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Competition coming for cable TV in city
Council working on deal to add Verizon as provider, joining Comcast
Thursday, August 07, 2008

For the first time in Pittsburgh's almost 30-year cable TV history, the stage is being set to give city customers a choice between providers.

City Council yesterday authorized hiring the Cohen Law Group to negotiate a contract to bring Verizon Pennsylvania Inc. into the cable TV market, where Comcast has ruled since it acquired the franchise in 2002.

Howard Stern, director of city information services, said a citywide build-out could take years, "but we are hoping to have an agreement in place by late fall" after several public hearings.

Verizon approached the city in the spring, the first time a competitor has shown interest, he said.

The city's first franchise deal for cable was with Warner Cable in 1980, an agreement that was transferred to TCI in 1984. TCI had an exclusive 15-year run before it merged with AT&T. Each incarnation of provider has had the market to itself mainly because building the infrastructure costs tens of millions of dollars, said Mr. Stern.

"Comcast knows other companies are entitled" to get into the market, he said. "The question is, under what terms."

Comcast currently pays the city 5 percent of its gross annual revenues in franchise fees, about $4.1 million, said Mr. Stern. With Verizon and Comcast sharing the same stable of customers, the franchise fee would probably not change much, unless revenues dip in a price war.

The city's agreement with Comcast expires at the end of next year and will also be renegotiated at that time, said Mr. Stern. He said the city hopes the competition will bring improved options and prices to customers.

Verizon spokesman Lee Gierczynski said Verizon began cable service last year in the Pittsburgh and Philadelphia suburbs. It spent two years building its fiber-optic network and now has agreements with 80 municipalities in southwestern Pennsylvania.

"It's a substantial investment, and it only makes sense that we would want to reach as many customers as possible with our new services," he said.

Verizon is in the same stage of entering the Philadelphia cable market as it is in Pittsburgh. The company already supplies local phone and Internet service but needs a separate franchise for cable.

Some council members asked for assurance that poor neighborhoods would not be slighted by being left out or last to be served. Mr. Stern said "100 percent of the city must be served."

"We will be negotiating with them to determine where they start," to make sure that the poorest neighborhoods aren't the last to get service, he said.

Municipalities can regulate basic cable rates -- and only basic cable rates -- according to federal law. They have no say over charges for Internet and phone and no say about the cost of expanded cable. The city can negotiate for extras, including support of public-access channels, which the city has done with Comcast, said Councilman William Peduto.

Currently, in its other markets, Verizon offers one package -- at $47.99 per month, access to all local channels, 200 digital channels, high-definition programming and video on demand.

Additional sports and movie channels can be added, said Mr. Gierczynski.

Customers who want only local channels pay $12.99.

"In the future, we will look to see what we can do to expand offerings," said Mr. Gierczynski.

Comcast charges $14.51 for basic cable -- local channels and several beyond, including WGN in Chicago. Its digital classic package of 177 channels, more than 30 of them high-definition, plus video on demand, is $67.93, said Bob Grove, Comcast's spokesman.

"We think we are very competitive, and when you get competition, consumers win," said Mr. Grove. "We knew this was coming, and we're going to compete for every inch of the territory."

Diana Nelson Jones can be reached at djones@post-gazette.com or 412-263-1626.
First published on August 7, 2008 at 12:00 am
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