Rhode Island politicians and some local television stations are celebrating a $21.7-million federal stimulus grant awarded to a non-profit consortium of educational, governmental and health-care organizations to construct a new fiber optic network that some claim will help “improve broadband service” for Rhode Island residents.

Unfortunately for residents of the Ocean State, the proposed network of 339 miles of fiber cable represents an example of “look, but don’t touch.”

The OSHEAN (pronounced ‘Ocean’) project is yet another example of an institutional network that is strictly off-limits to residential homeowners, unless they happen to use the service at an area school or library.

But politicians who appear at announcement ceremonies to celebrate stimulus awards, and the media that covers them, far too often sell the benefits of such projects to residents who can’t ultimately use the service their tax dollars are helping to fund.

Many parts of Rhode Island already receive access to fiber service from Verizon FiOS, which represents another reason to keep consumers out.

“Verizon would object strenuously if this stimulus grant allowed OSHEAN’s network to be available to anyone who wants access,” writes our reader Mike who lives in Providence.  “So to keep Verizon and other providers quiet, the network promises not to directly wire any residence or individual business who wants access.”

Instead, the network will predominately benefit Brown University, the City of Providence, Lifespan hospitals, the Rhode Island Division of Information Technology, the University of Rhode Island and the U.S. Naval War College.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/WPRI Providence Providence RI to get statewide fiber optic network 10-17-10.flv[/flv]

Here is WPRI-TV in Providence misleading viewers about the benefits of a broadband stimulus award, suggesting it will somehow improve residents’ Internet service.  (1 minute)

A controversial proposition on the ballot to extend a 1970 telecommunications tax to cell phones and “digital phone” service that largely did not exist when the tax was originally enacted has created a war of words between Chula Vista, Calif., mayor Cheryl Cox and the cable company that bears her last name (but no relation) — Cox Cable.

The proposed tax extension would broaden the types of telecommunications services that are subject to it, including Cox Cable’s “digital phone” service and broadband.  Cox officials appeared at city council meetings to oppose the tax, saying it would result in higher bills for customers.

But when Cox went on the air with “informational ads” the mayor accused of undermining support for Proposition H, Cox and the cable company started trading barbs in the local media.

Now the controversy has drawn the attention of San Diego’s local ABC affiliate.  On Monday, Mayor Cox accused Cox Cable of punishing the city by withdrawing free Internet access at the end of the year for City Hall, public libraries, and public safety agencies including the fire and police departments.

Mayor Cox called the timing of Cox’s announcement suspicious, coming the same day she did an interview complaining about Cox on San Diego’s KGTV-TV.

Under the terms of Cox’s franchise agreement with the city, Chula Vista was supposed to receive free Internet service through 2019, but now the cable company is reneging on the deal, a charge Cox Cable vigorously disputes.

Mayor Cox

With Chula Vista’s current budget crisis, the cash-strapped city is weighing the $30,000 a year it will cost to obtain the service at Cox Cable’s business rates, which could cause the city’s 1,012 computers, most available to the public, to lose access Jan. 1st.  Mayor Cox is also concerned the police department will lose its own connection, which it uses to communicate with other police departments and the Department of Justice.

The tax at the center of the debate, known as the City’s Utility Users’ Tax or U.U.T., amounts to 5 percent and is charged primarily to landline telephone customers.  Because of the way the tax ordinance was worded in 1970, technology changes that have taken place since have allowed more residents to escape paying the tax by switching to cell phone service or “digital phone” Voice Over IP service offered by Cox Cable or other broadband providers.

As a result, potential revenue earned from the tax has dropped over the years, especially as residents disconnect landline service.  With Chula Vista facing a $4 million deficit in the city budget, city officials are looking for new revenue sources.

Proposition “H,” before local voters Nov. 2nd, would keep the rate at 5 percent, but extend the tax to other telecommunications services, including:

• Wireless communications
• Text Messaging
• Prepaid/Postpaid telecommunications
• Private communication services
• Paging
• VoIP
• Toll free numbers

“Proposition H is all about continuing to fund the services we all benefit from: maintaining streets and parks, keeping libraries open, and the police protection and fire services that keep us safe,” Mayor Cheryl Cox wrote in a recent guest editorial in the San Diego Union-Tribune.

City officials are warning that without the estimated $5.6 million in estimated revenue from the tax, the city will have to cut services to cover the budget shortfall or raise other taxes.

Like many cash-strapped communities and states who have watched tax receipts plummet from dramatically lower property tax collections and increases in funding mandates, Chula Vista is trying a combination of budget cuts and tax increases to cover the difference.  But local voters are in no mood for tax increases, and last year rejected a proposal to raise the area’s sales tax by one percent.

