Chris Keeley

Verizon Cable Franchise Agreement: $70 Billion Bun That Needs More Time in the Oven

New York City’s cable marketplace is currently divided into territories, with some of the city controlled by Time Warner and other portions by Cablevision. New York City and Verizon recently reached a 12-year, first-of-its-kind cable franchise agreement which will allow Verizon to offer the “triple play” of services – cable TV, phone and internet service – throughout all five boroughs of the city. With this agreement, New York City is calling off a long-held, city-imposed truce between the city’s two cable providers, Time Warner and Cablevision, and other competitors.

Verizon, among others, has touted the agreement as a victory for competition in a free marketplace. And competition is important. After all, it will be Verizon’s competition that will soon point to this weak agreement and demand that they also be allowed to roll back their consumer protection provisions. Time Warner and Cablevision will point to this agreement and say any demands for assurances of Net Neutrality or the dedication of sufficient resources for public, education or government (PEG) channels would be tantamount to the city providing a competitive advantage to Verizon.

Competition may also lead to lower prices for some cable customers, but the public interests at stake are critical aspects of this and these future franchise agreements. An open process would allow the public to provide valuable input, and offer sometimes gentle reminders to the city’s negotiators that it is the city that is holding the cards. The city is in the position of leverage. It’s Verizon, after all, that needs the New York market more than the market that needs Verizon.

Assailing the closed-door mentality that has been pervasive through much of this process, Juan Gonzales of The Daily News explained that “cable service is too important to be carved up behind closed doors.” It was these closed-door sessions that allowed Verizon to submit its cable franchise application only one day after the city issued its Request for Proposal.

We joined with People’s Production House, Consumers Union, and NYPIRG, as well as NYC Council Chairs Gail Brewer (Technology in Government) and Tony Avella (Zoning and Franchises), on the steps of City Hall to call for a delay in the agreement’s approval so the public could have an opportunity to fully review the agreement. The administration-dominated Franchise and Concession Review Committee, however, did not heed this call. The FCRC, the final hurdle at the city level, approved the agreement unanimously on May 27 – the day after Memorial Day and only one week after the City Charter-required lone public hearing was held.

The New York State Public Service Commission (PSC) now plays the role as the final step in the approval process. Coupled with substantive public and consumer concerns, the nearly-nonexistent public review process this agreement has been subjected to thus far is reason enough for the PSC to send the agreement back to the City for further public review. This would be a break from its standard operating procedure, as it has thus far rubber stamped nearly every one of Verizon’s 115 franchise applications throughout the state without so much as requiring minor modifications.

The PSC’s five commissioners are appointed by the Governor for six-year terms. The current chairman, Garry A. Brown, is a Spitzer appointee while each of the remaining four commissioners is a Pataki appointee. AARP, the Public Utility Law Project and others did not support Mr. Brown’s nomination, citing possible conflicts of interest he could encounter because his employer at the time, NYISO, would surely have business before the Committee. Here at Common Cause, we’ve had concerns of our own regarding the PSC in the past.

Verizon is not taking its approach to cable franchise work in New York State lightly, and has made its presence well known in Albany. Through 2006 and 2007, Verizon spent more money lobbying ($5.4 million) and hired more lobbyists (24) than any other company in New York State.

Some of these lobbying expenditures were directly targeted to defeat Assemblyman Richard Brodsky’s Telecommunications Reform Act of 2007. Assemblyman Brodsky’s proposal would have provided for state-wide cable franchises, moving beyond the municipal-level agreements which are the current standard. It would have provided strong consumer protections, increased funding for PEG channels, and required assurances of Net Neutrality from cable franchisees. Verizon supported the state-wide franchise provisions, but ultimately had to join with the other cable providers in opposing the bill due to the Net Neutrality provisions. (For more on state franchising, see Consumers Union’s “Elements of Consumer Friendly State Franchising Legislation.”)

As to the nitty-gritty of this agreement, Common Cause/New York joined with Peoples Production House in calling for the following improvements to the agreement before its approval:

- All programming on public, educational, and government (PEG) channels should be made available through Video on Demand technology, greatly increasing the access everyday New Yorkers have to their government. These channels should be made available in high definition and not be treated as second tier resources. Competition among cable channels is as important as competition between cable providers.
- The Technology and Education Fund and should be dramatically increased, from its current pittance of $4 million for 5 boroughs over seven years.
- Verizon’s requirement to build-out services to lower-income communities must be improved. Simple language changes in the agreement could amount to drastic improvements. As Josh Breitbart points out, the current benchmarks are set with contractual language that is the “statistical equivalent of comparing apples to pineapples.”
- NYC should establish a Cable Franchise Oversight Committee, as has been done in many municipalities throughout the country.
- The modified contract must include enforceable penalties built into the contract to insure adequate incentive for timely performance and incentive to correct problems.
- Consumer protections should be strengthened, including requirements related to Significant Outages, poor customer service, and missed service or installation appointments. The proposed agreement weakens established consumer protection standards.

In addition, CC/NY believes the agreement should include language insuring Verizon will respect Net Neutrality. Verizon’s past efforts to restrict the free speech of its cell phone network users gives reason for concern regarding how Verizon might allocate, or limit, its bandwidth to organizations with which it does not agree.

So here we sit, with an agreement providing insufficient resources dedicated for the PEG channels or public education and technology fund, and without any semblance of Net Neutrality assurances. It goes as far as to even roll back existing consumer protections in the name of competition.

The city’s cable franchise agreement with Verizon is the new kid on the block that is setting a very poor example for those coming behind him. We call on the PSC to recognize this, and send this agreement back to the city for further public review and input.

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Posted at 7:01 AM, Jun 09, 2008 in Net Neutrality
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