SBC Communications, Verizon, along with other telecom companies won a major victory over cable companies Sunday when the Texas House of Representatives approved legislation, known as the telecommunications bill, which makes it easier for them to get into the television business.

Senate Bill 408 will allow Texas to set up a statewide franchise fee that phone companies and cable providers would pay to provide television service. Under the current system, phone companies would have to negotiate franchise agreements with individual cities.

"If you want to compete in video in Texas, you have to go to every city. And they can hold you hostage for up to a year," said Rep. Phil King, the sponsor of the television provisions. "It will allow for the first time for Texas to have competition" for cable TV.

But Rep. Harold Dutton, D-Houston, a critic of the measure, said, "SB 408 should be called SBC 408."

King had attempted to pass the legislation twice before but lost due to technicalities. It passed as part of legislation that also extends the life of the Public Utility Commission for six years.

The new measure would require that any television provider pay municipalities 5 percent of its gross revenues to offer service in a new area. Many Texas cities are arguing though that the loss of local franchise agreements will provide less revenue for them. Additionally, they state that the definition of gross revenue is narrower than the one used traditionally in cable agreements.

Traditionally, cable companies have reached franchise agreements where they had to serve entire cities or adhere to city-enforced customer protection standards. SB 408 will remove that requirement and allow companies to serve any area.

Cable companies along with other representatives believe the new legislation will allow the new rivals to cherry-pick only upscale neighborhoods where they have the most to gain.

Rep. Yvonne Davis, D-Dallas, proposed an amendment that would ban redlining of low-income communities. King said Davis' amendment would prevent smaller telecommunications companies from entering the market because they may not have the financial ability to build a citywide system.

"The reason that cable was directed to build out [citywide] was because they were given a monopoly," said King. But he said, "You can't require that with the small competitors coming in. There's no way -- you [would be] shutting out competition." Davis' amendment failed 94-46.

"We're not talking about something the cities should be regulating anyway. We're talking about entertainment. We don't tell Blockbuster that they have to put a store on every corner. We say go sell your product where people will buy it. That's the free market," King said.

Cable companies could get the same deals by canceling their local franchise agreements.

Opponents also note the Senate never got to debate the television provisions, which King added after the Senate already had passed the PUC part of the legislation.

SBC and Verizon are on the fast-track to launch IPTV (Internet Protocol TV) to offset their loss in telephone business largely due to VOIP (Voice over Internet Protocol) and increased cell phone usage. With Time Warner and other companies encroaching on the telephone market by offering VOIP service (Time Warner tags it digital phone service), it was only a matter of time when large and small telco companies alike attempt to tap the television market.

Steve Banta, Verizon's Southwest regional president, said the proposal is "progressive legislation that reflects the emerging competition" for television customers.

Verizon has been rolling out FTTP (Fiber-to-the-Premises) in as many as 14 states. The new service, known as FiOS, provides users with ultra fast speeds. Verizon is looking at offering television service through FiOS later this year.

"The telephone guys realize that the phone (revenue) is going to zero, so they have to replace it with TV (revenue)," analyst Patrick Comack with Zachary Investment Research in Miami said earlier this year.