Competition is expected to bring lower rates for telephone, television and Internet services to Malibu subscribers.
By Ward Lauren / Special to The Malibu Times
A choice of cable and telephone providers, bringing lower rates for telephone, television and high-speed Internet service through the competition that would result, may become a reality for Malibu residents thanks to advanced technology and a bill that Gov. Arnold Schwarzenegger signed into law last week.
AB 2987, the Digital Infrastructure and Video Competition Act of 2006, will allow telephone companies that can provide video services through phone lines to compete more easily against cable television companies by granting them a single statewide permit. Its stated intent is to open up cable competition to telephone and other companies, and thus offer consumers greater choice and lower cable bills. It will also shift regulation of pay TV services from cities and counties to the state.
The bill is a boon for television service providers because it will eliminate the costly practice of obtaining cable franchises city by city. However, it poses a potential problem for the cities, said Mayor Ken Kearsley, through loss of a sizable income from the licensing of franchises to cable companies, set at 5 percent of cable revenue.
This amounted to $189,000 for the city of Malibu last year, Kearsley said. The Assembly bill does stipulate that local governments would continue to receive their 5 percent, but the mayor sees an all-too-familiar pattern in this arrangement.
“Once the state takes over and gets the money, it tends to start looking at it avariciously, as its own money,” he said. “So we lobbied to try to beat this bill.”
This spring, on one of the state’s semiannual legislative action days, Kearsley and Councilmember Sharon Barovsky went to Sacramento and joined forces with the League of California Cities, which also wanted the bill defeated, to lobby against it. The effort was unsuccessful as the bill was passed 72-0, Kearsley said, but the city’s 5 percent revenue is secure because of a special deal made with Verizon.
“We now have a contract with Verizon that guarantees that our franchise revenue from them will continue for at least 15 years,” Kearsley said. “It also contains commitments to assign Channel 3 as the government channel, as it is now, and to reserve an additional public, educational and government channel for future use.
“The main thing is the language in the agreement states that if there is a change to federal or state law that permits but does not require a franchisee to opt out or terminate the agreement, the franchisee agrees to honor it for 15 years.”
The latter point is significant in view of a possible federal cable TV law that some see coming eventually that would prevail over the new state law, he said.
“So we got everything we wanted,” he said, ” because we were willing to step forward and do it right now. In the meantime, we still have our 5 percent contract with Charter and we intend to work out a private deal with them similar to the Verizon agreement.”
Verizon spokesman Jon Davies confirmed the terms of the deal his company has made with Malibu, and that all agreements reached prior to the signing of the bill will remain intact.
“This will allow us to get into the video business a lot quicker than if we had to wait for the bill to take effect,” he said, “because even after the governor’s signature, it won’t become law until the first of January. We’re very anxious to get out there and offer a choice to our customers.”
He said the work to install fiber optics service in Malibu is nearly complete. Some construction is still going on in some neighborhoods, but the bulk of the work has been done, he said.
A spokesperson for Charter Communications did not return phone calls by press time.
Verizon is ramping up to compete with Charter to provide television and high-speed Internet services to all of Malibu through fiber optics lines directly into the home of every subscriber. Charter, the city’s cable franchisee, in turn is planning to use its cable network to provide local telephone service to undercut Verizon.
A 2005 study analyzing Federal Communications Commission data on competitive and noncompetitive cable markets found that subscription rates for basic and expanded services averaged 16 per cent less in competitive markets. In January this year, a study conducted by Bank of America found that when new competitors have entered a cable market, existing providers have dropped prices by 28 to 42 per cent.