Judging from the well-organized opposition campaign, local voters may be on track to disappoint the city a second time.

Mayor Cox’s editorial advocating approval of the tax extension even met resistance from the newspaper it was printed in:

But business and taxpayer organizations question that claim and contend the long-term tax hike could be much bigger than 5 percent as new communications devices come to the fore. They argue Chula Vista hasn’t done enough to shore up its finances long-term to deserve voter support of a tax increase.

On balance, we agree. While city leaders have overseen some $40 million in budget cuts and eliminated 259 jobs, they mostly have been AWOL on one of the most crucial issues in modern government finance: the extreme cost of public employee pensions.

[…]This framing of the debate is not fair to Chula Vista taxpayers who now cover the entire cost of pensions that allow city firefighters and police officers to retire at age 50 with 90 percent of their final annual pay and general employees to retire at age 60 with 90 percent of annual pay.

These policies must be recognized as unsustainable and then be drastically changed. Only when that happens will Chula Vista’s leaders have the credibility to ask voters to raise their own taxes.

Vote no on Proposition H.

The San Diego South Chamber of Commerce ridiculed the tax as a “dash for cash” and many area small business associations are also opposed.

While the debate rages, the mayor’s office accused Cox Cable of being too cute by half by pretending to be a “neutral” party.  The cable company claimed its ads were “informational” and did not take a position either for or against the proposition.

But KGTV notes the ad only mentions groups opposed to the tax — no supporters, and ends with the tagline, “Proposition H: It’s not what it seems.”

An expenditure report obtained by 10News shows Cox Communications spent more than $2,400 on the Proposition “H” ad and additional literature. The report also lists money going towards Proposition H opposition. A Cox spokesman said they wanted to choose “neutral” but had to chose between “support” and “opposed” on the filing.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Chula Vista Debate 10-20-10.flv[/flv]

Three reports from KGTV-TV San Diego trace the dispute over the tax over the last few months.  Also included is a portion of a video from a taxpayer’s group opposed to the telecom tax.  (13 minutes)

With continued inaction at the Federal Communications Commission, some stakeholders in the Net Neutrality debate continue to file comments with the Commission trying to find a “third way” to bring about guarantees for online free speech and access while softening opposition to “network management” technology that allows providers to manipulate broadband traffic.

Among such filers is the Communications Workers of America, which seeks a “middle-ground approach” to protecting a free and open Internet.

The CWA has always maintained its feet in two camps — with consumers looking for improved broadband and with the communications companies that employee large numbers of the union’s members, who will build out those networks and provide service.

The union shares our annoyance with FCC Chairman Julius Genachowski for his complete inaction on broadband policy thus far.  In short, the Commission keeps stalling from taking direct action to reclassify broadband as a telecommunications service, restoring its ability to oversee broadband policy lost in a federal appeals court decision earlier this year.

The CWA used a piece by David Honig from the Minority Media and Telecommunications Council (MMTC) to echo its own position:

MMTC isn’t alone in being frustrated with the FCC’s disappointing attitude toward real action this past year. In a recent interview with the Wall Street Journal, FCC Chairman Julius Genachowski expressed impatience with the glacial pace of policymaking at his Commission. Although he mentioned that the FCC, under his direction, has implemented some notable reforms, he conceded that “there is still a lot to do.”

Unfortunately, regardless of how earnest the Chairman is in his desire to move forward with the business of policymaking, his actions speak much louder than his words. Indeed, his yearlong pursuit of network neutrality rules — first via a traditional rulemaking proceeding and, most recently, via an effort to reclassify broadband as a telecommunications service — has cast a long and almost suffocating pall over many of the items that the Chairman wishes to act upon. His inaction on civil rights issues — especially EEO enforcement — is just one example of how paralyzed the agency has become.

Recent news that Congress will not move forward to address the regulatory questions that currently vex the Commission (e.g., whether the FCC has authority to regulate broadband service providers) could embolden the Chairman to adopt the sweeping regulatory changes for broadband that he proposed earlier this year. Doing so in the absence of Congressional action would only invite immediate legal challenges that would mire the FCC in litigation, appeals, and remands for years to come.

To put it plainly, the FCC is stuck. Although it recently adopted some promising orders related to broadband (e.g., new rules for accessing new portions of wireless spectrum called “white spaces” and for enhancing access in schools and libraries), the Commission has failed to move forward with implementing core provisions of its monumental National Broadband Plan.

