• by David Kaplan , December 14, 2004

Accusing telecommunications company SBC of "discriminatory and anti-competitive" business practices because it plans to serve only high- and middle-income neighborhoods, the Washington, D.C. lobbying group National Cable & Telecommunications Association is calling on cable operators to fight back.

Telcos are trying to circumvent local franchising rules--which cable companies are bound by--"to gain unfair competitive advantage by red-lining," said NCTA President and CEO Robert Sachs in a speech Tuesday to the Washington Metropolitan Cable Club.

In Sach's view, the Federal Communications Act requires local franchise authorities to ensure that access to cable services is not denied to any group of potential cable subscribers because they happen to live in a low-income area.

But according to Sachs, SBC, a San Antonio, TX.-based "Baby Bell" company is actively pursuing a strategy to provide video service only to high- and middle-income neighborhoods. He noted that the anti-red-lining provision in the Communications Act applies to every franchised cable operator in the United States, and therefore should apply to telcos as well.

"Cable operators must be vigilant about plans by phone companies to circumvent the local franchising process to gain unfair competitive advantage by red-lining or any other means," Sachs said. "Serving only high- and middle-income neighborhoods in a community is both discriminatory and anti-competitive. If, on the other hand, a phone company wants to obtain a local cable franchise, as Verizon recently did in Beaumont, California, and compete on the same terms as the local cable operator, they are welcome to do so."

In its stated plans, SBC will spend up to $4 billion on a fiber network that will reach 18 million homes by the end of 2007. Taking on cable companies, SBC plans to launch "IP-based TV services" starting in the fourth quarter of 2005--and it is here that the NCTA wants the company held to the same standards as cable operators.

In making his charges, Sachs pointed to a recent presentation to investors, in which SBC said its business plan is based upon the company disproportionately serving what it calls "high value" and "medium value" customers while virtually ignoring "low value" customers.

"SBC has said that 'high value' customers make up 90 percent of their target base, 'medium value' customers make up 70 percent, and 'low value' customers make up 5 percent--a strategy about which Marilyn Morhrman-Gillis of the National League of Cities recently commented, 'The last time I looked, that was called red-lining.'"

An SBC representative could not be reached for comment.