Video franchise reform would both increase supply of broadband as well as demand for the service, adding to competition and benefiting consumers. The FCC should thus be praised for pushing forward an important but controversial issue. The FCC's recent order also raises interesting questions about how reforms should handle legacy investments and highlights the need to pay attention to inherent consumer demand for broadband.

Back in December, the FCC adopted an order to reform video franchising regulations. Under the existing regime, municipalities grant franchises to companies wishing to offer video services. Historically, that meant the local cable company was the lone franchisee and was in effect granted a monopoly in exchange for paying a franchise fee and providing certain services, such as public access channels. Cable companies enjoyed largely monopoly status until satellite companies entered the market, generating competition. In part because they did not use actual wires, satellite companies were exempt from franchise rules.

The issue today is that the legacy telephone companies, in particular AT&T and Verizon, are rolling out optical fiber and want to offer video over those lines in addition to lightning-fast broadband service. In order to offer video they must negotiate for franchise agreements with each municipality. Reforms could substantially reduce transactions costs and make it easier to obtain those agreements.

Franchise reform is long overdue. While cities understandably want oversight over some aspects of installing this infrastructure, such as digging up neighborhood streets, there is no economic rationale for local franchising of video services. The need to obtain a franchise represents little more than a barrier to entry. Removing this barrier will yield real consumer benefits in the form of additional broadband competition and additional video competition. Indeed, franchise reform is one of the few policies (along with moving more spectrum into the market) almost guaranteed to increase competition.

The FCC is now grappling with the sticky question of how to apply the order to incumbents and has requested comments on how the order should apply to existing franchisees (the cable companies).

Last week, we hosted another successful CEO luncheon featuring Comcast CEO Brian Roberts and Senate Commerce Committee Chairman Ted Stevens. Discussion at the event, now available as a webcast here, managed to cover topics ranging from the COPE bill to customer service. Below is, for me, some of the more memorable moments.