Orton Testimony on Wisconsin AB207/SB107

Testimony of Barry Orton
Professor of Telecommunications, UW-Madison

Assembly Committee on Energy and Utilities
Senate Committee on Commerce, Utilities and Rail

March 27, 2007

AB 207/SB 107:
Why Create An Unregulated “Video Service” in Wisconsin?

Nothing is broken that needs legislative fixing:

■   Local franchises for wired video services are the traditional method by which the public’s property is protected, the public’s consumer rights are protected, and the public’s interest with regard to local information is advanced. Local franchises have worked well for many years. AB 207/SB 107 eliminates them. There is no evidence of the unreasonable denial of a single franchise in Wisconsin. In fact, Milwaukee has been able to reach an interim agreement with AT&T so that they may build while the City’s lawsuit proceeds.

■   Franchise fees are the traditional method by which private users of the public rights-of-way pay fair compensation (rent) for the use of that valuable public property. These fees pay for services that benefit all citizens, who jointly own local rights-of-way. Franchise fees have worked well for many years.  The bill would achieve a 15-25% reduction in the franchise fee gross base by the limitation of gross receipts to revenues paid by subscribers (Section 2 (j) 1) and the exclusion of revenues now included, such as late fees. Further, the U-verse plan to serve “low-value” customers with a satellite product would take many current customers off the franchise fee base entirely. AB 207/SB 107 will cause local property taxes to rise.

■  Franchise Agreements and Ordinances are the traditional method to assure that all citizens have access to cable services and that neighborhoods are not left unserved. Such build-out requirements have worked well for many years. AT&T has stated that its “Project Lightspeed” will serve 90% of its “high-value” customers (those who spend $160 - $200/month on telecom & entertainment services), and less than 5% of its “low-value” customers (those who spend less than $110/month). AB 207/SB 107 creates an underclass of underserved citizens in Wisconsin.

■   State and local consumer protection has worked to the advantage of consumers.  Section 100.209 of Wisconsin statutes protects subscriber’s rights to prompt repairs, refunds for service outages, notice of rate increases or service deletions, and written notice of disconnection.    AB 207/SB 107 would eliminate these basic subscriber rights; Wisconsin video service providers could refuse refunds to customers if the service went out, raise rates or cut programming services without any notice, and disconnect customers without notice or reasonable cause.  Instead of eliminating Section 100.209, its protections should be explicitly extended to any video or high-speed broadband service.

■   Local franchise provisions for local noncommercial channels and the organizations that program them are the traditional method to create and fund local educational, cultural, sports, and governmental programming, which has great value in creating local community.  Local access channels have been critical sources for local information for many years. The decreased financial support and increased transmission costs in AB 207/SB 107 will make local access programming less prolific and more difficult for smaller communities to sustain.

These traditional public protections are not a barrier to genuine competition. There is no need to allow unfair advantage to the telephone industry in its efforts to enter the video business, nor no good reason to eliminate the historical structures by which the public’s interests are protected in this important area.

That AB 207/SB 107 prohibits the Department of Financial Institutions (DFI) from enforcing any of the bill’s requirements is a particularly egregious example of legislative chutzpah on the part of its sponsors. If a state agency charged with oversight of an industry cannot promulgate rules interpreting the bill’s provisions, cannot establish procedures for enforcing its requirements, cannot review a franchise applicant’s qualifications, and cannot review or approve a transfer of its franchises, it truly can be said to be powerless.  Under AB 207/SB 107, the DFI could issue a franchise; file it in a cabinet in perpetuity, and little else.  The video consumers of Wisconsin deserve far better.

Comments

[jim guilfoil]

Thank you for your testimony. I have passed it on to the Monona City Council, as well as my Representative and Senator.
The mayor wrote a letter as a result. Thanks.