MONTPELIER, Vermont --  The Vermont Public Service Board today denied approval of the transaction between Verizon and FairPoint.  The Board noted that its order did not consider the terms of the stipulation recently filed by the parties in Maine, and invited the applicants to submit a proposal to address its remaining concerns.

Verizon and FairPoint announced in January definitive agreements that will result in Verizon establishing a separate entity for its local exchange and related business assets in Maine, New Hampshire and Vermont, and then spinning off that new entity to Verizon’s stockholders and merging it with and into FairPoint.  The transaction requires approval by the three states’ regulatory agencies and by the Federal Communications Commission.

The following response should be attributed to Polly Brown, Verizon state president for Vermont.

“While we had hoped the Vermont Public Service Board had approved the transaction today, its order does recognize significant benefits for consumers and business in the state.  Today’s order also invites the parties to submit a revised proposal to address the Board’s remaining concerns.  The parties will evaluate the order and respond accordingly.” 

Likening members of the FCC to corrupt Roman emperors, he suggests the agency’s recent action to increase cable TV choice for apartment dwellers is a mere “bread and circuses” sop to the masses to distract them from its dark deeds to come.

Unfortunately for Grivner, his colorful invective fails to divert attention from the real conspiracy: Companies like his are attempting to manipulate the regulatory process and the facts.

They are engaging in a rhetorical circus to put more bread in their corporate pockets through regulatory advantage.  They want the FCC to allow federally-mandated network sharing policies designed to give companies a temporary leg-up to jump-start competition to become a permanent corporate welfare plan – even in areas that have lots of well established competitive choices.

If the FCC lifts the federal regulatory straight-jacket in six of the nation’s most competitive areas, consumers will continue to enjoy expanding options at competitive prices, and competing companies that use Verizon’s networks to serve their customers and do not wish to build their own facilities will continue to be able to provide service, either using comparable products from Verizon or by purchasing service from other companies.    

 No doubt, Washington conspiracy theories will continue, as well.

Friday evening, the Federal Communications Commission issued a news release with the headline “FCC Replaces Outmoded Long-Distance Rules With New Protections For Consumers.”  Those outmoded rules required companies like Verizon, AT&T and Qwest to offer in-region, long-distance service through a separate subsidiary in order to avoid the various regulations and constraints associated with being branded a “dominant carrier.”

In short, we’ll be able to provide long-distance and other services to consumers under one roof, in some cases using the same Verizon employees and equipment.  This makes sense in the era of convergence, competition and bundling.  In the words of analyst Anna-Maria Kovacs, “This move eliminates various costs for [the companies], gives them more marketing flexibility, and eliminates some awkwardness in their transactions with customers.” 

Another benefit for residential consumers is the agreement by the companies to provide special residential calling plans for up to three years for those few people who make very few long-distance calls, do not have wireless, or do not have access to VOIP calling.

What precipitated this order?  In a word, competition.  As FCC Commissioners Copps and Adelstein said in their joint statement, “We support this relief, with the conditions and commitments included therein, because the Commission must take into account the changing long-distance market.”  In the words of Commissioner McDowell, “This is a classic instance where regulation had been appropriate…but where the relevant market has become sufficiently competitive to warrant less onerous regulations, while continuing to protect consumers.”

“Verizon’s position is that the Federal Communications Commission should not impose ‘open access’ conditions on the 700 MHz spectrum.  The record compiled at the FCC does not justify these conditions.  Imposing any such requirements in the competitive wireless market would reduce the revenue the government will receive from the spectrum auction and limit the introduction of new and innovative wireless services.

“If the FCC persists in imposing open access requirements on the “C” block of spectrum to be auctioned, Verizon urges that the rules should be constructed to give the customer the ability to choose to have the same kind of relationship with a carrier that the customer enjoys today.  In other words, the customer should be able to purchase a handset from a carrier and enter into a service agreement with that carrier, thereby giving the carrier responsibility for optimizing all aspects of the customer experience.”

I just put this out this morning and thought I’d share here…

FOR IMMEDIATE RELEASE Media contact:

May 21, 2007 David Fish

202-515-2514

david.m.fish@verizon.com

The Federal Communications Commission, particularly Chairman Martin, took a stand for cable TV choice in an order released by the agency this afternoon.

