Global Insight Perspective | |
Significance | The telcos are cheered by news that they will no longer have to seek municipal-level approval for cable TV franchises in California. |
Implications | This will remove the main legal hurdle that the telcos have faced as they roll out video-capable next-generation networks, allowing them to concentrate on developing the network itself. |
Outlook | With legislation that would create a level playing field with cable TV companies and provide telcos with a national franchise stumbling through the Senate, state-level legislation will simplify matters for the likes of Verizon and AT&T, which no longer have to seek local approval to make the service available to small municipalities in California. |
News that Arnold Schwarzenegger, governor of California, has signed the Digital Infrastructure and Cable Competition Act into state law will provide relief to the telecom companies that are currently rolling out FTTx networks across the country. Previously, and still in other states, telecom companies have been required to gain approval from small municipalities to offer their services. For example, on 20 September 2006, the Board of Selectmen in Boxborough, Massachusetts, voted to allow FiOS TV services in their municipality of 2,000. Verizon has also been in negotiations with more than 40 communities in Massachusetts alone to allow it to deliver the FiOS service. This quantity of local legal manoeuvres affects the pace and cost of a network roll-out.
Cable TV companies are not limited by legislation on providing telephony services competing with the telcos on their own territory to the same degree, and have been rapidly rolling out VoIP telephony and triple-play service packages. Cable companies are also starting to target the telecoms' traditional business markets (see United States: 21 September 2006: Comcast Announces Growth; Cable Companies Target Businesses), increasing competition and threatening revenues from this lucrative market. The triple-play service package that television offers is integral to telcos' maintaining their competitive position in residential services, as 80% of FiOS TV customers purchase a bundle of voice, internet, and TV services.
Outlook and Implications
- National Legislation: To level the playing field, legislation has been proposed that will allow the telcos to have nationwide TV franchises, but this has stalled amid concerns over "Net Neutrality" aspects of the bill which would allow companies to limit or prioritise network traffic (see United States: 22 September 2006: Net Neutrality and Telco TV Telecoms Bill Looks Shaky).
- Legal Challenge Quashed: A similar law was passed in Texas in September 2005. A lawsuit from the Texas Cable and Telecommunications Association, claiming the legislation was unfair because it locks cable companies into existing municipal franchises, has just been dismissed by the federal court on the request of AT&T, which is rolling out the U-Verse TV service (see United States: 9 May 2006: AT&T Announces New Broadband and Video Deployment) with plans for delivery to 5.5 million homes in the 41 markets is serves.
- Good Outlook Improves: This news will help Verizon, which has already announced that the costs of FiOS deployment are falling and that subscriber numbers are growing faster than expected (see: United States: 28 September 2006: Verizon Lays Out FiOS Deployment Status, Expectations).