Asbury Park Press

New Cable Competition Law's Pitfalls Demand Fierce Watchdog

Asbury Park Press — Sunday, April 8, 2007

BY PHYLLIS SALOWE-KAYE

For many in New Jersey, the battle between 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 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 rule-making at the Board of Public Utilities will determine how the new competitive landscape takes shape. The BPU is the regulatory agency charged with ensuring competition is open and transparent, and rates are reasonable and affordable.

Right now, the BPU is poised to decide a number of critical issues that will have profound impacts on consumers, local governments and the entire state.

While these issues may be complicated and, quite frankly, a bit dull, they are 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 so critical to our modern age. And, the BPU decisions will mean a lot to our pocketbooks.

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

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

From the very beginning, consumer advocates 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 indicate 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 Jerseyan's live in high-rise buildings.

The BPU's proposed rules and regulations, which may be adopted as early as this month, require nothing more than a self-issued certification from Verizon that it has attained this 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, sufficient 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 having real benefits of choice in cable television service providers.

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

The reality is that without clear definitions to 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 this problem by including in its rules a notification process for interested parties, and by mandating a procedure to review whether Verizon truly is serving 60 percent or more of community.

Some would say 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 ensuring competition is available to all, discriminatory practices will not be tolerated and rates are fair and reasonable.

Consumers deserve no less.

Phyllis Salowe-Kaye is executive director of New Jersey Citizen Action, an independent citizen watchdog coalition representing more than 60,000 family members and 110 affiliated groups.

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