Testimony of Kelly McCutchen, Executive Vice President, Georgia Public Policy Foundation before the Georgia Senate Regulated Industries Committee

October 24th, 2006 by Leave a Comment

October 19, 2006

 

We believe that a statewide video franchise law is critical to Georgia’s future. Telecommuting, telemedicine, virtual schools and other high tech advances hold great promise for a large, rural state like Georgia, but to take full advantage of these technologies we need a more robust telecommunications network. Revenues from Internet service alone do not appear sufficient to support this size of an investment, but Internet services combined with voice and video services offer a much more attractive opportunity for capital investment.

 

Voice and video are shifting from analog to digital, and everything is becoming bits – nothing but ones and zeros represented by flashes of light. Fiber optic lines carry data, voice and video bits simultaneously. Traditional telephone companies, traditional cable television companies and other providers will own the fiber and will provide all of these services. It is clear that the old lines separating services and industries are blurring and disappearing – as should the regulations.

 

Eleven other states have deregulated their video markets, including our neighbors in South and North Carolina. When companies offering these new services are deciding where to invest, we don’t want to make it easy for them to prioritize other states because of our burdensome and outdated regulations.

 

No segment of the video market should be at a regulatory disadvantage. That’s why we would also support efforts to free cable television providers from existing franchise agreements, as other states have done. There should be a level playing field, but we should make sure that we level down, rather than up, ensuring that this effort results in deregulation for all parties.

 

Deregulation and additional competition will lower prices, improve quality, create jobs and spur much-needed investment in rural communities.

  • In 2004, a GAO study found that communities with competition between broadband providers and cable companies experi­enced lower rates (23 percent lower for basic cable, on average) and higher service quality.
  • The recent passage of statewide franchising in Indiana will produce an expansion of high-speed DSL service to 33 rural communities. Franchise reform in Texas resulted in new broadband service to 71 communities, and an analysis by the Perryman Group projects more than $3.3 billion in new telecom investment and thousands of new jobs for the state.
  • Researchers Robert W. Crandall and Robert Litan analyzed 2006 survey data and concluded that the introduction of competition from wire line companies will increase the number of video service subscribers between 29.7 percent and 39.1 percent. This expansion of the customer base ultimately exceeds the drop in rates, causing franchise fee revenue to grow. In fact, they find that “local franchise fee receipts in areas currently without a wireline competitor will increase by between $249 million and $413 million per year.” They also find “that local employment will improve as a result of (wire line) entry into the (video) market, since capital investment, such as the deployment of fiber for video services, has historically resulted in job creation.”

Lower prices, better quality and more choices are all positives for Georgia consumers. More access is a positive for rural Georgia. For all of these reasons, we believe the deregulation of video services should be a top priority.

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