The union last week also submitted its latest round of comments requested by the Commission, this time to broaden its position on a proposed compromise.  We’ve delineated which of the proposals we believe are primarily pro-consumer (in green), pro-provider (red), and which fall straight down the middle (blue):

• First, wireline broadband Internet access providers (“broadband providers”) should not block lawful content, applications, or services, or prohibit the use of non-harmful devices on the Internet.
• Second, wireline and wireless broadband providers should be transparent regarding price, performance (including reporting actual speed) and network management practices.
• Third wireline broadband providers should not engage in unjust or unreasonable discrimination in transmitting lawful traffic.
• Fourth, broadband providers must be able to reasonably manage their networks through appropriate and tailored mechanisms, recognizing the technical and operational characteristics of the broadband Internet access platform.
• Fifth, the Commission should take a case-by-case adjudication approach to protect an open Internet rather than promulgating detailed, prescriptive rules.

The first and third principles are strongly pro-consumer, although as we’ve seen, providers have a tendency to want to define for themselves what is “harmful,” “unjust,” or “unreasonable” and impose it on their customers.  We’ve seen provider-backed front groups argue that the concept of Net Neutrality itself is all three of these things.  Any rules must be clearly defined by the Commission, not left to open interpretation by providers.

The second principle cuts right down the middle.  Consumers deserve an honest representation of broadband speeds marketed by providers (not the usual over-optimistic speeds promised in marketing materials), and transparency in price — especially with gotchas like term contracts, early cancellation penalties, overlimit fees, etc.  But providers can also go to town with abusive network management they’ll market as advantageous and fair, even when it is neither.  Just ask customers of Clear who recently found their “unlimited” wireless broadband service, marketed as having no speed throttles, reduced in speed to barely above dial-up when they used the service “too much.”  Clear says the speed throttles are good news and represent fairness.  Customers think otherwise, and disclosure has been lacking.

The fourth and fifth principles benefit providers enormously.  Network management itself is neither benevolent or malicious.  The people who set the parameters for that management are a different story.  A traffic-agnostic engineer might use such technology to improve the quality of services like streamed video and Voice Over IP by helping to keep the packets carrying such traffic running smoothly, without noticeably reducing speeds and quality of service for other users on that network.  There is nothing wrong with these kinds of practices. There is also nothing wrong with providing on-demand speed boosts on a pay-per-use basis, so long as the network is not oversubscribed.

But since providers are spending less to upgrade their networks, providers may seek to exploit these technologies in a more malicious way — too stall needed upgrades and save money by delivering a throttled broadband experience for some or all of their customers.  If customers can be effectively punished for using high bandwidth applications, they’ll reduce their usage of them as well.  That’s good for providers but not for customers who are paying increasing broadband bills for a declining level of service.

Some examples:

• Customers using high bandwidth peer-to-peer applications can have their speeds throttled, sometimes dramatically, when using those applications;
• Internet Overcharging schemes like usage caps, overlimit fees, and “fair access” policies can discourage consumers from using services like online video, file transfer services, and new multimedia-rich online gaming platforms like OnLive, which can consume considerable bandwidth;
• Preferred content can be “network managed” to arrive at the fastest possible speeds, at the cost of other traffic which consequently must be reduced in speed, meaning your non-preferred traffic travels on the slow lane;
• Providers can redefine levels of broadband service based on intended use, relegating existing packages to “web browsing and e-mail” while marketing new, extra-cost add-ons for services that take the speed controls off services like file transfer and online video, or changes usage limits.

The CWA runs the Speed Matters website, promoting broadband improvements.

It is remarkable the CWA seeks to allow today’s indecisive Commission to individually adjudicate specific disputes, instead of simply laying down some clear principles that would not leave a host of loopholes open for providers to exploit.

Big players like Comcast, AT&T, and Verizon have plenty of money at their disposal to attract and influence friends in high places.  If the Commission thought Big Telecom’s friends in Congress were breathing down its neck about telecom policy now, imagine the load it will be forced to carry when these companies seek to test the Commission’s resolve.

Opponents of Net Neutrality claim broadband reclassification will leave providers saddled with Ma Bell-era regulation.  But in truth, the FCC can make their rules plain and simple.  Here are a few of our own proposals:

1. Network management must be content-agnostic.  “Preferred partner” content must travel with the same priority as “non-preferred content;”
2. Providers can use network management to ensure best possible results for customers, but not at the expense of other users with speed throttles and other overcharging schemes;
3. Providers can market and develop new products that deliver enhanced speed services on-demand, but not if those products require a reduction in the level of service provided to other customers;
4. Customers should have the right to opt out of network management or at least participate in deciding what traffic they choose to prioritize;
5. Providers may not block or impede legal content of any kind;

In short, nobody objects to providers developing innovative new applications and services, but they must be willing to commit to necessary upgrades to broaden the pipeline on which they wish to deliver these services.  Otherwise, providers will simply make room for these enhanced revenue services at your expense, by forcing a reduction in your usage or reducing the speed and quality of service to make room for their premium offerings.

