Since 2005, five cable and telephone companies and their respective lobbying trade associations have donated nearly $12 million to New York politicians, making Big Telecom companies among the biggest political donors in the state. Now a government reform group wants an investigation by the state’s anti-corruption commission.

By exploiting giant loopholes in New York’s campaign finance laws, telecom companies that used to live with annual campaign finance limits of $5,000 are now donating millions to powerful political leaders in Albany – the majority conferences in the legislature, the state party committees, and the governor. Some are using secretive “housekeeping” accounts controlled by political parties. Others hide behind shadowy contributions from “limited liability corporations” (LLCs) established by some of the state’s biggest cable and phone companies and treated under current law as living, breathing people.

“Big Telecom exemplifies the pay-to-play culture which has come to define Albany, giving generously to the leadership in exchange for veto power over bills which favor the public interest,” said Common Cause-New York executive director Susan Lerner.

The Optimum donor to state “housekeeping” accounts among telecom providers is Cablevision.

No telecom company donates more in New York than Cablevision, which has given more than $5.3 million in contributions to state politicians since 2005 as it fights its way through union problems, fierce competition from Verizon, and complaints from subscribers about rising cable prices and questionable service. The cable company doesn’t just donate in name-only. Common Cause-NY discovered Cablevision using eight different LLCs to evade contribution limits, handing over $1.5 million to candidates and committees. Gov. Andrew Cuomo received $130,000 from four different Cablevision-controlled LLCs between July and October 2010. On April 29 of this year, former Nassau County executive Tom Suozzi’s campaign received $190,000 from three Cablevision-controlled LLCs on that single day.

Verizon (82%) and Time Warner Cable (70%) prefer to quietly give the largest percentage of their political donations to the parties’ secretive, soft money “housekeeping” accounts. The Republican and Democratic recipients are not using the money to buy Endust, mops or spare light bulbs, although the average voter might assume as much.

Corporations with an agenda just love New York’s hush-hush “housekeeping” accounts because they come without dollar limits or complete disclosure about how the money was ultimately spent.

The State Board of Elections says “housekeeping” money is supposed to go toward maintaining a party’s headquarters and staff or “ordinary activities that are not for the express purpose of promoting the candidacy of specific candidates.” Unfortunately, nobody bothered to require detailed accounting, allowing funds to disappear down a political rabbit hole, to be distributed at each party’s discretion.

Comcast (59%) and AT&T (53%) are considerably smaller players, in part because neither company serves many wired cable/broadband customers in New York.

Verizon’s corporate PAC also likes to raise relatively large numbers of small contributions given in the name of company executives or employees, not necessarily mentioning the company itself. Campaign finance disclosures may list only the individuals’ contribution(s), not the company that signed their paycheck.

Where does all the money go?

Common Cause-NY says most of the money is channeled to the most influential politicians in the state, with minority parties and unelected candidates typically getting much less.

To gain influence on the state level, Big Telecom companies contribute to the governor, attorney general, and the majority parties controlling the state Assembly and Senate, with Republicans getting the lion’s share (over $3.5 million) in the Senate and Democrats (over $1.6 million) in the Assembly.

For local issues of interest to the state’s local cable and phone companies, contributions are funneled to influential county-level political machines, perhaps helpful in making life difficult for a competing Wi-Fi project, a municipal fiber network, or helping to cut red tape to place a cell tower in a controversial location.

The top six recipients of Big Telecom’s political cash in the legislature:

• Key Party Leaders: Dean Skelos ($117,700), Tom Libous ($57,150), Jeff Klein ($49,450), and Sheldon Silver ($32,749.61)
• Current and former Chairs of the Senate Energy and Telecom Committee: George Maziarz ($79,718.02) and Kevin Parker ($34,444.00).

Common Cause-NY notes the corporations involved don’t give money without expecting something in return. After generous contribution checks were deposited, a number of telecom consumer protection bills mysteriously died in committee or never made it to the floor. The same fate did not meet bills offering special tax breaks for cable and Internet Service Providers that have cost New York taxpayers nearly $500 million and counting.

