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Blanco, special interests try to spin her veto choices

All of Gov. Kathleen Blanco, cable companies, and local governments went into damage control mode to justify the special treatment handed out to certain special interests, to the detriment of consumers and taxpayers, with her recent veto decisions.

Blanco is fooling nobody by her issuance of an executive order which will have nongovernmental recipients of line item largesse in the state budget submit documentation and financial statements regarding their uses of the funding. All it does is to require reporting, it does not mandate any evaluation of the actual merits of the uses to which the money is put. True accountability would be to make sure the spending is in accordance with an essential need of the state. Or, as Treasurer John Kennedy noted, the time to scrutinize questionable projects is before they get into the budget, not after they have been put there by legislators.

Cable television interests attempted to spin away criticism of the veto of HB 699, which leaves its provision essentially in a monopoly controlled by them and local governments. Sharon Kleinpeter, vice president of governmental and public affairs for Cox Communications (which, by the way, is reducing its presence in the state with the recent completed sale of its north Louisiana operations), said the bill was unnecessary because there are no real barriers to competition in the cable industry.

That’s not entirely true. The barrier is local government’s attitudes and economic reality – nothing in the law requires any government to accept any offer to provide services. At present, the large fixed costs for provision of infrastructure makes it prohibitive to new entrants. Thus, one part of HB 699 would have waived off certain costs to new entrants in order to encourage competition – costs, in fact, emanating from the whims of local governments. One was the ability of local government to use pass-through fees on cable subscribers to raise revenue, a stealth fee increase on its citizens. Another was mandating “buildout,” meaning forcing providers to create supply in economically unviable parts of their jurisdictions. Both mean higher rates, one as a fee, and the other as a subsidy.

This is why HB 699 would have reduced costs to consumers and provided more choice. And that’s why both local governments and cable companies fought it – the former to protect its additional revenues, the other to protect its monopoly status, with the latter point brought home when Cox immediately raised its rates in two locations the day of the HB 699 veto.

Thus, it is with incredible arrogance and/or stupidity that one representative of local interests, Roland Dartez, executive director of the Police Jury Association of Louisiana, said, “We really think we’re going to be able to protect the consumers a lot better this way.” No, it just protects your ability to squeeze more out of them. It is also with incredible skepticism that one should greet Louisiana Municipal Association Executive Director Tom Ed McHugh’s statement, “We can work with the industry … to get them out competing quicker than the bill itself.”

If McHugh is serious, he’ll ask for legislation which gets rid of the stealth fee increase ability of local governments and negates buildout provisions. After all, if rates do go down with competition, demand will increase supply which will bring more money into government coffers from the sales tax on the rates and it will increase the economic incentives to supply in areas previously unprofitable. If he doesn’t, it shows his group's members merely wants to protect their power and privilege.

Legislation along these lines needs to reappear and pass next session. Maybe in an election year Blanco will listen more closely to the people than to special interests.


Anonymous said...

We all welcome both the increase in choice and a decrease in prices that this could have brought to the average consumer. One issued not mentioned in this discussion is the destruction of local public access television. Here in Lafayette, those “stealth” fees you refer to fund Acadiana Open Channel. Since Cox Cable must come to an agreement with the local government, AOC is guaranteed that locally produced content will air on a designated channel on the cable network. The proposed changes would have eliminated the need for negotiating with local governments, therefore discarding public access television. I readily admit I am not the most well informed person in regards to the public access issue, but as someone who has recently begun to help coordinate and produce local television at AOC, this is a concern. There should be a way that local programming can be protected while still giving us the choices and price reduction we crave. Mr. Sadow, please do some research and comment on how this affects this topic.

Anonymous said...

I'm worried that what used to be conservatism has become an excuse for shilling for corporate monopolies.

Really, HB 699 was BellSouth's bill. BellSouth is the definitive monopoly with only the weakest and sporadic competition. It has long "owned" the Louisiana legislature and this bill was a great example of that. During Senate debate the bills handler (most definitely not its "author") had to leave the podium to retrieve the "right" answers to hard questions.

