Verizon Cable Bill Clears Big Hurdle — Tuesday, March 14, 2006


Verizon's plan to sell cable TV service over a new fiber network in New Jersey got a major boost Monday.

A state Senate committee approved a bill that would grant Verizon a statewide video franchise, allowing the phone giant to bypass the lengthy town-by-town negotiating process that has been in place for more than 30 years. A full Senate vote may come this spring.

"This piece of legislation provides for competition in a fair and equitable way and will result in lower costs to consumers," said Sen. Joseph Doria, D-Hudson, the bill's co-sponsor.

Opponents, including the cable TV industry, warned that the law is a "special deal" for Verizon that would raise franchise fees paid by consumers for cable service.

If the bill becomes law, legislators estimated that between 75 and 85 percent of the state will be able to purchase Verizon's TV service within five to six years, and that prices charged for cable TV could drop by as much as 23 percent.

The bill includes provisions that would require Verizon to build its network and sell service in urban as well as rural parts of the state.

Some testifying Monday warned that despite the competition that would result when Verizon enters a TV market, prices might inch up after an initial marketing push. And others sought assurances that low-income residents, particularly those in high-rise buildings, would be given the opportunity to buy the new services.

"We need to make sure we don't create more haves and have-nots," said Newark Councilwoman Gayle Chaneyfield-Jenkins.

The measure has been fiercely opposed by local cable companies, which don't want to relinquish their market share to Verizon.

The phone company is building a high-speed network capable of phone, Internet and video service throughout its territory to compete with cable companies, which have successfully introduced telephone service.

The battle has been particularly hard-fought in New Jersey, a lucrative market where Verizon competes against some of the most advanced and aggressive cable operators, including Cablevision, Comcast and Time Warner. Both Verizon and the state's cable industry spent about $1 million apiece last year fighting each other by lobbying lawmakers and running ads.

Monday's hearing brought a parade of local officials, labor leaders, consumer advocates and hired experts testifying both for and against the proposal.

Verizon paid Randal D. Pinkett, a telecommunications expert who won "The Apprentice," Donald Trump's reality TV series, to testify in support of the bill.

The New Jersey Cable Telecommunications Association flew in a Texas legislator who had opposed a similar statewide law passed last year in Texas.

After four of the five committee members voted in favor of the bill and one abstained, Verizon New Jersey President Dennis Bone called it a "substantial step."

Verizon first attempted to get legislators to introduce a bill about a year ago, but lawmakers failed to agree on the bill's language. Negotiations on several key issues continued right up until the start of Monday's hearing.

Answering critics who accused Verizon of targeting only wealthy towns, lawmakers included requirements that Verizon build its network in many parts of the state, including inner cities and rural areas, or face penalties. They also deleted language that would have allowed Verizon to refuse to install service for "technical reasons," which New Jersey Citizen Action Executive Director Phyllis Salowe-Kaye referred to as a loophole big enough to drive a truck through.

The proposal calls for Verizon to build its network in 60 of the most densely populated towns in the state, which includes all the major urban cities. The company must start within three years, and complete the entire town within six years of starting the job. The bill also calls for the company to wire every county seat, a move that would guarantee wiring in some of the rural southern parts of the state.

In any town where Verizon begins building its network, it will build out the entire town and won't "just pick and choose," said Assemblyman Wilfredo Caraballo, D-Essex, the bill's Assembly sponsor.

The measure calls for an increase in the franchise fees paid by consumers and passed along to towns to pay for property tax relief. From its current level of 2 percent of the basic cable rate, the fees would rise to 4 percent of an expanded cable package, which averages about $67. Fees would increase for all cable customers but only in towns where Verizon has begun to sell its television service. A previous version of the bill would have boosted franchise fees statewide for all cable customers.

Of that 4 percent, 3

Karen Alexander, president of the state cable association, said she was "disappointed" that her organization hadn't had a chance to see the changes made by the committee. Later, she issued a sharply worded statement saying, "This proposed legislation paves the way for a special deal that will significantly raise taxes, widen the digital divide and compromise New Jersey's tradition of fair competition on a level playing field."

A handful of other states have passed similar laws giving Verizon a statewide franchise, but Bone said the New Jersey proposal includes more requirements than in any other state.

Verizon is selling its Internet service over the new fiber network in about 70 New Jersey towns and plans to have the service available in about 200 towns by the end of the year.

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