PSC Didn't Provide Complete Explanation When it Ended its 315 Area Code Proceeding

As we noted earlier this week, the New York State Public Service Commission (“PSC”) formally decided to put on hold its proceeding to add a new area code in the 315 region of central New York State. The PSC press release announcing the good news claims the reason the need additional numbering resources has dropped, causing the PSC to end its plans to add an overlay area code in the region, is “primarily due to the slowing of the economy.”

While there is certainly no argument that the current “Great Recession” is causing significant economic harm across the state, PULP does not agree with the PSC that this is the primary reason for the drop in telephone exchange code demand. Rather, it was the Commission belatedly ending its ill-advised procedure to dole out multiple 10,000 telephone number exchange codes (also known as NXX codes) to multiple providers in very rural communities.

When the PSC submitted its request to the FCC in August 2005 to expand "thousands block" pooling – that is, assigning numbering resources 1,000 at a time instead of 10,000 at a time – outside the state’s major population centers, the PSC did not signal the urgency of the need and did not request expedited treatment to stem the pending numbering crisis . While it did take the FCC over a year to grant the request, the PSC sat for an additional four months prior to implementing its new authority. During this brief time period alone, (November 2006 to March 2007), 10 new 10,000 telephone number NXX codes were assigned (19 requested, nine returned), representing 100,000 telephone numbers stranded in rural areas that did not need them.

Let’s look at more numbers: Between December 2004 and December 2007, a total of 40 NXX codes were assigned in the 315 area code, averaging between 13 and 14 codes a year. The big drop off occurred beginning in October 2007, when a net of only two NXX codes were assigned in total until July 2008 (six requested, four returned). Since then, only four NXX codes have been requested through May 2009 and three have been returned. As a result, since October 2007, a net of three NXX codes have been assigned in the 315 area code, far short of the levels hit in 2005, 2006, and 2007.

However, in order to recognize this fact, the Commission would be placed in a position to admit that the reduction in NXX code demand began when it implemented thousands block pooling. However, that admission would raise questions as to why the Commission was handing out 10,000 numbers at a time (and multiple times) to over 50 rural communities in central New York, each of which has only a thousand or two living there.

On top of this, despite souring economic conditions, demand for telephone numbers continues in other regions of the state, including New York City, where the recession has hit hard. Since the beginning of the year, 19 new NXX codes have been put in place in the city.

PULP is pleased that the PSC has rectified its numbering allocation procedures, which has caused it to avoid forcing over a million people to change their telephone number and change their dialing patterns for reasons which were completely avoidable. However, don’t blame the recession for the drop in NXX code demand. The credit for forstalling the new area code goes to the PSC's new number conservation policies, no matter how tardy they may have been in coming into play.

Lou Manuta

AARP Opposes PEPCO Plan for Spending on "Smart Meters"

Spending billions on "smart meters" seems to be really in vogue in states where utilities sold their power plants, failed to make money in their Enron-like holding companies, and now have no safe place to sink investment for a regulated return. See Not so Smart? High Tech Metering May Harm Low Income Electricity Customers.

Recently the electric utility serving the Washington D.C. area, PEPCO, proposed to roll out "smart meters" with large amounts of spending that would be underwritten in part by consumers through higher utility rates and in part by taxpayers through the use of federal ARRA stimulus funds.

The invocation of high tech and environmentalism sounds keen and green.

But on closer examination, testimony submitted today by AARP's expert witness, Barbara R. Alexander, shows that the "smart meter" proposal simply is not cost effective.

Update
See the Comments and Reply Comments of NASUCA to U.S. Department of Energy requests for information regarding "Smart Grid" initiatives. In their Reply Comments, NASUCA stated:

"First, the consumers are the ultimate owners of their energy consumption data. The establishment of privacy protections for personal energy information is critical, and the issue must be resolved in favor of the highest degree of consumer protection.

Second, consumers should have the choice to participate in any advanced metering program or in any dynamic pricing schedule that may involve data sharing arrangements.

Third, there are unique differences among electric consumers that must be considered for any Smart Grid deployment.

Fourth, investments made in Smart Grid technologies must be supported by a detailed cost-benefit analysis and subject to evidentiary proceedings and prudence review before costs are passed on to utility consumers."

PSC’s Market Ideology Clashes with Goals of Affordable Universal Broadband Service

Last week, PULP reported on the comments filed at the FCC regarding the development of a national universal broadband policy. See PSC to FCC: We Oppose Measures to Effectuate Universal Affordable Broadband Service. The New York State Public Service Commission (“PSC”), in conjunction with the state’s Chief Information Officer, submitted comments which in essence argue for continued reliance on failing market-based policies, policies which exacerbate the digital divide and have left millions of households without broadband. A review of other comments filed with the FCC reveals that New York is behind the times and out of step with every other state that submitted comments.

As we reported, the PSC comments did not directly voice support the goal of affordable, universal broadband, grudgingly acknowledged that the FCC has been tasked to address the problems, and then endorsed a lack of government involvement in broadband deployment:

“The [Federal Communications] Commission has been directed to develop a plan, but it may reasonably question the use to which the plan is to be put. The underlying assumption seems to be that the market is not providing the appropriate level of broadband service and that government should reallocate resources so there is more broadband. More broadband means less of something else and it isn't clear that people want to consume less of that commodity and more broadband. Indeed, given that the market is free, just the opposite is true.”

Essentially, the PSC seems to be saying that policy makers elected by the people who see the importance of universal affordable broadband to the future of the economy and society should not disturb the results of the broadband “market” - which in most localities is a duopoly of landline and cable providers. Such blind faith in the market, however, has already left New York far behind countries that have been proactive with policies to lower the cost of broadband, increase speed and bandwidth, and increase its deployment and actual use by citizens. The PSC even questioned the need to bring broadband to every citizen today:

A broadband plan seeking to bring broadband immediately to 100 percent of the country may be ill-advised. A goal of 100 percent broadband deployment may not be economically rational with traditional, wired service. However, the evolution of technology, like third generation wireless, could provide more efficient and cost effective alternatives for ubiquitous broadband.

This is a familiar refrain to defend market power of existing providers: someday the market will bring providers with a new technology that magically would bring affordable service to unserved or underserved areas, so therefore regulators and government should do nothing.

Groups that provided comments similar to those of the PSC were free-market think tanks, such as Americans for Prosperity, FreedomWorks Foundation, and Americans for Tax Reform (ATR). ATR, founded by anti-tax radical Grover Norquist. The PSC’s positions closely resonate with the comments of ATR, which glossed over the market failure and reduced competitive position of the United States in comparison to other countries, and wrote:

We are on the right track; the free market is working. Consumers are enjoying an ever-expanding array of choices and performance. . . . In order for free-market models to provide for the further development of broadband access, however, it is absolutely critical that government intrusion not prevent private capital from recouping its investment. If private capital becomes convinced that its ability to recoup its investments is less likely, it will be less likely to make the significant investments in broadband that is the very goal of this FCC inquiry.”

Both the PSC and ATR take these “hands off” positions when it comes to the price and deployment decisions of the cable and phone company duopoly, even though

• millions of people who in theory have “access” to broadband cannot afford it,
  
• the U.S. has some of the world's slowest, most costly broadband (per megabit per second),
• the U.S. subscribership rate has sunk from 4th to 15th in the world in recent years, even as other countries with more affirmative broadband policies surge ahead.

See The Broadband News Is In, but it Isn't All Good. The myths spouted by the PSC and ATR about markets and competition are addressed in the comments of Consumers Union:

The disappearance of potential competitors through mergers, the domination of the in-region wireless market by the dominant incumbent local exchange carriers, and the failure of CLEC competition on the platform have left residential consumers with, at best, a cozy duopoly that dribbles out bandwidth at high prices. While the Commission should prioritize its efforts according to the extent of market failure – zero providers is a worse outcome than one and one is worse than two – it should not fool itself in to believing that the mere presence of two competitors is sufficient rivalry to ensure consumers will get the benefit of real competition. This is particularly true in urban areas, where low-income households have been priced out of the marketplace. There is nothing in economic theory or real world experience to suggest that two is enough for vigorous competition.