This heart of this bill for BellSouth was the "build-out" requirements that you so blithely dismiss. In attempts to save the bill BellSouth made it clear that it was willing to pay without quarrel or question the vast majority of the franchise fees involved. AT&T, which is in the midst of an uncontested purchase of BellSouth has made it repeatedly clear that it doesn't intend to compete on price. And in its limited pilot it has not. So competition, as we usually understand it, or saving the consumer any real money is not even on the table.

What was on the table and what BellSouth refused to back away from were the build-out requirements and it is those that were at the heart of public outcry and local government resistance.

Contrary to popular belief local cable franchises are NOT and never have been grants of local monopolies. As you correctly note the real issue is the purely commercial cost of getting into the business and competing against a company that has paid for the expensive infrastructure that is necessary. NO local government is going to stand in the way of cable competition...if you think differently you've not attended a council or police jury meeting where cable rates are the issue.

But more potent than cable rate increases for local government is the issue of service. Public officials hate dealing with outrage at rate increases-increases over which they have no control. But even more they hate the idea of telling the people of the community that some of them are "good enough" to get service and some are not. Surely we can all look around our own community and know which neighborhoods will be served by BellSouth's faux "competition" and which will not...ever. Competition for the rich, gated communities is gonna be hugely unpopular and local officials who are embroiled daily in conflicts of this kind are acutely aware of how poisonous such neighborhood resentment already is.

What cable franchises really do is something every so-called conservative that isn't bound up in the new corporate "conservatism" ought to be for: they exchange the rights of the owners of property--the public's rights of way--for cash and contractual obligations. One of those VERY reasonable conditions is that if you want to use the public's property for your private property you have to agree to serve all the public -- not just the wealthy, influential few. That is ALL the buildout requirement does and it is only responsible for public officials to insist on it.

BellSouth has its infrastructure built out into every corner of the state (built on a nationally sanctioned monopoly) and doesn't need the state of Louisiana to strip away local governments' property rights in order to serve communities. Would it be less profitable? Sure. Too bad. The state has no right to step into the breach and tell communities what they have to do with their own property in order to serve the profit margin of some corporation so its CEO and execs have bragging rights at the golf club and a fatter pension.

Jeff Sadow said...

In the second post, you seemd to have missed the entire point. Is provision of cable an "essential" service? Of course not. Then why should governemnt be in the business of telling providers who they have to create access for if the service (unlike water & sewerage, electricty etc.) if it is not essential? Especially when there's burden shifting going on with some ratepayers subsidizing others for, I remind you, a nonessential service. That is the true conservative argument to be made here.

As for the right-of-way issue, if we remove the extraneous point above, then the statewide franchise fee compensates for any trade of public property for private use. And the issue is removed from local officials responsibility -- you don't go complaining about electricity rate increases to them, it's the PSC where that is handled. So why can't it be that way for cable?

The "monopoly" argument also depends upon curious logic. Note that the handlers of HB 699 offered to give cable companies the same statewide fracnhise deal -- and cable companies rejected it. They did because they enjoy their monopoly status; they don't want rates being forced down and they don't want competition. Which is why the "same existing offer" deal was a red herring and fraud; cable companies know that with the up-front fixed costs competitors cannot hope to match the deal they're getting. (Ironically, over 20 years ago AT&T was being criticized for having this very advantage.)

Finally, HB 699 was an attempt by the state to use its legitimate Lawrason powers to tell communities what they had to do with their property -- in order to prevent local communities' politicians from committing stealth revenue increases and to prevent the fattening of cable companies' profit margins (or, more accurately, stem the losses of a cable industry grown fat and and inefficient by the very lack of competition). It's almost comical to see this unholy alliance scrambling to justify its power and privilege by the arguments you present by their very weakness.