The industry itself illustrates this can be done using today’s technology.

The cable industry managed to accomplish benevolent network management with products like “Speed Boost” which delivers enhanced, short bursts of speed to broadband customers based on the current demand on the network.  Those speed enhancements depend entirely on network capacity and do not harm other users’ speeds.

Groups like the CWA need to remember that compromise only works if the terms and conditions are laid out as specifically as possible.  Otherwise, the player with the deepest pockets and closest relationships in Washington will be able to define the terms of the compromise as they see fit.

And that’s no compromise at all.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/CWA Larry Cohen on the Open Internet Jobs and the Digital Divide 9-14-10.flv[/flv]

Communications Workers of America president Larry Cohen outlined the union’s position on Net Neutrality before the Congressional Black Caucus Institute on Sept. 14, 2010.  (2 minutes)

Verizon’s lobbyists are warning western New York politicians that unless they defeat a state measure to allow Verizon ratepayers to share in the proceeds of any future landline network sell-offs, Verizon may take a multi-billion dollar proposed data center elsewhere.

The Niagara county community of Somerset, population 2,900, is the planned home for the new high-tech infrastructure project.  Verizon officials propose to use Lake Ontario breezes and water to help cool the energy-intensive facility, to be located on 160 acres just yards from the shoreline.  In all, the Verizon campus will consist of three buildings — each 300,000 square feet in size.  If built as proposed, it would be among the largest of Verizon’s 250 data centers around the world.

But there’s a hitch.

While Verizon project manager Bruce Biesecker showed drawings and answered questions from an eager audience of local residents, Verizon lobbyists were telling reporters the entire project could end up in another state because of legislation under consideration in the state legislature.

Our regular reader Smith6612 dropped us a note wondering if we knew about the project.  Yes, we did.  But we also noticed company officials spending almost as much time complaining about interference from Albany threatening to derail the data center as they spent talking about the project itself.  Company officials also rarely named the exact bill in question or how it would directly threaten its data center investment.

Stop the Cap! covered the introduction of New York Assembly Bill 2208/Senate Bill 7263 earlier this year.  Introduced by Assemblyman Richard Brodsky (D-Westchester) and Senator Brian X. Foley (D-Blue Point), the companion bills came in response to watching Verizon sell off large segments of its landline network in a dozen states to Frontier Communications.  Both legislators were concerned the deal forced subscribers to deal with a new phone company that earned an “F” rating from the Better Business Bureau, all while personally enriching company executives and shareholders in a tax-free transaction.  They don’t want to see a repeat performance for rural New York residents.

Brodsky and Foley argue that such sales should be in the interests of ratepayers, especially rural customers who have few alternative choices.  Their legislation would compel Verizon to share 40 percent of the proceeds of any sale with their customers — the ones that pay the monthly bills that made Verizon’s network possible.  Alternatively, Verizon could spend an equal amount on verifiable infrastructure improvements and escape writing checks to ratepayers.  In either case, the legislation forces Verizon to spend less on bonus bonanzas for a handful of deal-making executives and more on the customers who have to live with the results.

Verizon lobbyists and company officials have routinely mischaracterized the legislation, claiming it singles out the state’s largest phone company with a “40 percent tax” that “exempts cable companies.”  They have also repeatedly hinted the legislation could force Verizon out of the state.

“That weighs as heavily in our decision as do things like power, taxes, environment,” Verizon spokesman John Bonomo said. “The business climate in the state is as important as some of those other factors.”

Verizon officials have not exactly been subtle about what they want to get the multi-billion dollar project ultimately built:  solid opposition to the two bills, which garnered support from consumer and ratepayer groups and the Communications Workers of America.  The legislation passed the state Assembly but ultimately died in the Senate several weeks ago.  Verizon is obsessed about keeping such bills from being reintroduced.

With billions at stake, the western New York delegation of politicians in Niagara and nearby Erie Counties have been especially supine to Verizon’s arguments.  In particular, some Republicans in the state legislature have made it their mission to see the bill permanently killed.

