On Brink of NY PSC Vote on Comcast Merger President Urges FCC to Deem Broadband a Utility Telecom Service

On the brink of New York PSC action on the Comcast/Time Warner Cable merger petition, which involves the provision of internet service as well as phone and cable services, President Obama has urged the FCC to regulate internet service as a telecom utility service under Title II of the Telecommunications Act, which governs telecommunications carriers.  Edward Wyatt, President Tells FCC to Ensure Open Internet, N.Y. Times Nov. 11, 2014. Currently the FCC considers broadband service to be an “information service” that did not involve the duty to serve the public at just and reasonable rates.  The New York PSC has not attempted to regulate internet service under its state law powers over the phone lines used to provide it.

While much of the national discussion has focused on the obligation of utilities to provide equal access to other providers of content (“net neutrality”) this is also a welcome bit of news for those who cannot get high speed broadband at reasonable prices under a New York PSC regulatory regime that is relying on phantom competition.  This has actually resulted in market division by monopolistic (or at best duopolistic) holding company providers of wireline broadband service.   For example, in the capital region, except for a few of the more affluent Albany suburbs where Verizon has deployed its FIOS internet service, there is only one provider of wireline internet service, Time Warner Cable, and Verizon has no plans to provide its “competitive” service in Albany or many other areas.

Classifying a service as a Title II service under federal law brings with it duties of universal service which are critical to lower income households and users in rural areas and small towns.  Universal service is a mandate of the 1934 Telecommunications Act as amended by the Telecommunications Act of 1996. A central purpose of the law is “to make available, so far as possible, to all the people of the United States, without discrimination on the basis of race, color, religion, national origin, or sex, a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges….” 47 U.S. Code § 151. Even though the deployment of new broadband facilities to provide higher speeds or to reach more remote areas of New York state would be justified based on regulated utility profits, say, in the range of 9 – 10%, the holding companies are free to choose instead to harvest profits from New York — where they enjoy monopoly and market power under a market-faith-based state regulatory scheme — and invest the revenues gleaned from New Yorkers in other states or countries where even higher returns on investment can be made, or where there is more actual competition.  Notably, Comcast and Time Warner Cable have protested and delayed the public disclosure under FOIL of the  broadband deployment plans for  Time Warner Cable’s many franchises in upstate New York, claiming them to be “trade secrets”.  See the documents in the New York PSC case file for the Comcast Time Warner Cable merger.

President Obama said:

For almost a century, our law has recognized that companies who connect you to the world have special obligations not to exploit the monopoly they enjoy over access into and out of your home or business,” Mr. Obama, who is traveling in Asia, said in a statement and a video on the White House website. “It is common sense that the same philosophy should guide any service that is based on the transmission of information — whether a phone call or a packet of data.”

Under the New York Public Service Law § 91, internet service arguably is included in the services subject to state PSC regulation, because it is provided over the same line which also provides intra-state telephone service.

“Every telegraph corporation and every telephone corporation shall furnish and provide with respect to its business such instrumentalities and facilities as shall be adequate and in all respects just and reasonable. All charges made or demanded by any telegraph corporation or telephone corporation for any service rendered or to be rendered in connection therewith shall be just and reasonable and not more than allowed by law or by order of the commission. Every unjust or unreasonable charge made or demanded for any such service or in connection therewith or in excess of that allowed by law or by order of the commission is prohibited and declared to be unlawful.” PSL 91.1.

We have been invoking the venerable New York state common law precedent regarding utility services, including New York State Court of Appeals  decisions of Judge Cardozo on the duty to serve all at reasonable rates, in the Utility Project’s comments urging the New York PSC to dismiss as insufficient the Comcast Petition to acquire Time Warner Cable.  The Project is also urging the Commission  to take a hard look at Time Warner Cable’s telephone service and rates in light of New York’s declining household phone subscribership, and to scrutinize the cable companies’ internet deployment plans and pricing.

The Comcast/Time Warner merger case is on the New York PSC’s November 13, 2014 session agenda.

Updates

On November 12, 2014 Comcast/Time Warner Cable filed a letter acquiescing in postponement of a decision in the case until December 31, 2014.  See Larry Rulison, Vote Put Off on Takeover by Comcast – Second delay raises questions on whether deal is in trouble, Times Union, Nov. 13, 2014.

Gerald A. Norlander

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