Phone companies and cable TV providers are locked in an intense debate over proposals to deregulate telecommunications.

Proponents say deregulation will create jobs and lower consumers' cable bills. Opponents contend that the legislation would lead to higher phone bills and give phone companies unfair advantages.

Representatives from the telephone and cable TV industries, plus a Ball State professor and AARP's state director, debate telecom reform.

The Indiana Telecommunications Association stands behind telecom reform legislation that will bring customers choice and competitive prices for voice, high-speed Internet, video and cable TV service.

The greatest opposition to these reform measures, which include a statewide video franchising system, has come from large monopoly cable companies. They fear competition will eliminate the windfall of profits that have accompanied rate increases of 86 percent over the past 10 years. If the cable companies were not so fearful of competition and had real plans to continue major infrastructure investments to new territory in Indiana, they would not oppose the legislation.

The Ernst & Young study, "Fast Forward: Technology Propels Media and Entertainment," shows that local franchise agreements have not served their watchdog purpose in building out cable services in a timely manner. The study reports that cable TV service took 35 years to reach 50 percent of American households, while cell phone service took 16 years and Internet service took nine years.

Federal Communications Commission statistics clearly reflect that less competition to cable means higher rates for the consumer. Customer satisfaction rankings from the highly-respected American Customer Satisfaction Index show that the cable industry is ranked lower than the Internal Revenue Service in customer service.

We want to change this picture by offering a true alternative to monopoly cable service.

Some have argued that they don't want to give up local control over video services. If local franchise agreements work so well, why haven't we seen more choice in cable providers and lower rates?

By contrast, Verizon -- the first company to make a major fiber-to-the-home investment in a large Indiana city -- has laid enough fiber to deliver video to every neighborhood in Fort Wayne. Rochester Telephone Company (RTC) has already delivered fiber-to-the-home to its customers and will build out the rural areas around the city in 36 to 48 months. RTC's entrance into the video market caused the local cable provider to immediately lower prices and further invest in its infrastructure.

Cable, wireless companies and other unregulated providers are competing for subscribers in the voice and Internet business. This is why Indiana phone bills for local and long-distance services have decreased 21 percent since 2000, according to TNS Telecoms. Let's make sure the same thing happens to cable bills.

Clearly, consumers win when competition exists.

This is our opportunity to save Hoosiers money on their monthly communications bills, attract large-scale infrastructure investment, ensure Indiana's economic development competitiveness and make our laws keep pace with technology.

ITA represents the interests of the 41 telephone companies in Indiana -- from large companies, such as Verizon, AT&T Indiana and Sprint, to small companies, such as Rochester Telephone Company and Geetingsville Telephone Company.

Statewide video franchising will benefit all of our members by making it less time-consuming and therefore, less expensive for them to secure video franchise agreements. Proposed legislation allows them to submit one application to the state, instead of negotiating individually with each municipality.

The legislation proposes similar franchise fees currently being paid by cable companies to municipalities statewide. The legislation is designed so there will be no loss of revenue to municipalities, which would continue to receive franchise fees directly. And, the legislation retains the existing number of public, educational and government channels in a community. The legislation also does not prevent cities and towns from owning broadband utilities.

To further protect rural consumers, the legislation only grants phone companies pricing flexibility on phone service when they have reached 50 percent broadband penetration by exchange area. This provision ensures that rural areas also will see the benefit of telecom reform.

It's time for Indiana to empower consumers to make their own choices in telecom and reap the rewards.

It is important to dispel a few myths when discussing telecommunications reform and, more specifically, video franchising.

First, cable monopolies do not exist. Congress outlawed monopoly agreements with cities in 1992. Many cities in Indiana have at least two cable providers. In addition, most have at least two satellite providers. Thus, many cities have as many as four or more television providers from which to choose.

