Worlds Apart

This latest Verizon status report is motivated by a document from the FCC website. It was noticed by a reader of this blog who posted it into the comments area - and evidentally wishes to remain anonymous. Thank you anonymous reader!

The document describes a meeting between Montgomery County officials and FCC officials to explore why Montgomery County was mentioned so prominently at the FCC's Keller TX hearings. During those hearings, Montgomery County was cited - the only jurisdiction to be so cited - as inhibiting the rollout of FIOS in 2006.

Is this true? The document goes on to describe a lengthy list of meetings and conference calls between Verizon and the county - roughly one per month beginning with the first back in May of 2005. Despite all these meetings, fingerpointing continues. After the Keller meeting, the FCC asserted that it would act to resolve such situations but that the claims it had heard so far regarding Montgomery County were simply too vague to act on.

Key Differences Between Verizon and Montgomery County

Now we get to the interesting part. In that same document, drafted by the county's own outside communications lawyers (Miller & Van Eaton - these are the guys pulling down the big bucks I referred to previously - $375K of the $451K that the Executive is budgeting for FY06 cable-related legal fees), is a table dated March 17 2006 and labelled Key Problems which I interpret as the current areas of disagreement. In a sense, this table of differences actually proves the claims that the FCC heard.

And both sides are unwilling to compromise. So what are the differences?

• what can be regulated: Verizon wants regulatory oversight limited to the signal. Montgomery County (MC) is concerned with safety and rights-of-way and asserts authority over much of the cable system hardware.
  
  
• 3-year bailout option: If Verizon hasn't achieved a commercially reasonable level of subscriber penetration in 3 years, Verizon wants the option to leave the county. MC doesn't want to provide that option.
  
  
• gross revenues: MC wants gross revenues to include anything related to the cable system: customer fees, advertising, PEG, etc. (The franchise fee is based on gross revenues, normally 5%.) Verizon wants gross revenues to exclude everything but TV fees.
  
  
• police powers: MC wants its laws or other jurisdictional law to supercede the franchise. Verizon wants to prevent this, or if necessary, an escape clause so they can terminate the franchise or demand binding arbitration.
  
  
• build-out: MC wants restrictions against redlining based on income, a fast deployment, and a requirement to serve all homes with density 15 or more homes per mile. Verizon wants a slower deployment, no redlining restriction, density of 30 or more homes, and the option to withhold rollout to homes or areas for a variety of reasons as determined by Verizon such as difficulty gaining access.
  
  
• indemnification: MC wants Verizon to be responsible for any franchise-related claims (ranging from construction to copyright violations). As for what Verizon wants - this section of the chart is so vague that it appears Verizon wants to avoid responsibility for anything.)
  
  
• PEG interconnects: Verizon wants guarantees against excessive cost to connect to PEG channel redistribution sites. MC wants Verizon to pick up the costs of PEG channel connections.

Wow - those are some serious differences. There are going to have to be significant and surprising compromises here.

Who will be the winner?

I could discuss the issues individually but it's easier to say the following: Although Verizon has dumped a huge wad of cash in our ground already, they can cut their losses and walk today. MC however is stuck. It can't leave! It has existing law and franchises on one side. On the other, it has citizens desperate for competition. And if MC doesn't do something, it will serve as the catalyst for those state and nationwide bills floating in Congress to assist competitors in situations like this.

My bottom line prediction: Montgomery County will cave on most of these issues. If it doesn't, it will get the short end of the stick anyway. Winner: Verizon. Do the citizens win? I don't know. They'll get competition and that's good. But they'll lose a lot of the regulation that the county has historically provided - and needed. But then, maybe it was needed only because there was no competition. One can only hope.