For the regular person, who isn’t steeped in Washington jargon and acronyms, it amounts to this: counties and local authorities should not put unreasonable roadblocks in the way of granting local video franchise approvals to companies wanting to compete against the "cable guy" for the nation’s eyeballs.

For consumers, this means price and product competition between cable and new entrants.

Verizon’s FiOS TV is already out there with our fiber-to-the-premises network, and this will help us keep up our aggressive deployment of TV.

In a nutshell –and we’re still reviewing the FCC document – here is some of what the order calls for: a 90-day time frame for local franchise authorities to deal with new competitors’ franchise applications (if they have existing rights of way), and six months for others (who do not have rights of way); a limit on fees that can be assessed; a limit on unreasonable ‘buildout’ requirements (telling a new entrant it must build everywhere at once or, in effect, nowhere at all).

Here is what our Marilyn O’Connell, chief marketing officer of Verizon Telecom, said this afternoon on the development:

"This decision removes obstacles to the continued aggressive rollout of our FiOS network. It means that we will be able to reach our goals of rapidly expanding the number of consumers who have a choice of video service providers. Verizon spends more on capital investment than any other American company. It would be difficult to invest so much into broadband and video deployment without common sense decisions like this one. Chairman Martin has led the Commission to a breakthrough for consumers."

That’s the take-away from today’s above-the-fold editorial in the Wall Street Journal, “Broadband Breakout.”

What’s the bottom line for consumers?  According to the Journal, it’s cool stuff like YouTube, that “wouldn’t exist today but for the fact that there’s enough broadband capacity to allow millions of people to view videos over the Web.”

Another key point made is the type of deployment: the largest portion (58%) of June 05- June 06 broadband growth (52%) was in wireless.   Yes, it is a competitive market. See Scott Cleland.

Both of these points challenge basic arguments of the Net Regulation forces.  Everyone wants cool stuff to flow (or stream) at high speeds from content and application providers, including network providers eager to win customers and keep them happy.  And this market is clearly competitive.

So, what’s the policy “ask” of today’s piece?

Let’s maintain the proven bipartisan consensus that has persisted for several years, and not risk, “bogging down industry players with regulations or price controls that raise the risks that these mammoth investments will never pay off…Consumers will end up paying for such policies in fewer choices and higher prices.”

Those prices have decreased.  Let’s keep the cool stuff flowing.

In the frenzy of the MSM coverage yesterday, I forgot to post this.  Here's Verizon’s statement on the FCC’s pro-consumer decision yesterday.  Technology Liberation Front says: “The deregulatory milestone is a victory for consumers, who will benefit from more rapid investment in competitive video offerings.…”  It's also discussed here and here.  Rep. Markey (D-MA) promises hearings here.

VZ News Release:

FCC Decision Speeds Cable TV Competition

Agency Puts Consumer Video Choice on ‘Fast Forward’ Guyer says

NEW YORK -- The Federal Communications Commission today took steps to speed the entry of new competitors into the cable television market by streamlining the local franchising process through which companies gain approvals to offer subscription television services.  The following statement should be attributed to Susanne Guyer, Verizon senior vice president for federal regulatory affairs.

“Today’s action will fast-forward the delivery of new choices, lower prices and better services to consumers.  The FCC is standing up for consumers who are tired of skyrocketing cable bills and want greater choice in service providers and programming.  Verizon has an aggressive schedule to deploy FiOS TV.  This order will enable us to reach agreements with local franchise authorities more quickly so we can deliver the benefits of competition to consumers faster.  The FCC has taken strong steps to increase consumer choice and spur investment in broadband and video deployment.”

Verizon Communications Inc. (NYSE:VZ), a New York-based Dow 30 company, is a leader in delivering broadband and other wireline and wireless communication innovations to mass market, business, government and wholesale customers.  Verizon Wireless operates America’s most reliable wireless network, serving nearly 57 million customers nationwide.  Verizon’s Wireline operations include Verizon Business, which operates one of the most expansive wholly-owned global IP networks, and Verizon Telecom, which is deploying the nation’s most advanced fiber-optic network to deliver the benefits of converged communications, information and entertainment services to customers.  For more information, visit www.verizon.com.

Let’s hope not. 