Second, one needs to understand that before a video (traditionally called cable) service is provided in a town or area, a franchise agreement is negotiated with local government. Those agreements vary in length and detail. The franchise "fees" (really a tax on the consumer) are negotiated and range from 0 percent to 5 percent on a variety of defined products and services. The franchise agreements may also include provisions for: Public, Educational, or Government (PEG) access channels; service standards; location of customer service facilities; and language that requires the cable company to provide its service to the entire city or town. Cable companies cannot choose to serve wealthy neighborhoods, while ignoring poor people.

Third, state-issued franchising will not speed the entry of competitors into the marketplace. Competition is abundant in the video provider marketplace. Cable companies do not object to competition. But we object to competitors (in this case, large phone companies) being allowed to play by a different set of rules than us. State-issued franchising will widen the Digital Divide. SBC/AT&T is on record as informing their investors that they intend to only deploy to "high end" (read wealthy) neighborhoods.

SB 245 and HB 1279 purport to allow cable companies to opt out of our current franchise agreements, but the language of the bills requires us to maintain our current contractual (i.e. regulatory) obligations. Many companies in Indiana, including phone companies, have obtained franchise agreements. As Mike Farmer, executive vice president of CinergyMetroNet (providing competition to incumbent cable companies in 11 Indiana cities) recently said, "We don't expect any different terms than the incumbent providers. For the communities, it's a competitive choice. That's why they've been eager to get us in there. To us, [a franchise agreement] has not been a barrier to entry."

Fourth, state-issued franchising will not lower cable rates. Proponents of state-issued franchising point to Texas and claim that rates decreased after its enactment there. That's simply not true. There is not one example of cable rates falling in Texas. In many cases, cable rates have continued to increase because those increases are reflective of items outside the pure "number of competitors" model: increased offerings; more channels; increased programming costs; increased services like Video on Demand, high-speed Internet, telephone services, and DVRs.

Likewise, state-issued franchising proponents promise jobs and investment. There are two problems with this claim. First, nothing in these telecom bills guarantees the first dollar of investment or the first job -- nothing. Second, the current regulatory scheme has produced $50 million in each of the past two years in upgrades from Comcast alone. These upgrades include DVRs, high-speed Internet access, telephone service, video-on-demand, and HDTV. That investment is mirrored by all cable companies across the state. But more important, perhaps, is our competitors' investment. CinergyMetroNet has invested more than $100 million in the past two years to bring its customers -- and yes, our customers -- choices in broadband, television and phone. Those investments by our members and our competitors occurred under the current regulatory scheme. So why should the legislature change this structure when it is producing so much competition, so much investment and, more important, so many well-paid, skilled jobs?

Because of their size and resources, the rhetoric from the phone companies is hard to ignore. However, the facts do not support one of their contentions. The cable industry is investing in our products and in our future at a tremendous pace. Our competitors (small cable companies, small phone companies, and satellite companies) are doing the same. The biggest bellwether of all, stock prices, continues to edge downward or remain flat. Those facts -- investment and stock prices -- indicate that competition is flourishing. If so, then why are we changing a regulatory scheme producing such wonderful results for Hoosiers? Ask your legislator and the governor.

A recent 40-6 vote by the Indiana Senate is strong indication that a movement to deregulate telecommunication policy here is gaining momentum. Indiana legislators seem to understand that the sky won't fall if they establish a truly competitive, deregulated environment for modern communications technology.

Before an honest discussion of telecommunication reform can begin, however, proponents of deregulation will have to debunk myths used to delay an updating of Indiana's telecommunications laws.

These laws have artificially sustained high cable prices, have delayed local competition for video services, restrained statewide commerce, hampered outside investment in infrastructure and sustained an out-of-date pricing model that creates economic distortions.

For example, as early as 1984 the cable industry had complained to Congress that rate restrictions in local franchise agreements prohibited the industry from making the necessary capital investments to defend itself from a satellite industry poised for rapid expansion and, in turn, direct competition. Capitol Hill buckled under the pressure of cable industry lobbyists and deregulated rates beginning in 1986.

