New York Bill Would Buck Trend by Increasing Telecom Regulation

The measure could force companies to return to customers up to 40 percent of the proceeds of asset sales, a Verizon spokesman said. The bill would threaten jobs and investment in New York, he said. It targets a few companies and could steer potential investors away from projects that would add jobs and other opportunities in the state, the spokesman said. The measure would penalize only Verizon and Frontier, if they created a joint venture or reached a different deal to become more competitive, he said. The bill attempts to “provide a solution to a problem that doesn’t exist and sets a bad precedent for all industry and businesses in the state,” the spokesman said. The bill wasn’t aimed at a particular company, LaCarrubba said.

Frontier has been fighting the bill on grounds that the state commission already can review telecom transactions, said Steve Crosby, a senior vice president. LaCarrubba said the measure would help prevent the state Public Service Commission from approving sales that don’t deliver real benefits to consumers and telephone workers.

Some analysts said the measure might get in the way of Verizon’s choosing Somerset, N.Y., as the site of major data center that’s under consideration. The carrier is looking at a Somerset parcel for the purpose, the spokesman said. Verizon, which runs about 250 data centers, is also looking at a handful of sites in other states, he said. The company is weighing matters including state business environments in the decision, and the bill would affect the climate in New York, the spokesman said. “That’s just as important to the construction of a data center as design, power costs, tax implications,” he said.

Verizon has tried to sell upstate New York wireline properties but has never gained enough support at the state commission to go through with it, an industry observer said. The carrier may want to divest properties where it doesn’t offer FiOS, she said. But the Verizon spokesman said the carrier doesn’t plan to divest wireline assets in the state.

In California, the Public Utilities Commission turned its back on the telecom market after it was deregulated in the state in 2006, said a report by Dorothy Korber of the California Senate’s Office of Oversight and Outcome. It said state regulators aren’t paying attention to rate increases, market dominance and other matters. California’s Legislature is “enmeshed in an epic struggle to hammer out a state budget” with Gov. Arnold Schwarzenegger, and “once the budget dust settles, the Legislature can get back to other business, including my PUC report,” Korber told us.

California PUC President Michael Peevey’s office submitted a memo to the state Senate saying that although two carriers dominate the state telecom market, there’s too little evidence to conclude that market concentration is leading to wide-scale market abuse. Market dominance in the state “in and of itself does not justify increased regulatory intervention,” the memo said.

Connecticut has largely deregulated the telecom and cable industries, said Kevin McCarthy of the state Office of Legislative Research. Most states have a broadly similar regulatory system for telcos, and several, most recently Illinois, have gone further than Connecticut in deregulating the companies, he said. In contrast, most states regulate the cable industry at the local level and continue to impose franchise requirements and rate regulation on cable companies to the limited extent that federal law allows, he said.

Legislation passed this year in Illinois reduced regulation of conventional residential landline phone service. It allows a carrier to seek a declaration of competitiveness for its service areas. If all the areas are declared competitive, the company no longer comes under rate or other regulation by the Illinois Commerce Commission, except for some customer service standards and a requirement to offer specified packages, McCarthy said. A carrier must agree to service standards to take advantage of this option, he said.

Meanwhile, a Wisconsin bill would remove several longstanding regulations. Supporters say the measure would remove unfair burdens from landline companies to help them stay competitive and encourage investment. Opponents said the proposal would hurt consumers through increased rates and reduced quality. The state legislature reconvenes in January.

State regulation of the cable industry has become more common in recent years, McCarthy said. Ohio shifted from local to state regulation in 2007. States including California, Indiana, Kansas, New Jersey, North Carolina, South Carolina, Texas and Virginia, have authorized state franchises in video competition laws. California allows an incumbent cable company to apply for a state franchise when a local franchise expires or a local franchise authority agrees to it, and the state allows an authority to require all local franchisees to apply for state franchises. Kansas requires the local franchising authority to change the franchise of an incumbent cable company facing competition to match the terms of the competitor’s state franchise within 180 days of a request by the cable operator.

Several states have included build-out requirements in recent legislation, McCarthy said. California requires that large telephone companies entering the video market ensure that, within three years, at least 25 percent of the households with access to their video services have an annual household income below $35,000. The proportion increases to 30 percent after five years. Virginia allows municipalities to require that a company provide video service to up to 65 percent of the dwelling units in its telephone service area within seven years after service has begun. This can be increased to 80 percent after 10 years. But Indiana, Kansas, North Carolina, South Carolina, and Texas, like Connecticut, prohibit build-out requirements.