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New Telecom Firms Are Not Regulated, Taxed In State


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Internet Phone Business Reveals New Challenges
Albany -- Hearing Focuses On Fact New Telecom Firms Are Not Regulated, Taxed In State


April 15, 2004

By Sara Clemenc

Sign up for Internet-based phone service and you can get heaps of long distance and local calls, plus extras such as voice mail, caller ID and your choice of dozens of area codes -- all for less than the regular telephone company would charge.

But those newfangled telecom companies aren't regulated or taxed in New York state. Customers don't pay the service charge that helps maintain 911 service. In other words, the technology has changed, but the regulations haven't.

Some believe the disconnect threatens phone reliability and rates for New Yorkers.

"We're facing an extremely serious situation ... across the state," Richard Brodsky, D-Elmsford, chairman of the state Assembly's corporations committee, said in hearings held Wednesday.

"Across the country," chimed in William Flynn, chairman of the state Public Services Commission, which regulates utilities in New York.

The hearings focused on whether and how new kinds of telecom companies should be regulated here, as well as how changes in the industry could lead Verizon Communications Inc., to sell its upstate phone lines.

The company has about 2.6 million land-lines from Orange County to Buffalo, and has discussed divesting them because they are unprofitable.

Brodsky, who grilled telecom executives and state regulators Wednesday, pointed out that Verizon has been losing land-line customers. There is a chance, he said, that the lines will be bought by a financial company that sucks out the value and then puts the system in bankruptcy. Labor agreements, rates and reliability could be affected, and people in more remote areas might have trouble getting phone service at all.

Current policy "does not create a level playing field," said Robert Master, political director for the Communications Workers of America, District 1. The union represents thousands of Verizon workers in the state.

The Internet phone companies partly rely on the land-line system to connect calls to regular telephone customers, he said.

"Their customers ride the highway, but they do not pay any of the tolls," said Masters, who finished his statement to applause from dozens of union members in the audience. They wore bright red T-shirts that read, "Stop the Sale of Verizon Upstate!"

Flynn said any proposed sale would be carefully reviewed by the Public Service Commission, and would not happen overnight.

Internet phone service is not the only problem, Verizon has said. It also has to provide access to its lines to resellers at rates that don't cover the cost of installation and maintenance. It has asked the commission to raise those rates.

Nearly all of the witnesses Wednesday said Internet phone service has sped up innovation and boosted competition.

It "is one of the most exciting developments in telecommunications technology in many years," Flynn said.

Regulation could stifle that competition and force people to pay higher prices, said Jeffrey Citron, chief executive officer for Vonage, a leading Internet phone service company.

"I urge you to resist this temptation and leave this new, innovative technology free of inappropriate regulation," Citron said.

Internet phone technology, or Voice Over Internet Protocol (VoIP), is already being used by large businesses as well as telephone companies, including Verizon and AT&T Corp. Verizon will likely provide Internet phone service in upstate New York this year, a spokesman said.



 
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†AK and HI residents pay $29.95 shipping. ††Limited time offer. Valid for residents of the United States (&DC), 18 years or older, who open new accounts. Offer good while supplies last and only on new account activations. One kit per account/household. Offer cannot be combined with any other discounts, promotions or plans and is not applicable to past purchases. Good while supplies last. Allow up to 2 weeks for shipping. Other restrictions may apply.

1Unlimited calling and other services for all residential plans are based on normal residential, personal, non-commercial use. A combination of factors is used to determine abnormal use, including but not limited to: the number of unique numbers called, calls forwarded, minutes used and other factors. Subject to our Reasonable Use Policy and Terms of Service.

2Shipping and activation fees waived with 1-year agreement. An Early Termination Fee (with periodic pro-rated reductions) applies if service is terminated before the end of the first 12 months. Additional restrictions may apply. See Terms of Service for details.

HIGH SPEED INTERNET REQUIRED. †VALID FOR NEW LINES ONLY. RATES EXCLUDE INTERNET SERVICE, SURCHARGES, FEES AND TAXES. DEVICE MAY BE REFURBISHED. If you subscribe to plans with monthly minutes allotments, all call minutes placed from both from your home and registered ExtensionsTM phones will count toward your monthly minutes allotment. ExtensionsTM calls made from mobiles use airtime and may incur surcharges, depending on your mobile plan. Alarms, TTY and other systems may not be compatible. Vonage 911 service operates differently than traditional 911. See www.vonage.com/911 for details.

** Certain call types excluded.

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