Open Letter
From Phyllis Salowe-Kaye, New Jersey Citizen Action Executive Director, to Governor Jon S. Corzine
VIA FACSIMILE: 609.292.3454
July 15, 2008
The Honorable Jon S. Corzine, Governor
The State House
P.O. Box 001, State House
Trenton, NJ 08625-0001
RE: Request to Veto S1886/A2906 to Protect Telecommunications and Cable Consumers
Dear Governor Corzine:
Thank you very much for meeting with me and members of our Board and staff on July 7, 2008 to discuss a number of concerns impacting our members including proposed foreclosure legislation and education efforts, health care reform and S1886/A2906. We look forward to continuing our conversations and working together to improve the quality of life for all New Jerseyans.
On behalf of New Jersey Citizen Action, I am writing to follow up on our conversation and urge you to veto S1886, proposed legislation that will substantially eliminate public oversight and regulatory review of the telecommunications and cable industries. The bill seeks to exempt these industries from the regulatory review necessary to determine the costs and benefits to consumers, businesses and our state of the impacts of a myriad of broad and complex financial transactions taking place in these markets, within and among these industries. We believe if enacted, this legislation will prove detrimental to the interests of every NJ resident.
S1886 is also opposed by the NJ Public Advocate's Director of the Division of Rate Counsel who testified before the Senate Economic Growth Committee that the proposed bill would have adverse impacts on consumers.
Telecommunications are vital lifeline utility services upon which every resident depends for personal safety, to connect with loved ones in times of need and for the growth of our economy. In this era of rapid change in the telecommunications and cable industries, including the advent of new technologies like cable telephony, internet-based television, wireless broadband and the rapid rise of new forms of other web-based information sharing systems, it is imperative that public oversight of these changing markets be maintained to ensure that all New Jersey consumers have affordable and reliable telecommunications services.
S1886 would specifically prevent the NJ Board of Public Utilities (BPU) from reviewing and approving mergers, combinations, and consolidations that affect a transfer of control, the sale lease, mortgage or encumbrance of assets or franchises and the issuance of stock, bonds, notes or other indebtedness if any of these actions occur at the holding company level.
Despite assertions to the contrary, S1886 is likely to impact telecommunications and cable consumers in any number of ways. The bill would exclude any transaction that involves a parent corporation of a telecommunications company, such as Verizon Communications, that "does not itself provide telecom service or telephone access line service," from BPU review if the parent company merges with acquires, or sells assets to a corporation that does not provide regulated telecommunications services or telephone access line service "in this state."
If signed into law, an analysis of the bill suggests for example that if Verizon were to acquire Frontier Telecom no review by the BPU would be required. NJSA 48:2-51.1 currently requires Board review of such transactions including consideration of whether or not such a transaction satisfies a "positive benefits" test. Passage of S1886 would preclude such a review and consideration of whether or not an acquisition of this type provides positive benefits and/or would result in negative consequences for consumers. These types of transactions should continue to be subject to public oversight and review in order to protect the public interest and is but one example of why this legislation should be vetoed.
S1886 would also, for example, allow Verizon to acquire any public utility (except a telecom company that currently provides regulated telecommunications services in NJ) without any public review to insure that the public's interest is protected. If passed, S1886 would allow Verizon to purchase an electric, gas or water utility without any review and could also allow Verizon to purchase a cable company, depending on whether its phone service is considered a regulated service, without any Board of Public Utilities review.
The bill is drafted in a confusing manner and according to the Division of Rate Counsel, creates open questions as to its applicability to Competitive Local Exchange Carriers (CLECs) and whether or not they provide regulated telecommunications services since they are not rate regulated but are required to submit tariffs and are currently subject to provisions of NJ statutes. There are approximately 130 CLECs registered in New Jersey including AT&T, Cablevision and Comcast.
The market place, as we have all too painfully witnessed in the savings and loan, energy, and most recently in the mortgage industries, does not always know best, particularly with the imperfect markets that already exist in the telephone and cable markets. Given the steep rise in the value of corporate mergers and acquisitions over the last 25 years, encouraging the continued flurry of merger and acquisition activity, (and the consequences of which are not always readily apparent), the need for public oversight is great. Sensible government regulation is a necessary component of our democracy, serves to secure fairness in the marketplace and to protect the interests of consumers. Rather than gut public oversight, policy makers should be looking to strengthen our regulatory framework.
We are not aware of any evidence suggesting that the NJ BPU has overstepped its bounds in carrying out its public oversight responsibilities in these areas or that it abuses its authority. The BPU can expeditiously review and approve transactions where it is obvious that no material effect on consumers will occur. More complex transactions do require more time for investigation and review but such a process is necessary to insure that consumers, businesses and our state's general economic interests are protected.
Unfortunately the Legislature demonstrated little if any regard for these interests when it very quietly passed, less than 3 weeks from introduction, and under the din of this year's budget battles A2906 (Chivikula) and S1886 (Lesniak, Sweeney). We trust that after reviewing this faulty legislation you will agree that despite what may be good intentions, it creates many more problems than it seeks to solve and is detrimental to the interests of consumers. Again, I urge you to veto S1886.
Once again, thank you for your careful review and consideration of this proposed legislation and our request. If you would like additional information please don't hesitate to contact me or members of our staff.
Sincerely,
Phyllis Salowe-Kaye
Executive Director
CC:
Edward McBride, Chief Counsel (Via Fax 609-777-0393)
Maggie Moran, Deputy Chief of Staff
Patti McGuire, Legislative Liaison
Adam Zellner, Policy Counsel
NJ Public Advocate Ronald Chen
Stephanie Brand, Director, Division of Rate Counsel
