WASHINGTON -- Federal Communications Commission Chairman Kevin J. Martin said yesterday that the agency should help telephone companies such as Verizon Communications Inc. offer television service in competition with cable TV.
The FCC will "seek to eliminate any unreasonable barriers to entry and to address other issues that we find impede such progress," Martin said at a commission meeting in Keller, Texas, where Verizon first began offering TV services in September.
Martin's comments indicate that the FCC may override state and local rules that Verizon and AT&T; Inc., the largest U.S. phone companies, say hamper their ability to roll out TV service. Phone companies right now must seek approval from local communities before offering TV to compete with cable providers such as Time Warner Inc., Comcast Corp. and Charter Communications Inc.
"It would be very good news" for Verizon and AT&T; as well as consumers, said Daniela Spassova, who helps manage $153 billion at Des Moines, Iowa-based Principal Global Investors, including Verizon and AT&T; debt. "People will have a lot of options and prices of the packages will go down. It will validate all the spending."
Shares of Verizon, which is spending as much as $22 billion on its TV service, rose 52 cents to close at $33.18 yesterday on the New York Stock Exchange. AT&T;'s shares rose 35 cents to $27.48; Comcast fell 6 cents to $26.55; Time Warner dipped 3 cents to $18.32; and Charter inched up a penny to $1.20.
Verizon has since expanded TV service to 13 other Texas communities and parts of Virginia, New York, Florida, Massachusetts and California after winning approval from local authorities, and is laying cable in parts of Maryland. AT&T; offers television service on a trial basis in San Antonio. AT&T; plans to broaden the service this year and expand its fiber-optic network to reach 18 million homes by the end of 2008.
"The commission should facilitate this entry," Martin said, after releasing an annual FCC report on video competition.
The FCC's report showed the market share of cable companies fell to 69.4 percent in the year through June, from 71.6 percent 12 months earlier. Satellite companies' market share rose to 27.7 percent, from 25.1 percent a year earlier. The number of basic cable subscribers fell from 66.1 million to 65.4 million, while the number of homes subscribing to satellite services rose from 23.2 million to 26.1 million.
Cable companies are more likely to expand their services and channels in response to competition, rather than reduce prices, according to the report. It said telephone companies "hold promise to become a growing presence" in the television market.
"I think this is potentially the most exciting and dramatic infusion of competition we've seen since the advent of satellite television," said Democratic Commissioner Michael J. Copps.
Testifying at the FCC meeting, Verizon and AT&T; executives said the local franchising process makes it difficult and costly to roll out TV services in competition with cable companies.
Verizon Senior Vice President Marilyn O'Connell said it takes an average of 18 months to 20 months to complete the process in each municipality. Many local agencies have proposed "conditions that we cannot accept," such as requiring the company to extend its fiber-optic network beyond the area that is subject to the TV franchise, she said.