FCC Backs Cable Over Verizon In Dispute

The chairman of the Federal Communications Commission was on the losing end of a vote for the first time in his tenure when his colleagues sided with the cable industry in a dispute over marketing practices.

Late Friday night, the commission voted to reverse a staff decision and uphold a complaint that Verizon Communications Inc. had violated privacy laws, according to an agency official who asked not to be named because the decision has not yet been made public.

Cable companies claimed that Verizon had improperly used proprietary information in an attempt to keep their customers from switching providers. Agency enforcement staff originally dismissed the complaint.

But by a 4-1 vote, with FCC chairman Kevin Martin the lone dissenter, the commission upheld the complaint and sided with the cable industry.

The initial complaint was brought by Bright House Networks, Time Warner Cable and Comcast Corp.

When a customer switches from one service provider to another, the existing provider is required to allow the customer to take their phone number with them, a practice known as "number porting."

The cable companies claimed that when Verizon received a request to "port" a customer's number to a competitor, it would try to convince the customer to stay, offering discounts and American Express reward cards.

In an unusual move, on Saturday morning FCC member Robert McDowell released his formal statement that will accompany the formal announcement of the vote.

"Consistent with Congress's intent and Commission precedent in the long-distance context, today we carry out Congress's unambiguous mandate to protect consumer privacy in local markets as well," he wrote.

Citing the "unusual circumstance" regarding McDowell's release of his statement, Martin released his own, dissenting from the majority.

"I am concerned that today's decision promotes regulatory arbitrage and is outcome driven," he said. "It could thwart competition, harm rural America, and frustrate regulatory parity."

Verizon issued a statement late Friday night, anticipating the commission vote, attributed to Tom Tauke, executive vice president of public affairs, policy and communications. He said the commissioners decision was a "disappointing outcome" that "enables cable companies to lock in TV customers by forbidding Verizon from providing information about better voice services or prices."

Comcast Corp. also released a statement, attributed to Catherine Avgiris, senior vice president and general manager of Comcast voice services.

"The FCC majority deserves the gratitude of all consumers for standing up for fair play and against anticompetitive tactics," it read in part.

Martin has been commission chairman since March 2005. As chairman he decides what issues are brought to a vote. He has prided himself on building consensus within the commission. This was the first time in his chairmanship that he has been outvoted.

It also marked a rare victory for the cable industry, which has claimed the chairman has treated it unfairly.

The dispute comes as cable companies and traditional phone companies in many markets are battling head to head for customers seeking Internet, voice and video service.

When FCC staff initially ruled in favor of Verizon, it also recommended that the commission start a rule-making process to ensure that "customer retention marketing practices be made consistent across all platforms."

There was no word Saturday on the status of that initiative.