Unfortunately, the quality of the reporting done by local media about Verizon’s lobbying agenda has been especially underwhelming — frequently shallow, lazy, and downright inaccurate.  The assertions raised about the Brodsky/Foley legislation in area newspapers and television news reports makes one wonder if any of the reporters actually read the bills in question.

Take Bill Wolcott’s piece in the Lockport Union-Sun & Journal.

Wolcott never strays far from Verizon’s talking points, describing the bills as “[containing] conditions for givebacks of 40 percent for telephone providers, but does not do the same with cable TV corporations.”

Wolcott does not bother to accurately depict “givebacks” in terms of what they actually are — refunds to Verizon customers.

Verizon’s red herring complaint of unfair treatment is also repeated by the reporter, who apparently does not realize there are major differences between Time Warner Cable, which controls the overwhelming majority of cable subscribers in western and central New York and Verizon’s telephone operations:

1. Time Warner Cable has no plans to sell off its network to the highest bidder, abandoning rural and suburban areas served today.  Verizon did exactly that in most of the dozen states it left on July 1st;
2. Verizon’s landline network provides universal service to New York telephone customers, for which it receives a substantial subsidy from the Universal Service Fund;
3. Time Warner Cable is not held to universal service standards, something Verizon rarely complains about these days now that the phone company is in the same business as Time Warner through its selectively deployed FiOS network (which incidentally is not available in the Niagara county area where the data center is proposed.)
4. Verizon’s prior landline selloffs have almost always resulted in bankruptcies for the buyers, leaving phone customers uncertain about the level of service they will ultimately receive.

The proposed site for Verizon's data center in Somerset. Lake Ontario is visible in the distance. (Courtesy: WIVB-TV Buffalo)

The Buffalo News reporter did little better, misrepresenting a fundamental part of the bill (underlining ours):

Under the weight of a multibillion- dollar deficit, the State Assembly in the spring passed a bill that would require telephone companies to return 40 percent of their proceeds to the state if they reached a joint venture with another company or sold off some of their properties in New York.

Reporter Teresa Sharp managed to bungle an important fact.  The state of New York would not receive the proceeds — Verizon ratepayers would.

Most television coverage didn’t bother to challenge the inaccurate assertions made by Republican lawmakers or Verizon representatives either.  Talking points were read and reporters simply nodded their heads.

As a public service to the Buffalo-area media, Stop the Cap! presents a primer on the actual language of the legislation Verizon wants to see dead (underlining ours):

         (1) PROVIDES SHORT-TERM AND LONG-TERM ECONOMIC BENEFITS TO RATEPAYERS.
   49    (2)  EQUITABLY ALLOCATES, WHERE THE COMMISSION HAS RATEMAKING AUTHORI-
   50  TY, THE TOTAL SHORT-TERM AND LONG-TERM FORECASTED ECONOMIC BENEFITS,  AS
   51  DETERMINED  BY  THE  COMMISSION, OF THE PROPOSED MERGER, ACQUISITION, OR
   52  CONTROL BETWEEN SHAREHOLDERS AND RATEPAYERS.  RATEPAYERS  SHALL  RECEIVE
   53  NOT  LESS  THAN  FORTY  PERCENT OF SUCH BENEFITS; PROVIDED, HOWEVER THAT
   54  REINVESTMENT OF SUCH BENEFITS  IN  A  TELEPHONE  CORPORATION'S  IN-STATE
   55  INFRASTRUCTURE MAY BE DEEMED TO SATISFY SUCH REQUIREMENT.

What this means is that Verizon has two choices if it chooses to throw its rural New York landline customers overboard — before paying enormous cash bonuses to executives and deliver subscribers into the waiting hands of a potentially unstable buyer, up to 40 percent of the proceeds must be reinvested in improving the existing telephone network.  Barring that, the same percentage of proceeds must be returned to ratepayers in the form of refund checks or service credits.

Verizon may have a major problem giving customers their fair share, but they have no problem asking New York taxpayers for generous tax breaks.

Verizon has applied for a 20-year payment-in-lieu-of-taxes, or PILOT agreement, which would deliver substantial property tax savings, not a small matter in a region with the highest property taxes in the country.  It also wants a sales tax exemption on building materials and the equipment to be installed at the data center.  The sales tax break alone is expected to cost state taxpayers up to $330 million in lost tax revenue.

Because Verizon is upset about the legislation, local politicians have done one better expressing outrage that Albany politicians could drive Verizon to pack up its data center and head out of state.

Corwin

Somerset Supervisor Richard Meyers was quoted in Wolcott’s piece suggesting New York residents don’t want any part of a bill that returns money to phone customers if Verizon sells them out.

