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Friday, July 14, 2006

Louisiana -- Please Don't Invest Here!
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As if Louisiana doesn't have enough challenges these days, its governor this week vetoed a video franchise reform bill that will drive away broadband investment. Though all of these state-level franchise reform efforts are something of muddled compromises with localities, it defies explanation that a state in rebuilding mode like Louisiana would continue to subject new terrestrial video investment to the shakedown artistry of local video franchising.
The premises for Governor Blanco's veto are thin gruel indeed. First, she claims that the reform would have an uncertain effect on local revenues. Since all these bills keep the needless franchise taxes in place, how would more competitive entry lower tax revenues? To the contrary, by potentially bringing satellite subscribers who laudably avoid these needless taxes back to terrestrial service, the franchise reform would arguably increase local tax take.

Second, the governor expresses an ultimate paranoid-attorney's concern that the bill would subject the state to liability for granting rights it does not hold. Though I am complete amateur in interpreting Code Law that governs Louisiana, I cannot imagine any state court interpreting a statute reforming franchising as granting more property rights than are actually held by a municipality, and so creating a Takings problem. Most courts -- even in Louisiana -- read statutes to not create constitutional infirmities.
Finally, the governor expresses concern over interference with existing contractual obligations with cable companies and localities. While some legitimate legal concerns could exist here, the proper "solution" is to buy out these contracts in the legislation. The cable bear hug of the local franchising process is certainly unseemly, but such opportunism is nearly obligatory -- if you have an entry barrier, your stupid not to try to keep it erected.
State-level franchise reform has picked up considerable steam this year, with nearly all positive outcomes to date where legislatures have taken it up. No state has given the right answer: get rid of this antiquated and needless institution. But that is to be expected given the reliance interests and political economy of the situation. It is a shame that Louisiana has chosen the opposite path. Now, BellSouth's (soon-to-be AT&T's) broadband upgrade plans will be revised to put LA at the end of the line.

posted by Ray Gifford @ 12:23 PM | Cable

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