In contrast to the New York PSC, other states that submitted comments recognized reality: the marketplace is failing to provide universal affordable broadband and that more steps need to be taken if the United States is to keep up with countries that have a sound broadband policy and program. This is what they had to say:

The Michigan Public Service Commission (“MPSC”) hit many important notes in its comments , stating:

the FCC should develop a national broadband plan with the goal that all Americans have physical access to broadband service . . . at the location of their residence. While physical access alone does not imply that all Americans choose to adopt broadband service due to constraints like price, the FCC should not overlook this essential component. . . . The best solution would be to work toward an infrastructure that allows for broadband connections at reasonable prices at every residence, as well as robust broadband connections at free or further reduced prices available at community centers such as libraries. These two goals need not be mutually exclusive. While the national broadband plan will likely need to prioritize which of these types of projects to fund with public money, such as the money available under the [American Recovery and Reinvestment Act] ARRA, the FCC should ensure that the ultimate goal of the national broadband plan is true access for all Americans, including access through community centers and at their place of residence.
* * *
While the MPSC believes that demand-side policies will help encourage competition, thereby reduce price for consumers, it cautions the FCC against simply ‘allowing market forces to work.’ Due to the largely deregulated environment for broadband technologies, the FCC should closely monitor the competitive marketplace for broadband in order to address any areas where the market fails to provide broadband services at reasonable prices and with reasonable privacy protection. In the cases where the market does not produce sufficient demand for broadband at reasonable prices, the national broadband plan should include recommendations for reforming the universal service fund in such a way that broadband services would be supported.

Similarly, the Vermont Public Service Board and the Vermont Department of Public Service wrote that the deployment of broadband needs to be supported by the Universal Service Fund, stating:

The Vermont Public Service Board and the Vermont Department of Public Service (“Vermont”) are of the view that our national communications and technology culture have evolved to the point where broadband has become an indispensable tool for how Americans obtain and disseminate information, and communicate with each other about that information. Furthermore, for rural states such as Vermont, broadband internet service is vital for efforts to promote job creation and to retain a modern and technologically literate workforce. For these reasons, it is imperative that a national broadband policy be implemented that facilitates the deployment of a robust, inclusive broadband infrastructure that reaches American communities large and small with rate and service parity and reliability. To this end, Vermont recommends that the Federal Communications Commission (“FCC” or the “Commission”): (1) adopt a technically robust definition for “high speed” broadband; and (2) treat the deployment of broadband as a service to be supported by the Universal Service Fund (“USF”).

Vermont favors creation of a separate Broadband Fund, as outlined in the Federal-State Joint Board Recommendation, which would be tasked with expanding broadband Internet services to unserved areas.

The New Jersey Department of the Public Advocate's Division of Rate Counsel made several recommendations in its comments, including expanding universal service support to include broadband services and to make broadband affordable for all citizens.

Absent such regulatory intervention, the United States may become a two-tiered society of disparate access to and use of broadband.

The California Public Utility Commission in its comments stressed the need for government involvement for a broadband universal service fund:

At the federal level, we do support a limited federal Lifeline/Link-up Pilot Program to provide computers and discounts for monthly Internet access service to low-income consumers as a way to gauge the costs of such a program. However, if the Commission or Congress decides to permanently add Internet access or broadband service to the definition of federal ‘universal service’, all broadband and Internet access providers should be required to contribute to the federal Universal Service Fund. The FCC should then expressly clarify state authority to seek contributions from all broadband providers and Internet access providers for their respective universal service programs.
* * *
Another suggestion for funding of broadband would be for the FCC to explore universal service, at least initially, as a matter of ubiquitous availability of broadband infrastructure separate from universal subsidy of broadband service. If the broadband infrastructure is in place universally, then service plans and their costs can be approached relatively free of the costs associated with infrastructure deployment.

The Massachusetts Department of Telecommunications and Cable supports a broadband fund in its comments:

In response to the Commission’s queries with regard to universal service, the Joint Commenters affirm the [Massachusetts Department of Telecommunications and Cable] MDTC’s previous position that universal service support should be expanded to include broadband. Specifically, if the Commission were to incorporate broadband access into high-cost support, then it should establish a separate broadband fund for that purpose. In fact, the Commission should adopt the creation of a Broadband Fund comparable to that proposed by the Federal-State Joint Board on Universal Service.

The biggest telecom providers in New York support movement away from market-based solutions that have not worked. For example, Verizon in its comments stated its support for “policies that increase computer ownership, teach people how to use those computers and navigate the Internet, and demonstrate the relevance and benefits of broadband to their lives could go far in increasing broadband adoption.” Its preferred method to address affordability, however, was for refundable tax credits for low income families to help them afford broadband access. Time Warner Cable in its comments wrote that it:

encourages the use of federal funds to support broadband demand side programs, with a focus on outreach and education, subsidies for low-income consumers, and
programs that distribute laptops to low-income schools and families. Such initiatives are a core component of the broadband stimulus legislation, and figure prominently in the Rural Broadband Strategy. Even where broadband services are available from multiple providers, penetration remains relatively low in certain at-risk communities. Addressing that gap should be among the Commission’s highest priorities, facilitated by the process of obtaining improved information about the extent of that gap already underway, independent of this proceeding.

In sum, every state that submitted comments, consumer groups, and two of the largest voice and broadband providers in New York all recognized the need for a national policy and action to address the inadequate deployment and unaffordability of broadband. It is unfortunate that the New York PSC still has its head in the quicksand of the last century's market ideologies and continues to leave broadband deployment and pricing to the whims of the duopoly "marketplace" – despite the duopolies’ continuing failures to bring affordable broadband to all.

Lou Manuta

ESCO Advertises 9.75% Tax Savings on Delivery Service

We commented previously on the odd tax break given to ESCO customers which reduces the cost of delivery service still provided by the utility, enabling the ESCO actually to charge more for the part of the service it provides, i.e., the "commodity" portion of gas or electric service, and still show total bill "savings" to the customer. See ESCO Tax Subsidies: A Hidden $128 Million Cost of the New York PSC's "Retail Access" Scheme

We recently received a glossy flyer in the mail from "Energy Plus", an ESCO, claiming that residential customers who buy electricity commodity will get up to 9.75% savings -- on the utility-provided delivery service taxes:

Monthly sales tax savings
Save up to 9.75% on the delivery portion of your bill every month since you will no longer have to pay sales tax when you select EnergyPlus as your supplier.

These savings are because of a law that exempts sales tax on the delivery service part of the ESCO customer's total bill. According to a publication of the state tax department, sales taxes vary locally, but in no location are the total state and local sales taxes more than the 8.75% rate for Erie County.

According page 149 of the latest New York State Division of the Budget (DOB) Annual Tax Expenditure Report, the foregone public tax revenue due to this loophole

• was $6 million/year in 2002
  
• was $128 million/year in 2008,
  
• is projected to reach $154 million in 2009, and
  
• is still rising at a rate of more than $20 million/year.

There is no valid reason to subsidize an industry built upon arbitrage of tax breaks for financial middlemen who do not produce electricity. This permits companies who resell the same services at higher cost to win customers by splitting the savings from the unjustified tax break. This tax break rather than superior value may account for the widespread switchover of large industrial and commercial customers to ESCO commodity service.

It is difficult to imagine why DOB regularly proposes to axe worthy programs, in the name of balancing the budget, but doesn't propose elimination or phaseout of the increasingly expensive corporate welfare tax break favoring ESCOs and their customers, which might hit more than $150 million next year. For example, the Governor proposed a slow phasein of welfare grant increases, which had not been adjusted for 18 years, whose annualized cost, when phased in fully, will be $109 million a year. While some of the ESCO sales tax break is for local sales tax, ending the ESCO tax break could have helped New York's poorest families cope.

Energy Plus customers will get US Airways "dividend miles" for each dollar they pay for their electricity. Perhaps one function of the "plus" is to add a perk - frequent flyer miles - making it even more difficult to make an "apples to apples" comparison of what is being really charged for fundamentally identical ESCO utility service. See PSC Makes ESCO Service Comparisons Difficult; and PULP's Con Edison Bill Estimator.

