Simple Questions, Complex Answers: An Examination of SB5s Impact on Texans

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Simple Questions, Complex Answers An
Examination of SB5s Impact on Texans

• Connie Ledoux Book, Ph.D.
• Elon University
• TATOA
• August 7, 2008

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What was in store for North Carolina?

• A review of the new franchise areas established
  using SB5 by Verizon and ATT and the
  demographics of those locations.
• A review of the activity at the Public Utility
  Commission of TX
• Perceptions among municipal officials as to how
  well the process was working.
• A review of citizen complaints being received.
• How the establishment of competitive environments
  impacted cable bills.
• An understanding of costs and taxation in Texas
  associated with the new telecommunications
  competition.
• Interviews on the impact of public, education and
  government funding models changing.

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Has SB5 created competition that resulted in
lower cable costs for customers in Texas?
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• SB5 has created competitive markets in more
  affluent, wealthier areas of Texas. These
  residents benefit from having choice between
  cable providers and the hope that a competitive
  environment will bring about better customer
  service and pricing benefits. However, none of
  the newly established pricing plans ultimately
  save these Texans more money on a monthly basis.
  At the same time this competitive cable scenario
  exists for a few communities in Texas, the
  passage of SB5 has resulted in every Texan
  subsidizing competition for the few through
  telecom taxes and regulatory fees.

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The argued positives.

• create thousands of jobs
• create telecommunications competition
• bring new products
• provide for better service from telecom providers
• lower prices for consumers

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The argued negatives.

• raise telecom taxes
• create a digital divide
• reduce revenue or services in some Texan cities
  where cable franchising negotiations had provided
  more than a franchise fee
• would fall hardest on the poorer communities and
  rural communities of Texas.

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The First Roll-Out Areas

• Earn almost twice as much in annual income as the
  average Texan.
• Are twice as likely to be White non-Hispanic
• Have home values that are more than double that
  of the average Texas home
• Have virtually non-existent poverty levels (500
  lower than the State of Texas)
• Are twice as likely to have earned a college
  degree
• Additionally, 34 more likely to report owning
  their home.

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Over time the Texans receiving Verizon FIOS
service has come closer to reflecting the average
Texan, but there is still a significant
disparity.
At the rate Verizon is building-out in Texas, it
will not reach full penetration until 2020, even
with the help of millions of dollars in subsidies
a year.
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Understanding the Triple Play Customer

• 83 of cable subscribers are not bundled
  customers.
• National Cable Television Association Statistics
• Total number of households served by
  cable 65,600,000 (59 penetration of HH)
• Total number of digital cable subscribers 34,000,
  000 (52 of all cable households)
• Total number of high speed data
  subscribers 28,900,000 (46 of all cable
  households)
• Total number of telephone subscribers 11,000,000
  (17 of all cable households)

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Not surprising

• Of the 78 of customers that did not switch said
  there was no real cost benefit to doing so.
• Most customers that did switch did not report any
  cost savings. Primary reasons for switching were
  customer service and more package options.

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The PEG Dilemma

• Case study San Antonio
• PEG costs
• 415,000 of which 186,000 was operating.
• These operating costs became a new fiscal
  obligation of the City.
• 300 franchise will expire across the State in
  the next 10 years.

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Hyper-Local Intiatives

• Verizon FIOS in DC
• In some ways, the content of public, education
  and government access channels is now in
  competition with these very local initiatives.

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Sample Bill
Telephone Bill
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Federal Universal Service Fund

• Mandated by the FCC in the Telecommunications Act
  of 1996
• High Cost high cost and rural areas
• Lifeline emergency services
• Schools and Libraries qualifying schools and
  libraries
• Rural Healthcare health care providers in rural
  areas

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PUC of Texas

• Texas Universal Fund, geographic areas havent
  been upgraded in 10 years.
• Texas has third highest telecom taxes in the
  Country.
• 600 million in payments to telephone providers
  each year.
• Infrastructure improvements allowed on basic
  phone bill pass thru, up 19 in last five years.
• Advertising too!

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Texas Universal Service Fund

• Created in January 1999
• Growth of fund
• Disbursements to programs
• High Cost
• Lifeline
• Schools and Libraries
• Rural Healthcare

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Disbursement of Federal USF funds provided to
Verizon by initial FiOS communities (thousands)
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Success of SB5 Report? Missing.

• The oversight of customer service provisions of
  video services.
• An understanding of the target area for video
  services competition and when other communities
  of Texas will see deployment of telco video
  services.
• An understanding of the impact of the loss of
  in-kind provisions of the cable franchise on the
  local tax base and the loss of these services in
  general.
• The role of PUCT in video service issues.
• A review of the Texas telecommunications tax and
  fee base and embedded costs in the phone bill
  related to infrastructure improvements and
  advertising for video services. be addressed for
  consumers.

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An Examination of the Use of Anecdotal
Evidencein the FCCs Report and Order on Video
Franchising
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Scant, dated, isolated and unverified FCC
Chairman Jonathan Adelstein describing data
presented in the video franchising report and
order.
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• The report and order cites 25 examples of
  municipal franchising, of which 15 are provided
  by telephone companies of unreasonable and
  extravagant requests made my municipalities in
  the local franchising process.
• All were supplied by ATT or Verizon.
• Only seven (7) could be identified with a
  specific LFA.

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What the Report Order Could have said

• Offering good examples in open forums.
• 30,000 franchises and historically the least
  litigious of FCC environments and with the most
  concrete public interest outcomes.
• Concerns about telco litigious activity.
• Morganton, NC
• Greensboro, NC