Politics, Comcast slow Verizon's pay-TV bid

Telecom giant Verizon Communications Inc. hoped to sprint to a new pay-TV franchise agreement in Philadelphia this year and bring the cable battle to Comcast Corp.'s doorstep.

But Verizon is facing headwinds from the cable king - which says the city's proposed 15-year deal with Verizon should be the same as the deal with Comcast - and from the realities of Philly politics.

In its initial plan to install a high-speed FiOS pay-TV network in Philadelphia, Verizon said it would not wire the suburbanesque Far Northeast and the Northeast for years. Other parts of the city could get wired almost right away.

"The area above Cottman Avenue is not getting any service for six or seven years. I can see that the company was concerned about being criticized for cherry-picking. But it's another matter of wiping out the area that you could be accused of cherry-picking," Councilman Brian O'Neill, whose Far Northeast district has higher-income households and more predominantly white neighborhoods than other parts of the city, said Wednesday.

Verizon, which has been accused of targeting wealthier suburban towns with FiOS, relented after complaints by O'Neill and Councilwoman Joan L. Krajewski.

On Thursday, Verizon added zip codes in the initial FiOS installation phase in the Northeast districts. The company now says it will wire 45 percent of the city's homes for FiOS in four years and the remaining 55 percent by the seventh year.

But other issues remain on the table - among them jobs at a call center in the city, the participation of minority contractors in the installation, and financial penalties if Verizon fails to live up to its deal.

Verizon did not expect that winning a Philadelphia franchise agreement "would be a walk in the park," company spokesman Eric Rabe said Friday. "City Council is facing an avalanche of lobbying from the local cable company, and the people of Philadelphia are being held hostage," he said. Verizon had said it would like an agreement this year, but now it appears it will not get one until late January, at the earliest.

Councilman Darrell Clarke, chairman of the committee reviewing the proposed Verizon franchise, said Friday that Comcast had asked questions about the agreement but that he did not believe the company had slowed the process.

The Nutter administration gave Council the proposed agreement about a month ago after negotiating it over several months. Clarke said he believed Council had improved the proposal.

Verizon has told city officials it will invest $700 million in a new network if the city government awards it a 15-year franchise agreement.

The fast-tracked agreement has firm support of Mayor Nutter, who would like the competition. Comcast collects about $325 million a year in pay-TV revenue from city residents and has been criticized for frequent rate increases. Comcast is based in Center City.

The FiOS installation will likely generate economic benefits for Philadelphia in additional wage-tax collections and new fees.

Verizon also could boost revenue for city coffers over many years as it converts satellite customers to FiOS, said Joseph James, a city deputy chief information officer.

DirecTV and Dish do not pay the city the 5 percent gross-receipts tax on pay-TV revenue, as Comcast does and Verizon would. There are an estimated 100,000 satellite customers in Philadelphia.

Verizon could eventually contribute $8 million to $10 million a year from gross receipts to the city, James said. Some of that would be business taken from Comcast and some would be from customers taken from DirecTV or Dish.

Comcast is forecast to contribute $16.2 million in gross receipts to the city this year, the city said.

Verizon would like an agreement in Philadelphia by the holidays. But that will not happen as issues keep arising, and Council has recessed.

Comcast expects a Verizon deal to eventually happen. But its officials have asked, what's the rush? Comcast and its lobbyists have gone through the Verizon proposal line for line to make certain Verizon's deal is no more favorable than Comcast's own pay-TV franchise with Philadelphia. The company is a powerful voice in the city. For example, David L. Cohen is a top executive at Comcast and former Mayor Ed Rendell's chief of staff.

Verizon has a diminished political presence in the city but retains about 2,000 jobs and has hired in-house lobbyist Tabb Bishop, the son of State Rep. Louise Williams Bishop, of Philadelphia.

One group making its case to Council says Verizon needs to boost funding for government-run public-access channels.

Verizon's union has lobbied for the company to hire 150 to 200 additional employees in the city. The company says this issue is outside the scope of the franchise agreement, but Council is eager to promote economic development.

Wilco Inc., a minority-owned cable company, says it would like an equity slice of Verizon's proposed 15-year pay-TV agreement, and has hired attorney Sharif Street, son of former Mayor John Street, to lobby for it.

Clarke is concerned there would be minimal job opportunities for minority contractors in the FiOS installation.