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Ewing, NJ March 13, 2006 I dirtied my hands for the first time in the legislative process today. Tom Alibone picked me up at my house at 9 am and by 9:25 am we were inside the huge 50 by 100 foot hearing room at the NJ State Legislature. The experience was very disheartening. The room was full of suits who milling around reminded me of a well orchestrated gathering of vultures gathering to pick the remaining meat of the bones of the public while telling them all the time that: “I am Senator Doria and I am here to help you. Trust us.”

The fix is in and here’s how it is being portrayed. Doria:

1. The citizens are disgusted with their high cable rates. We are hear to help them because we are bringing competition to them. We will give Verizon the right to compete on an equal footing with the greedy MSOs. It is incumbent on us to help the people of the state move ahead with new fiber optic technology. (Doria doesn’t want to hear that his legislative predecessor have allowed the telco to charge rate payers billions for fiber never delivered,)

2 Well yes it is true that we have announced that the franchise tax is being doubled from two to 4% by my legislation. And further more the tax that is now applied not just to basic cable service (about 13.00 per month at 2%) will go to 4% and be applied to the entire bill which may range from 40 to 60 dollars a month. This added revenue will benefit our cash starved municipalities. And we are showing our concern for senior citizens and the poor and disabled be cause we will take 1/2 on one per cent of the 4% and use it to set up a universal service fund to pay their bills. [Yes Virginia, there is a Santa Claus. Verizon gets ANOTHER universal service fund! Thank you Senator Doria!)

Something for Nothing or Hang on to Your Wallets

3. But the good and caring Senator added this will be done at no expense to the customers of Verizon or Comcast or any of the other NJ MSOs. Why? Because according to the FCC’s own study when the phone company can compete with the MSOs with cable services, prices will decline between 17 and 23% in the first year. So yes their bills will go up a few dollars a month because of the higher franchise tax but they will save more than the increased tax because competition of the state sanctioned duopoly will bring them down 17% - to 23 percent. [The cable for the bridge I have to sell you Virginia was made right here in Trenton. Trust me.]

4. The strategy is working quite nicely. The various mayors and members of the league of municipalities were heard to say to Tom Aliibone: Sorry Tom we will have to support this. Yes they are taking away our local home rule and freedom of choice to act on behalf of our local citizens. But the new tax will likely triple our franchise fee income. We NEED the money. We are broke. (One mayor thanks the senator for giving him increased franchise fees that he can use to reduce property taxes!)

The Carnival Begins

Several people from Newark came to testify. Verizon was invited by the municipal authorities of Newark to come to town last fall and negotiate a franchise with Newark. Verizon never returned the invitation. Now one problem in Newark, the largest city by far in the state is low income and people who live in apartment buildings. Newark has many high rises and Verizon’s FiOS is not equipped to serve high rises. We are going to be left out from progress yet again senator.

Doria: No Verizon has told us that the technology to serve high rises does exist. It’s coming – you just need to be patient. [Never mind that a Verizon representative calling in from Heightsown in Mercer county to Radio 101.5 said on air that Verizon”s competitive package would bring customers 200 channels for 39.95 a month. A huge 4 dollar savings from the MSO price. Why would anyone switch? Especially when the copper phone line would be ripped out.]

Paul D Moriarty, Assemblyman from the 4th district and newly elected Mayor of. I believe. Washington township (population 50,000 but in a rural area) was eloquent. “ I invited Verizon last fall to come to our township and negotiate a franchise. We would be happy to give them one. Franchises in NJ are NOT exclusive. Like Newark they never returned our phone call. I have 20 years consumer affairs journalism experience Senator Doria and let me tell you for 6 to 18 months there will be a brief flurry of competition and then prices will magically climb back to where they are now and higher. Verizon doesn’t need a statewide franchise law. If they go into our township and ask we will grant their request. We invited them to come and they turned their backs. “ Doria: I disagree we a giving the people of the state a uniform competitive footing and level playing field. I am right and you are wrong.