There is no representation in the flyer of the rates actually being charged by Energy Plus for the unbundled commodity portion of electric service. The flyer claims that "we buy electricity every day at the best possible price and use that price to set our rate." Other than the vague puffery about the "best price possible," and that we "use that price to set our rate" which might be something other than the best price possible, the only clear representation of any savings is the tax break on the portion of the bill for utility-provided delivery service - there is no real representation that total bills will be any less than the charges of the traditional utility for full bundled service.

An article about at least one Energy Plus customer's experience indicates that savings may be illusory. See ESCOs Cost More -- A Familiar Experience. There is no evidence that shopping for other ESCO suppliers of residential utility service pays off over time, and those who switch often find themselves paying more than if they had not switched. See Think Twice Before Switching Utilities.

PULP's recommendation to customers wanting to reduce their electric bills: conserve.

For more on ESCO service, see PULP's webpage on ESCO issues.

Assembly Passes Bill to Correct Diversion of Complaints Regarding Submetered Electric Service

The Basics - The PSC Decides Customer Complaints over Utility Service
The Public Service Law and the Home Energy Fair Practices Act (HEFPA), enacted in 1981, have always provided for administrative adjudication by the Public Service Commission of customer complaints regarding residential utility service and bills. HEFPA was a major reform tantamount to a utility consumer bill of rights, and part of the package was a more customer-friendly PSC complaint adjudication system that can be invoked by customers with a phone call, letter, office visit, or an email or online complaint.

HEFPA Applies to Submeterers
The PSC administratively revived the practice of residential submetering in the late '70s, allowing owners permission on a case by case basis to resell electricity to occupants, a practice generally forbidden since 1951. In its submetering orders, the PSC repeatedly includes a statement, as it did in a February 2009 order, wrongly suggesting that HEFPA's coverage of submetered service was something entirely new that came about only in 2002:

Prior to the amendment of PSL Article 2 (HEFPA) by addition of PSL §53, HEFPA only applied to the provision of residential service by natural gas, electric and steam corporations and municipalities.

The above revisionist statement is completely belied by the fact that the PSC's own submetering regulations, on the books since the 1980's, allow waiver of the prohibition against resale of electric service only if the submeterer 's application provides for "complaint procedures and tenant protections consistent with HEFPA."

When the Legislature clarified HEFPA with the Energy Consumers Protection Act of 2002 (ECPA), it should have been crystal clear to all, including the PSC, that nontraditional providers of utility service like ESCOs and submetering landlords must comply with HEFPA. Most critically, ECPA clarified PSL Section 53 so that the PSC has no power whatsoever to waive HEFPA requirements, a power it had previously asserted regarding ESCOs, and apparently has done with submeterers. Perhaps prior to 2002 the PSC thought it could waive some HEFPA requirements, and that illusion ended with the Legislature's clarification.

Waterside Plaza, one of the first large rental buildings to be converted to submetering, claimed that it could have an alternative system for deciding complaints of its 1400 submetered tenants but this was rejected in 2006 in a court decision which stated

Those who submeter electricity for sale to residential end-users are utilities within the meaning of Article 2 of the PSL. Accordingly, those entities must provide all HEFPA protections.

Those protections, of course, include the right to get a PSC decision on a dispute.

The PSC's Submetering Regime Fosters Diversion of Complaints
Despite the clear statutory requirements, for years, both before and after the 2002 ECPA the PSC has allowed landlords to evade and escape HEFPA requirements. [One of the methods, discussed elsewhere, is to allow landlords to "deem" charges for electric service to be rent, and to avoid many HEFPA protections like deferred payment plans, which are triggered by utility termination notices, by evicting the tenants in landlord tenant court if they did not pay in full the electric charges demanded].

Another way around HEFPA's reach was to approve terms and conditions of owner-provided electric service that diverted complaints to owner-hired private arbitrators rather than telling tenants about the opportunity to obtain PSC determinations.

Even after the 2002 ECPA clarification, the PSC routinely issued - and continues to issue - orders that provide a route for landlords to divert customer complaints about their electric service to private arbitration before owner-paid arbitrators. For example, in a decision issued in May, 2009, the PSC discussed the submeterer's internal grievance procedures -- which require written complaints not required by HEFPA's simplified procdeures -- and stated:

Thereafter upon receipt of the protest, the matter may be submitted to arbitration under the provisions in the Bylaws of Argyle Condo by the Applicant or the resident, to resolve the grievance. All residents can also contact the New York State Public Service Commission if they are dissatisfied with either the managing agent or Board’s response to their complaints.

The process described thus approves time-consuming arbitration of utility service issues. In a January 2009 decision the PSC allowed the landlord to commence court proceedings against the tenant for eviction or for damages to decide disputes over electric bills instead of direct customer access to the PSC complaint determination function:

If dissatisfied, the tenant may request a review of the determination by filing a written protest to the Applicant within fourteen (14) days from the date of the property manager’s response. Upon such protest, the property manager will initiate, at no cost to the tenant, a proceeding in either Small Claims or Housing Court in New York City. All tenants can also contact the New York State Public Service Commission if they are dissatisfied.

The orders merely say that "all residents" or "all tenants" can "contact" the PSC -- but there is never an actual reference by the PSC to its duty to decide individual complaints under Public Service Law 43.

Wishy washy PSC orders such as this allow submeterers to discourage and deter complaints with the spectre of formal and risky arbitration and court proceedings, and encourage landlords to evade full disclosure of the real decisional function and duty of the regulatory agency.

The confusing PSC orders issued over the past decade affect more than 28,000 tenants. For detailed examples of these orders, see Under HEFPA, the New York PSC Must Decide Complaints of Submetered Customers. Even worse, if tenants check their leases or information provided by landlords when they submetered, they will typically find misleading gibberish about having to arbitrate disputes before landlord-hired arbitrators in formal arbitrations, or being taken to landlord/tenant court, and no solid information at all about the PSC complaint handling procedures and detailed information about how to access them.

The PSC's Laissez Faire Approach
Generally, we have found that landlords with PSC submetering orders never provided adequate notice to their tenants of their statutory right to have their complaints about electric service decided by the PSC, just as landlords never implemented other requirements of the orders, such as including essential terms and conditions of utility service in agreements signed by the tenants, as riders to their leases. See Lax PSC Enforcement of Submetering Orders Allows Landlords to Overcharge for Electricity Sold to Tenants and to Circumvent HEFPA Protections.

A consequence of this subversion of utility customer rights is that PULP's research cannot identify a single PSC complaint determination involving submetered electric service, even though an estimated 28,000 rental apartments have been submetered in the past decade, and even though there is considerable tenant dissatisfaction with chronic billing errors, high bills, defective meters, shared meters, miswiring, violation of the rate cap provisions of submetering orders, and other service issues. Parenthetically, we also note that even though the PSC's Office of Consumer Services logs a high level of complaints lodged involving ESCO service, we cannot find a single PSC decision in a case against an ESCO. Shifting customers to unregulated utility providers, a legacy of the Enron era, still remains part of the New York PSC deregulation agenda: at least circumstantially, it appears that part of that deregulation agenda may be never to issue a precedental decision regarding the service of the new providers of utility service, i.e., ESCOs and submetering landlords.

Pending Legislation to Require Notification to Submetered Tenants of PSC Complaint Remedies
Assemblyman Micah Kellner sponsored a bill, A.7867, as part of a five-bill package to address submetering issues. A.7867 requires all submetering landlords to notify their tenants annually of their right to have disputes over landlord-provided electric service decided by the PSC. As stated in the Memorandum of Support for A.7867:

These alternative venues for complaint adjudication all involve time consuming and comparatively formal proceedings. They may also prove to be expensive and risky, for example, if an eviction case is the forum for resolution. These factors may serve to deter customers with meritorious complaints from making them, and reduce awareness at the Public Service Commission of the nature and quality of customer service actually provided by certain utilities.

Assembly Passes A.7867
Today, the New York State Assembly passed A.7867. A counterpart bill is pending in the State Senate, S. 5252.