“I’ll tell you who’s calling the shots in the Senate, and that’s the residents of New York state,” Meyers said. “The average citizen in New York state does not like this bill, and I don’t either. I think it stinks. It’s not a necessary bill, and there’s a lot of time and energy wasted.”

Assemblywoman Jane Corwin, (R-Clarence) characterized the legislation as a union plot, quoted bashing the bills in the Lockport newspaper:

“It’s a very bad bill, being pushed by the Communication Workers of America, the union that represents the workforce at Verizon,” she said. “Of all the people that stand to get hurt, it’s the employees that would get hurt the most, and the investors as well. The whole bill doesn’t make sense.”

“This bill chills any business incentive to invest in New York state … because they stand to lose 40 percent of that investment down the line. The playing field will be made uneven, if we start taking 40 percent of that potential away from Verizon and not from the cable companies and Internet companies.”

She  contends that the CWA was putting pressure on the Assembly. “The shame of it all is that it’s been driven by a special interest group. They are the ones pushing this bill.”

What is especially chilling is that Corwin never bothers to mention concern for the one group affected above all others: Verizon landline customers.  To her, they are incidental.  The CWA?  A “special interest group.”  Verizon?  A source of campaign contributions for her.  This year, she has already picked up some nice change from the folks at Big Red:

Source: New York State Board of Elections

That’s not bad for a New York Assemblywoman serving a rural district whose total campaign take since her first election is just under $125,000.

State senator George Maziarz (R-Newfane) is just as bad.

“It’s a terrible piece of legislation, and I’m doing all I can to make sure it doesn’t pass,” said Maziarz, who heads the Senate’s Energy and Telecommunications Committee.

Verizon also thanks Maziarz for his efforts, for which he has been well-rewarded in the last two election cycles:

Source: New York State Board of Elections

Maziarz

The prospect of new high technology jobs and investment are more than promising to an upstate economy that has suffered difficult economic times for years.  But Verizon’s threats to skip Somerset for its new data center because of “anti-business” hostility ignores the company’s own willingness to abandon its rural customers.  In states where Verizon has sold off landline service — ending the prospects for real improvements in broadband and other modern services — communities like Somerset were the first to go, seen as too small and isolated for Verizon’s urban-based business plans.

The legislation Verizon fears protects New York residents, including those in Niagara County, from deals that enrich a handful of executives and Wall Street bankers while delivering sub-standard service to customers left behind.  Verizon’s record of sell-offs has been a disaster for customers, forced to endure long-term service disruptions, inaccurate bills with unfair charges, low quality broadband, and high prices.

Ironically, Verizon’s fear is totally misplaced, assuming they intend to remain committed to serving customers across the state — from cities as large as New York -and- towns as small as Somerset.  Even using Verizon’s own language, they can avoid the 40% “tax” if they simply keep providing service to their customers.

That’s just one of many facts the media in western New York needs to do a much better job of communicating to their readers and viewers.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Verizon Data Center 10-18-10.flv[/flv]

WIVB and WKBW-TV in Buffalo delivered several one-sided reports about the proposed Verizon Data Center while allow inaccurate information about Assemblyman Brodsky’s proposed bill to go unchallenged.  (8 minutes)

Another fight over retransmission consent leaves New York-area Cablevision subscribers in the middle of a dispute they will ultimately pay for.

At 12:01am Saturday, an unintended economic stimulus package kicked in for New York area sports bars as News Corporation yanked Fox network affiliates in New York and Philadelphia from Cablevision subscribers in a dispute over programming fees.

WNYW-TV (Fox), WTXF-TV (Fox), WWOR-TV (MyNetwork TV), Nat Geo WILD, Fox Business Channel, and Fox Deportes were all replaced with a looped message from Cablevision attacking Fox for negotiating in bad faith and greedily demanding more money than the cable company pays for every other New York area broadcaster, combined.

The dispute sent sports fans scurrying for access to weekend sporting events blacked out on the cable system serving Brooklyn, Long Island, and parts of Connecticut and New Jersey.  Cablevision customers were denied yesterday’s New York Giants-Detroit Lions football game and Philadelphia Phillies-San Francisco Giants baseball playoff game.  For a brief period, Fox raised the ante by also blocking Cablevision broadband subscribers from accessing Fox programming on Hulu, until political pressure and complaints from consumer groups forced Fox to retreat.

At issue, as always, is money.  Broadcasters are increasingly insistent on being paid for the right to retransmit their programming over cable systems.  Without agreements, a broadcaster can insist that a cable system drop their station(s) from the lineup until a retransmission consent agreement can be reached.

