Executive Hearing Testimony

This past Thursday, September 28 2006, I attended the hearing for the public to testify on the Proposed Verizon franchise. There were 15 speakers, most of them members of the public. There were no council members present and the executive (whose hearing it was) was not there either. I was not surprised as the same thing happened at the previous hearing of this type (the last was during the Comcast transfer several years ago).

A few of the presentations were excellent and I hope to get a hold of the transcripts when available. In the meantime, if you're on a Windows platform, you can watch the video. It's about an hour. A discussion of some of the testimony can be found at dslreports.

Here is what I presented. If it seems short, that's because members of the public were asked to keep it to 3 minutes.

My name is Don Libes and I thank you for the opportunity to testify on the proposed Verizon franchise.

Although I look forward to competition in Montgomery County, I am concerned that the county appears to be rushing into this particular agreement without a thorough understanding of what it means.

I have been stymied in understanding it myself. For example, I have asked the county cable office for a list of differences between the current and new franchises and have received no reply. Surely, the council needs such a list as well. Please make this information available along with a clear explanation of the reason for each change and its expected impacts.

I would also like to ask why the county appears to be suppressing much of the background material. For example, roughly 135 pages have been made available. This is in contrast to the roughly 900 pages of material made available during the last Comcast negotiation. What’s missing?

The technology assessment from CTC is completely missing. The assessment from the county’s financial advisors Ashpaugh & Sculco is missing. There’s no correspondence, no indication of discussions, no explanation of the reasons the proposed franchise looks the way it does.

And this is after a year of negotations followed by court actions and mediation, during which the franchise was shaped. There ought to be a huge paper trail and the county needs to provide this to the public. And all PDF documents should be searchable. The council does this; the Executive should as well.

Time will not permit all my other questions but here are a few examples:

Will the existing franchises be changed in any ways to bring them closer in to line with this new one? If so, how?

How are gross revenues for video-on-demand and streaming video to be computed? Does it depend on whether such video is initiated via an internet connection or whether it is transferred using cable TV bandwidth? The franchise is too vague on what is and is not a cable service and leaves consumers open to unpleasant surprises and court battles.

How does the county justify the continuing demand for dedicated PEG channels when they are more effectively provided as video-on-demand? The county continues to do this without any meaningful viewer statistics as far as I’m aware. Just because the FCC says we can doesn’t mean we should. Video-on-demand is the future of narrowcasting and PEGs should lead the way. I believe the cost to the consumer would decrease and PEG viewership would rise if VOD were widely adopted by the PEGs and protected by the franchise.

Lastly, the Verizon application, attachment 4, promises an analog tier in the clear but the corresponding description in the proposed franchise seems quite a bit more narrow. As most subscribers seek to avoid set-top boxes, please address this difference between the two documents.

Thank you for allowing me to testify on the proposed Verizon franchise.

Hearing Tonight

As I mentioned previously, the public is invited to testify at the hearing this evening (Thursday, Sept 28 2006) on the proposed Verizon franchise.

Earlier today I spoke to Amy Wilson in the Cable Office and she said that 16 people are on the list to speak tonight. It's not too late to pre-register and she encouraged pre-registration but said that people will be permitted to speak without registering in advance. Citizens normally get 3 minutes each. Additional comments can be submitted in writing or email up to October 2. Note: The meeting has been moved from the 3rd floor to the 7th floor of the County Council Building.

Amy also explained that the hearing is for the benefit of the County Executive. (I had previously written that it was a council hearing.) This tells me that the proposed franchise is still in the Executive's hands and has not gone to the council for approval. I don't know what to make of that given the county's publication of the proposed franchise on their website. My past experience with these dual hearings is that the county executive hearings are purely for appearance. Nothing I've ever heard at one - at least the cable-related hearings - has been incorporated or used in any way.

In contrast, comments at the council hearings do get more consideration. You'd think that it ought to work in reverse - that the earlier you get your comments in, the more likely they can be incorporated. Your best bet: Give testimony at both hearings.

Yes, there will be a second hearing on the Verizon franchise. The council is required to hold their own. I'm not aware that any date for that hearing has been set yet. So predicted deployment dates that I mentioned previously should be moved further back - perhaps by another month at best.

See you tonight!

Proposed Verizon Franchise

Verizon has officially submitted their franchise application. The Executive has accepted it and the two have agreed on a franchise. Whew!

I'll be precise: the franchise should now be referred to as the proposed franchise because it must still approved by the County Council. We can expect them to request changes to the proposed franchise. There will be severe pressure not to make changes but that won't stop them from trying - they are politicians, after all. It's in their nature.

In addition, they are required to hold a public hearing on the franchise. There's little reason to speak at the hearing just to encourage the council to approve the franchise. Shucks, even Comcast has said "... we welcome competition" so mere cheerleaders are not needed.

But if there is something that isn't properly addressed in the proposal, it is our duty as citizens to point it out. Indeed, that is the point of the public hearing. It is our one opportunity to speak directly and publicly to the council on the matter. Given that the proposal is for a 15-year franchise (that lengthy term itself is only the start of my concerns), this is a rare opportunity indeed.

A public hearing will be held on September 28 at 7 p.m. in the Third Floor Hearing Room of the Stella B. Werner Council Office Building, 100 Maryland Avenue in Rockville. Individuals may either testify in person at the public hearing or provide written comments for the record. To pre-register to testify at the hearing, contact the County’s Cable Office at 240-777-3684. Written comments may be submitted through 5:00 p.m. on Monday, October 2, 2006 or as otherwise directed by the Hearing Officer. Comments should be mailed or delivered to DTS-Cable Office, 100 Maryland Avenue, Suite 250, Rockville, MD 20850. Comments may also be submitted via email to amy.wilson@montgomerycountymd.gov.