For more information see PULP's website page on submetering.

PSC Seeks Comments on Petition of Hazel Towers Tenants to Halt Submetering

Tenants at Hazel Towers, a former Mitchell-Lama housing project in the Bronx, petitioned the Public Service Commission to halt submetering previously authorized by a PSC Order that waives the general prohibition against resale of electric service. The Petition alleges noncompliance with the Home Energy Fair Practices Act and the Commission Order. See Hazel Towers Tenants Association’s Petition for Investigation and Remediation of Noncompliance with Prior Order for Vacatur or Modification of Order Establishing Terms and Conditions of Submetered Electric Service at Hazel Towers and for a Stay. PULP is representing the Hazel Towers Tenants Association (HTTA).

The Petition of the Hazel Towers Tenants Association maintains that no valid agreements exist between the landlord and tenants for providing electric service to the tenants at rates, terms and conditions approved by the PSC, and that the Commission cannot now retroactively approve charges for service not agreed to by the tenants and not provided in accordance with the terms and conditions in its prior Order. Some tenants were overcharged in six out of the first twelve months of submetering, which began in 2007. Tenants disputing their landlord's charges for electric service were not given notice of the opportunity for PSC decisions on their complaints, and were threatened with court action or arbitration of disputes before private arbitrators hired by the landlord. Tenants first complained to the PSC more than one year ago. See Hazel Towers Tenants Ask PSC to Act on Submetering Complaints, PULP Network May 6, 2009.

On June 6, 2009, the PSC issued a Notice Establishing Comment Period providing for comments from interested parties by July 15; reply comments are due by August 15. Comments are to be filed with PSC Secretary, Hon. Jaclyn A. Brilling, at the Public Service Commission, 3 Empire State Plaza, Albany, New York 12223 and electronically via email at Secretary@dps.state.ny.us.

For further information see "Top Ten Submetering Myths" and PULP's web page on submetering.

Update on Lack of Lifeline Information at the PSC Website

A PSC representative took issue with our statement in All NY Phone Customers Lose Big $$ Due to PSC Lifeline Policies that

We could look for details on Lifeline and LinkUp assistance at the New York PSC’s Lifeline webpage -- but there isn’t one.

In fact, about all the consumer information you’ll find by searching the NY PSC website is an “Options for Telephone Consumers” page, which offers a one sentence description of Lifeline.

We were pointed to another PSC-funded web site, "AskPSC.com. It has a page on the Lifeline assistance program.

Still, the site index on the main PSC website does not mention Lifeline and Linkup, nor does the "A-Z Index" on the main PSC site.

The vast majority of eligible customers eligible for but not receiving Lifeline assistance should not have to "ask" the PSC and apply one by one at the alternative website or through their telephone company. Indeed, many of the households eligible for Lifeline assistance may be living in hardship made worse by high phone bills, and they cannot afford the internet service or computers they need to find information via the internet and the "AskPSC" website.

They should be more efficiently automatically enrolled in the reduced rate through a confidentiality protected match of records of customers receiving Food Stamps, HEAP, and other Lifeline-qualifying programs.

On the PSC's watch

• the major provider, Verizon, was allowed to adopt tariffs restricting Lifeline assistance when the customer buys service in a package,
  
• competing telephone service providers such as cable companies are allowed to avoid providing Lifeline, and
• the automatic enrollment system pioneered in cooperation with PULP, state agencies, and telephone companies is broken, with only 300,000 households getting the assistance out of an easily found population of four to five times that number.

As a result, a million easily identifiable eligible households are not getting assistance, low-income New Yorkers are losing hundreds of millions of dollars every year in telephone assistance, and New Yorkers are paying universal service surcharges that go to other states.

Update - July 7, 2009
According to latest available statistics, 309,000 customers received telephone lifeline assistance in 2008. While this is more than the 300,000 mentioned above, it reflects the downturn since the peak of 746,000 customers about ten years ago, and illustrates the failure of the PSC to commit to providing assistance to all who are eligible for Lifeline and to oval of barriers to enrollment.

PSC Acknowledges 315 Area Code Change is Not Needed

With the release of a three sentence Notice on June 15th, the New York State Public Service Commission ("PSC") brought an end to a proceeding to provide area code "relief" to the 315 area code region in central New York. This case began with a December 2007 Order to resolve the apparent diminishing availability of exchange (or NXX) codes in this area, a problem created by the PSC itself when it assigned multiple 10,000 telephone number NXX codes to competing phone companies in rural communities.

PULP identified this issue of waste and stranding of unused numbers in filings over the ensuing months - contending that a new area code should not be necessary for the mostly rural area with about 1.4 million residents and asking the PSC to reconsider its action:

• PSC Considering "Area Code Relief" For 315 -- Where Did All The Numbers Go? ;
• PULP Asks PSC to Investigate Need for New Telephone Area Codes in the 315 Region;
  
• PSC Puts 315 Area Code Changes on Hold Pending Investigation;
• PSC Denies Request for Open Inquiry and Continues with 315 Area Code Changes;
• PULP Asks PSC to Reconsider Refusal to Investigate Alternative to New Area Code in 315;
• PULP Provides Further Proof That Area Code Changes Are Not Needed Now in the 315 Area;
• 315 Area Code Number Exhaust Pushed Back Another Year: No Need to Add New Area Code Now;
• PULP Submits More Evidence to PSC Showing that a New Area Code in 315 Region is Unnecessary;
• PULP Submits New Evidence to PSC Showing No Need for Area Code Changes Now in Central NY 315 Area.

The Commission defended its action, saying it was correct in how it allocated upwards of 50,000 telephone numbers to each of over 50 tiny rural exchanges with just a couple of thousand residents each, stranding hundreds of thousands of telephone numbers that could have been used elsewhere.

Until today, the Commission had forged ahead with the proposal to add a new area code, and decided to implement it with an "overlay" code. If the "overlay" had been implemented, new numbers within the existing 315 area code would have a different area code, requiring the public to use ten-digit dialing instead of the current seven-digit dialing to make local calls. A company across the street or across town could have a different area code, requiring changes in signs, advertising, and directories.

• PSC Denies Request for Open Inquiry and Continues with 315 Area Code Changes;
• ALJ Recommends "Overlay" Telephone Area Code Requiring 11-Digit Dialing, Despite Plentiful Numbers and Exchange Codes in Central New York's 315 Area;
  

The legislature began to review the PSC's process for deciding whether to add area codes. In the 315 case, the PSC only had public hearings on how to implement a new area code ("split" versus "overlay") and refused to hold an on-the-record proceeding to hear evidence on whether to add a new area code. See Bill Would Require PSC to More Closely Scrutinize Area Code Changes. The Assembly passed the bill last month.

While the Notice does state that the 315 area code proceeding will merely be “held in abeyance” until the need for relief has arrived, with 100 NXX codes still available (with 10,000 telephone numbers each) and no NXX codes being requested at all in 2009, the case should be in "abeyance" for at least 10 or 20 years. The residents of the 315 area will thus be spared the cost and inconvenience of an unnecessary area code change.

Lou Manuta

Update
See No New Area Code for Syracuse, Syracuse.com, June 15, 2009

PSC to FCC: We Oppose Measures to Effectuate Universal Affordable Broadband Service

A New York state goal "to ensure that every New Yorker has access to affordable, high speed broadband Internet," was articulated by former Governor Spitzer, and it looks like the current Governor also well understands the connection between broadband availability and economic development. Governor David Paterson's recently released report, Bold Steps to the New Economy: A Jobs Plan for the People of New York, affirms the state commitment to universal broadband service:

Universal broadband is the keystone to creating equal access to opportunity in the innovation economy. The pace of business in the global economy has far surpassed the age of dial-up Internet connections. Governor Paterson is taking steps to ensure broadband is universally available throughout New York.

The crafters of American Recovery and Reinvestment Act ("ARRA") also recognized the need to improve access to broadband service. Among its numerous provisions to help jump start our ailing economy, Congress, through the ARRA, directed the FCC to develop a national broadband plan to bring broadband access to all Americans.