“Multi-million dollar campaign contributions clearly help Big Telecom maintain the status quo of corporate control, high prices, and lax regulation,” Common Cause-NY concludes.

The legislature is rife with examples of bills that would have likely passed with popular support but suddenly or “mysteriously” didn’t:

• A 7635-A / S5630-A: Establishes a moratorium on telephone corporations on the replacement of landline telephone service with a wireless system.
  • The “VoiceLink” moratorium bill, passed the Assembly, had broad bi-partisan support in the Senate but never came to a vote.
• S542: Relates to enacting the “Save New York Call Center Jobs Act of 2013,” which requires prior notice of relocation of call center jobs from New York to a foreign country; directs the Commissioner of Labor to maintain a list of employers who move call center jobs; prohibits loans or grants.
  • The “Call Center Jobs Act” would take away tax breaks and state grants if companies move a call center to another country. The bill passed the Assembly in 2012 (A9809) and had bipartisan support in Senate but was blocked. The 2013 bill died in Senate committee.
• A6003/S5577 — Directs the Department of Public Service to study and report on the current status of cable television systems providing services over fiber optic cables.
  • Bipartisan support in Assembly for further oversight of broadband but gets little support in Senate, the same bill was also blocked in 2012.
• A5234/S1075 — Enacts the “Roadway Excavation Quality Assurance Act” demanding utility companies or their contractors shall use competent workers and shall pay the prevailing wage on projects where a permit to use or open a street is required to be issued.
  • Bipartisan support in the Senate and Assembly but no passage in either 2012 and 2013.
• A6239/S4550 — Creates the State Office of the Utility Consumer Advocate to represent interests of residential utility customers.
  • Bipartisan support in Assembly, dies in Senate.
• A6757/S4449 — Requires providers of electric, gas, steam, telephone and cable television services to issue standardized bills to residential customers; provides the standards for such bills shall be established by the Public Service Commission.
  • Bipartisan support, passes Assembly, dies in Senate.

Just weeks after Time Warner Cable and CBS settled a dispute over retransmission fees, other broadcasters and networks are preparing to make new demands for increased compensation from their cable, satellite, and telco IPTV partners at prices likely to provoke more blackouts.

Despite repeated protestations from Time Warner that over-the-air stations and networks deserve lower fees than cable-only networks, once the two parties went behind closed doors, the cable company quickly agreed to pay considerably more for CBS programming. Sources say CBS made a deal that will run up to five years and includes more than $1.50 in fees per subscriber, up from between 50-85 cents per month, depending on the city served, under the old contract. CBS had asked for about $2 a month. Effectively, the company will earn more than that because Time Warner also agreed to renew both the CBS Sports Network and Smithsonian Channel, which cost extra.

“There is a new template here. Two dollars is the new holy grail,” Wunderlich Securities analyst Matthew Harrigan told Reuters.

Fox was the highest paid network before the CBS deal, collecting close to $1.25 per month per subscriber. ABC receives 50-65 cents and NBC less than that.

Harrigan predicts the other networks will race to raise their own prices, with Time Warner Cable (and others) likely forced to raise rates early next year to cover increased costs.

In the war for compensation, programmers hold most of the leverage.

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The Wall Street Journal reports the dispute between Time Warner Cable and CBS set new industry precedents on the value of broadcast stations and networks and how their programming is distributed on digital platforms. (2 minutes)

There have already been local station blackouts in 80 cities so far this year, with the likelihood last year’s record of 91 markets will be broken before Thanksgiving. In almost every instance where a popular network is involved, the pay television provider eventually capitulates because of subscriber complaints or cancellations.

Moonves

Time Warner Cable admits its dispute with CBS cost the company business, both from prospective new customers going elsewhere and customer disconnects. Time Warner also spent money advertising its side of the dispute and paid to distribute free antennas to affected subscribers.

