BROOKLYN (CN) — Days before it was set to take full effect, a New York program to provide low-income families with affordable broadband was stopped in its tracks.
U.S. District Judge Denis R. Hurley granted a preliminary injunction against the program on Friday in a win for Verizon, AT&T and other internet companies that faced a June 15 deadline to start selling discounted internet plans to qualifying households.
Under the program, New Yorkers who qualify for free and reduced-price lunch, Medicaid and supplemental nutrition program benefits would pay $15 per month, or $20 for higher speeds, compared with an average of around $50 per month cited by Governor Andrew Cuomo.
Cuomo’s office expected around 7 million New Yorkers in 2.7 million low-income households to benefit from the Affordable Broadband Act. As a trade group for the telecoms argued, however, the measure would force companies to sell at a loss. Mammoth businesses like Verizon Communications were joined in the case by smaller enterprises like Empire Telephone Corporation, which operates in eight counties of upstate New York.
Empire's attorneys noted that the company had qualified for an $11 million federal grant to expand its service to Livingston County but would have no choice but to turn down the funding if the Affordable Broadband Act took effect.
“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,” Empire chief operating officer Jim Baase said in a declaration to the court.
The argument of imminent, irreparable injury was enough to win over Hurley, who said the program would both decrease revenue and increase costs, requiring providers advertising the program to “make all commercially reasonable efforts,” as the law states, as well as spend money verifying eligibility status, a one-time cost expected to start at $125,000.
The judge underscored the varying sizes of the companies challenging the Affordable Broadband Act, which three of the plaintiffs’ declarants estimated would lose them $1 million per year.
“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. As an example, he cited the Champlain Telephone Co., which estimated that half of its existing broadband customers would qualify for the discount.
Hurley estimates that the plaintiffs are likely to succeed on the merits of their preemption argument: that New York’s broadband law conflicts with the Federal Communications Commission.
“Because the ABA regulates within the field of interstate communications,” he wrote, “it triggers field preemption.”
Hurley’s order acknowledged that internet access “has transcended beyond mere luxury to modern necessity,” a fact that the plaintiffs did not dispute last week at oral arguments in Brooklyn.
Scott Angstreich, an attorney at Kellogg Hansen for the internet trade groups, 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.”
The groups filed their complaint in the Eastern District of New York on April 30.
A spokesperson for the United States Telecom Association, which counts Verizon and AT&T among its members, pointed to an emergency federal internet discount program enacted to help those struggling during the Covid-19 pandemic.
“The broadband industry is committed to working with state and federal policymakers on sustainable solutions that will serve the needs of all low-income Americans,” USTelecom said in an email Friday.
“While well-intended, the state’s law ignored the $50 monthly broadband discount Congress enacted, as well as the many commitments, programs and offerings that broadband providers have made for low-income consumers,” the statement continues.
Rich Azzopardi, senior adviser to Governor Cuomo, said in light of Friday's ruling that the office isn't giving up.
"We always knew big telecom would pull out all the stops to protect their profits at the expense of the New Yorkers who need access to this vital utility the most," Azzopardi said in a statement to Courthouse News. "We are going to continue to fight for them."
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