Jimmy Naifeh

NASHVILLE — Lawmakers said Monday that Tennessee consumers should benefit from a compromise that allows AT&T to compete more easily with cable companies such as Comcast in offering television services.

“The bill creates a climate for competition here in Tennessee,” said House Speaker Jimmy Naifeh, D-Covington.

Speaker Naifeh and other proponents said the legislation should encourage better services and faster deployment of new technologies for cablelike services and quick broadband Internet access.

But the speaker cautioned the legislation “is not a silver bullet to rising media prices, nor will Tennesseans see an immediate impact on the next cable bill.”

Stacey Briggs, the Tennessee Cable Telecommunications Association’s president, said in a statement that “AT&T and other companies have had the right to compete under local franchising rules for more than a dozen years. This new policy streamlines the franchise process, but it remains to be seen whether new entrants will compete in Tennessee.”

The revised Competitive Cable and Video Services Act was hammered out during some 14 weeks of negotiations this year. That came after AT&T’s effort to push the bill through in 2007 failed amid resistance by the cable industry and city and county governments.

The bill, scheduled to be heard in the House Commerce Committee today, creates a statewide video services franchising process that would be overseen by the Tennessee Regulatory Authority. It would bypass franchise agreements with local governments, some 300 of which now have deals with cable companies.

But cable companies could opt to keep their existing franchise agreements.

Under the bill, AT&T would have to offer television services to 30 percent of the 1.69 million customers it now has within 3 1/2 years of winning a state-issued franchise. That comes to about 600,000 households.

If AT&T or another company fails to meet the requirement, it could face fines of $10,000 a day for up to 200 days — a $2 million maximum.

But AT&T or other state franchisees could get substantial credits if they choose to expand broadband Internet services to previously underserved or unserved rural areas, said House Commerce Committee Chairman Charles Curtiss, D-Sparta, who helped broker the deal.

The bill would prevent discrimination against lower-income households. Twenty-five percent of those being served would have to have incomes below the state’s $35,000 median annual income level.

If AT&T or another state franchise was found to discriminate against anyone, they would be subject to a $5,000-per-case fine. There would be no cap.

“The cities and counties didn’t get everything they wanted, but the main thing they were fighting for was to make sure the people back home were being protected,” Chairman Curtiss said.

He said the bill has “stringent language” against redlining, a process in which companies seek to discriminate against low-income areas.

“There’s no cap on how much they can be fined for red lining,” Chairman Curtiss said. “If they’re discriminating, the sky’s the limit.”

Companies with state-issued franchises would pay a 5 percent franchise fee based on their gross receipts to any municipality or county in which they provide service. That includes commissions from home shopping services and advertising.

Chattanooga now gets a 5 percent fee, but officials last week weren’t sure how the agreement might affect them because they have an expansive definition of gross receipts. Efforts to contact Mayor Ron Littlefield’s special assistant, Matt Lea, were unsuccessful Monday.

State Comptroller John Morgan helped facilitate discussions between the special interests and select lawmakers. He said if Comcast decided it could do better under the state’s definition of gross receipts, the company could seek a state-issued franchise and choose to pay the city 5 percent based on the state’s definition.

Jimmy Naifeh

But he noted that Chattanooga presumably also would be getting new revenues from AT&T, as well.

AT&T intends to roll out its U-verse package in Tennessee. It delivers television programming using the Internet.

“While there are items in this bill that we do not think are necessary, we support the compromise legislation,” AT&T Tennessee President Gregg Morton said in a statement. “We know that competition benefits Tennessee consumers, and we look forward to being able to compete for Tennessee customers with our superior U-verse service.”

Gov. Phil Bredesen earlier this year questioned whether Speaker Naifeh’s methods would succeed and wondered whether it would benefit consumers.

In a statement, Gov. Bredesen said, “I’m pleased to hear that Speaker Naifeh and others who have participated in this process have crafted an approach that focuses on bringing real benefits to Tennessee consumers. Making these services more widely available, especially in rural areas, will help consumers and businesses across the state realize these benefits.”

Rich Franklin, a telecommunications analyst for Edward Jones in St. Louis, said the Internet protocol television offering allows AT&T to tap into the $125 billion-a-year video market now controlled by the cable industry.

But so far, AT&T has rolled out the service in a fairly limited manner to an estimated 230,000 people in less than 50 major cities, the Wall Street Journal recently estimated.

“The big question on U-verse is its scalability,” Mr. Franklin said. “Can they grow off this platform?”

AT&T’s technology allows it to use the copper wires still installed in most homes in the Southeast for the last portion of the video download. Verizon in other markets and EPB in Chattanooga, in contrast, plan to install fiber-optic technology throughout their network.

Staff writer Dave Flessner contributed to this story.