AT&T could begin selling TV service in Tennessee within the next three years under compromise legislation unveiled Monday by state legislators that would allow the company to get a state franchise and bypass local government control.

The legislation caps more than three months of back-door negotiations between AT&T, the cable industry and local governments as AT&T pushed to change a decades-old system of local control over the cable TV business.

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Under the proposed law, which is scheduled to be introduced in the House commerce committee today, AT&T and other companies could get a state franchise to sell TV anywhere in the state, issued by the Tennessee Regulatory Authority. Such franchises now require companies to get approval from local governments.

Legislators who gathered to present the plan to the media said it would create competition for the cable companies in Tennessee, encourage the deployment of broadband Internet and provide service to low-income neighborhoods. House Speaker Jimmy Naifeh, D-Covington, said the bill "creates a climate for competition in Tennessee."

The bill is expected to pass this year after failing during the last legislative session. This time around, Naifeh sat the opposition down to work out an agreement with AT&T.

Over the past three years, 19 other states have passed similar legislation allowing state franchising. Groups that represent local governments and consumers cautioned that the legislation could end up eroding many of protections consumers have enjoyed under local control.

"The reality is there will be neighborhoods where this infrastructure will not reach," said Barry Orton, a telecommunications professor at the University of Wisconsin-Madison, who has worked for local governments on cable regulatory issues in the past.

Reaction is mixed

Comparable laws in other states have provided a way for cable companies to abandon their obligations to local governments and consumers, including build-out requirements that typically force cable companies to serve most of a county or city, said Libby Beaty, the executive director of a group that represents municipal telecommunications, the National Association of Telecommunications Officers and Advisors.

"The biggest entity that takes advantage of statewide franchise is the incumbent cable companies,'' she said.

But the Rev. George Price of Bethesda Original Church of God in north Nashville, who had previously opposed the legislation, said he was pleased Monday that the proposed law would require service to low-income households.

"I think I can go with that,'' he said. "It's fair."

200,000 have signed up

AT&T has signed up more than 200,000 customers for its digital TV service, called U-verse, mostly in states that have already passed state franchise legislation.

The service isn't available anywhere in Tennessee.

U-verse costs $69 per month, which includes up to 100 channels and a 1.5-megabit broadband Internet connection.

Other pricing packages also are available. The bill provides no regulation over the pricing for U-verse.

Under the proposed law:

Starting service: AT&T will have to apply for a franchise within one year of the bill's passage and would have to roll out service within two years after that, although the company could apply for an extension.

Build-out requirement: Within three-and-a-half years of its first TV service rollout in the state, AT&T would have to provide access to 30 percent of residents within its phone service territory, about 600,000 households. The company could provide service to fewer customers by getting extra credit for households that don't have access to broadband Internet.

Broadband incentive: AT&T could get credit toward its 30 percent build-out requirement by counting one house without access to its broadband service twice, and a house without access to any broadband Internet four times. This creates the possibility of AT&T providing access to its U-verse service to a minimum of about 150,000 houses in Tennessee. There would be no requirement that AT&T provide broadband service to areas that don't have it.

Low-income households: Twenty-five percent of households with access to AT&T's TV service would have to be low-income, defined as households with income of $35,000 or less, within three-and-a-half years.

Cable companies: Existing cable companies would be able to get a state franchise starting July 1. They must continue to comply with existing local franchise agreements until the term of those contracts expire. Cable companies and new telecommunications companies that have a state franchise could choose specific areas or cities where they want to provide service. They also would be required to meet the build-out and low-income household provisions for new areas where they didn't previously provide service.

Local governments: Local governments get 5 percent of gross TV revenues in taxes paid directly to them. This is the maximum allowed by the federal government, though some Tennessee cities and counties levy a smaller percentage.

Joint ventures: Cities and counties could join with cooperatives or municipal electric systems to provide broadband Internet to areas that don't have access to it. Current law forbids cities and counties to provide such service.