For years, many smaller independent stations fought to get on cable systems — for free — especially in areas where poor reception made it difficult to watch.  Broadcasters increased local advertising rates thanks to the extended viewing area many cable systems provide.

But now that local ad revenue is not what it used to be, and with viewers going online for access to their favorite shows, agreements increasingly require cash payments for permission to carry stations.

For the nation’s largest television market — New York City, the amounts exchanged can be staggering — well over $100 million dollars each year.  With that kind of money at stake, disputes have become almost routine, and area viewers are sick of it.

“It’s all about the money,” complained resident Joe Figueroa. “They’re always greedy.”

Figeroa and fellow Bronx resident Shinequa Gaillard told WNBC-TV these disputes always leave customers in the middle.

Fox briefly yanked its shows on Hulu Sunday for Cablevision customers attempting to bypass the dispute

“I think neither one of the two are thinking about the customers and the viewers — neither one of them,” Gaillard said. “As consumers, what can we do? Nothing.”

Briefly over the weekend, viewers hoping to bypass the dispute by watching Fox programming on Hulu learned the network had decided to involve Cablevision’s broadband subscribers in the fight as well — blocking access to Fox-owned content.  Some of our readers, include PreventCAPS, noticed.

Stop the Cap! reader and Cablevision subscriber Jim in Garden City, N.Y., discovered the programming blockade when he tried to watch an episode of COPS on Hulu.

“Fox has gone hardball on us by blocking Hulu for anyone with a Cablevision IP address,” Jim writes. “This is how these bastards operate, cutting off programming even for those like me who don’t even have cable TV and should not be involved in this debate at all.”

Jim uses a rooftop antenna to access local stations, and does not subscribe to a Cablevision video package.  He’s convinced this is exactly why we need Net Neutrality enforced by law in the United States.

“Imagine if this was Comcast-NBC vs. Fox,” he warns. “Do you think Comcast wouldn’t think twice of pulling the plug on Fox’s website and video content if the two hated one-another?  They’d flip that switch off in a second.”

The implications did not go unnoticed by Free Press and other consumer groups.

“Consumers should have the right to watch online content, and this access should not be tied to a dispute over cable television carriage arrangements,” said S. Derek Turner, research director for Free Press. “This move is also an example of a major user of public spectrum abusing the public interest.”

The matter quickly also went political, triggering an angry response from Rep. Ed Markey (D-Mass.) urging the Federal Communications Commission to step in and “actively defend Internet freedom and consumer rights.”

A few hours after statements like that, Fox pulled back and restored access, but the point was made for those who recognize media companies have major involvement in online and over-the-air programming.

Israel

Rep. Steve Israel (D-N.Y.), whose district includes shut-out Cablevision subscribers, thinks these disputes have become way too common.

Cablevision subscribers have endured short-term lockouts from Food Network and HGTV, networks owned by ABC-Disney, and now this latest dispute with Fox.  Israel wants binding arbitration for these types of disputes, if only to shield customers from one side or the other yanking access:

“I spoke to officials today at the FCC and they confirmed they have offered to mediate arbitration and pledged to keep the heat on both parties to come to the table without disrupting service.  Haven questioned Chairman Genachowski about this issue in March, I know that he shares my concerns about the continued brinkmanship of these negations that threaten to leave customers in the dark.  I’m disappointed that both parties haven’t agreed to hold Giants fans harmless while negotiations continue.”

While Cablevision announced it was willing to enter arbitration to resolve the dispute, Fox officials refused, claiming it would reward bad behavior by the cable company.

Both players have their own websites defending their respective positions and trying to sign up viewers to help fight the battle.

News Corporation, which owns Fox, runs KeepFoxOn and is encouraging Cablevision subscribers to cancel subscriptions and switch to Verizon FiOS or satellite television.  It also accuses Cablevision of hypocrisy over their resistance to paying “fair fees” for Fox-owned programming.

Lew Leone, vice president and general manager of News Corporation’s WNYW and WWOR-TV says Cablevision wants special treatment:

Instead of negotiating like a responsible business, Cablevision decided to make this your problem in the hope that if they caused you, the viewer, enough inconvenience, then politicians would intervene.

That is what Cablevision’s call for “arbitration” is all about.   But ask yourself – do you think Cablevision would be ok with someone else stepping in to decide the price you pay them for cable and broadband service?

And the Cablevision family certainly doesn’t allow arbitrators to set the rates for their cable channels like MSG and AMC.  In fact, just a few weeks ago, MSG and MSG Plus went off the dial for millions of DISH Network subscribers – and MSG did not ask for arbitration.