As for the first comment, there's no need for government to provide any kind of broadcasting, public or public access; taxpayers or ratepayers should not be forced to subsidize programming over which they have next to no control. If that chafes, then I would recommend dissemination over a low-cost media -- such as the Internet. It obviously works -- you found this blog.

Anonymous said...

It is entertaining to see so-called conservatives trying to justify transferring power up the hierarchy of government to the state in order to benefit the bottom line of one of the most rapacious corporations in the state. Whatever happened to good ole Goldwater conservatism and the new libertarianism?

The "nonessential" argument doesn't hold water..literally. The water drilling companies are surely hurting from the widespread provision of municipal water. Should we stop cities from providing water just because it makes good sense from both a cost and community safety point of view? Apparently not, if you are a corporate conservative. We could all have toll roads. It's not essential that we let government build them. It just makes a lot more sense than any private alternative. Electricity and sewerage have become "essential services" within the lifetime of people now living. And the arguments against city provision of these "luxuries" is the same sort of complacent "they don't really NEED that and I don't want to help pay for it" sort of short-sighted justification that is put forward here.

Good, cheap, rapid, high-rate broadband is the interstate of new economic development. Broadband infrastructure doesn't need to make money-- communities want is the money that will be made because of its existence. Conservatives conveniently forget their opposition to the "boondoggle" of the Interstate Highway System now that it has become an unquestioned economic driver.

Anyone who thinks that complaining to the PSC about their electricity rates is more effective than complaining to their local municipal electric company or their coop isn't thinking very hard. The state regulatorium is notoriously the creature of the corporations. Unless we get on the stick even fewer of us will have a local alternative for broadband than we do for electricity. Moving control up the hierarchy to a spot more distant from local control is profoundly anti-conservative. And, hey, anti-democratic.

You are simply wrong about Cox, Time-Warner et. al and their opposition to the statewide franchise deal. Cox and the cable companies in the state came on board between the house and the senate versions of the bill--precisely when BellSouth & AT&T wrote in a section giving the cable companies leave to break their contracts with local governments. That wasn't in the initial bill because the local governments pointed out the flaw. It got put back in to shut the cable companies up. There is a serious constitutional and practical issue here. The constitution prohibits the state from preempting such contracts. (Sanctity of contract? Constitutional issues? That's for those old-fashioned non-corporate conservatives.)

BellSouth-AT&T has confidently stated that it don't intend to lower prices. They want to compete on features at the high end of the scale. They say so very plainly in their conversations with investors. (Regardless of what they tell rural legislators like Montgomery who front their bills.)

What they want to do is to cherry-pick the wealthiest few neighborhoods, snip off the really profitable "high value" tier, get the majority of profit available in the local market and leave the rest of the community high and dry.

Local government is absolutely right to object to a private company using public property to serve the already favored few. They ought to be free to say to a corporation like BellSouth "Serve us all or lease your rights of way from private providers."

That is the real issue here.

Jeff Sadow said...

Sigh ... it's pretty tough to live if you don't have access to water or electricity by a provider. I don't think anybody ever has had problems surviving without cable. If this comparison doens't make you see how silly your assertion of the "essentiality" of cable is, nothing is going to. And, if it is so essential, why hasn't government done anything about those dastardly satellite providers that avoid franchise fees entirely? Please, think before you make these arguments.

Also, you seem confused over what a conservative would support in this instance. At its heart, conservatism argues for the minimal state that intervenes only in the case of a failure of a good provision (such as defense, public safety, etc.) and to preserve a moral fabric that has evolved over the ages (it is here that it departs from libertarianism, which argues only for the nightwatchman state). HB 699 would have permitted less government involvement in this provision of this good.

At the same time, conservatives recognize that, except for those instances above, that free markets are the most beneficial for all of society. As noted, you cannot with a straight face claim cable is a good so essential and so underprovided without government involvement that it should not operate in as free a market as possible. If you are a true conservative, you will dispense with facile notions of corporate power which in fact is dwarfed and almost impotent when up against market forces -- if government will stop interfering with the market.