History also shows us the cable industry is in no position to talk about potential rate increases. After deregulation, and with no direct competition, cable rates began to skyrocket at three times the Consumer Price Index (CPI). Due to rate increases of 60 percent since 1986, and a landslide of consumer complaints, Congress was forced to re-institute cable rate regulation with the passage of the Cable Television Consumer Protection and Competition Act of 1992. Things are no better this year as Comcast announced it was raising rates by an average of six percent in all markets.

With the best of intentions, Congress took on the task of crafting the first major revision to the Communications Act of 1934. Written in 1993, the Telecommunications Act of 1996 was outdated by the time it was signed into law. While the intent was to remove residual restrictions of the consent decree and create a statutory environment that would stimulate deployment of a national infrastructure and foster the emergence of a new digital information economy, the reality is a slightly different story. As some in Washington would later characterize it, the 1996 Act regulated things in strict buckets of service where service and platform are horizontally linked together.

Deregulated as a result of the Telecom Act of 1996 and free from common carrier restrictions by federal mandate, the cable industry has been allowed to grow to maturity in the provision of video entertainment services, unencumbered by any meaningful competition until the last five years.

Faced with increasing cable rates consumers began to examine direct broadcast satellite (DBS) as one alternative to cable service. FCC figures show the market share for cable television in the delivery of video entertainment has dropped from 85 percent in 1998 to 72 percent in 2004, while satellite penetration rose from 12 percent to 25 percent respectively. Unfortunately, national satellite firms alone do not provide "equivalent" competition at the local level.

If cable firms were forced to face meaningful competition, in other words direct, head-to-head competition with other cable firms or other broadband video providers, then the impact on cable rates would be immediate.

Indiana consumers are in for a rude awakening if the telephone deregulation proposals currently rocketing through the General Assembly become law.

Behind all the rhetoric about broadband investment and economic development is a much more grim reality: Senate Bill 245 and House Bill 1279 would allow phone companies to hike your rates for basic local service.

How is it that legislation allowing basic phone service price hikes and less oversight over phone service quality is moving through the legislature with such momentum? Indiana's giant phone companies, AT&T (formerly SBC) and Verizon, have done an excellent job selling legislators on an ingenious bargain: remove state oversight of pricing and quality of service, and we will invest in broadband and other advanced telecommunication technologies.

It seems a reasonable tradeoff, until you consider two things.

First, SB 245 and HB 1279 do not actually require additional broadband investment. True, under the proposals, a phone company can hike basic local service rates only if it provides broadband access to 50 percent of homes in that local exchange. This sounds like a real incentive for investment, until you realize that under current regulation, AT&T and Verizon are already required to provide broadband to over 70 percent of homes in the state in the next two years.

There is no requirement in SB 245 or HB 1279 that the revenue generated by hiking rates on Indiana customers be spent in Indiana. Those dollars in fact are likely to be siphoned out of state to help these giant national corporations compete in big, profitable urban markets outside of Indiana.

The second key problem with the grand bargain being sold to legislators is that the bills remove basic consumer protections for price and quality of local service. Some have argued that AARP's warning of price hikes is just "scare tactics" -- that competition will keep basic local phone rates low.

But there is no meaningful competition in Indiana for basic local phone service. AT&T now controls 93 percent of the landlines that provide basic local service in Indiana, according to the state's own data.

Nor can many Hoosiers just switch to cell phones as a competitive alternative to basic local service. Cell phone service is more expensive than basic local phone service, is not available or reliable everywhere, and cell phones do not have assistive technologies for the vision and hearing impaired. For many of Indiana's most vulnerable citizens, there is no real alternative to basic local phone service.

Consumers are not being fooled by the phone companies' rhetoric. A January survey of AARP members in Indiana found that 78 percent of them oppose changes in Indiana law that would allow increases in basic local phone rates. Fifty-five percent said they would be less likely to vote for a legislator who supported such a change.

What can Indiana telephone consumers do to put the brakes on these proposals, which would leave Indiana with higher phone bills and a handful of empty promises? Input from concerned consumers can help. Contact your state representative at 800-382-9842 and senator at 800-382-9467 and ask them to oppose SB 245 and HB 1279.