The FCC requested public input, and more than 500 entities submitted comments, including the New York State Public Service Commission ("PSC") in conjunction with the state's Chief Information Officer/Office for Technology. While the FCC requested and received comments on a variety of issues, including data mapping (which is used to determine where broadband is lacking and to focus activities), public safety, and network diversity, the New York PSC's positions on broadband availability are worthy of note. Indeed, they are disappointing and unsupportable.

The PSC began its comments by taking a position in seeming direct opposition to Governor Paterson's public statements about the benefits of broadband deployment.

The [Federal Communications] Commission has been directed to develop a plan, but it may reasonably question the use to which the plan is to be put.... The underlying assumption seems to be that the market is not providing the appropriate level of broadband service and that government should reallocate resources so there is more broadband. More broadband means less of something else and it isn't clear that people want to consume less of that commodity and more broadband. Indeed, given that the market is free, just the opposite is true.

Is the PSC displaying its true colors here, adhering to a laissez faire deregulation approach and opposing meaningful governmental action to bring affordable broadband to all?

In addition, the State's Chief Information Officer, who signed onto the PSC's broadband comments to the FCC, stated in the New York State Universal Broadband Council's recently released Annual Report:

There has never been a more critical time in our history to invest in the future of our children, to enable us to jumpstart our economy and compete on a global level. We must continue to effectively educate our citizens on how to use technology resources and Internet applications to enrich their lives.

So, how did the PSC, a representative of the state, take positions in comments to the FCC on broadband seemingly at odds with what the Governor himself - and his Chief Information Officer - publicly stated in the "Bold Steps" document and the state's own universal broadband report?

The whole purpose of ARRA's broadband provisions is to reallocate public resources in order to make affordable broadband universally available. The current "hands off" PSC approach has been a major failure - today the U.S. has some of the world's slowest, most costly broadband (per megabit per second) and the subscribership rate has sunk from 4th to 15th in the world in recent years, even as other countries with more proactive broadband policies surge ahead. See The Broadband News Is In, but it Isn't All Good, PULP Network, June 5, 2009.

The PSC comments went on to share the Commission's antagonism to expanding universal service support for eligible low-income broadband customers:

We're concerned that decisions will be made to subsidize the supply of broadband which would in turn be funded by the Commission's Universal Service Fund. This would harm New York, a net payer into the fund. New York would subsidize states that have not undertaken the investment - an unreasonable burden.

While it is true that New York is a net payer into the Universal Service Fund ("USF"), why is this so? Perhaps a reason is the New York PSC's own deficient policies which reflect a sad lack of commitment to universal service, a lack of direction, and a failure to devote resources needed to increase universal service support to New York's low-income telephone consumers:

Over the years the PSC has passed up many opportunities to expand Lifeline eligibility criteria, advocate for increased participation to keep federal universal service dollars from leaving New York for other states, and to work with the providers and the Office of Temporary and Disability Assistance to make automatic enrollment work better, but has chosen to sit on the sidelines. As a result, everyone loses. . . . According to the FCC's most recent Universal Service Monitoring Report (with 2007 data), New Yorkers contributed $445,600,000 into the federal USF in 2007, but New York telephone companies only received $248,838,000 in return ($36 million for Lifeline). The difference - nearly half of what is contributed - goes off to help fund programs in other states, most notably Alaska, Kansas, Louisiana, Mississippi, and Oklahoma. With an increase in the number of Lifeline customers in New York, more of this money would stay in New York, with little (if any) impact on the contribution level.

See All NY Phone Customers Lose Big $$ Due to PSC Lifeline Policies, PULP Network, March 21, 2009.

So now, under PSC logic, the failure of the New York PSC to revive and roll out the low income telephone assistance program, which makes New York a net payer into the federal USF, becomes a justification not to support universal service programs that would make broadband more affordable to the poor!

The failure of the PSC to advocate for increased federal support for broadband - because New York pays more into the USF than it receives when the reason for that disparity rests at the feet of the PSC -- is disingenuous and harms low income residents. Is that a valid reason to oppose a broadband Lifeline program? Or should New York's telephone Lifeline assistance program be fixed instead. In addition, somehow, the PSC believes it deserves a pat on the back for the "success" of its automatic enrollment process ("In New York we have increased our efforts on automatic enrollment program for lifeline and worked with other state agencies to streamline the applicability process.") The automatic enrollment process is obviously broken when there are more than a million easily identifiable recipients of Food Stamps yet the number of Lifeline customers is dropping in a nose dive - from over 750,000 Lifeline customers in 1996 to under 300,000 in 2008. See Low-Income Telephone Lifeline Assistance Reaches Fewer than 300,000 New Yorkers, Lowest in 20 Years, PULP Network, June 5, 2009.

In any event, the PSC does not seem to be too concerned about low income customers - or broadband ubiquity - in its comments. The PSC wrote:

A broadband plan seeking to bring broadband immediately to 100 percent of the country may be ill-advised. A goal of 100 percent broadband deployment may not be economically rational with traditional, wired service. However, the evolution of technology, like third generation wireless, could provide more efficient and cost effective alternatives for ubiquitous broadband.

The PSC advocates this position, while asserting that 95 percent of New Yorkers have access to broadband, yet only 71 percent subscribe. Besides the fact that the U.S. census claims only 54.1 percent of New Yorkers subscribe to broadband, the PSC offers no explanation for the large gap between availability and subscribership. Why do 20 (or 40) percent of those with "access" to broadband fail to subscribe? Obviously the PSC is not seeking answers to whether the cost of broadband is affordable to those low-income households not now subscribing, or causing hardship to those who do.

Could it be the combination of a lack of digital literacy and a lack of affordability? While PULP does support the PSC's goal of bringing broadband to libraries and schools (which the PSC referred to as "community gathering places"), we do not believe that stopping there will promote broadband in the home at some later date. Yes, educating people to the benefits of broadband is vital and is a natural role for libraries and schools, but creating a broadband Lifeline program is an equally important goal that should not be pushed off until some time down the road. See Is There a Need for a "Broadband" Universal Service Fund?, PULP Network, April 23 2008 Universal broadband means the service runs to the front door and the customer can afford to subscribe. Obviously if 20 to 40 percent of New Yorkers do not subscribe when it is on their doorstep, cost is a major factor.

In these comments, the PSC may have displayed its true colors - an agency out of step with its own administration, an agency which still wishfully believes the market will take care of all when market failures are abundantly clear, and an agency which caused most of the problems it discussed but tried to present as victories. New Yorkers need and deserve better.

Lou Manuta

GAO Report Supports Broadband Stimulus Goals, Coordination Needed

On June 10, 2009, House Energy and Commerce Committee Chair Henry Waxman, Communications, Technology, and the Internet Subcommittee Chair Rick Boucher, and Congressman Zachary Space released the Government Accountability Office (“GAO”) report entitled Broadband Deployment Plan Should Include Performance Goals and Measures to Guide Federal Investment.” The Report found that despite the efforts of the market-based policies of the previous Administration to deploy broadband, gaps remain, primarily in rural areas. Because of limited profit potential, investments may be targeted to other more profitable areas, regions or countries.

The GAO noted that the American Recovery and Reinvestment Act of 2009 provided more than $7 billion to the Department of Commerce’s National Telecommunications and Information Administration (“NTIA”), the FCC, and the Department of Agriculture’s Rural Development Utilities Program, to map broadband infrastructure in the United States, develop a plan for broadband deployment, and issue loans and grants to fund broadband access and availability in rural areas. “This funding,” found the GAO, “will greatly increase the potential for achieving universal access, but overlap in responsibilities for these new broadband initiatives makes coordination among the agencies important to avoid fragmentation and duplication.” It added that “[t]hese efforts will help guide federal involvement in deploying broadband in the coming years. Additionally, the efforts complement each other.”

Specifically, it was found that NTIA’s data will allow all agencies to identify and cost effectively target federal funds to the areas with the largest unserved or underserved populations and will assist in the creation of the plan developed by the FCC. The GAO called on the FCC to include additional elements, such as timelines, specific performance goals, and clearly defined roles and responsibilities for the involved federal agencies to achieve transparency and accountability in the use of federal funds. “Increasing accountability for achieving intended results is especially important given the potential costs of expanding broadband deployment to currently unserved or underserved areas.”

