Cuomo backs off regulating Internet phone

When Gov. Andrew M. Cuomo released his executive budget in January, the telecommunications industry was thrilled.

Nestled inside the various legislation needed to enact Cuomo's budget was a bill designed to ensure that the state would not start regulating Internet phone service, otherwise known as Voice-over-Internet Protocol, or VoIP.

For years, telecom companies -- notably Verizon and Time Warner Cable, fierce competitors in the marketplace -- have worked together to convince the State Legislature that regulating Internet phone service is a bad idea for consumers and that the best thing to do is to pass a law saying that Internet phone, which is already subject to federal regulation, is not subject to state regulation.

But union and consumer groups say the opposite is true and that a state law backing off regulation would benefit the large phone and cable companies, while harming consumers.

Perhaps not wanting to get caught in the middle of such a fierce debate at a time when he has bigger priorities, such as pension overhaul, Cuomo quietly removed the VoIP bill from his budget, apparently at the urging of the Assembly.

Nothing fundamentally changes with no law in place. Internet phone service is not regulated by the state Public Service Commission, which has wide-ranging oversight of the traditional landline business of Verizon and others.

But now, Verizon and Time Warner, which are engaged in a turf war in the Capital Region after Verizon started its own cable TV service last year, say that withdrawing Cuomo's support on the issue -- leaving the door open for regulation -- is bad for consumers and the state economy.

After all, Cuomo's budget documents said the legislation was critical because it would encourage more capital investment in broadband networks that carry large amounts of data and voice service. Besides increasing broadband Internet access, the networks would also presumably create jobs and increase tax revenue in the state.

Instead, even though VoIP remains unregulated, the telecoms say Cuomo's move will have a chilling effect on their investment plans in New York -- which they say will be bad for consumers, who won't benefit from lower prices and better products that come from the heat of competition.

The Cable Telecommunications Association of New York estimates that VoIP service in New York allows consumers to save more than $326 million a year because of cheaper rates, compared with traditional, regulated phone service.