NJ: Cable watchdog

Posted on April 7, 2007 - 10:39am.

Note: Excellent analysis of what can go wrong in state franchising - the devil is in the details.

from: Trenton Times

Cable watchdog

Saturday, April 07, 2007

or many in New Jersey, the battle over state vs. municipal franchises to foster competition in the cable market ended with the governor's signature on the sweeping new law. The decision was made to allow Verizon to provide cable television service without a local franchise, in the belief that new competition will lower cable rates for consumers.

But that wasn't really the end of the story. As consumers wait for the day when their cable bill goes down, and we think that could be a long wait for many, a little-known rulemaking at the Board of Public Utilities (BPU) -- the regulatory agency charged with insuring that competition is open and transparent, and that rates are reasonable and affordable -- will determine how the new competitive landscape takes shape. Right now, the BPU is poised to decide a number of critical issues that will have a profound effect on consumers, local governments and the entire state.

While these issues may be complicated and, quite frankly, a bit dull for everyday New Jerseyans, they are very important for the future of cable competition. And this isn't just about our television service anymore -- this is about who will and who won't have access to high-speed Internet broadband services and the information technologies that are so critical to our modern age. And, importantly, the BPU decisions will mean a lot to our pocketbooks.

Few people are aware that the new law fostering cable competition came with a tax increase: The cable tax paid by consumers as part of their cable bill was increased from 2 percent to 4 percent in certain circumstances. The law requires all cable companies to raise the tax paid by its customers from 2 percent to 4 percent in a given town when Verizon indicates that it can serve 60 percent of the municipality. And if you are part of the 40 percent of that town that still has no competition, and receive cable service from the one other company serving your neighborhood, you have to pay the tax increase anyway.

A great deal hinges upon whether Verizon says that it is capable of serving 60 percent of homes in a particular town. When it does, cable customers are faced with a big tax increase. If it can't, Verizon customers pay more taxes than cable subscribers. The poten tial risks for consumers under such a situation are clear.

From the very beginning, consumer advocates like us have been calling for clarity and real transparency from all competitors. We are concerned because, at every critical juncture, Verizon has failed to provide build-out maps that would in dicate to municipalities when and where they would be getting Verizon's cable service. Verizon has provided only vague commitments of how they will provide service, particularly in low-income areas where thousands of New Jerseyans live in high-rise buildings

But the BPU's proposed rules and regulations, which may be adopted as early as this month, re quire nothing more than a self-is sued certification from Verizon that it has attained the threshold. There is nothing in the rules that guarantees citizens, their municipal representatives, the state's Public Advocate or existing cable operators a chance to submit evidence to the contrary -- evidence that could help keep the tax increase from taking effect.

Without real transparency, suffi cient monitoring and an opportunity for due process for all concerned parties, through a robust administrative appeals process that offers a legitimate chance to establish whether the 60 percent threshold has been met, cable consumers may end up paying more in taxes without ever really having the benefits of choice in cable television service providers.

People clamoring for competition and believing that lower rates are on the way have been willing to overlook Verizon's lack of specificity and give it the benefit of the doubt. We hear some people say, "Won't Verizon want to reach everyone?" and "Won't our cable bills come down?"

The reality is that without clear definitions of ambiguous terms, prompt reporting requirements and thorough monitoring practices by the BPU, not everyone will benefit from competition. As a result, the consequences could be profound for every consumer throughout the state.

The BPU has an opportunity to fix the problem by including in its rules a notification process for interested parties and by mandating a procedure to review whether Verizon is actually serving 60 percent of the community.

Some would argue that New Jersey is a leader in ushering in the new telecommunications landscape in this country. However, we risk giving away all that is good about the new law if we don't do the hard work of putting in place real rules, real benchmarks and a real process for insuring that competition is available to all, that discriminatory practices will not be tolerated and that rates are fair and reasonable. Consumers de serve no less.

Phyllis Salowe-Kaye is executive director of New Jersey Citizen Action.

© 2007 The Times of Trenton

( categories: NEW JERSEY | State Franchises | Verizon )