As a result, the GAO recommended that the FCC’s national broadband plan, which is due to Congress by February 2010, include performance goals, measures, and time frames for achieving the goals. The GAO went on to recommend that the FCC Chairman consult with the Secretary of Agriculture and the head of NTIA on those goals, and work with them to define the roles and responsibilities of these agencies in carrying out the plan.

Lou Manuta

South Carolina Finds Cable Phone Service to Be a Telecom Service; What about NY PSC?

The Public Service Commission of South Carolina ruled that Time Warner Cable’s digital voice service is a telecommunications service subject to its jurisdiction in a June 5, 2009 order. Most importantly, it found that neither the FCC nor any federal court has expressly preempted state regulation of telecommunications services offered by fixed interconnected Voice over Internet Protocol (“VoIP”) providers such as Time Warner Cable. As a result, the company must now contribute to the state universal service fund.

PULP considers this to be good news as we look to level the playing field between carriers providing fundamentally similar local telephone service using related, but different technologies. South Carolina now joins Kansas, Missouri, Nebraska, and New Mexico in requiring VoIP providers to contribute to the state universal service fund. Where is the New York PSC?

PULP has expressed our support for VoIP providers contributing to New York’s universal service fund, the Targeted Accessibility Fund (“TAF”). See The Time Is Now - New York Should Begin Requiring VoIP Providers to Support State Universal Service. We wrote:

Today, both nomadic and fixed VoIP providers have become vibrant competitors in New York. The cable companies, primarily Time Warner Cable and Cablevision, are the second and third largest local telephone service providers in the state. However, for every customer they migrate from the incumbent, the state loses regulatory assessment fees (which are used to run the Public Service Commission), gross receipts taxes, and TAF assessments. TAF is New York’s version of a state Universal Service Fund and supports Lifeline discount telephone service, 911 connectivity, and the relay service for the deaf. Contributions to TAF are dwindling due to migration of customers to unassessed cable telephone or other VoIP service, and the situation has reached the point where consideration of assessing VoIP providers has become not just a question of fairness, but one of necessity.”

There was a time when the New York State Public Service Commission (“PSC”) was one of the leading state regulatory agencies in the country. About 10 years ago, the PSC led the way with establishing the parameters for permitting the dominant local exchange carrier into the long distance business and with creating customer migration guidelines -- both of which have been duplicated around the country. Now, we are behind other states on this vital issue of fairness, which results in reduced state revenues, diminished benefits for the most needy New Yorkers, and an unfairly tilted playing field favoring some competing providers of similar services. The time for the PSC to bring VoIP into the fold is now.

Lou Manuta

Study Finds High Profits for New York's Electric Power Generators

In March, a McCullough Research report, New York Independent System Operators Market Clearing Price Auction is Too Expensive for New York estimated that New Yorkers pay $2.2 Billion per year more for electricity due to the high prices obtained by sellers in the flawed York Independent System Operator (NYISO) wholesale power spot markets. The report cites the example of a seller who offers power consistently at the highest amount allowed by NYISO, $1,000/MWH, as an indicator that prices are not based on marginal running cost - as predicted by spot market enthusiasts - but on other factors, perhaps to game the market.

A high bid can effectively withold power from the day-ahead and hourly spot markets. When sellers demand an extremely high price for part of the output they may be "hockey-stick" bidding as a stratgem to drive prices higher than if they had made a cost-based bid.

In response to hearings held by the New York Assembly, the NYISO and its defenders (the New York PSC, the NYISO market monitor consultant, and the merchant power industry) refused to identify the seller who regularly demanded $1,000/MWH. They pointed out that NYISO rules filed with FERC require the identity of sellers and the price they demand to be completely confidential for six months and then for the identities of sellers to be "masked" when the prices they demand are eventually released. They also argued that a $1,000/MWH price demand is rarely paid and might even be justified in some hypothetical circumstances, and that the NYISO's private consultant "market monitor" had vetted the system for manipulation.

McCullough Research responded with further analysis of NYISO data showing that high bids are not an isolated anomaly, but are in fact quite common.

The problems posed by NYISO's lack of transparency amply demonstrate that the [PSC Staff] are unable to provide convincing explanations for the hockey stick bid in New York that is continuously posted by bidder 55446280. Even worse from a policy perspective, it appears that the Public Service Commission has not yet been briefed on the full extent of the problem.

* * * * Hockey stick bids are not simply the province of a single bidder in New York State. Bids higher than any plausible level of marginal cost are made continuously by a number of different bidders. Our database of NYISO bids, for example, has non-economic bids (over $900/MWh) made by 95 different bidders. On average, each bidder submitted non-economic bids for seven different generating units.

* * * * In the twelve months from September 2007 through August 2008, the New York ISO received 585,043 bids at $900/MWh or more. This appears to be a very large number of anomalous bids – 12% of the 4,859,186 bids entered into the NYISO markets during this period.

* * * * If (as appears reasonable to assume from the limited data available) the complex and secretive bidding process at NYISO is creating an environment where anomalous bidding is a frequent occurrence, this should be part of the public debate concerning NYISO's reform.

New Yorkers Lost $2.2 Billion Because of NYISO Practices: The Debate Continues, and A Short Review of Anomalous Bidding at the New York ISO from September2007 through August 2008. See McCullough hits back at NYISO report, Larry Rulison, Times Union Blog, March 31, 2009.

In reaction, on May 29, 2009 the director of New York's trade association representing the merchant power industry authored an op-ed article extolling the benefits of a "free market." See Free market means cheaper power, Times Union, May 29, 2009.

The "market-based rate" system of the NYISO spot markets allows sellers to charge what the market will bear (within the $1,000/MWH cap), and to avoid running at any hour when their costs will not be covered by the market price. FERC allows the market to set the price when it believes the sellers lack market power and it assumes the market prices are reasonable without reviewing the prices demanded and without public disclosure of who demands what and who won the hourly auction bids.

In contrast, the traditional test of whether wholesale electric rates are "just and reasonable" as required by the Federal Power Act has been based on transparent disclosure of all rates demanded and evaluation of some measure of cost, with rates fixed so that sellers have a fair opportunity to recover their prudent operating costs plus a reasonable regulated return on their investment. Thus, an examination of the earnings of the power producers is another way to test whether the market prices in New York are reasonable.

On June 5, 2009 McCullough Research issued a memorandum with an analysis of the estimated earnings of New York power producers in 2008.

A combination of high fuel costs and non-economic bidding practices at the New York In-dependent System Operator (NYISO) made 2008 a very profitable year for generators in New York. The profits of the largest plants in New York were very high. On the most conservative basis, assuming no debt in the capital structure, the profits range from 19% to 99%. Alternatively, assuming a 50/50 capital structure, the profits range from 31% to 186%. The before-tax weighted average of 100% equity is 50%, and the same measure for 50% equity is 93%.

PRE-TAX RETURN ON EQUITY

50/50 Capital Structure / 100% Equity
AES Cayuga 186% / 99%
AES Somerset LLC 112% / 61%
Astoria Generating Station 122% / 67%
Athens Generating Plant 44% / 27%
Bethlehem Energy Center 40% / 23%
C R Huntley Generating Station 155% / 81%
Danskammer Generating Station 85% / 46%
Dunkirk Generating Station 154% /81%
Indian Point 2 51% / 28%
Indian Point 3 114% / 60%
Nine Mile Point Nuclear Station 102% / 54%
R. E. Ginna Nuclear Power Plant 72% / 39%
Ravenswood 31% / 19%
Weighted Average: 93% / 50%

McCullough Research Memorandum, June 5, 2009.

See Electricity Price Gougers, N.Y. Post June 6, 2009; Deregulated Electric Market Allows New York's Electric Generation Plants to Reap over 100% Profits, Yonkers Tribune, June 5, 2009.

