The Federal Communications Commission approved changes yesterday that make it easier for big telephone companies such as Verizon Communications Inc. to enter the pay-television market.
The commissioners voted to support regulations that would keep local franchising authorities from "unreasonably refusing" to award franchise agreements to cable providers. Examples noted by the commission of ways local authorities have unreasonably prohibited franchise agreements include having drawn-out negotiations and demanding certain costs and fees of the provider.
The vote was along partisan lines, with the commission's three Republicans voting in favor of the changes and the two Democrats opposing them.
"Today the commission is taking a step forward in what I hope will be a noble quest to spur more competition across more delivery platforms," said Commissioner Robert M. McDowell, a Republican.
FCC Chairman Kevin Martin said he hoped the changes would halt the relentless rise in cable prices. An FCC report released yesterday showed that the average monthly rate for cable service rose 5.2 percent in 2004, and 93 percent since just before the telecommunications sector was deregulated in 1996, while the cost of other telecommunications service has fallen. Several of the commissioners, however, said the report was flawed and provided insufficient data.
The study shows that "cable competition can make a difference and impact consumers' bills," Martin said.
Critics argued that the decision takes authority away from local government, leaves some consumers vulnerable and does not create a level playing field as cable and telephone companies jockey for customers. Proponents of the changes said they would bring more competition to the cable market, giving consumers greater choices and ultimately lower prices.
"Simplifying that process has been something that's been needed for quite a long time," said Wayne Crews, vice president for policy at the Competitive Enterprise Institute, a Washington think tank. "What we need to do now is move to a world where it's a lot easier for different competitors to get into offering the same services."
Doing so, Crews said, will mean more broadband choices for customers - allowing consumers, for instance, to download movies instantly.
The report and ruling come as cable, television and the Internet are converging into a single set of services. Comcast, Maryland's dominant cable provider, is now offering telephone service, while Verizon is rolling out a fiber-optic television service known as FiOS TV to customers around the country, including parts of Maryland.
The phone giant has been seeking local franchise agreements around the country and said yesterday's FCC vote would help speed up its entry into the television market.
"Today's action will fast-forward the delivery of new choices, lower prices and better services to consumers," Susanne Guyer, Verizon's senior vice president for federal regulatory affairs, said in a statement. "The FCC is standing up for consumers who are tired of skyrocketing cable bills and want greater choice in service providers and programming."
Verizon has obtained more than 200 local franchise agreements in Maryland, California, Florida, Massachusetts, Pennsylvania, Texas and Virginia, said David Fish, a company spokesman.
At the end of the third quarter, Verizon had 118,000 FiOS TV subscribers and service was available to 1.2 million homes and businesses. The company hopes to have 175,000 subscribers and service available to 1.8 million premises by the end of the year, Fish said.
But cable companies are moving into the phone industry at a much faster clip than traditional telephone providers are getting into cable. The Convergence Consulting Group, a consulting and research firm headquartered in Toronto, predicts that cable companies will have 9.1 million residential telephone subscribers in North America by the end of the year, and 24 million by the end of 2009.
Telephone companies are expected to have 600,000 television subscribers by the end of the year and 6.5 million by the end of 2009, according to the group.
Comcast declined to comment on the FCC ruling, saying it was an industry issue. The company deferred comments to the National Cable & Telecommunications Association.
Kyle McSlarrow, president and chief executive officer of the National Cable and Telecommunications Association in Washington, called the decision a step backward. Any changes should apply to both cable companies and new entrants, he said, adding that the changes approved yesterday do not.
"We ought to be providing one level playing field on which everybody can be playing fairly from day one," he said. "We see no justification or authority for disparate treatment of us and the telephone companies."
Mark Cooper, director of research at the Consumer Federation of America, called the decision "outrageous." The changes restrict local authorities' ability to negotiate deals for communications networks in their area, he said.
"The county is a cornerstone of providing local services. We in America have always prided ourselves on that, police and fire, garbage and snow removal, county libraries ... and the county, one of the things they ask for is a 21st-century communications network," Cooper said.
Putting restrictions on local government puts some consumers at risk of higher cable prices and fewer choices, Jeannine Kenney, senior policy analyst with Consumers Union, said in a statement.
"Consumers are ill-served by the commission's decision to let phone companies pick and choose which neighborhoods will get more choice for cable service and which will be left with only their monopoly cable provider, facing both rate hikes and no hope of any alternative," Kenney said.
"Unless consumers receive assurances from both the FCC and the Bells that cable rates will actually decline for all customers in a market after phone companies begin offering service, FCC's decision may do more harm than good," Kenney said.