LANSING – AT&T officials told the Michigan House Energy and Technology Committee on Wednesday that they need changes to the state’s cable television franchise system to be able to reasonably enter the video market.

Cable officials countered that the only thing holding AT&T back is the hope for a legislative leg up into that market – and they asked for the same treatment if the state does change franchising.

AT&T officials said the current franchise system, which requires companies wanting to provide cable television service to reach agreements with local governments that specify the size of the network, what services it will offer, rates charged and what portion will be paid to the local government, is a barrier to new companies competing with the incumbent cable providers.

They said they needed changes to the system (HB 5895 ) to ease their entrance into the market. But cable officials said they and others had gotten into the market under the current system without difficulties.

Of particular concern was the “build out” provision of most franchises. “There’s not another competitor required to build out to enter the market against the incumbent,” said Jim Murray with AT&T, adding that cable companies offering telephone service are not being required to build out to reach all of their television customers.

But Colleen McNamara, executive director of the Michigan Cable Telecommunications Association, said cable companies automatically design new services to be available to all customers. “When we roll out a service, we make it available to our entire footprint,” she said.

And she argued that some communities already have two cable providers, both of which were subjected to franchise agreements that included both fees and build out requirements. “Why does the fourth or fifth company (including satellite television providers) coming into a mature market need legislative assistance?” she said.

Rick Zimmerman with the National Cable Telecommunications Association said AT&T was being disingenuous with its arguments that it did not want to have to meet build out standards. “They already have a connection to every house in their territory, lines that in some cases were subsidized by federal and state universal service funds,” he said.

Murray disputed allegations that the telephone giant was planning to serve only the wealthiest communities. “High value” customers are those who spend the most money on communications services, not those with the most to spend, he said. “That’s why Detroit was first on the list. That’s where the customers are.”

AT&T is beginning to negotiate franchises with some communities, but mostly as an effort to jumpstart efforts to get into the video market, Murray said. “We approached some cities to see what we can do because the year is fading,” he said. “If we have to city by city this will take years.”

He said requiring the company to negotiate individually with some 1,200 communities was unreasonable, particularly considering AT&T’s goal of making video service available to half of the households it reaches in the next three years and to all customers in as little as five years.

Murray attempted to take money off the table, vowing that AT&T would match the franchise fees being paid by current cable companies. Many local governments have raised concerns, and more are expected to next week, that the proposal is an attempt to cut or eliminate the franchise fees, which are significant source of revenue for some communities.

“AT&T is committee to paying our fair share and support local control,” Murray said.

Zimmerman said in the end all franchise provisions, not just the fees, needed to be the same for all competitors. “What we support is fair franchise reform that would treat everyone equally,” he said.

The question yet to be resolved is whether a new statute could abrogate existing franchise agreements in favor of the new statewide agreement. The committee has so far heard opinions that the agreements are binding, that they could be dissolved, and that there is no comparison between AT&T’s proposed service and the services offered by cable companies and so no need to change the current franchises.

Attorneys for the MCTA said any legislation mandating changes to the franchises would likely end up in the Supreme Court.

And Zimmerman said the solution should come from Congress, as that is the body that developed the local franchise agreement in the first place.

The two sides also disagreed whether the bill would lower prices.

“I do anticipate lower prices with a statewide franchise,” Murray said. He said prices had come down in Texas before AT&T even began offering service.

Zimmerman said prices can only come down as far as costs will allow. “Our highest cost is programming costs,” he said. “Programming costs for some reason are not going down.”

And he said AT&T would face similar costs for its services.

The committee is expected to hear next week from the Michigan Telecommunications Association, which represents the smaller incumbent providers, and the Michigan Townships Association.

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