It depends on whether the new Congress will act in time to renew the Internet tax moratorium.  It expires next fall, so we don’t have the usual two-year Congressional session for the anti-tax elves to prepare. 

Remember, we’re talking about a hike in your bill of about 14 percent (the extension of existing telecom taxes to Internet services – the primary reason for the moratorium, in the first place).  

Relevant history and facts: the moratorium – the Internet Tax Freedom Act – became law in 1998.  It expired in 2001, and was extended to 2003.  In 2004, it was strengthened and extended (retroactive to 2003) to November 1, 2007.  One update made sure to include broadband and wireless Internet services. Another provided a ‘DSL grandfather clause’ until 2005. 

We understand some of Santa’s key helpers in this enterprise will continue to be Sens. McCain, Wyden and Sununu.  Another potential anti-tax elf may be incoming Senate Majority Leader Harry Reid.  At this point, Speaker-to-be Nancy Pelosi may be a wildcard – though we hope her tech roots lead her to back Claus’s cause with vigor.  (Warning: Do not offer cookies or eggnog to any of the elves lest you run afoul of ethics rules.)

Bottom line: All Congressional elves of both parties need to act soon with hearings and votes, or state tax administrators could be driving the sleigh next Christmas.  It takes a lot of time to build up momentum – and there will be strident voices on the other side.

You see, a handful of states – even some without grandfather status – are taxing Internet service and flaunting Congress’ will. (Note to Santa: they are AL, FL, IL, MN, NH, PA and WA.) And still more states may do so, unless a moratorium is renewed and enacted by November.

For recent discussion of the related sales tax issue, look here and here. 

Again, it can take an entire two-year Congress – sometimes longer – for legislative fruit cakes to bake.  And, even though he lost the leadership race, Sen. Alexander is still a force to reckon with.

This is a season of hope.  So don’t let this warning spoil your holiday cheer.  (After all, Massachusetts – an extremely blue state – has issued a strong ruling saying it will stop collecting the broadband tax.)  Prospects are good for timely action, particularly given the new majority’s aversion to being branded ‘tax and spend’ elves. 

Note to both parties – Santa is watching.  Be nice to the Internet and its users.

Everyone agrees that inter-carrier compensation policy needs reform.  But reform needs to bring programs up to date, simplify, prepare for the future, and make policy clearer and, well, better.  There should be greater emphasis on consumers, markets and the impacts of new technology – and a little less on just keeping an old tractor running at the same sputter.

Verizon has urged the FCC not to adopt the Missoula plan for a number of reasons.  In short, the plan fails to achieve the FCC’s stated objectives for reform, such as promoting economic efficiency and competition, reducing the need for regulation, and minimizing opportunities for arbitrage.  

It replaces one complex, flawed system with another, even more complex and equally flawed one.  It fails to address the system’s most significant problem – the high access rates charged by rural phone companies – leaving some of the highest rates untouched.  At the same time, it asks all consumers to chip in more through higher fees and universal service charges. The net effect: many consumers will pay more, a fact not lost on Florida’s Attorney General yesterday.

As bad as the current system is, the Missoula plan will make things worse.  It will: leave in place and create new arbitrage opportunities; harm urban customers by hiking their Subscriber Line Charge higher than that of less urban areas; do away with some existing agreements that benefit consumers; create artificial incentives for carriers to rearrange network facilities (thus reducing funds dedicated to new networks); burden the sector, particularly wireless carriers and their customers, with costly changes in recording and billing systems (because the plan does not unify inter-carrier rates); create uncertainty and inconsistency with its different – sometimes opposing—elements; and add at least $2.25 billion to the Universal Service Fund, with little regard for the overall health of the program.

We salute our friends for trying.  But, to be fair, they have persisted with this approach, despite knowing that much of the sector (including many cable, wireless and telecom –including CLEC – companies, as well as consumer groups and regulators) has had severe reservations about consumer, investment and other effects.

When the FCC started looking at ICC reform six years ago, it was a big deal.  However, the world has changed.  The volume of circuit-switched traffic exchanged – the subject of the Missoula plan – is declining and will continue to decline as more and more communications are carried over the Internet.  The old system of ICC is still a problem, but it is a shrinking problem.

The key test for reform should be significant improvement over the old system.  Unfortunately, the Missoula Plan falls way short.

