Cable competition bill good for Louisiana citizens

What many people don’t understand about the ramifications of HB 699 is that it’s not so much telephone vs. cable companies, but rather it’s local government vs. the people.

This bill by Rep. Billy Montgomery would allow telephone companies to provide channel-selectable cable television service by going through a state franchising agreement, rather than by negotiating one by one local contracts. While the phone company side of the story is that greater competition ensues and the cable company side is that the phone companies get special privileges under this bill, the conflict actually revolves around other considerations:

Currently, negotiating locally for cable service which is almost exclusively granted to cable companies allows local government to extract concessions from operators such as requiring the making available of service to financially unprofitable customers, in exchange for which cable companies are unregulated in terms of their prices they may charge to customers and in the kinds of payments they must make to local governments which then can be passed along to consumers. Further, local governments are not compelled to grant contracts to providers other than cable even if the offer made by the other providers is much superior to the existing contract with the cable company.

The bill would grant a statewide franchise to phone companies that would make local governments unable to specify requirements concerning customer service and “buildout” (mandating service provision in potentially unprofitable areas), as well as not being able to force providers to carry public access channels or other channels favored by local governments on the basic (minimum) tier of coverage and would allow the state to supersede local right-of-way restrictions.

Thus, the question is, should greater competition be encouraged by allowing in phone companies under fewer restrictions than other franchisees have contracted for (some over 20 years) which will lower prices to consumers and reduce revenues to local governments, or is it unfair to do so? Specifically, by ridding the phone companies of having to adhere to local standards (like buildout, customer service requirements, channel provision, and assessing extra fees that can be passed on to consumers), would that reduce the barriers to entry (costs) to the market enough to encourage phone companies not only to get in the business of offering channel-selectable services at no extra cost (note that cable companies due to their near-monopoly status offer only a limited form of this and at premium prices) but to expand those services, given their start-up costs are lower because they do not have to adhere to the local standards and the extra expense that they entail?

This answer depends upon how one conceptualizes the scope and purpose of local government. The organizations representing these governments have taken the position that local government needs to control the marketplace to excise from providers what it thinks is best, and thus opposes the bill. Proponents of the bill see the marketplace as a better, more efficient distributor of resources regarding this area of policy – and they have the better of this argument.

For example, why should there be buildout provisions? It’s not like cable service, unlike water and electricity and/or gas, is essential to anybody’s life. Let the market decide who has access to cable; if enough people demand it, providers will do so. Why must government mandate this? Why is that so important to the polity?

In the end, as is so often true in politics, you need to follow the money to understand who supports what. And again, it’s quite simple here despite the bill’s complexity: the current arrangement allows local governments to divert more money to their own coffers, extracted from the citizenry itself in the form of pass-along charges from operators, than probably would happen under the bill (the bill’s supporters would say not as signing contracts with phone companies for the service would grow the market at the expense of the one provider local governments cannot extract from, satellite, while its detractors argue legal changes could allow phone companies to evade paying such fees to local governments).

This is why the conflict properly is viewed as one of local government rights vs. the peoples’. Do local governments have the right to raise money through a back-door scheme as under the current law and justifying it by referencing supposed benefits such as “buildout,” or does the state have the power to impose greater competition that may cuase local governments to lose revenues but which would aid consumers (and recall that all local governments in Louisiana, even those 32 entities operating under home rule charters, are subordinate to the state government that created them and may regulate their behavior)?

The answer should be obvious: the latter, and even objections to this as being a “double standard” do not stand up under scrutiny. For example, one objection is that contractual arrangements have been made between local governments and cable operators for extended periods, locking in the operators under conditions that are more stringent than those that could be specified under this bill, putting them at a disadvantage. So what? This could be solved by state statute, by voiding all such contracts and allowing for renegotiation.

Another is that customer service standards no longer could be mandated. But that’s necessary only in a near-monopoly situation which typifies landwire service today. If there’s real competition, the marketplace competition will eliminate the need for government to mandate.

In short, even if one phone company likely would take up most of this new market, the fact is it would bring competition to a monopolistic market not so much dominated by cable companies, but by the local governments that use cable companies to create the near-monopoly to benefit both. The simple fact is, even if you assist a dominant supplier into a marketplace, if it squares off against a favored dominant supplier backed by government, more competition has been introduced and consumers ineluctably benefit. Two would-be monopolists competing prevents that market from becoming a marketplace ultimately dictated to by government. (Indeed, under the current law a local government could deliberately favor a provider for political reasons, and pass any additional costs into consumers.)

In the final analysis, even if local government may lose revenues with this bill’s enacting into law, consumers as a whole gain. That’s why it was good that the bill advanced today in the House, and that it should become law.