New York's Household Telephone Penetration Holds Steady, Remains Low

In its latest report on telephone penetration in the United States, the FCC found that from July 2008 to November 2008 (the date of the most recent data), the percentage of households in New York State with a telephone grew from 94.3 percent to 94.7 percent. By comparison, the national average is now 95.0 percent, down from 95.4 percent in July. The New York numbers are lower than neighboring states Connecticut (97.1 percent), Massachusetts (96.1 percent), Vermont (97.4 percent), Pennsylvania (98.3 percent), and New Jersey (95.4 percent). To ensure the most complete, accurate results, in recent years, residents in the FCC survey are asked “Does this house, apartment, or mobile home have telephone service from which you can both make and receive calls? Please include cell phones, regular phones, and any other type of telephone.”

We estimate that with its 95% household telephone penetration rate, about 369,000 New York households lack telephones.

If New York achieved the 98.3% penetration rate of Pennsylvania, 243,565 more New York households would have telephones than have them today.

The report also includes data on telephone penetration by income. Nationwide, in November 2008 only 92.9 percent of households with incomes under $20,000 a year had a telephone, while 98.2 percent of households with incomes up to $100,000 had a telephone.

Lou Manuta

The Broadband News Is In, but it Isn’t All Good

Dr. Melodie Mayberry-Stewart, New York’s Chief Information Officer, head of the state Office for Technology , and Chair of the New York State Council for Universal Broadband, took to the podium at the Opportunity Online Broadband Summit on June 3rd and delivered the sobering news: the Council’s just released NYS Universal Broadband Annual Report for 2008 revealed that the U.S. lags behind much of the world in broadband penetration, broadband speed, and price per megabit. In addition, while New York’s median download speed, 4.14 megabits per second, does exceed the nationwide average of 2.35, our country is ranked in 15th place worldwide, far behind Canada (7.6), France (17.6), Finland (21.7), South Korea (49.5), and Japan (63.6). She added that 48 percent of households throughout New York state lack broadband connectivity, roughly 3.7 million households or 10 million people.

On top of this, recently released U.S. Census data shows that 61.5 percent of New Yorkers had Internet access at home in 2007, but only 54.1 percent had broadband connectivity. While these figures slightly exceed the national average (50.8 percent of Americans had broadband in the home in 2007), it is safe to say that millions of New Yorkers currently lack broadband access.

What do these statistics hold for economic development, educational opportunities, and job training? Plenty.

In one of his first public statements since being elected President, Barack Obama stressed the importance of broadband when on December 6th he said that “It is unacceptable that the United States ranks 15th in the world in broadband adoption. Here, in the country that invented the Internet, every child should have the chance to get online.” N.Y. Times, Dec. 8, 2008, Obama Pledges Public Works on a Vast Scale. The President and Congress began to follow up on this commitment with a $4.7 billion universal broadband program as part of the federal stimulus package. As stated in a National Telecommunications and Information Administration (NTIA) press release:

The U.S. Congress has appropriated $4.7 billion to establish a Broadband Technology Opportunities Program for awards to eligible entities to develop and expand broadband services to unserved and underserved areas and improve access to broadband by public safety agencies. Of these funds, $250 million will be available for innovative programs that encourage sustainable adoption of broadband services; at least $200 million will be available to upgrade technology and capacity at public computing centers, including community colleges and public libraries; $10 million will be a transfer to the Office of Inspector General for the purposes of BTOP audits and oversight. Up to $350 million of the BTOP funding is designated for the development and maintenance of statewide broadband inventory maps.

Dr. Mayberry-Stewart gets it: Broadband access to the Internet is critical for success in economic development, educational opportunities, and job training. However, global competitiveness dictates not only ubiquitous broadband availability, but the ability of every citizen to know how to use it and to be able to afford the service. Rolling out fiber optics and ensuring everyone has a computer to access broadband are certainly critical, but what happens when the monthly service fees are beyond the ability of most people to pay? Should a discount program for low income families and those on various forms of public assistance be made available for broadband, as currently exists in the Lifeline assistance program for local telephone service? Let’s not pave the superhighway, only to price the automobiles out of range for many.

What can the state do to boost broadband deployment and participation? Certainly the creation of the New York State Council on Universal Broadband and placing a knowledgeable expert like Dr. Mayberry-Stewart in charge gives the movement credibility and a chance at success. While the New York State Public Service Commission may balk at taking a lead role in achieving universal broadband, claiming that it lacks jurisdiction, that argument may not work for long. Just this week, the Minnesota Court of Appeals ruled in Bridgewater Telephone Company, Inc. v. City of Monticello (File No. 86-CV-08-4555) that broadband access can be a utility service provided by a municipality, just like water or electricity. The court found that:

The definition of municipal public utilities appears broad enough to contemplate Internet service. . . . Furthermore, Merriam Webster dictionary defines telecommunication as ‘communication at a distance (as by telephone).’ . . . Internet services seems to meet this definition. E-mail, instant messaging, and talking via web cam are all ways to communicate at a distance utilizing Internet service.

While this decision has no direct bearing on New York State, the decision recognizes that broadband service can be considered a utility, and that concept carries with it the public service duties including the obligation to make it available to all, at reasonable cost, in accordance with nondiscriminatory policies.

Yes, broadband is out there for some and more needs to be done to bring broadband to the door of every school, library, and home. No doubt about it. But, what more can be done to sustain this development? If people don’t use it or can’t afford it, the benefits of universal broadband connectivity – including concepts not yet dreamed of – will never become reality.

Lou Manuta

PSC Pulls Lifeline Tariff Language from Non-lifeline Providers

Back in February, PULP Network reported on a competitive local exchange carrier purporting to “Lifeline” telephone service even though it had not been certified as an “eligible telecommunications carrier” (“ETC”). See When Is Lifeline Not Lifeline?. ETC status makes the company eligible to be compensated for a large portion of the Lifeline rate reduction out of the federal Universal Service Fund (“USF”) and New York’s Targeted Accessibility Fund (“TAF”) . The federal USF is paid for by most telephone customers in the country who contribute to the fund through a surcharge on their monthly phone bills. The New YorkTAF is a mandatory contribution made by certified local exchange carriers in the state and is based on a percentage of their intrastate revenues. While the ETC is reimbursed for most (but not all) of its costs through the USF and TAF, true Lifeline customers pay a fraction of the normal installation charges (under the Link-Up program) and are exempt from most of the taxes and surcharges attached to the phone company’s charges, including the $6.50 subscriber line charge. These taxes and surcharges can add $15 or more to a typical phone bill.

In the situation reported in February, since the carrier in question is not an ETC and is not eligible for reimbursement, their “Lifeline” customers do not see these discounts; rather, they may “save” say $2 or $3 off the regular price of service (which is far less than true Lifeline), but the customer still must pay the subscriber line charge and the other taxes and surcharges not applicable to Lifeline customers. As a result, without any notice, these “Lifeline” customers are paying far more each month than they should.

PULP brought this situation to the attention of the staff at New York State Department of Public Service (“DPS”). We learned that many smaller carriers opt to just copy the DPS’s model local exchange and access tariff and treat this tariff as their own. While there is nothing inherently wrong with using the model tariff, it included Lifeline language even though the carriers can not offer Lifeline without ETC status. As a result of PULP’s input, the model tariff’s Lifeline language was changed to reflect ETC eligibility requirements and seven competitive carriers (in addition to the one initially reported on) deleted the Lifeline language from their individual tariffs this week.

While PULP supports as many providers offering Lifeline as possible, we are glad that these carriers decided to remove the Lifeline language from their tariffs as the current situation was confusing and cost customers wanting real Lifeline assistance more than they should have paid.

Lou Manuta

With HEAP Closed, More Electric and Gas Customers Facing Termination

Utility terminations are soaring after the closure of the federally funded HEAP block grant program on May 15. Assistance under that program often covers only part of a customer's bills, and utilities are required under their vendor agreements with OTDA to continue service for only 30 days. After the HEAP program ended May 15, customers facing termination for nonpayment of bills are being confronted with demands to pay arrears beyond their means to pay, and some utilities are not providing new payment plans, on the ground that the customer broke a prior payment plan.