CBS’ Les Moonves had predicted Time Warner would eventually meet most of the network’s compensation demands before football season arrived. He was right.

“CBS is the winner. Content owners always win these negotiations, it’s just a matter of how much they won,” said Craig Moffett of Moffett Research. “They have all the leverage. Consumers don’t get mad and trade in their channel when these fights drag on. They go looking for a different satellite or telephone company.”

Almost 200,000 Time Warner Cable television customers left during the second quarter, and company officials admit that trend continued during the third quarter as the dispute dragged on. Time Warner Cable is likely to end the year with fewer than 11.5 million video subscribers, a loss of several hundred thousand this year.

Sources say one major sticking point that kept CBS off Time Warner Cable systems for nearly a month wasn’t about money. Instead, it was about digital distribution rights.

Time Warner Cable wanted CBS on its TV Everywhere app TWCTV and was also concerned about CBS selling content to online video streaming competitors that could accelerate cord-cutting.

Time Warner Cable did win permission to offer Showtime on its digital streaming platform and on apps for portable devices. But Time Warner will not get to carry local CBS-owned stations on streaming platforms, a significant blow. The cable company will also have to pay more for streamed and on-demand content.

In the end, CBS got almost everything it wanted and Time Warner Cable was handed back its largely unfulfilled wish list and a bigger, retroactive bill subscribers will eventually have to pay.

“We wanted to hold down costs and retain our ability to deliver a great video experience to our customers,” Time Warner Cable CEO Glenn Britt said in defense of the agreement. “While we certainly didn’t get everything we wanted, ultimately we ended up in a much better place than when we started.”

Moonves gloated to various trade publications and investors that CBS went unscathed after the month-long dispute.

“Our national ad dollars did not go down,” Moonves told attendees at the recent Bank of America/Merrill Lynch Media Communications & Entertainment Conference. “There were no such things as make-goods and there was no harm done financially to CBS Corporation.”

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CBS’ Les Moonves has won his dispute with Time Warner Cable, says Les Moonves in this interview with Bloomberg TV. (10 minutes)

Comcast owns both NBC and the cable companies that carry its local affiliates.

Cable rate increases are not likely to stop with the agreement with CBS. Analysts predict NBC, ABC, and FOX will be seeking similar rates when their contracts come up for renewal. Altogether, every cable, telco IPTV, and satellite subscriber could see rates increase up to $6 a month for the four major American networks.

“Any time one of these larger networks sets the new standard in terms of pricing for their programming, the rest follow,” Justin Nielson, an analyst for SNL Kagan, told Hollywood Reporter. “In most cases it’s been CBS and FOX trailblazing what the rates should be and then ABC and NBC following.”

Comcast-NBC’s Steve Burke is already there. Burke told investors affiliates should be paying 20 to 25 percent more for cable networks such as USA, Bravo, SyFy, CNBC and MSNBC .

“We’re not paid as much as we should be given our rating and positioning by cable and satellite companies,” Burke said. “I see no reason why we won’t sort of draft behind the other broadcast networks and get paid in a similar way.”

Burke predicts NBC will earn between $500 million to $1 billion annually from increased retransmission consent fees comparable to what CBS and FOX receive.

Next week, DISH Networks faces the expiration of their contract with ABC/Disney-owned channels, including the Cadillac-priced ESPN. The outcome of renewal negotiations may serve as an indicator for where rates are headed in the world of retransmission economics.

A growing number of elected officials in Washington are paying attention as they and their constituents live through one programmer blackout after another. At least four pieces of legislation have been introduced to deal with the problem in very different ways, according to Bloomberg News:

The Satellite Television Extension and Localism Act

This law, known as STELA, dates to 2004 and gives satellite companies a license to provide local TV stations, just as cable operators do. The current law is set to expire at the end of 2014, with most observers calling its reauthorization a near certainty. The debate is mainly over how “clean” the STELA reauthorization bill will be as it emerges from the legislative process, with the pay TV companies urging lawmakers to address the issue of retransmission disputes. Broadcasters are working for a “clean” bill, written narrowly to address the satellite companies’ immediate needs. “There’s nothing clean about the current retransmission system,” says Brian Frederick, a spokesman for the American Television Alliance, a coalition of pay-TV companies. Two House committees held hearings on the law this week. A final bill and vote are expected next year.

