Is it legal for cable or phone companies to obtain a credit report and use it to decide whether to service a new customer?

Normally they do not do this, however it is legal. It is legal and customary for utility companies to pull credit in response to a request for service. Many utility companies also report delinquencies on the bureaus. PECO (Pennsylvania Electric Company) is a specific example). The use of credit reports and credit scores is widespread and is a motivating factor for consumers to educate themselves and manage debt wisely. Some other examples of when credit is pulled are; by insurance companies, for employment purposes, by rental companies and by banks for savings and checking accounts.