There is a bit of a "Catch-22" here. Much of the assistance available through the HEAP program is "Emergency HEAP," eligibility for which is triggered by a utility service termination notice. See Needy Households Must Stop Paying Energy Providers to Obtain Supplemental HEAP Benefits. It is not uncommon for utilities to "coach" or "educate" customers who fall behind in their winter bills to draw a termination notice - by not paying - and then obtain Emergency HEAP to help cover the arrears.

The PSC, however, is not requiring utilities to enter into new affordable payment plans after receiving the Emergency HEAP grants, and apparently is allowing them to demand large sums, beyond the customers' ability to pay, and to again threaten to terminate service. Growing numbers of households without the means to provide a down payment on a new payment plan sufficient to satisfy the utility or the PSC Hotline staff are losing utility service.

This drives customers into financial distress and thence to local Departments of Social Services to seek assistance under the state and locally funded emergency utility assistance program created in 1981, along with HEFPA, by Section 131-s of the Social Services Law. That program will provide grants to restore service, but on terms much more restrictive than HEAP. For example, customers with incomes above the welfare payment level are required to sign draconian repayment agreements, and some counties insist that they provide a lien on their homes. Because the standard of need for welfare has not been adjusted for 18 years, many low income workers find that they are ineligible for utility assistance grants, and must sign the agreements to repay, even though they are on harsher terms than the payment agreements they could not afford to pay to the utility.

Inevitably, many people were unable to repay the local department of social services for past grants, and now, under an OTDA regulation, they are barred from receiving any further assistance. OTDA allowed local departments of social services to relax the harsh rule temporarily last winter, but it is again in force throughout the state. See OTDA Eases, but Continues, its Administrative Restriction on Assistance to Utility Customers with Incomes Above the Public Assistance Level.

Low-Income Telephone Lifeline Assistance Reaches Fewer than 300,000 New Yorkers, Lowest in 20 Years

[See Update at bottom regarding number of Lifeline assistance recipients in New York]

The latest FCC telephone Lifeline subscribership numbers are out, and the news is not good. For the first time since 1989, the number of low-income Lifeline customers in New York has dropped below 300,000. As of December 2008, the largest local exchange carriers in the state (Verizon-NY, Frontier Telephone of Rochester, and Citizens Communications) served a total of 290,283 Lifeline customers. This represents a drop of approximately 20,000 since December 2007 and over 60,000 since 2006. By way of comparison, Lifeline subscribership in New York peaked at 786,657 in 1996.

What is the reason for this loss? It certainly can not be a lack of low-income households, as the state Office of Temporary and Disability Assistance (“OTDA”) recently announced that a record number of families throughout New York State were served through the Home Energy Assistance Program (“HEAP”) this past winter:

OTDA Commissioner David A. Hansell said that the total number of HEAP benefits issued during the 2008-09 HEAP season, which officially concluded on May 15, grew by one-third over the previous year to nearly 1.5 million, bringing more than $400 million to New York families. That total, already a record high, will grow as applications submitted in the final week of the HEAP season are still being processed.

So, the number of New York households eligible for Lifeline discount telephone service is surging, yet provision of the benefit intended by Congress and the FCC to help them afford phone service without hardship is falling. For another example, a record number 1.2 million New York households now receive Supplemental Nutrition Assistance Program (SNAP) benefits (formerly Food Stamps), as of March 2009, according to the caseload statistics of New York Office of Temporary and Disability Assistance.

Food Stamps and HEAP are only two of several alternative criteria used under New York State Public Service Commission (“PSC”) standards for Lifeline eligibility. Telephone customers are eligible for Lifeline assistance if they also receive benefits in any of the following programs:

• SNAP
• HEAP
• Medicaid
• Safety Net Assistance
• Supplemental Security Income ("SSI")
• Temporary Assistance for Needy Families ("TANF")
• Veterans Disability Pension
• Veterans Surviving Spouse Pension
  

In addition, customers are eligible for Lifeline assistance if they earn up to 135 percent of the Federal Poverty Guidelines.

The New York PSC has not included other assistance categories permitted by the FCC (which include Section 8 housing assistance and families with children eligible for the federal school lunch program). This would further broaden the pool of eligible customers. Also, New York could expand eligibility beyond the list of federal programs is a state matching program through the Targeted Accessibility Fund (TAF).

With the ranks of the unemployed swelling and a growing number of families participating in need-based assistance programs – many for the first time – it is inexcusable that Lifeline subscribership continues to drop in New York. This is not an academic exercise – Lifeline means cash remains a little while longer in the pockets of low-income participants, available to be spent in the local economy on other needs. Not only is there is a reduction in the cost of the monthly service (ranging from charges of $1 a month for Basic Lifeline to about $15 a month for Flat Rate Lifeline), some taxes and surcharges that other telephone customers must pay are inapplicable, including the monthly $6.50 subscriber line charge. This results in about $20 in savings every month, which can be applied to other bills, medicine, rent, or food. For low-income families living from check to check, and often running out of funds for food and other needs before the end of the month, this can be a significant amount.

If all of New York's HEAP households received Lifeline assistance to which they are entitled, their purchasing power would increase by more than than $280 million. Instead, universal service surcharges collected from New Yorkers under FCC orders exceed the benefits received in New York by approximately $200 million per year. See All NY Phone Customers Lose Big $$ Due to PSC Lifeline Policies.

PULP attributes much of the responsibility for New York’s backsliding on Lifeline enrollment to the PSC's laissez faire approach to regulation and inaction on affordability of utility service. In addition, while the landline telephone companies can always do more to facilitate fuller Lifeline enrollment, their overall subscribership ranks are shrinking. Last month, the PSC found in a Verizon service quality order that the company is losing about 63,700 access lines a month in New York alone. Verizon’s total subscribership (as of December 2008) stood at 5.9 million, a drop from over 11 million as recently as 2002. Other local exchange carriers around the state are seeing similar, but not as stark, drops in recent years.

Wireless companies are offering Lifeline discounts today in New York, including Verizon Wireless, Sprint/Nextel, and TracFone, but these new Lifeline providers do not have enough Lifeline customers yet to make an impact on the totals. That said, the latest figures from the Universal Service Administrative Company – the entity charged with managing the Universal Service Fund (“USF”) – indicate that TracFone is anticipated to be the second largest recipient of low income support in New York, after Verizon. Since TracFone’s Lifeline customer base is proprietary, there is no way to know exactly how many Lifeline subscribers they have enrolled, but simple math (the total amount received divided by the $10 per month federal reimbursement from USAC) indicates the company will have over 21,000 Lifeline customers in New York during the third quarter 2009. While the time will come when the wireless Lifeline offerings will become major players, we do not anticipate that happening in the next year or two, primarily because, with the possible exception of TracFone, they do not significantly promote the discount.

On top of that, the largest competitive telephone service providers in the state – the cable companies – currently do not offer Lifeline. PULP believes that the cable providers should contribute to the state Targeted Accessibility Fund. See The Time Is Now - New York Should Begin Requiring VoIP Providers to Support State Universal Service. Cable providers currently are required by the FCC to contribute to the federal USF – which provides support for Lifeline – and begin to offer Lifeline themselves.

These number do not lie – New York’s Lifeline subscribership has plummeted in recent years and far too many low-income households are paying more for the telephone service than necessary. Much more can be done to ensure that all eligible customers know about Lifeline and can easily participate. Lifeline subscribership numbers are stable or up in other states, such as Texas, so what’s wrong in New York, whose customers and telephone companies are sending universal service surcharge funds to the Universal Service Administrative Company in Washington exceed by hundreds of millions of dollars the funds received.

Lou Manuta

Update July 7, 2009
We have learned that the latest available data indicate that there were 309,000 customers receiving telephone Lifeline assistance in 2008, not 300,000. The difference is due to smaller companies that were not included in the 300,000 count. Nevertheless, the falloff of enrollment since 1996, when it reached 757,000, is remarkable, and is reflective of the lack of attention given by the Commission to this issue. See PULP's Chart of Lifeline Enrollment, 1988 - 2007.