Then Senator Bill Gormley from Atlantic county (2nd district) was called. He was interesting - saying that the third great wave of competition was coming. WIRELESS. Wi-Fi. Please tell my constituents Senator Doria that unlike Pennsylvania you are not going to be back here next year and take the right to do our own wireless networks away from us. Don’t worry senator we won’t do that Doria replied.

Then I was called on. I ad-libed. Not wise. Greenhorn walking into the lions den. I am a 30 year resident of Ewing and for 15 years self-employed with my own telecommunications newsletter. That the COOK Report had an international reputation and that it ways my only source of income. FiOS is available to me. I don’t want it because the terms of service are such that I am in violation if I make disparaging remarks about them or use a peer to peer phone service such as Skype. I need reliable internet service or I am out of business.

Mr. Cook you are out of order. This is a hearing on television not Internet.

My apologies Senator: But the name of the committee is committee on economic development is it not? I was hoping that you understood the critical role of broadband internet services in enabling NJ taxpayers to be self employed when they were laid off by verizon and other large businesses.

Also I would like to know if you told the people of NJ that when they save money with Verizons cable service their copper phone line will be ripped out and if they want land line phone service they have to take Verizon’s package? And that with no copper they will depend for their dial tone on a battery set in their basement. And that in the next disaster, flood snowstorm civil emergency - you name it when the power fails and stays down when that battery dies there will be no phone service – no dial tone, no 911 service. I haven’t heard mention of that senator. Thank you for the opportunity to appear.

Donald Trump’s Newark Apprentice – Instant Policy Expert

The dear senator seemed a bit shocked as a walked back to my seat. Quickly Randal D Pinkett, PhD, MBA from MIT was called. Randel is president and CEO of “BCT Partners: A Management technology and policy consulting services firm that works with government agencies, corporations, educational foundations and non profit organizations” with a Chinese menu of five tech services and six business sectors listed on the back of the card. (And I thought the COOK Report was verbose.) Dr. Pinkett’s business address is in Newark. He explained that the issue was not just competition in Television but the creation of a modern advanced technology infrastructure for the state of New Jersey over the next decade.

Then Doria quite troubled by the news I had left the room with asked – is it true what Mr Cook said that Verizon customer will have no copper phone line and therefore no 911 service if their battery power runs out in an emergency? We yes senator. That is true. Fiber is glass and glass does not conduct electricity.

The good senator Doria: thank you for your testimony and by the way you sir look familiar. You are the Apprentice aren’t you? You just won and work for Donald Trump? Yes senator. Well congratulations ands thank you. [Editor – what next? Bread and circuses for the good citizens.]

Tom Alibone was called and made his points that Verizon was not in compliance with ONJ. Karen Turner from NJ CTA mad very astute points about Dish not being subject toi franchise fees. And then comment on legal problems with the bill phrasing in terms of language about common carrier and regulation and pointed out that it looked like Verizons service might be free of all regulation – given the language and the lack of compliance with federal language on that subject.

Doria: not to worry we have changed the language. Oh you have? Could I see the new language. Doria: well we’d like to show it to you but the bill has been under constant revision and we really hope to have the current version available later this afternoon. Alexander: After you vote it out of the committee to the rest of the Senate? Something then that is going to be offered to the legislature that none of the rest of have even seen the final text of?

Several times people commented on flaws in the bill only to be assured that the flaw had been fixed in text that they had not seen and would not see until the bill was voted out of committee. Trust us Virginia - we have your interests at heart and we are here to help.

Now early on before the hearing began I heard someone saying in an English accent that he used to be with Bell Labs at Murray Hill.

I go “hmmmmm.” walk over and introduce myself to the person - who then says: well I am here to talk about Verizon’s role and the state of NJ BPU’s role in in failing to enforce on Verizon the requirements to which NJ Bell agreed in 1992 in return for 1.5 billion in rate increases!

