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Brier Dudley's blog

Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

February 9, 2015 at 10:00 AM

Seattle drafts new cable TV rules in CenturyLink’s favor

Once again, the city of Seattle is letting CenturyLink decide how and where digital services will be upgraded on public property.

At least that’s what it looks like is happening at City Hall, which last week floated a plan to basically give CenturyLink carte blanche to roll out a new TV service where it sees fit.

This is a departure from longstanding policies that require cable TV companies, within seven years of entering an area, to provide service to everyone.

The policies were put in place a generation ago to ensure companies didn’t cherry-pick the city by providing service to affluent and dense neighborhoods while leaving others behind with substandard service.

Telecom companies have long chafed against rules calling for such universal service. Nationally, their lobbying against these rules has contributed to the political tug of war between those who believe business should be unfettered and those who believe regulations are needed for public benefit.

For the past two decades, telecoms have been winning. Since 1996, the industry has been steadily deregulated in Congress and courts.

The concept of universal service, which ensured that just about everyone could get wired phone service, was later applied to cable TV. But that was basically cast aside when wireless telephony and broadband emerged.

Now the pendulum is swinging the other way.

The net-neutrality regulations that the Federal Communications Commission proposed last week reflect a new consensus that’s emerging. There’s widespread belief that we can no longer trust broadband-providing telecom companies to act in our best interest and it’s time to regulate them like other utilities.

Here's the current cable franchise districts. Comcast is Blue, Wave is green and beige is where they overlap.

Here are the current Seattle cable franchise districts. Comcast is Blue, Wave is green and beige is where they overlap.

You’d think Seattle would be on board. City officials have supported the Democratic stance favoring firm net-neutrality regulation.

But City Hall is going the opposite direction with CenturyLink and giving up what little leverage Seattle has to push the company toward universal service.

Reports by the staff of Mayor Ed Murray describe the old approach — defining areas of the city where service must be made available — as “an antiquated concept.”

So instead of requiring cable companies to offer service to everyone in their service area, the city would only require them to provide a map showing where they opted to build out their service.

Murray’s proposal goes even further by removing a backstop preventing exclusion. Currently, the City Council can require that service be extended to a previously excluded area. That’s being repealed.

Perhaps this is happening because CenturyLink has been one of the biggest donors to Murray and other officials’ election campaigns.

Maybe Seattle officials are spooked by FCC decisions that have chipped away at cities’ franchising authority.

Or maybe they just have faith that CenturyLink will do the right thing.

Instead of requiring the company to serve everyone in a franchise area, the rules propose having CenturyLink “meet with the city regularly to demonstrate that its commitments to consumer equity are being met.”

If only they were so mellow when you wanted to use a plastic shopping bag.

But CenturyLink gets special treatment. Last year, at the company’s request, Murray changed land-use rules to make it easier to install aboveground utility cabinets on parking strips in front of homes.

This was pitched as a way to foster competition. Century­Link has indeed started adding fiber-optic broadband in a few neighborhoods, though $152 per month is too high for most.

The bottom line is that Murray tilted the benefit of the regulations from residents toward the company.

It’s happening to ease Cen­turyLink’s rollout of its “Prism” cable TV service.

Seattle was going to overhaul its cable TV rules anyway. Some of the proposed changes are great, like prohibiting cable companies from locking apartment buildings into long-term, exclusive contracts.

But after the city showed CenturyLink a draft of its plan, the company called for all sorts of changes that ended up in the proposed legislation.

This isn’t just happening in Seattle. Phone companies moving into the cable TV business have fought universal-service policies all over. In California, they persuaded lawmakers to eliminate local franchising and replace it with state regulations that don’t have the same build-out requirements.

In Seattle, the city now has franchise agreements with Comcast, which cover most of the city, and with Wave Broadband, which has pockets including the Central District. Under the established franchising system, the city used its authority to make cable-TV providers build out their systems within their franchise areas and required them to provide universal service.

As a result, pretty much every home was covered by those agreements when those cables began also carrying broadband. That was a lucky break, since cities don’t have authority over broadband.

Perhaps Seattle could try something similar with CenturyLink, to ensure that its broadband is upgraded far and wide. Its Prism TV service is delivered via broadband, so its broadband will go where Prism service goes.

Instead, Seattle is proposing to let CenturyLink and other new providers pick and choose where to go, as long as they’re not discriminating against racial or economic groups and extend service to some low-income housing.

Asked how much of the city will get CenturyLink’s TV service, CenturyLink spokeswoman Meg Andrews said that remains to be seen.

“When service is launched under a competitive franchise, expansion is dependent upon consumer demand and company capabilities,” she said. “This approach is consistent with other recent facilities-based providers across the country.”

It should be a given that CenturyLink can’t discriminate without consequences. Connecting low-income housing suggests universal coverage but it’s not; low-income housing units are scattered around the city so CenturyLink will pass some wherever it goes.

“You can see what’s going to happen. The new providers are interested in the (valuable) demographic areas and other residences will be without,” said Tillman Lay, a Washington, D.C., lawyer who represents local governments on telecom issues.

“The question is, how far can you push them?”

Then there’s the promise of competition — and implication of lower prices — under the proposed changes. Yes, CenturyLink will compete with Comcast and Wave Broadband.

But I’ll bet cable TV prices won’t change much, even if Murray personally hangs wires for CenturyLink. Cable prices reflect the cost of content, which is going up. Rates you pay are determined largely by how much ESPN and other networks charge cable carriers.

In other cities where CenturyLink has launched Prism TV — a service it delivers via broadband — it charges about $65 per month when bundled with other Cen­turyLink services. Comcast charges $66 to $75 per month for standard digital service and less if it’s part of a bundle.

Meanwhile, the biggest competition for cable TV has come from people getting creative and mixing and matching budget TV options — such as free broadcast TV or $16-a-month bare-bones cable — with online video.

I wish Seattle would also get creative in its pursuit of new TV services.

Perhaps the city should consider the path taken by Denver, which is also haggling with CenturyLink and updating franchise rules.

Instead of doing away with franchise areas and build-out requirements, Denver is proposing a progressive, tiered approach. It calls for CenturyLink to offer TV service to at least 15 percent of the city within two years and add network hubs in every city council district.

If the company wins 27.5 percent of the customers in a district, it would have to add another hub there.

Finally, if its TV service grows to serve 50 percent of the market, it would then have to provide universal service within four years.

Seattle has a better football team. But Denver is putting us to shame when it comes to creatively figuring out how to encourage new digital services and competition without abandoning its commitment to universal service and the best interests of its residents.

Comments | More in Columns | Topics: broadband, centurylink, Comcast

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