Video CHOICE (Consumers Have Options in Choosing Entertainment)

Representative Anna Eshoo, a Democrat who represents much of Silicon Valley, introduced this bill Sept. 9 aimed at ending blackouts. “Recurring TV blackouts, including the 91 U.S. markets impacted in 2012, have made it abundantly clear that the FCC needs explicit statutory authority to intervene when retransmission disputes break down,” Eshoo said in a press release. (The FCC gets involved now only if one party accuses the other of negotiating in bad faith.) The bill would unbundle broadcast stations from a cable package and prohibit a broadcaster from requiring a pay TV operator to take affiliated cable channels to obtain more popular channels. That issue is at the heart of why Cablevision sued Viacom in February, following a contentious negotiation.

Eshoo’s bill would also require the FCC to study programming costs for sports networks in the top 20 regional sports markets. The rising fees for sports programming—led by ESPN—is considered one of the major influences behind rising cable bills and the power that content creators such as Disney hold in negotiations. Cable companies have praised Eshoo’s bill, while broadcasters are not fans. Don’t expect to see it get far in a Republican-led House.

Television Consumer Freedom Act of 2013

This bill, introduced in May by Senator John McCain (R-Ariz.), would end the long era of the cable television bundle, that phenomenon by which you pay for hundreds of channels and find yourself watching only about two dozen, or fewer. This summer, Connecticut Senator Richard Blumenthal signed on as a Democratic co-sponsor, but there’s been no similar sponsors on the House side. Blumenthal explained his support of the bill in an August interview with the Hollywood Reporter:

“What I hear from cable consumers overwhelmingly is, ‘give us freedom of choice. Don’t make us pay for something we don’t want and won’t watch. Why am I paying for—you name a channel you don’t like or five or ten or them—just so I can watch the one I do want.’ That’s overwhelmingly the sentiment of people who buy this product. So this bill just gives voice and force to that sentiment.”

Next Generation Television Marketplace Act

This bill from Representative Steve Scalise, a Louisiana Republican, and former South Carolina Senator Jim DeMint, also a Republican, dates to December 2011 and would deregulate the entire television market, top to bottom. It would repeal compulsory copyright licenses, the legal mechanism by which content owners are required to let pay TV companies carry their programs, if they are paid a fee for the content. The bill, which would also dismantle the system of retransmission fees, is essentially an exercise in carrying free-market ideology to its logical conclusion. The problem? It would require a countless number of individual deal negotiations—any radio or television station that wanted to carry programming (i.e., all of them)—would need to strike deals with every programmer, yielding an inefficient system that would likely prove unworkable. Lawyers would love the bill, but don’t expect it ever to pass Congress.

In fact, none of these bills are expected to pass through both the gridlocked House and Senate this year.

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CNBC also talked with CBS’ Les Moonves about CBS’ views towards compensation and distributing content online. (13 minutes)

EPB this morning celebrated its fourth anniversary by thanking Chattanooga residents for supporting the utility’s fiber network with a series of price cuts and speed increases.

Beginning today, EPB’s fiber broadband customers are getting the following upgrades and savings:

• 50/50Mbps customers get a free upgrade to 100/100Mbps service with no change in their current price ($57.99/month);
• 100/100 and 250/250Mbps customers get a free upgrade to 1,000/1,000Mbps service;
• 1,000/1,000Mbps customers now paying $349 a month will see their bills slashed to $69.99 a month, a savings of $230 a month;
• EPB’s business broadband customers will be contacted individually to coordinate the speed upgrades.