Wow! Amazing! A quick exchange of cards showed the person to be

Simon Wilkie
Director Center for Communication Law and Policy
Gould School of Law
University of Southern California Los Angeles

The Real Expert is Quickly Put in his “Place”

Toward the end of the morning Senator Doria called out Dr Wilkie from the University of SOUTH California. I could not restrain myself and said loud enough to be heard SOUTHERN California. Doria corrected himself and Simon sat down. In 2002-2003 it seems he had also served as Chief Economist at the FCC under Michael Powell. His testimony was eloquent as he talked about economic analysis of the harm done by depriving localities of the right to impose their own franchise agreements.

Doria after two or three minutes said something to the effect that he was not there to listen to the theories of some economist that he did not agree with and said anything else? Well yes: I am troubled by the impression I hear in the wording of a bill that seems to be under continual revision on the fly. We have heard assurances that there will be strict penalties for Verizon if it doesn’t comply but I want to call to the attention of the senator the BPU docket for Opportunity New Jersey from 1991 –1992. Verizon was warned on page 86-87 that the board could consider remedies such as altering the depreciation allowances for NJ bell, restricting NJ bells ability to implement indexed price increases, or in the extreme scenario voiding the plan and instituting a traditional rate based proceeding.

They have failed to deliver their promises Senator. Where is the audit, where are the sanctions? Why should we believe there will be penalties for non compliance this time around?

Well said the senator. That was 15 years ago. The time is long past when we can do anything. But we will be watching them now with strong penalities. Doria had been reminded often during the morning that Verizon’s initial promise to fiberize the state was to complete the mission in 12 years. And that now in 2006 he was extending the deadline from 2010 until 2015 with nine years being allowed for the latest build out promise.

Dennis Bone the president of Verizon NJ was then called to declaim on the benefits being offered the taxpayers. And one of the very last questions asked was again about the shocking information I provided that no one in the room had heard before. The copper local loop would be removed?

Yes it would. Fiber is Verizon’s new and modern network for the 21st century. There is no way that the state of New Jersey should expect Verizon to maintain a copper and a fiber network. Besides FiOS users would be given a spare battery for emergencies.

With that the hearing ended and the bill was reported out to the full senate. I walked over to President Bone ask whether if I ordered FiOS Verizon would let me keep my copper. Before I could get the question out of my mouth he was surrounded by staff and spirited off leaving a very

pleasant Mr Lewis if I heard the name correctly to answer my questions. I was assured that if I took FiOS no one in
Verizon would ever look at my packets, that the terms of use that I had seen had very likely been changed and that of course I was free to be FiOS customer and speak critically of them in my newsletter.

I then asked about compliance with ONJ. We report every year to the BPU on our progress and you are perfectly welcome to read our reports and the reports of the BPU. I turned to Tom Alibone and said tom would you ask Mr lewis to identify these BPU reports that presumably show their audits of Verizon? Tom said well yes he would indeed like to see them but he wasn’t aware there were any.

Well Mr Lewis responded: “if Verizon had not complied the BPU would have made a report.” [Oh – I see. Gosh its

really simple.] I volunteer to send the good Mr Lewis who is here from the Washington DC Verizon office a newsletter since they have been a subscriber and have told me they are looking for money in their budget to renew. Unfortuneately he does not have a card and wouldn’t get it anyway because as he explained he is constantly flying round the country all time to state hearings like this one. He hands me the card of Sam Delgado VP of community and stakeholder affairs from Verizon’s Newark office.

And on that happy not with cable price competition assured Tom and I left the esteemed seat of New Jersey law making. Yes Virgina your New Jersey Senate IS here to help you.

One Response to “NJ State ILEC Politics - A Meeting with the Senator From Verizon”

  1. on 07 May 2007 at 5:37 pm MediaChannel.org

    […] Here’s another take on the New Jersey cable franchise legislation by a respected telecom analyst, Gordon Cook: […]

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