State Laws/Franchising

'Verizon Bill’ Is Now Pa. Law

12/12/2004 7:00 PM Eastern

Shunting aside opposition from consumer groups, Pennsylvania Gov. Ed Rendell has signed a Verizon Communications Inc.-backed telecom reform bill that includes language that curbs municipal broadband overbuilds after 2006.

Though critics called the bill anti-competitive, in a Dec. 1 statement announcing his approval, Rendell noted that Pennsylvania has a mandate for universal broadband access by 2015.

The bill will speed universal deployment ahead of that date, said Rendell, a Democrat. It will also provide other consumer benefits, he said, such as making more subscribers eligible to purchase low-cost lifeline service.

Philadelphia and other cities questioned the bill because the anti-overbuild language was inserted deep into the amendment of the state’s utility policy. Pennsylvania’s largest municipality plans to deploy wireless fidelity, or Wi-Fi, broadband Internet access citywide.

’06 EFFECTIVE DATE ON BAN

Some last-minute tweaking moved the municipal overbuild ban’s effective date to Jan. 1, 2006. After that, only cities where the incumbent local-exchange carrier has not upgraded its plant to provide high-speed services — or does not plan such an upgrade in the next 14 months — can develop a municipal broadband systems.

Even then, a city will have to consider commercial partners, and the local ILEC will hold the right of first refusal.

In an 11th-hour move, Verizon waived rights to participate in any Philadelphia Wi-Fi project, a fact Rendell noted in his bill-approval statement.

“It seems like a great deal for the telcos,” said Jim Baller, an attorney who advises cities on broadband projects.

Other critics were more harsh. One called the bill “Rendell’s early Christmas gift to Verizon.”

“No doubt Verizon will continue to pour even more campaign contributions and gifts into Rendell’s coffers,” said Jeff Chester of the Center for Digital Democracy in a statement. “Verizon, SBC, Comcast and other media and telecommunications giants are afraid of competition, especially from groups trying to provide the public with lower-cost net access. In today’s world, access to broadband should be a right.”

Josh Silver, executive director of the advocacy group Free Press, which promotes a more competitive, public interest-oriented media system, was also harsh in his assessment.

“Verizon may be promising not to interfere with Philadelphia’s plans, but since when does a city need a permission slip from the phone company before providing a necessary service for its own citizens?” he asked.

Comcast Corp. spokeswoman Jeanne Russo declined to comment on the passage of House Bill 30. “It’s Verizon’s bill,” she noted.

But the MSO does not oppose deployment of Wi-Fi in its headquarters city of Philadelphia, where it is also the local cable operator.

Russo contended that customers take Comcast high-speed Internet for its Web-based entertainment and educational content, and not just for speed. Thus, Comcast does not view the city’s Wi-Fi buildout as competition, she said.

The new telecom bill is unique to Pennsylvania, said Verizon spokesman Lee Gierczynski, and the telco is not pursuing overbuild restrictions in other states.

The change was sought in Pennsylvania because the telco has concerns about municipal buildouts that put taxpayers at risk, he said. Cities compete on an unlevel playing field because they have easier access to capital for and are not subjected to the same fees and taxes as commercial broadband providers, Gierczynski added.

The Broadband Cable Association of Pennsylvania backed Verizon’s initiative, but that trade group sought an even-tighter restriction.

Cable wanted language that was more technology-neutral and would have prevented overbuilds where any company is offering broadband services.

“However, from a practical standpoint, this prevents overbuilds in many instances,” BCAP president Dan Tunnell said.

The state’s cable operators have been bristling ever since the rural burg of Kutztown overbuilt Service Electric’s fully upgraded system. For three years, the BCAP has been trying to get an overbuild ban through the General Assembly.

Cable supported the language in House Bill 30 language because “didn’t want to throw out the good in search of the perfect,” Tunnell said.

VoIP EXCLUDED

Cable was disappointed over another exclusion to the bill. MSOs need “business certainty” when it comes to VoIP deployment, he said. Thus, cable operators lobbied for protections in the bill that would prevent the imposition of state or local fees.

The cable industry sought the language so it would be protected from local assessment no matter what federal officials did.

But on Nov. 9 — a week before the state Senate approved the bill — the Federal Communications Commission, in a ruling on standalone VoIP provider Vonage Holdings Corp., signaled it is prepared to shield the platform from non-federal regulation.

Because that FCC ruling is not the final word on VoIP regulation, cable still wanted House Bill 30 to contain VoIP-tax language. But lawmakers would not support cable’s arguments, citing the Vonage case.

“The FCC did the right thing,” said Tunnell. “I just wish they’d waited a week.”

Previous state telecom policy defined VoIP in a manner that went far beyond what the FCC has established, Rendell said in his signing statement. Pennsylvania wants to promote VoIP growth, so instead of refining those rules, all references to the technology were deleted from House Bill 30.

The measure also reaffirms the power of state utility regulators to create rules for unbundling telephone-network elements until the FCC or the courts designate a higher authority.

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