.

It gets a little dicey, though, once the horse trading begins because the truth is we are dying for some cable competition, especially in Philadelphia. It’s just a question of whether that’s what Verizon and Harrisburg are offering us.

Here are the goals the local governments are hoping to achieve:

The coalition’s principles are . . . foster free competition; ensure good video customer service through service provider compliance with local regulations; require timely full build-out of community-wide video service; retain local governments responsibility and authority over the municipal rights-of-way; preserve franchise fee revenues and foster the development of public, educational and governmental channels; and, streamline the franchising process through innovative procedures that are consistent with these principles.

Beth McConnell, Director of PennPIRG, which is a member of the Grassroots Cable Coalition, testified at the August 8 hearing [pdf / text].

Like the local governments, she asked for “universal build-out” or some requirement that state franchisees provide service to everyone and not just the rich; provisions for public, educational, and governmental access channels; and maximum preservation of local authority, whether in franchise fee assessment or in controlling public rights of way where cable or phone companies run their wires. She also pushed for an open system through incentives for leased access to the video channels and net neutrality in broadband.

(The devil is in the details of those build-out requirements. Harrisburg has a track record of being extremely lax in enforcing buildout requirements on Verizon. We talk frequently about the municipal broadband restrictions in Act 183. But the main point of the bill was to erase from memory the deadline the Commonwealth had placed on Verizon to provide broadband throughout the its coverage area and give it a new deadline well into the future.)

I didn’t see any mention of the Comcast Loophole in her statement. However, she smartly points out places where the state could provide incentives or disincentives for certain actions even when it does not have the authority to require or ban them. This would be the same way it could deal with the loophole, though it’s hard to imagine that they would. It’s clearly not something Comcast is interested in negotiating away if they managed to hold onto it through the Adelphia merger.

The objectives Beth offers would probably provide the best results as far as consumers statewide are concerned, but Philadelphia is in a unique spot compared to the rest of the Commonwealth and the country.

Here are the characteristics that make us look at this issue of state and national franchising in a way that no one else does:

  1. We are the largest city without an active public access channel to preserve (though we could lose our claim on the ones we’re not using). That has been a major motivator for opposition from community media, but it doesn’t quote apply here, except out of love for Pittsburgh and Reading and places that do have it.
  2. Comcast has disproportionate influence over our local government. To the extent we preserve “localism,” which in principle I support, we consign ourselves to Comcast’s rule.
  3. We are the most monopolized television market in the country: Comcast owns our major venues, our local sports teams, broadcasts of the local sports games, cable television throughout the entire city, and the soon-to-be-dominant ticketing service… for starters. That makes us the least inviting to a new entrant into the market.

Comcast owns our major venues, our local sports teams, broadcasts of the local sports games, cable television throughout the entire city, and the soon-to-be-dominant ticketing service… for starters. That makes us the least inviting to a new entrant into the market.

The only thing that Philadelphians can care about when they look at these bills in Harrisburg is when will Verizon start offering a TV service that includes Comcast content to all of the neighborhoods of Philadelphia? We should support a bill that makes this more likely and oppose one that makes it less likely.

This may seem callous, especially to people in rural areas, but forcing a build-out to those parts will be tough under any circumstances. Were it able to offer broadband, satellite could be the solution for rural areas, but alas. As it is, satellite providers will probably have to content themselves with that market and they will be closed out of the Internet.

For Verizon to enter the Philly market, they would still have to strike a deal with Comcast for SportsNet – the deal DirecTV couldn’t strike – to make it worthwhile for them to offer video service here.

A Verizon FIOS subscriber in our area told me (FIOS is their branded service for fiber optic broadband and, where allowed, video) that a district manager guaranteed that Verizon would be offering video service in Philadelphia in the near future. The subscriber was skeptical, knowing what he knew about the Comcast Loophole, but the district manager promised that Verizon had deep pockets and would make it happen.

I’m not so sure. An industry analyst told me Verizon has said bluntly it does not intend to build here. Too many poor people for their tastes. Not enough “triple play” customers. That’s my assumption. Why attack the fort when there’s all this low hanging fruit in the form of small, wealthy municipalities?

So it’s not clear that closing the loophole would solve our problem even if they took care of it in Harrisburg or DC. It is still an egregious anticompetitive measure and a regulatory scheme that is particularly offensive to Philadelphians, so we should continue to publicize the issue and work to correct it.

But with the results of this wireless auction the terrain has clearly shifted. The problems run much deeper than SportsNet. We might have to rethink our strategy for getting access to the content we want.

In the meantime, it seems the State Senate Communications and Technology Committee will consider SB 1247 at its next meeting on September 26 and they may be making changes to accommodate the concerns of local governments.

You can contact the following State Senators before then and say that you oppose SB 1247 because it doesn’t close the Comcast Loophole and won’t actually impact my range of choices for cable:

Senator Robert Wonderling, Chair: (717) 787-3110
Senator John Rafferty: (717) 787-1398
Sen. Gibson Armstrong: (717) 787-6535
Sen. John Pippy: 717-787-5839
Sen Bob Regola: (717) 787-6063

Sen. Connie Williams , Minority Chair: (717) 787-5544
Sen. Vince Fumo: (717) 787-5662
Sen. Leanna Washington: (717) 787-1427
Sen. John Wozniak: (717) 787-5400

I will try to submit something in writing to them based on past Free The Flyers comments before then, but, as I said, it’s a busy week. 256 and counting, by the way.


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