Cablevision has called us greedy. It’s an interesting charge, given the fact that the price we’ve offered Cablevision for FOX5 and My9 is more than 70% lower than what the Cablevision family charges other cable operators for MSG and MSG Plus.

Frankly, it is hard to believe a company like Cablevision is accusing anyone else of greed.  Cablevision customers pay an average of $149 per month including up to $18 for broadcast stations – and that earned them an average profit of over $795 per subscriber last year.  Yet, they have only offered to pay less than a penny a day for FOX5 and My9.

Cablevision has stated that they intend to provide you with a rebate.  But if the rebate is equal to what they offered Fox for our stations, you can look forward to a credit of less than 30 cents on your next bill.

Cablevision officials fire back that they won’t be bullied.  The Cablevision website, along with a video airing on blacked out channels, accuses Fox of greedily demanding $150 million for stations, many of which customers can watch for free over-the-air:

• Cablevision currently pays 70 million dollars per year for News Corp’s programming (which includes channels such as FOX 5, My9, FOX Business Network, National Geographic Wild, and FOX Deportes), and now they are asking for more than 150 million dollars for the exact same programming – no new programming, just another 80 million dollars per year for News Corp.
• Cablevision has reached agreement with every other major broadcast station, including CBS, NBC, ABC and Univision. But News Corp is demanding more in fees for FOX 5 and My9 than Cablevision and our customers pay for all of the other broadcast stations combined!
• We think in these economic times that this is outrageous, especially since FOX 5 and My9 are available for free over the air, and they make many of their most popular shows available for free on the Internet.
• News Corp has pulled the plug on their most popular programming, holding viewers hostage until their unreasonable demands are met. NFL Football, the MLB playoffs and World Series, House and Glee are just a few of the programs that News Corp is depriving their viewers of in an attempt to bully us into accepting their unfair demands.
• Cablevision is willing to accept binding arbitration from an independent 3rd party to settle this dispute. We call on News Corp to accept binding arbitration, and to put FOX 5 and My9 back on the air for our customers until we can come to a fair agreement.

Both sides have publicized their views in the local media, including full page ads in New York tabloids.  One from Fox targeted Cablevision’s owners personally, accusing the Dolan family of getting top dollar for lesser-watched sports networks under the MSG umbrella while playing hardball over program fees for channels 5 and 9, heavily viewed in the New York area.

Right now, Cablevision pays about 25 cents per month for both broadcasters.  News Corporation reportedly wants a dollar per month.

Forbes entertainment columnist Lacey Rose warns these repeated battles may bring unintended consequences from viewers, especially for Fox:

The networks’ current strategy –block programming while trading barbs with the cable operator in question—may do more harm than good, however, as consumers are (further) incentivized to find new ways to occupy their time. (Much as they did during the 100-day writers’ strike, when new scripted programming was shelved for months.) Still more worrisome, the resulting fees that will be passed down to already cash-strapped subscribers in the form of higher cable bills could end up pushing them away forever.

In an era of 1,000-plus channels and infinite entertainment on the Internet, the broadcast networks are already in a precarious position with younger viewers, which advertisers pay a premium to reach. Blackouts or not, nearly 70% of cord cutters are under the age of 34, according to a BTIG study released last month — and that doesn’t include a growing subset of these younger, tech-savvy viewers who never even bother with a cable subscription, preferring entertainment outlets like Hulu and Netflix for their content.  Though the networks are loathe to admit it, viewership continues to decline as the median age of the audience at the big four rises. In fact, thus far this season the median age of a prime-time viewer is 50 years old, according to The Nielsen Company.

But at least for now, as negotiations continue in the third day of the programming blackout, there appears to be no end in sight.  Cablevision has even engaged in some programming blackouts of its own, denying access to today’s New York gubernatorial debate to Verizon FiOS, which prompted an angry response from the phone company.

“Verizon FiOS TV customers and millions of other viewers served by other providers across the state have essentially been blacked out of the debate, denying them their rights as citizens and voters, since Cablevision is the sole broadcaster of the event,” said Michelle Webb, general manager and chief programming officer of FiOS1, Verizon’s news channel for Long Island and northern New Jersey. “And while the broadcast will be available on certain websites and some radio, those may not be practical solutions for many people.”

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Fox Cablevision Dispute 10-18-10.flv[/flv]

Stop the Cap! brings you a comprehensive roundup of coverage from the New York area regarding the Cablevision-Fox dispute, with coverage from WNYW, WABC, and NY 1 television, Cablevision and Fox themselves, and WINS and WCBS Radio.  (14 minutes)