After pressure from Verizon, NY relents on affordable broadband plan

BROOKLYN (CN) — It’s the end of New York state’s plan to offer affordable broadband internet to low-income families — at least for the foreseeable future. 

In a stipulated judgment proposed Friday in Brooklyn federal court, the state conceded defeat to trade groups representing giants like Verizon and AT&T, as well as smaller, rural internet companies, that pushed back on Governor Andrew Cuomo’s program. 

Filed at the end of April, the companies’ complaint argued that the state was preempted from rate regulation by the Federal Communications Commission.

Scott Angstreich, an attorney at Kellogg Hansen for the internet trade groups, said during oral arguments that he sympathized with the desire to “close the digital divide, to close the homework gap,” but that “this law is an illegal way to do it.” 

Under the stipulation, the plaintiffs abandoned their second claim for relief, concerning enforcement of rate regulation. 

The state also reserved the option to appeal the decision.

U.S. District Judge Denis R. Hurley granted the internet groups a preliminary injunction last month, erasing a June 15 deadline by which the companies were required to sell qualifying families internet plans for $15 per month, or $20 for higher speeds. 

An estimated 7 million New Yorkers in 2.7 million low-income households would have benefited from the Affordable Broadband Act, according to Cuomo’s office. They included New Yorkers who qualify for free and reduced-price lunch, Medicaid, and supplemental nutrition program benefits.

But the telecoms companies argued that the measure would force them to sell at a loss. 

“While a telecommunications giant like Verizon may be able to absorb such a loss, others may not,” wrote Hurley, a George H. W. Bush appointee, in his 34-page order. One upper New York company, Champlain Telephone Co., estimated, for instance, that half of its existing broadband customers would qualify for the discount. 

Another company, Empire, which operates in eight upstate counties, submitted a declaration from its chief operating officer about how New York's law would undercut plans to expand the fiber optic network in Livingston and Broome counties, including in the city of Binghamton. Empire had qualified for an $11 million federal grant to perform the Livingston work alone, but COO Jim Baase said it would have no choice but to turn down the funding. 

As a result of Hurley’s order, the program, now requested to be permanently enjoined, never got off the ground. 

The state’s decision to relent is a shift from earlier tough-talk from Cuomo and other state officials. 

When the suit was first filed, Cuomo warned companies that if they failed to offer affordable internet as required, “you will lose your franchise in the State of New York and that’s a promise,” according to the complaint. 

Cuomo doubled down on that view after the filing.

"Let me be abundantly clear,” Cuomo said, “providing internet in the Empire State is not a god given right.

“If these companies want to pick this fight, impede the ability of millions of New Yorkers to access this essential service and prevent them from participating in our economic recovery,” the governor said at the time, “I say bring it on."

Speaking to Courthouse News on behalf of New York's Public Service Commission, Jim Denn noted that the state can appeal the proposed stipulated final judgment.

"In the interim, New York will continue its efforts to expand broadband service all across the state," Denn said in an email, noting the state has expanded access to "2.4 million locations" since 2015. 

The state is conducting an "in-depth statewide mapping study of broadband to identify the availability, reliability and cost of high-speed broadband services," to be released within a year, he added, which will map both availability and quality of coverage. 

"This is part of the state's effort to make broadband accessible and affordable for all," Denn said. 

A spokesperson for plaintiff United States Telecom Association, which counts Verizon and AT&T among its members, declined to comment on the settlement. 

Follow Nina Pullano on Twitter.

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