Friday, September 15, 2006

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
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

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.


Anonymous said...

Thank you!
Glad that FIOS TV is coming.

Anonymous said...

Don, an informative blog, as per usual!
Now that a week has past since you posted your blog - have you read any interesting sections of the franchise proposal? Has any independent consumer's group done an analysis yet? Has the financial data turned up?
I'm sure that Comcast is doing an in-depth study of this franchise!
It's really too bad that TAC isn't functioning responsibly. Maybe more people like you on that Committee could make a difference to MC...

Don Libes said...

I submitted a request to the Cable Office for a list of differences (they surely know what they are!) and the missing information (e.g., financials) but haven't heard back from them yet.

McCall said...

I'm forwarding a link to your blog to the county council. Maybe they will respect the care and thought you put into your questions rather than the rubber stamp tax that the proposed Verizon franchise promises to be. Frankly, the PEG programming monies are another political payout by incumbents. Todd

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