CABLE LARGELY UNENCUMBERED BY ADVERSE LEGISLATION IN STATES

As traditional cable issues continued to take a back seat in state legislatures this year, the industry turned its attention to more-peripheral issues -- bills sponsored by DSL providers for regulatory parity, privacy, spam and energy efficiency standards for set-top boxes and DTV converter boxes. It was an “uneventful” legislative year for cable in the states, said NCTA Senior Dir.-State Telecom Rick Cimmerman.

Cable spent time dealing with bills backed primarily by SBC and to a lesser extent by BellSouth that would require either that cable modem service be treated the same as DSL for regulatory purposes or that DSL be deregulated, he said. State cable associations also lent support to efforts in cash-poor states to tax DBS, although only a few were involved directly.

Cable didn’t have problems with deregulating DSL, Cimmerman said. But when telephone companies sought parity, there was a chance cable modem might be regulated. Based on a model that passed in Okla. last year, bills were introduced in Conn., Ill., Ind., Kan., Miss., Nev., Tex., S.C. and Tenn. this year, he said. Of those, he said, 2 were enacted -- in Nev. and S.C. -- that barred state regulators from imposing any regulation on broadband providers regardless of the technology or medium. The cable industry also was following privacy and spam legislation in the states because cable operators were providing high-speed Internet services. The concern for cable here was that whatever rules were mandated they not be overly burdensome for the providers, Cimmerman said.

The cable and CE industries put up a joint fight against a spate of bills that sought to mandate the Environmental Protection Agency’s voluntary Energy Star standards for cable and satellite set--top boxes and digital converter boxes (CD July 3 p5). Bills were introduced in 14 states -- Colo., Conn., Hawaii, Ill., Mass., Md., Me., N.C., N.H., N.J., N.Y., R.I., Tenn. and Tex. Cable officials had worked with their CE counterparts to oppose the bills because “we were concerned about what that means for those boxes in terms of costs and innovation,” Cimmerman said. In almost all cases where the bills got out of committee, the industry was able to win removal of provisions mandating standards for set-top boxes. In Md., the legislature passed a bill that called for a study of energy consumption of set-top boxes but it was vetoed by Gov. Bob Ehrlich (R). Energy conservation advocates have vowed to try again next year.

Cable had argued that although it wasn’t opposed to energy efficiency standards for any devices, set-top boxes that typically were left on all day for always-on Internet connections and other video functions already were relatively energy efficient, Cimmerman said. Ten different set-top boxes meet the Energy Star’s voluntary requirements, he said. To meet standards proposed in the bills, manufacturers would have been forced to limit the number of products and features that consumers demanded, he said.

As for cable proper, there wasn’t anything in the legislatures that seemed to have the potential for a trend that would require the NCTA to become involved, Cimmerman said. The reason 2003 had been a legislatively uneventful year was that there was no coalition or group of competitors pursuing issues such as open access, he said: “There is no burning issue out there raging across the country.” Privacy and spam will continue to be on the cable industry radar in the next legislative session, he said. Voice-over-Internet Protocol (VoIP) is one the issues that cable will be working on with regulatory commissions and to a lesser extent with lawmakers in the states next year, he said: “We don’t really expect legislators to jump into the VoIP game.”

Cal. is one of many states where cable is backing legislative proposals to tax DBS revenue to offset shrinking revenue. The industry is supporting efforts to include language in the budget calling for a 5%-8% tax on satellite services, said Dennis Mangers, senior vp, Cal. Cable & Telecom Assn. Assn. Vp-Govt. Affairs Gilbert Martinez said cable programming was identical to what was provided on DBS and that Cal. tax policy required that every service be taxed in a fair and equitable manner. The legislature finally has recognized that, he said: “Cable pays 5% of gross revenue to most cities, a utility user tax in over 180 jurisdictions and to a varying degree we provide free PEG channels.” DBS, on the other hand, doesn’t even pay sales tax, except when a consumer buys a product, he said.

Most of the other bills in which cable was interested in Cal. related to the telephone side of the business, Mangers said. Cox, which provides facilities-based telephony, and other companies are developing IP telephony plans, he said, and when they do so they'll be subject to laws on telephone companies. “So everything currently going on relating to telecommunications has become of heightened interest to us,” Mangers said. Of the half-dozen privacy bills, cable was concerned about SB-602 that would bar sharing of cable TV customer information with affiliates within the state. The industry did persuade the sponsor of the bill to carve out an exemption for cable, Martinez said. As far as traditional cable issues were concerned, “we were able to insulate the industry from any attacks this year based on our rates or services quality,” he said. That was despite concerns raised by lawmakers on rates and service quality, he said: “Of course, all this happened prior to the recent announcement by the FCC that cable rates had risen dramatically.”

In Fla., cable was concerned primarily with 2 bills that ultimately were adopted, state Cable & Telecom Assn. Pres. Steve Wilkerson said. SB-654, a comprehensive rewrite of state telecom law, prohibits the state from regulating VoIP in ways that telecom services have typically been regulated. It also preempted local govts. from regulating broadband or information services. All cable companies in the state are in trials with VoIP, Wilkerson said, and would roll out the service in the next few months “on a fairly substantial basis.” HB-79, which related to security of broadband communications, broadened the definition of communications services to include all video, data and audio communications services on all delivery systems. Under tax reforms undertaken by the state 3 years ago, all communications providers, including DBS, are subject to equal taxes across the board, he said.

New England states were hit with identical energy standards bills this year, but where they got out of committee, “we were able to get the cable references taken out,” said Bill Durand, exec. vp of the New England Cable & Telecom Assn. (NECTA). The issue probably will be back, depending on what happens with the energy bill in Congress, he said. The energy bill now being debated in the Senate calls for a Dept. of Energy rulemaking on standby energy consumption of battery chargers and external power supplies that find application in products such as cordless phones, wall packs and portable electronic devices, especially lap- tops. DoE then will specify whether standards restricting standby mode power consumption will be required within 18 months. The department also would be required to determine whether the standards should cover other products such as set-top boxes.

Other bills NECTA opposed were those in Me. that sought to impose rate regulation on expanded basic service and to create state regulatory authority for franchising, Durand said. Both were defeated. In R.I., which gives franchises in perpetuity, an unsuccessful effort was made to legislate a 12-year franchise term with a 3% franchise fees. The industry made the case that companies such as Cox were encouraged to invest millions of dollars in system upgrades because of the franchise system in the state, which had the highest percentage of high-speed data and telephone availability in the country, he said. In Conn., a bill that would tie the length of the franchise term to whether a company had raised rates above inflation passed the legislature, Durand said: “That bill is obviously illegal and the question before us is whether it is ripe for challenge.”

R.I. taxes DBS as it does cable, Durand said: “I see it [DBS tax] coming in the other states. These states are struggling fiscally and if you have someone out there picking up the multichannel market share, legislators are bound to turn attention to them.” Barring the passage of the energy efficiency bill in Md., the cable assn. for Md., Del. and D.C., had to deal with only minor issues such as telemarketing, Assn. Pres. Wayne O'Dell said. DBS taxation hasn’t surfaced as an issue in either Md. or Del., he said.