PHOENIX — State utility regulators are recommending that Cox Communications be fined $2 million for arranging a special deal with a developer that prevented other phone companies from selling services in a Peoria community.
An Arizona Corporation Commission staff report called the pact between Cox and developer Shea Sunbelt for the Vistancia development "discriminatory and anti-competitive" in violation of federal and state laws promoting open competition for voice, video and data services.
Cox officials said the company will ask the commission to cut or eliminate the fine at an Aug. 28 hearing.
"This is merely a staff recommendation with which we obviously disagree," said Ivan Johnson, Cox's vice president of community relations and televideo. "We believe the recommended fine is unfounded and inappropriate, and we intend to challenge it vigorously."
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Cox could have been fined up to $4.2 million, but the staff recommendation said it chose the $2 million figure instead because Cox cooperated with investigators and canceled the deal after it came to light.
Cox is primarily a cable-television provider but also provides digital telephone and Internet services over its lines.
The deal between Cox and Shea Sunbelt became known when small phone provider Accipiter Communications sued Cox and filed a complaint with the commission alleging the deal prevented other phone companies from doing business in the 17,000-home development.
Cox Communications paid Accipiter $1 million to settle the lawsuit.
Under the Cox-Shea Sunbelt deal, Peoria allowed the developer to take control of communications access and decide which companies could provide service. Cox paid a $1 million "licensing fee" to the developer for the right to lay the wires and sell services to about 45,000 residents. The developer paid Cox $3 million to install the system.
Regulators also implied that they plan to investigate similar cases.
"Staff is signaling its view that Cox engaged in truly anti-competitive behavior," Commissioner Kris Mayes said. "If we approved a $2 million fine, it would send a very strong signal to all phone companies that we are serious about this."
The fine would be the second-largest ever imposed by the commission against a communications company. Qwest Communications was fined $9 million in 2004 for multiple violations relating to competitive phone service.
"(The ACC) staff is signaling its view that Cox engaged in truly anti-competitive behavior."
Kris Mayes
Arizona Corporation Committee commissioner, regarding Cox Communication's alleged violation of federal and state open-competition laws