The hearing is less than 2 weeks away. You may get excited that such a rapidly-scheduled hearing means MC is now pushing hard to get to the end, but I'm concerned that there isn't enough time to review the material, form an educated position, and write any kind of intelligent statement with suggestions to the council. The application and proposed franchise have only just been released to the public. And I've seen no analysis whether the franchise proposal has any changes from current franchises. (Surely, the county has such an analysis?) What timebombs are waiting in the franchise for us to discover only when it is too late? (Community discussion and analysis can be found at dslreports.com.)

I've only started going through the material myself. Do we know how some of the contentious issues were resolved? No. (For example, will Verizon be subject to the existing cable modem regulations or was Verizon able to get them scrapped?) At the same time, I'm already shocked at the LACK of material. During the last Comcast franchise hearing, there were 900 or so pages of documentation made available to the public. That depth of analysis is either missing here or has been withheld from the public. For instance, the financial data is completely absent.

Various MC officials have stated that the conditions should be the same across franchises; however, don't misinterpret this to mean Verizon will just get a copy of the existing Comcast franchise. There are plenty of things in the existing requirements that don't make much sense in the context of duplicate systems (such as the institutional network and free access for public facilities). And other provisions are worded so vaguely that the provisions are useless (such as the telephone answering requirements). New franchises are opportunities to fix the worst of these.

Since the council can significantly delay the process, my guess is another four months before service can actually be offered, meaning roughly January 1 of 2007. Verizon hedged a bit and predicted "early next year." Jane Lawton, MC Cable Administrator, carefully spoke only about MC activity when the Washington Post quoted her saying that "council approval could come by the end of the year."

MC Wins ... and Loses

One might assume that the Verizon agreement is a win for Montgomery County. Whether that's true depends very much on the individual.

For example, the COPE Act is the national franchise bill pending in Congress. Earlier, I had wondered if COPE would make the Verizon lawsuit moot if the lawsuit ran long enough. COPE actually has some good provisions as well as bad ones. Consider the PEG financing amendment. COPE would have lowered the payment to PEGs from 3% to 1% of gross revenues. If you are a watcher of PEG channels, this is a disaster - think 66% budget cut. (The PEGs claim 53% but don't explain their calculations. Close enough anyway. The point is, it's a huge cut.) On the other hand, if you don't watch PEG channels (which is probably true for greater than 95% of the population), you might wonder why you have to pay for all this stuff you don't watch.

But the cost for PEGs is peanuts compared to the expected (17%) savings that other communities are averaging from competitive TV offerings. And we can already see the dramatic difference in the cost of internet service. It's inconceivable that Comcast will not lower its internet prices. And Comcast will have to raise its performance as well. I've compared the two services before and the figures are still valid. (See Best Deal For Comcast Customers and What's FIOS.)

On the other hand, if you're an RCN customer, you may not find this news too uplifting. For RCN, this is yet one more nail in the coffin - quite unfortunate given RCN's record of customer satisfaction. As long as Comcast was their competition, it was easy for RCN to shine. But with Verizon entering the picture - driving down prices - and all three offering triple plays (and possibly quadruple plays - net, tv, home phone, cell phone), RCN will likely find its business even more financially untenable. The winners in the industry are growing in order to profit from the advantages of scale. RCN, which recently sold off a significant base of its subscribers, is headed in the other direction. RCN claims it is looking for a buyer but it would be nuts to buy its MC operation given the presence of Comcast and Verizon. And there's no reason for either of them to buy RCN either.

One more potential winner: Rockville. Since the earlier treatment that Rockville was giving Verizon, it appears that Rockville is coming around. I've been told that Verizon offered to fund a new study that might justify lower permit fees in Rockville. And the Baltimore Business Journal reports that the proposed franchise would include Rockville.

Finally, it bears mentioning that Verizon's lawsuit has not disappeared. Until the council approves the franchise and the papers are signed, Verizon will hold the lawsuit over MC's head. Good thing, too.

TAC This

The Telecommunications Advisory Committee is a group of citizens appointed by the Montgomery County Executive to provide advice to the Executive and the Council. Earlier this summer, I pointed out how disappointed I was that the TAC wasn't meeting during the summer. Let me rephrase that: I'm disgusted that the TAC is completely out of the loop. In my earlier tirade, I gave examples of what they've missed during their summer recesses and to that list we can now add another item of significance: the proposed franchise. As of today, they still haven't met since they began their recess and thus there will not be enough time to deliver a TAC recommendation to the council on the franchise by the September 28 deadline.

But this should not be a surprise. The TAC has been kept out of the loop for the entire year of Verizon negotations. It was never told about the extent of the meetings with Verizon. The TAC was never informed about the recommendations the county was making to Verizon or what Verizon was requesting in return. The TAC was never told about any of the Verizon-related FCC filings. And the TAC was not invited to the strategy discussions of the Council or the Executive.

So a failure to deliver any kind of recommendation is, well, tradition. There's no point to continuing the committee anyway - is there? When was the last time the Executive followed the TAC's advice anyway? I fail to see the point of going through the pretense of advertising for candidates, interviewing them, selecting them, having the council approve them, and holding meetings. It's a big charade. It's a waste of taxpayer dollars. We ought to stop it.