Price-capped broadband on hold for New York State after judge rules telcos would 'suffer unrecoverable losses'

A new law due to come into force tomorrow that would force broadband providers in New York State to provide net access to low-income households for $15 a month has been put on hold.

A preliminary injunction [PDF] was granted by United States District Judge Denis R Hurley on Friday after a string of trade bodies – including the New York State Telecommunications Association and The Broadband Association – launched the action on behalf of their members.

The ruling notes that telcos and ISPs forced to impose the price caps would "suffer unrecoverable losses increasing with time" and that the "bulk of these losses will stem from lost income."

"While a telecommunications giant like Verizon may be able to absorb such a loss, others may not: the Champlain Telephone Company, for example, estimates that nearly half [approximately 48 per cent] of [its] existing broadband customers will qualify for discounted rates,' with each such customer 'caus[ing] a monetary loss'," it states.

The legal action also highlighted that not only would telcos lose revenue by offering cut-price access, they would also incur additional costs associated with increased spending on advertising.

In April, New York Governor Andrew Cuomo put his name to legislation that would force operators in the state to offer $15 a month high-speed internet to low-income families across the state.

The legislation also made it a legal requirement for operators to inform the authorities about their broadband products and prices, and how many had taken up the offers.

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In all, it was estimated this change would impact seven million New Yorkers and some 2.7 million households.

At the time, Governor Cuomo said the need for remote access to work, education, and healthcare – which had been brought into sharp focus by the pandemic – had underlined the "need to make sure every household has access to affordable internet."

"This program – the first of its kind in the nation – will ensure that no New Yorker will have to forego having reliable home internet service and no child's education will have to suffer due to their economic situation," he said.

US telcos in the crosshairs of the enforced price cap were quick to challenge the legislation, pointing out, among other things, a temporary $50-a-month discount being offered to households as part of a federal benefit.

In a 19-page lawsuit filed on 30 April, the industry lined up to say that they're already doing their bit to help close the digital divide including offering cut-price tariffs to people on low incomes.

They also claim that New York is acting beyond its jurisdiction.

"In short, New York has overstepped its regulatory authority," lawyers acting on behalf of the telcos said in their lawsuit.

Governor Cuomo hit back almost immediately and in a statement on the same day as the 30 April lawsuit said: "I knew giant telecom companies would be upset by our efforts to level the playing field, and right on cue, they're pushing back. This is nothing more than a transparent attempt by billion-dollar corporations putting profit ahead of creating a more fair and just society."

Fast-forward to this week and the decision to grant a temporary injunction halting the introduction of the $15-a-month broadband cap has left many wondering what happens next.

In a statement, US Telecom said: "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. 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." ®