This inquiry will gather facts related to consumers' access to the Internet and content, and address other issues raised in the neutrality debates.  Whatever it contains, an FCC report is expected next year.

To recap, Chairman Martin stated publicly that net neutrality rules aren’t needed since there is no evidence of abuse, and because the FCC is monitoring network providers’adherence to the neutrality principles it published last year. Except for Madison River, there have been no reported incidents of any significance.  Still, at his recent re-confirmation hearing, Martin pledged vigilance and continued monitoring.

Verizon’s commitment and involvement dates back several years, at least to our early support of the High-Tech Broadband Coalition’s ‘connectivity principles,’ the precursor and foundation of the FCC principles Martin issued.

In addition to monitoring by the FCC and FTC, oversight by Congress, and the watchful eye of the media, Internet community and general public, we expect scrutiny from current and future customers.  In today’s environment, consumers have no reason to pay for anything short of fast and full Internet connections to everything they want, using applications and devices of their choice. Translation: a network provider would be nuts to block, degrade or interfere with Internet connections, even if it had the means to do so. 

Such conduct would result in an immediate storm of protest (as it did with Madison River), harm the business of the offending company, and expand that of the competition.  Again, who wants to buy a Verizon 50 Mbps fiber connection if they can’t use it to do cool stuff?  Today’s marketplace is driving providers to offer higher speeds, more pricing options and connections that provide more and better access to whatever people want. Consumers are firmly in the drivers’ seat, as they should be.

Now, at the risk of having my e-hat shot off, a few thoughts on a mistaken premise lurking in the blogosphere:  Some smart folks are claiming that telecommunications providers somehow weaseled out of common carrier regulations pertaining to Internet connections because of last year’s FCC rules following the Supreme Court’s Brand X decision.  In fact, there has never been Title II regulation of fiber (though there was of copper dial up and DSL).  Importation of such regulations to the fiber world would be brand new and retrograde.

We'd like to hear your thoughts.

This may not be earth-shattering news to the techno-policy elite.  But, we aren’t placing high odds on Congress enacting ‘cable TV choice’ reform this year.

Yes, the House produced a clear, bipartisan vote in favor, the Senate committee approved it, and survey research indicates strong popular support.  But, who knows if a lame duck Senate will muster 60 votes to beat the threatened ‘net neutrality’ filibuster?

What we do know is that ‘choice’ marches on at the state level.

Nugget #1: So far, eight states (TX, IN, VA, KS, SC, NC, NJ, CA) have enacted streamlined, state-wide plans to speed up what now can be an 18-22 month negotiation process between network operators, big and small, and individual local franchise authorities. 

As Verizon’s Tom Tauke told Bloomberg recently, we aren’t likely to pursue federal reforms next year, instead increasing our focus on efforts in such states as MA, NY, and PA.  Sure, a national franchise is better – and it may still pass Congress – but there are other options, too, that are already working.  Verizon’s Doreen Toben and Virginia Ruesterholtz made this point when they supplied all those useful fiber-optic deployment numbers to analysts on September 27.

Nugget #2: FiOS TV is now available in 80-plus communities in seven states (CA, FL, MD, MA, NY, TX, and VA). FiOS Internet is available in portions of 16 states (add CT, DE, IN, NH, NJ, OR, PA, RI, WA).  Nugget #3: The ‘triple play’ of FiOS Internet, TV and phone service is available in CA, FL, MD, MA, NY, TX and WA.

Still, Federalism thrives, and Washington has other irons in the fire.  For example, the FCC continues its probe of local franchise authorities to see where some may be delaying consumer choice by unreasonably refusing to grant a video franchise.  (Remember, those seeking franchises include small guys, too.) Also, the Commission has been asked to look into cable companies’ efforts to strike exclusive access agreements with owners/managers of apartment and condo buildings.  This practice can restrict the options of individual renters or owners.  Cable has its view, too. 

The many lop-sided votes in favor of ‘video choice’ by municipal officials and state legislators suggest that cable TV choice is a popular issue.  A recent, Verizon-commissioned survey by two national research firms found that 90 percent of registered voters think it’s important for there to be a choice of cable TV providers. Eighty percent want their senator to vote for the legislation containing the proposal.

Whatever the Senate does or does not do by year-end, progress is being made.  The numbers prove it.