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Los Angeles Times

May 30, 2005 Monday

Home Edition

From Bloomberg News and Lexis Nexis

Verizon Communications Inc. and SBC Communications Inc. failed to win passage of legislation in Texas that would have made it easier for the companies to sell television services in the state.

The failure highlights the difficulties the nation’s two largest phone companies face in broadening their services to compete against cable system operators.

Texas lawmakers were unable to reach a compromise on an agreement that would scrap a requirement forcing phone companies to get permission from local governments before they could offer video, Verizon spokesman Bill Kula said. The legislature’s biennial session is scheduled to end today.

Failure to get the measure passed keeps in place a hurdle faced by Verizon and SBC as they confront competition from cable companies such as Comcast Corp. Both phone companies are pushing state legislators and members of Congress to eliminate the regulations.

“Competition for video services will occur much slower without a statewide video franchise,” said Steve Banta, president of the Southwest region for Verizon. “We regret Texas lawmakers did not have enough time to reach a compromise.”

The Texas House of Representatives approved a bill May 23 allowing any cable or video provider to get statewide permission to sell TV services instead of having to go town by town, but the Senate was unable to reach a compromise deal.

Verizon Chief Executive Ivan Seidenberg in April said the need to get approval from local governments was the “biggest barrier” to his plans to offer television.

SBC Chief Operating Officer Randall Stephenson said this month that his company’s video effort would “hit a brick wall” if SBC was forced to seek franchises in each target city.

At issue are regulations that say companies aiming to enter cable TV markets must get permission from local governments that require it. Verizon and SBC say they shouldn’t be subject to the rules.

Verizon, the largest U.S. phone company, spent $1 billion last year to extend fiber-optic cables to 1 million homes and businesses, and aims to reach an additional 2 million homes with the high-speed network this year. SBC is spending $4 billion on a system that would reach 18 million homes in three years.