Telling a federal judge they will be forced to sell at a loss, internet companies big and small fought Thursday against New York’s plan to help millions of low-income families get online at home.
BROOKLYN (CN) — New York’s affordable broadband program is set to begin in less than two weeks. It would require internet providers to sell discounted internet plans to low-income families: $15 per month, or $20 for higher speeds.
Telecommunications titans like Verizon Communications, AT&T and T-Mobile are among those seeking to block the program from taking effect on June 15. In making their case for injunctive relief in court this afternoon, however, they also had small business support.
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.
“Even with the grant money, Empire could not afford to invest in this buildout because a large percentage of its potential customers would be eligible for the discounted monthly rates under the rate regulation,” Baase wrote.
Scott Angstreich, an attorney at Kellogg Hansen for the plaintiff trade groups, spoke about Empire at oral arguments Thursday before the court in Brooklyn. He noted that state business law does give companies the possibility of exemption, but Empire would not be small enough to qualify because of its expansion efforts.
Angstreich accused New York of wading into interstate communications issues already governed by the Federal Communications Commission and Congress.
“The New York law that we are challenging — it’s unprecedented,” he said. “It regulates in a field that Congress occupied long ago.”
Governor Andrew Cuomo’s office notes that a basic, high-speed internet plan typically costs around $50 per month, and that 43% of families earning less than $30,000 don’t have home internet. The 7 million New Yorkers in 2.7 million low-income households qualifying for the program include those eligible to receive free or reduced-price lunch; supplemental nutrition assistance program benefits; and Medicaid benefits.
Angstreich said 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.”
He said internet companies will face irreparable harm and cash flow shortages if the state law is enacted, because “the amount they’ll see from their customers will be less than it costs them to provide the services.”
For Verizon, a company worth more than $236 billion, Angstreich said it would have to sell its service at a loss to poor families.
“All of these companies face a Hobson’s choice in the absence of a preliminary injunction,” he said, meaning they have only the illusion of a choice: They can either comply with rules they can’t afford, or face substantial financial penalties from the state.
New York state hit back at that idea, saying the financial damages raised by the companies are all speculative.
Four of the six declarants cited by the plaintiffs have already gotten temporary exemptions from the yet-to-be-enacted statute, said Patricia Hingerton, of the state attorney general’s office.
“If the plaintiffs’ situation is as dire as they are alleging, presumably those temporary exemptions will become permanent,” she said — and if not, the companies have state law remedies at their disposal.
Hingerton also disputed that the state is trying to regulate rates or the companies’ products.
“The state is simply regulating an in-state business practice,” she said. If a company offers broadband, they have to do so at a certain price, and only to a certain subset of New Yorkers.
As to charging customers that don’t qualify for the discount, Hingerton said, “you can do whatever you want.”
When his office passed the affordable internet program, Governor Cuomo warned companies that failure to comply would be grounds for losing their franchise in the state — “and that’s a promise.”
Cuomo reasserted that stance in response to the April 30 complaint, filed in the Eastern District of New York.
“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, “I say bring it on.”
The U.S. Telecom Association, one of the named plaintiffs, replied to an initial request for comment on Thursday but did not respond to a follow-up. Verizon did not respond to a request for comment.
U.S. District Judge Denis R. Hurley offered little as to his forthcoming decision on the preliminary injunction motion. He said he intends to make a ruling by June 11, ahead of the June 15 deadline for companies to begin offering the discount.