Or, ‘The Case of the Pot Calling the Kettle Black’

As Cathleen Black wrote in last month’s issue (see Vol. 1, No. 7, p. 9), there is a growing fear that if the telephone companies are allowed to provide information over their own networks, they will do so in a biased and unfair manner, taking full advantage of their ownership of the wire.

But in a twist on this scenario, New Jersey Bell, a division of Bell Atlantic, is seeking court action against Suburban Cablevision for initially refusing to broadcast a paid New Jersey Bell advertisement, and then only broadcasting the ad when directly followed by a Suburban Cablevision rebuttal.

New Jersey Bell, believing that the cable operator is using its control of the cable network to slow the entry of the telephone company into competing businesses, called upon the state Board of Regulatory Commissioners (BRC) to order Suburban Cablevision “to stop its discriminatory practices immediately.” The petition also asks that Suburban, as the owner and operator of a state-granted franchise, be permanently forbidden from such practices and that the BRC determine ways to oversee and enforce such a ruling.

“Operation New Jersey.” The Bell advertisement was about “Operation New Jersey,” an 8-year plan by the telephone company to rewire its network with fiber-optic cable, which would enable it to provide new community services as well as shopping, educational and entertainment programming. Such a system would allow a telephone customer to dial up a competing cable system in order to enjoy its programming.

Suburban Cablevision responded by claiming that the Bell ad was part of a concentrated public lobbying effort to gain support for its proposal, now before the New Jersey State Legislature, which would deregulate the telephone company and allow it to wire the state with fiber at a cost of more than one billion dollars.

Suburban believes it is acting within its rights in presenting opposing views on an important public policy debate. “It is analogous to trying to prevent a newspaper from printing an editorial on a public policy issue,” according to Frank DeJoy, vice president and general manager of Suburban Cablevision.

NOT BLACK AND WHITE

But the issue is not so clear cut. As the owner of a state-granted monopoly (no other cable companies are allowed to operate in the geographic region controlled by Suburban), does a cable operator have the right to choose which advertisements will or will not run, or whether a paid advertisement will be “coupled” with a counter-position advertisement — especially one that is produced by the operator itself?

Ironically, this is just the type of behavior that the telephone companies have been accused of practicing. Karen Johnson, a spokesperson for New Jersey Bell, said that everyone is assuming that “once we [the phone companies] build the network, we will control both the highway and the trucks that travel over that highway. Here you have a cable [television] company that is doing just that … . They are using their monopoly position to sell their franchise system in this area.”

This case is one of what will certainly be many legal disputes on the state level as the telephone companies begin directly competing with cable operators. The debate already rages on the topic of how the telcos will pay the enormous cost of upgrading their systems to fiber-optic cable without charging the cost back to the telephone customer.

New Jersey Bell denies that the upgrade would be paid for by current customers. “The investment will benefit everyone, and will be paid off over the next 25 years — by customers who choose to use the new services it delivers,” said James G. Cullen, president and CEO of New Jersey Bell. But it’s hard to see how profits from local telephone service will not be used to fund the transition.

The forum is in the courts. Cable operators across the country are scared to death of both situations that are under way in New Jersey: the call for regulation and the almost inevitable entry of the telephone companies into the information services business.

But Suburban Cablevision has probably done itself (and the rest of the cable industry) a great disservice by withholding New Jersey Bell’s advertisement. It has effectively accomplished what the cable industry (and the newspaper and other industries) have been fearing from the telcos: it has exerted unfair control of a government-granted monopoly in order to hold its competition at bay.

David Baron