Customers will see the new speeds provisioned within the next two weeks. At least 3,000 residential customers will be upgraded to gigabit service.

EPB also reported this morning it has 55,000 broadband customers.

EPB is one of the nation’s most successful municipal fiber providers and is proving itself a major challenger to Chattanooga’s cable competitor Comcast and incumbent phone company AT&T.

AT&T’s U-verse is the least capable network in Chattanooga, because its fiber-to-the-neighborhood technology currently limits AT&T’s maximum broadband speed in the city to 24/3Mbps. AT&T says it is working on doubling or tripling speeds, but it still leaves U-verse far behind Comcast and EPB.

Comcast has lost at least 47,000 customers in Chattanooga, estimates EPB CEO Harold DePriest. Comcast originally had 122,000 customers on the EPB grid when EPB launched fiber broadband. This year, Comcast has about 75,000 customers and is expected to see numbers decline further in 2014 to about 60,000 customers.

The best Comcast offers is 505/20Mbps service in select cities, with a price tag of $400 a month.

Neither Comcast or AT&T is competing on price for higher speed broadband in Chattanooga. Comcast charges $114.95 a month for 105/20Mbps service and offers 505/100Mbps service in a handful of other cities, for $399.95 a month. Comcast is also currently testing the reintroduction of usage caps and overlimit fees in several markets.

AT&T charges $65 a month for 24/3Mbps service — its fastest — with a 250GB monthly usage cap, currently not enforced. For $5 more, EPB customers get 1,000/1,000Mbps with no usage limits or overlimit fees.

EPB has been criticized by conservative groups, bloggers, and its competitors that argue municipal utilities have no business being in the broadband business. Most of these groups predicted EPB Fiber would deliver a costly failure for Chattanooga utility ratepayers. The utility has also come under repeated fire from the conservative editorial page in the Chattanooga Times-Free Press, often from ex-editorial writer Drew Johnson, who was fired in August.

DePriest can afford to take the criticism all in stride. He has been with the publicly owned utility for 42 years and has seen Chattanooga transformed from its old manufacturing roots into an increasingly high-tech city, thanks in part to EPB’s robust broadband infrastructure that has exceeded even EPB’s expectations.

EPB’s original business plan called for 28,000 customers to break even, with an estimated ceiling of 43,000 customers that would be willing to sign up. EPB has already passed both estimates with additional growth anticipated. DePriest even predicts EPB could surpass Comcast — the city’s biggest broadband and cable TV player — in market share by the end of next year.

Far from being a financial failure, EPB Fiber is now covering the $19 million debt payment incurred by the utility’s electric business, protecting Chattanooga residents from an electricity rate increase.

EPB is also making money offering advice to other cities who want to launch their own publicly owned fiber networks and avoid making costly mistakes. Consulting services will net EPB more than $1 million over the next three years.

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EPB CEO Harold DePriest announces speed increases and price cuts for customers to celebrate the utility’s fourth anniversary in the broadband business. (3 minutes)

Correction: The original story misreported Comcast’s upstream speed for its 505Mbps tier as 20Mbps. It is, as corrected above, 100Mbps.

Bell’s version of price competition before the government made wireless prices and competition a priority.

After years of acute bill shock afflicting those who didn’t bother to check the breathtaking cost of using a Bell cell phone abroad, Canada’s largest phone company announced today it was cutting in half the prices it charges for mobile data, voice, and text roaming plans for customers headed to the United States.

“During the summer, Canadians told the federal government that they support wireless competition and strongly believe the wireless rules should be the same for all carriers, Canadian or international. But Canadians also told us that they want to use their smartphones a lot when they travel, and they want the price to come down,” said Bell Mobility president Wade Oosterman in a statement. “We heard you, and today Bell is cutting in half the cost of mobile roaming where Canadians travel the most: the U.S.A.”

