California’s powerful telephone and cable companies, bitter rivals who have been at loggerheads for months, came together Tuesday for the first time to jointly support a revised proposal to carve up the state’s multibillion-dollar broadband Internet and video-services market.
In a surprise move, the lead lobbyist for the cable industry, Dennis Mangers, testified in the Senate utilities committee in support of the measure, which is authored by Assembly Speaker Fabian Nunez, D-Los Angeles.
“We support the bill and we want to thank the chair and the speaker for collaborating around-the-clock [with us],” testified Mangers, president of the California Cable & Telecommunications Association.
Their agreement, however, does not spell the end to the controversy of the bill.
A parade of more than one hundred consumer advocates and local government representatives lined up, stretching far into the hallway, to express reservations about the measure during the three-hour hearing. One Senate negotiator said key groups may have been deceived into supporting the bill.
But the story of the day was cable’s sudden reversal. After months of lobbying and advertising campaign against the bill, Nunez won over incumbent cable providers with an amendment to allow the existing cable companies to scrap locally negotiated agreements and opt-in to the new statewide franchise process.
Cable representative Mangers said that, “under the narrowest of circumstances,” cable companies would now have “the ability to opt-in and be able, when faced with imminent competition, to compete with the new entrants on a level playing field.”
The surprise alliance of two of the state’s best-funded political players–the phone and cable companies–ends what has been the year’s most expensive lobbying effort.
With the cable companies now in support, the League of California Cities becomes the chief opponent of the measure, seeking amendments to ensure the bill requires new broadband providers to “build-out” service to entire communities, remains revenue neutral and provides for continued funding for public access television stations.
“Cities welcome competition. We invite competition and embrace choice for consumers, but it has got to be done the right way,” said Alex Padilla, president of the League of California Cities and a candidate for Senate. “Over the years we have established standards to protect consumers at the local level that serve as a great model if the state is going to insist on a state franchising authority.”
With all the major industry players now backing the measure–and consumer groups still raising questions, the rewriting of cable regulations drew several comparisons to California’s failed electricity deregulation plan in 1996. That plan has been blamed, at least in part, for consumer price-gouging and California’s 20001 energy crisis.
“There are a lot of members here who took that vote in 1996, me being one of them,” said Sen. Martha Escutia, D-Montebello, the chairwoman of the committee. “The last thing I want is for this to be labeled the energy debacle of 2006.”
Sen. Joe Dunn, D-Garden Grove, who led an investigation into the energy crisis, said he saw similarities between the language used by energy executives during the energy deregulation scheme and the current cable debate.
Citing energy executives that told one thing to the Legislature and another to earnings-driven Wall Street, Dunn expressed skepticism about AT&T and Verizon’s promise that competition would inherently lower prices. The phone companies say consumer savings could reach $1 billion.
“The problem I have is those are the words of Ken Lay,” said Dunn, referring to Enron’s former CEO, who was recently convicted of fraud and conspiracy charges.
At the end of the marathon meeting, Escutia was granted a rule-waiver to reconvene the Senate utilities committee on Thursday, working out what she described as the “nitty-gritty” details of the legislation.
In the procession of supporters for the bill, Escutia saved her harshest words for the top executives of AT&T and Verizon, promising that Thursday’s hearing would be less pleasant for the telecommunications executives as she tries to extract concessions from them, particularly on issue of serving poorer communities.
“I know that we have more or less an outline of the general consensus, but I really really need to nail this specifically,” Escutia told the Verizon executive.
Indeed, so-called build out requirement remains the biggest looming issue for the legislation.
“Mr. Speaker, you and I come from the same barrios,” said Escutia in her opening remarks. “I am not going to allow a bill to get out of my committee