Texas Mulls Fiber Preference in Broadband Bill

A possible Texas preference for fiber split AT&T and Verizon at a Texas Senate Commerce Committee hearing livestreamed Tuesday. The committee heard testimony on a bill (SB-1238) meant to update Texas laws to prepare for incoming federal dollars from NTIA’s broadband, equity, access and deployment (BEAD) program. Also at the hearing, cities clashed with DirecTV and Dish Network over a bill (SB-1117) to ensure satellite and streaming TV services would not have to pay video franchise fees.

SB-1238 follows a 2021 Texas law that created a state broadband office and program, said a statement by sponsor Sen. Robert Nichols (R) in a March 16 bill analysis. It would update definitions and standards for broadband, served, underserved and unserved and revise metrics used to develop the state broadband map to reflect newly available location-based data. The bill also “alleviates conflicts in state statute with federal guidelines for deployment of federal funds,” said the summary: A section on “fiber optic preference” would require the state broadband office to prioritize projects that use fiber, while allowing the office to consider alternative technologies proposed for high-cost areas if it costs less and meets other criteria. The proposed law would take effect Sept. 1.

Verizon mostly supports SB-1238 but has concerns with Texas declaring a fiber preference, said Vice President-Governmental Affairs Richard Lawson at the hearing. Legislators should keep Texas law “free of costly technology preferences,” he said. Verizon isn’t saying to delete the preference but rather to confine it to federal dollars where it’s required, like in the BEAD program, said Lawson: For state funds, the broadband office should get to consider all technologies.

AT&T supports declaring a preference for fiber, which is more scalable and has symmetrical speeds, said David Tate, retired vice president-legal affairs. "Fiber technology does more than any other.” Witnesses from AARP and Texas Electric Cooperatives also supported including the fiber preference.

The bill includes the fiber preference because it's in the BEAD notice of funding opportunity, said Nichols: SB-1238 leaves the door open for satellite and wireless. “If you’re in the business of wireless, you would certainly want every option to use wireless, and we feel like we’ve given the [Texas broadband] office that discretion,” the state senators said. “But very clearly there is a preference at the federal level, where the giant bulk of this money is coming from, for fiber.” It’s the preference because it can “do so much more stuff,” the Republican added.

Sen. Jose Menendez (D) suggested incorporating optional labor standards recommended by NTIA. Communications Workers of America lobbyist Harrison Hiner agreed. Nichols said there's no federal requirement to include them, but he’s open to further talks.

‘Air We Breathe’

Don't let cities charge for air, Sen. Kelly Hancock (R) said earlier in the hearing. He was explaining his bill to keep Hulu and other streaming services from paying franchise fees.

Streaming services don’t use the right of way (ROW) to reach consumers, but cities have sued them to collect a 5% state franchise fee, said Hancock, referring to litigation by Dallas, Houston and others against Disney, Hulu and Netflix (see 2208120004). “If you're streaming a device ... using the atmosphere, the cities don't get to charge for the airspace” used by the streaming services, he said. "Are we going to charge to use the air we breathe?"

"Streaming does not equal air,” stressed local government attorney Luis Reyes of Ashcroft Sutton. “Streaming is over the right of way." It “has nothing to do with airspace,” said McKool Smith’s Steve Wolens, also representing city litigants. SB-1117 doesn’t merely clarify the state’s 2005 law setting a state franchise rate, as supporters claim, said Wolens: “This is a total repeal.”

Streaming services still go through wires, but cities aren’t receiving compensation, said Dallas Manager-Regulatory Affairs Nick Fehrenbach: Cities fear that “with a simple marketing change” of saying that TV services are now streaming, cable companies will be able to avoid paying franchise fees. Dallas stands to lose $6.1 million in annual revenue, he said.

Sen. Lois Kolkhorst (R) appeared to support the bill. Rural residents shouldn’t have to pay franchise fees for satellite connections since that’s the only way they can get TV. If she wants to watch “March Madness, I’m streaming that [and] I shouldn’t have to pay some fee.”

Woolens said he doesn’t disagree. But if it’s a direct satellite connection, it’s already exempted under federal law, said the attorney: Services that use wired facilities in the ROW to reach customers should have to pay.

The company that put wires in the ground should pay ROW fees, not the services riding on top, said Dish and DirecTV lawyer Kate Owen of Orrick Harrington. The point of SB-1117 is to clarify existing law, said Owen: Similar bills passed with bipartisan support in five other states.

Democrats appeared skeptical. Would passing the bill amount to Texas “subsidizing Hulu, Netflix and Disney” by “letting them take a free ride on the public right of way?” asked Menendez.

"It seems to me that we're just carving out somebody who wants to be carved out so they don't have to pay a fee,” commented Sen. Nathan Johnson (D). He questioned whether the 2005 policy truly needed clarification. "I would submit it was clear in the original." Hancock replied, "Apparently not, based on litigation.”