The new, discounted rates begin Tuesday and cover the following plans:

• 30-day travel bundle: $25 (was $50) — includes 50MB of data, 50 anytime minutes in the U.S. or to Canada, unlimited incoming text messages, 200 sent text messages.
• 30-day travel add-ons: $20 each (formerly $40) — 100MB of data, or 100 minutes of voice calling, or unlimited incoming and sent texts.

Bell officials said the company is not stopping with the United States and plans further cuts in joint roaming rates in conjunction with their global telecom partners.

Some Canadians wonder what took the company so long.

“When you can just casually drop the price of something by half, I can only imagine how much profit you are actually making on it to begin with,” commented Mark Winn.

Analysts speculate Bell’s move is designed to preempt, or at least soothe “competition fever,” now rampant in the Conservative Harper government. Officials in Ottawa were reportedly disappointed that a rumored entry by Verizon Wireless into Canada never came to fruition. Opposition critics have labeled the current ‘all competition, no regulation’ government policy impotent. Some have also pointed the finger at the Canadian Radio-television and Telecommunications Commission (CRTC), Canada’s telecommunications regulator, criticized as being too cozy with incumbent market leaders.

“Viagra couldn’t grow competition in this country,” said Sally Pearson, a consumer advocate fighting to broadly open Canada’s wireless market to foreign-owned competitors. “Years of government policies that favor Bell, Rogers and Telus and flaccidity at the CRTC has given us the level of competition telecom lobbyists intended all along.”

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With Verizon out of the picture, there are no obvious candidates to take on the big three Canadian wireless providers. Canadian Press reporter Steve Rennie considers how this will impact the Harper government, its telecom policies and the telecom industry. Will Canadian consumers demand something better when Parliament returns in the fall? (2 minutes)

Coming soon nationwide? Comcast, Time Warner, AT&T and CenturyLink sure hope not.

Verizon is talking to major cable programmers about launching a nationwide version of FiOS TV as an over-the-top video service that works with your existing broadband provider.

The NY Post reports Verizon is looking at launching an online pay television service for customers without installing additional fiber optic lines to deliver it.

The service would likely be an extension of the “TV Everywhere” online video platforms that many national cable and telco-TV providers already offer existing cable TV subscribers. What would make Verizon’s offer radically different is selling the virtual cable TV service in areas where it does not offer FiOS service.

Verizon must carefully negotiate with programmers to distribute networks over an online video service that would likely compete directly with those programmers’ best customers: cable operators and telco IPTV services like U-verse and Prism TV.

The concept was rejected out of hand Wednesday by Time Warner Cable chief operating officer Rob Marcus, who agreed with Comcast executive vice president Steve Burke’s contention that “over the top” video services that offer virtual cable television outside of their respective service areas lacked a compelling business model and would be difficult to monetize.

“At this point we don’t really aspire to delivering an over-the-top service,” Marcus said. “Our value proposition is delivering video via our facilities as opposed to being a retailer of somebody else’s video, which is a somewhat commoditized product.”

Neither cable executive mentioned the fact cable operators have also maintained an informal “wink and nod” agreement to steer clear of head-on competition with each other for decades.

Verizon: The next big supporter of Net Neutrality?

Verizon apparently wants to shake things up and sell online video without incurring the cost of expanding its fiber optic network FiOS to deliver it.

“They’ve had exploratory talks about how to become a virtual [multiple-system operator],” one person close to the conversations told the Post. “It’s a question of how to get there.”

Interestingly, Verizon CEO Lowell McAdam is worried about developing the service without Net Neutrality protection or some other form of government oversight of broadband. Verizon could spend millions to negotiate programming contracts only to find competitors with their own TV packages to protect outmaneuvering the venture. Without Net Neutrality, Verizon could find its service blocked by competitors or made untenable with the implementation of broadband usage caps or consumption billing that would make a subscription too costly to consider.

The company is now trying to figure out exactly which branch of government (or agency) controls broadband policy in the nation.

The FCC’s current Net Neutrality policy depends on a shaky regulatory framework now being challenged in federal court.

Verizon declined to comment.