Philadelphia Panel Hears Telecom Firms Request for Cable, Phone Competition --
Nov. 1 (The Philadelphia Inquirer/KRTBN)--The issue of whether Philadelphia will get its first head-to-head cable television competition went before a City Council committee yesterday, and the issue generated controversy, a crowded
chamber and Council grilling.
RCN Corp. of Princeton -- a telecom company that has brought cable competition to towns in Delaware County, as well as Boston, New York, Washington and other parts of the country -- is asking City Council to approve an agreement it crafted with city negotiators to bring cable and telephone competition to Northeast and Northwest Philadelphia.
If the agreement is approved, RCN would compete head-to-head against Comcast Corp. in those sections of the city.
There will be at least one more hearing by the Committee on Public Property on the proposed agreement, committee chairman James F. Kenney said. He did not specify a date.
Committee members questioned RCN and city officials on the contract finalized in June. They asked about the company's choice of building in the Northeast and Northwest sections of the city, its commitment to minority and union hiring, its plans for corporate citizenship, and especially what competition will do for the city.
"What will happen to rates" in other parts of the city, asked Kenney of RCN. "Will the [other city] ratepayers subsidize a rate war" in the Northeast and Northwest?
Kenney said he was concerned about whether rate competition in two of the city's franchise areas would raise rates in the other two franchise areas.
Councilman Darrell Clarke questioned why RCN chose the Northeast and the Northwest instead of the citys' other two areas.
RCN regional manager John Pitts said one of the reasons it preferred to start building its network in Northeast Philadelphia is because that area is closer to its main regional telecommunications fiber.
If City Council approves the contract, RCN would offer cable television, local and long-distance telephone service, and high speed cable modem service. Building the network in the Northeast and Northwest would take seven years.
Pitts and other RCN representatives testified its competition with Comcast would lower cable rates in the Northeast and Northwest, improve customer service and create 350 new permanent jobs in the city, with an estimated payroll of $14 million.
And in the future, the company said it might decide to request franchises in the other two areas as well.
"We have demonstrated our capability and our sincere interest to compete here in Philadelphia and we believe that Philadelphia is absolutely ready for competition," said Scott Burnside, RCN's senior vice president for regulatory
and government affairs.
RCN's agreement calls for minorities to be 30 percent and women to be 20 percent of its hires, which it said were the same percentages in the city's other cable franchise contracts. RCN said it has an agreement in principle with the International Brotherhood of Electrical Works (local 98) to build its network in the city.
Supporters of RCN's position included WPVI (Channel 6) as well as advocates of community access channels, a consumer advocate and private citizen.
Comcast as well as Urban Cable Works of Philadelphia, the new name for the Time Warner Wade Cable franchise in West Philadelphia, and community representatives raised objections to the proposed RCN contract.
Comcast and Urban Cable Works have said the proposed RCN contract is not as stringent as theirs were. Comcast said that when the city first granted cable franchises to four areas in 1986, it required each area to be built within four
years. And no one franchise area was awarded until all were, Comcast said.
Comcast said RCN would serve middle and upper-income neighborhoods before lower-income ones, particularly in the early years of the build out.
"I submit to you that residents of South Philadelphia, West Philadelphia, Roxborough, Manayunk, Center City and portions of North Philadelphia will be denied the benefits of competition," said Ed Pardini, regional vice president of
Comcast Cable. "For many years, if not forever."
"If the city really intends to bring the benefits of more competition to all of its citizens, this council must not permit RCN to cherry-pick its way to big profits," Pardini said.
The neighborhoods Pardini cited are all in the franchise areas RCN has not proposed to build in.
RCN said it would be too expensive and too difficult to build out the entire city at once and that it prefers to commit to only two of the four franchise areas.
RCN's plan to build its network starts in the Northeast , swings down into North Philadelphia, and reaches Chestnut Hill last.
Lawrence Jarrett, vice president of Urban Cable Works of Philadelphia, wondered if RCN could simply jump into competing in Urban Cable Works' area -- West Philadelphia, Manayunk and Roxborough -- without receiving a franchise first.
"What is to prevent [RCN] from running a fiber" into those areas? he asked. "Those are the kinds of things that concern me."
WPVI (Channel 6) President and General Manager Dave Davis came to the hearing to support RCN because he said station owner ABC wanted more competition to Comcast in the Philadelphia market.
WPVI and Comcast have been unable to agree since last December on payment for Comcast to carry Channel 6 on its Philadelphia systems. Instead they have signed several contract extensions.
"Comcast is the last major cable company that we [ABC] do not have an agreement with," said Davis in his written testimony. "Why? The only reason is because they are negotiating from the strength of their monopoly."
Davis said ABC was asking Comcast to pay it 65 cents per month per subscriber to carry WPVI. Comcast SportsNet, the company's network that carries the Flyers, Sixers and Phillies games, has lower ratings and is priced at more than $1.00 per month per subscriber, Davis said.
Davis also said that if the ABC, which is owned by the Walt Disney Co., and Comcast cannot reach an agreement, the contract "extensions will end, and Comcast will have to discuss with their own customers how much their cable
service is worth without Channel 6."
Proponents of community access television stations in the city also expressed support for RCN.
"We do believe the competition will be good for Philadelphia," said Inja Coates, a representative with the Philadelphia Community Access Coalition. "Beyond that, we have reason to believe they [RCN] are less hostile to the issue of public access than Comcast has been."
RCN estimates the seven-year construction project would cost $250 million and provide 400 to 500 individual subcontracting jobs.
The company has also agreed to build a technical operations center in both the Northeast and in Northwest Philadelphia, each employing about 200 people, as well as other employment and technical centers.
In addition, the company said it had committed to giving $1.85 million for public and educational television programming, and employment training.
The lone consumer to speak, Robert Oliveti, said he had testified for Comcast in the past, but now he believes Comcast needs competition.
"Technically, [Comcast's] performance is good, but from a price standpoint, I think they need competition desperately," he said.
By Patricia Horn
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