Shreveport needs to support true cable provision reform

In April, the Shreveport City Council joined other local governing authorities in Louisiana in unanimously passing a resolution stating it that invites competition for local provision of cable television services. This was a feel-good-only instrument that does practically nothing to encourage competition or to lower prices for cable customers, and instead creates more opportunity to empower government and incumbent monopolistic cable providers at the expense of consumers.

Actually, it could have been worse. A large portion of the resolution was lifted from language formulated by the Louisiana Municipal Association, but it left out the strongest part of the suggested verbiage that would have stated it was Shreveport’s intent not to enter a franchise agreement with any provider that did not adhere to an attached “model” cable franchise agreement – an agreement skewed in favor of government and existing providers.

Why is the LMA so keen on slighting ratepayers by pushing this resolution and agreement? Because last year, with his most significant bill in his nearly-two decades in the state Legislature, state Rep. Billy Montgomery nearly won a big victory for consumers. HB 699 would have created less bureaucracy, less government intrusion, and genuine competition to bring down cable prices while increasing quality had it been enacted into law.

This bill would have made significant changes to the way in which cable franchising is done in Louisiana:

Currently, negotiating is done locally for cable service which is almost exclusively granted to large cable companies that 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 (usable as general revenues) 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 not already comprehensively covered by federal law, 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 existing tiers of channels plus 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 demands and the extra expense that they entail?

Opponents brought up a number of spurious arguments against the bill which all fail because of a simple fact: the increased competition brought about by this bill, similar ones of which already have passed in numerous states, will lead to lower costs, better service, and solve any genuine problems, such as encouraging buildout not through government mandate but by market forces. Last month, an American Enterprise Institute- Brookings Joint Center for Regulatory Studies publication noted a bill substantially like HB 699 would save consumers three times the revenue local governments lost by it.

Unfortunately, despite his long tenure Montgomery did not have the power to prevent defenders of the status quo from getting Gov. Kathleen Blanco to veto the bill. In response, the LMA launched a pre-emptive strike with its sham posing as a supporter of competition and reform with its agreement language in order to try to take the steam out of genuine reform attempts like a reintroduced version of HB 699 (which also should allow present franchisees to operate under the new rules). Its suggestion basically invites in new competitors under the old, anti-competitive rules, with the exception that matching offers will be accepted.

In case you're wondering, this legislative session Montgomery, nor any other legislator, did anything to bring back a version of HB 699. Meanwhile, local cable companies across the state have begin rolling out phone service, taking advantage of statewide approval to do this -- an option denied phone companies trying to get into the cable business when HB 699 was vetoed.

If serious about assisting consumers through lower prices and promoting quality, the Council and other local entities will pass a resolution supporting the concepts of last year’s HB 699, instead of tagging along behind a big-government advocacy smokescreen that allows them to continue to inflict backdoor revenue-raising franchise fees passed through onto consumers.