Technology and Media & Marketing and Small Business

Cable firms call foe a phony: Group touting itself as consumer group funded by biz giants

November 21, 2005

At first glance, Consumers for Cable Choice appears to be one of those grass-roots organizations likely to have a framed picture of Ralph Nader on its wall.

You know, the kind of activist group whose religion is social justice, whose bible is Mother Jones, and to whom eternal damnation would be to accept a penny from greedy and manipulative Big Business.

Not so with Consumers for Cable Choice. The Indianapolis group that advocates more competition in cable and relaxed regulation of the industry accepted seed funding last summer from cable competitors Verizon and SBC Communications.

Those would be the same telephone companies that want relaxed regulation as they prepare to introduce video services via high-speed phone lines that will compete against traditional cable companies such as Comcast.

And don't look for a ponytail adorning CCC head Robert K. Johnson, an attorney who once worked at law firm Bose McKinney & Evans, where he represented telecommunications clients before state and federal regulators.

To many observers, CCC is merely a veiled attempt by SBC and Verizon to add legitimacy to their lobbying efforts in state legislatures and in Congress. Rather than a grass-roots group, they dub CCC an "Astroturf" group.

"This is obviously a front group for those companies interested in breaking into cable," said Grant Smith, executive director of Indianapolis-based Citizens Action Coalition.

"If SBC and Verizon feel the need to cover their tracks with this type of message, what does this say about the legitimacy of their legislative proposals?" said Tim Oakes, director of the Indiana Cable Telecommunications Association, a trade group of the state's cable operators.

Is CCC, as some argue, SBC's puppet?

"We certainly support the organization's overall cause of educating people about the need for alternatives to continued skyrocketing increases [in rates] by cable companies," said SBC spokesman Mike Marker.

Making cable types even hotter is that CCC increasingly is being given credibility via media reports about what's wrong with cable TV service, including in a recent Washington Post column [though at the bottom it noted the Verizon/SBC funding].

"What a joke. It's embarrassing that this is coming from Indianapolis," said Rick Maultra, director of the city's cable communications agency, which enforces terms of a cable franchise agreement that allows Comcast and Bright House Networks to operate in the city.

Under current regulation, it appears SBC would need to sign such an agreement to provide video via phone lines within Marion County. Such franchise agreements give the city a cut of cable revenues and require companies to adhere to customer service standards, in return for their monopoly status in the areas of the city they serve.

"What's wrong with customer service regulations? There is some value to those regulations ... but [telecommunications companies'] m.o. is to change the rules before they enter," added Oakes.

CCC's Johnson seemed mildly amused at the reaction from cable.

"They've gone on a jihad," he said.

Gifts from phone giants

Johnson acknowledges that CCC received $75,000 from Verizon and an undisclosed amount from SBC.

"That's something we certainly never have hidden," he added, although the funding sources aren't disclosed on the group's Web site.

The site lists about 20 consumer groups said to support CCC's mission of bringing new competition to the cable industry. None are household names, such as the California Small Business Association and the World Institute on Disabilities.

One of the groups, Electric Consumers' Alliance, lists its address as 135 N. Pennsylvania St. A phone call placed to the group was answered by an attorney at Bose McKinney-the law firm at 135 N. Pennsylvania St. where Johnson worked until a couple of years ago.

Another group in CCC's orbit, the League of United Latin American Citizens, last year received a $1 million grant from San Antonio-based SBC.

Cheryl Reed, who handles CCC's public relations, was quick to point out that Johnson during the 1980s worked for the Indiana Office of Utility Consumer Counselor. Johnson represented ratepayers in proceedings before federal agencies, including the Federal Communications Commission.

"So his legal representation history is consistent with his consumer/competition focus" at CCC, Reed said.

In an effort to boost its credibility and its voice, CCC last week said it added 15 new groups to its ranks, including the American Corn Growers Association, National Grange, and Soybean Producers of America.

A Grange official said the group was jumping aboard the CCC bus because many in rural areas have no cable TV or high-speed Internet service.

"Agriculture will speak loudly as lawmakers debate telecom reform because our future success depends on us having access to better communications tools. We cannot afford to be left out of the discussions," Larry Mitchell, CEO of the corn growers' association, said in a statement.

Johnson said CCC has brought on board a number of other disaffected groups, such as those representing the disabled and small-business organizations, because they're often underserved by cable companies. Small businesses, in particular, want interactive video applications.

Despite the financial contributions from SBC and Verizon, Johnson said his group is not pushing one technology over another when it comes to delivering video service and high-speed data. However, many of the stories on its Web site deal with telephone companies' entering the video market.

"It is competition to cable that is going to drive down rates," he said.

And who would the big competitors to cable be? SBC and Verizon, to start with. SBC, for example, might launch in Indiana by the end of next year its IPTV, short for Internet protocol television.

IPTV is capable of delivering video, Internet and phone service simultaneously-all possible because phone companies in recent years have quietly extended fiber-optic cable farther into neighborhoods.

Telcos hung up on regulation

SBC has yet to reveal its strategy in Indiana for greasing the regulatory skids for IPTV rollout.

But in Texas, SBC's home state, telephone companies gained a huge victory in September when Gov. Rick Perry signed a law that would enable Verizon and SBC to obtain statewide video franchises-rather than negotiating with individual municipalities as do cable TV firms.

Easing regulation is a core message of CCC. Johnson estimated there are somewhere around 33,000 municipalities around the nation requiring franchise agreements. "We're advocating a more streamlined process through the states, as with how telephone is regulated."

"Ones and 0s are 1s and 0s, whether voice, video or data," he said of digital technology.

Johnson also argued that the franchise fees cable firms now pay to cities amount to a hidden tax on consumers.

"Negotiating with thousands of cities across the country is not realistic, either for the consumers or for the company," said SBC's Marker.

Maultra said phone giants are overplaying the burden of obtaining municipal approval. He said cities could essentially put the names of telephone companies atop the franchise agreements now in place for cable firms.

He argues that shouldn't be such a big deal for companies in exchange for using public rights of way for their wires. He also said municipal franchise agreements are an important protection for consumers.

Five years ago, SBC had a rash of consumer complaints that the Indiana Utility Regulatory Commission found frustrating and difficult to resolve. Just imagine the potential for consumer complaints as phone companies launch sophisticated new technologies, Maultra added.

"We mediate thousands of complaints per year" involving cable, already, he said.

The battle could be played out on a federal level, instead, with legislation already floating around in Congress that would eliminate the need for new cable entrants to sign municipal franchise agreements.

On whatever the battlefield, CCC is likely to be there, with its affiliate groups ready to take a microphone at hearings. Opinions are mixed as to how formidable CCC could be.

Maultra said he wouldn't discount the group's potential impact, saying he's already seen press releases coming out of congressional offices quoting CCC and portraying it as an unbiased consumer group.

Ken McEldowney, executive director of Consumer Action, a traditional consumer group based in San Francisco, has a different take on such groups.

"Maybe I'm just jaded, but Astroturf groups in general seem so obvious to me, to the media and certainly to legislators," McEldowney said. "I just don't think they have the impact."
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