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In North Carolina, Wilson Sets the Record Straight

What do you do when the media gets key facts about your community network wrong? Set the record straight!

This blog post from the Public Affairs Manager in the city of Wilson, North Carolina, demonstrates a good response to errors in an article. In the first case, it offers "clarifications," a better term than errors when dealing with reporters, especially as many reporters have less expertise than we would like in the complicated world of broadband networks, policy, and technology.

This is a good excerpt - with the City's response in blue text.

Other conflicts can arise as well. For example, in 2007, when Wilson was developing its Greenlight service, the town tripled its rate for using municipal utility poles from $5 to $15 a year. That raised the pole fee for Time Warner Cable from $82,000 to $246,000 a year, but Time Warner is still paying the old rate while it negotiates with town officials over the issue.

Before 2007, Wilson’s pole fee had stayed the same since 1975. The attachment fee increase was not related to Greenlight. The old fee schedule was outdated. By comparison, the cable company’s standard rates have doubled since 1997.

“When the regulator becomes your competitor, it’s not a good situation,” said Marcus Trathen, a lawyer for the cable lobby.

Wilson and other cities regulate only the pole attachments. The cable and telecom companies are regulated by the State of NC. The local regulation of cable services ended in 2007 after intense lobbying from the cable/telecom companies.

The main issue is to make sure false claims are corrected at every opportunity. These networks and local policies around pole attachments are greek to most people. Any false claim without a response (and some that are responded to) will be believed by many in the community.

Wilson Wins Awards for Community Broadband Blog

Wilson has won two awards for communications due to its efforts on the Save North Carolina Broadband Blog. The city of Wilson's public power utility built a citywide FTTH network called Greenlight.

Their blog has featured a lot of content both about Greenlight's successes and efforts by cable and telco lobbyists to ban community broadband in the state. Cities should strongly consider creating similar blogs as helpful communications tools with citizens... but if such a blog is created, the community must make an effort to keep it updated.

LUS Files Complaint: Cox and NCTC Limit Competition

Lafayette Utilities System has filed a complaint with the FCC following what seems to be a rather arbitrary decision by the National Cable Television Cooperative (NCTC) to deny Lafayette as a member. This is a crucial issue for communities that want to build fiber-optic networks, so we will dig in and offer an in-depth explanation.

It all starts with the business model. Fiber-optic networks are fantastically expensive and are expected to be financed entirely with revenues from subscribers. Though communities typically want fiber-optic networks for the broadband capacity, they find themselves having to offer cable television services also to ensure they will attract enough subscribers to make the debt payments on the network.

Unfortunately, cable television services are the most difficult and expensive part of the triple-play (broadband, telephone, cable tv). A community network has to sign deals with different content providers in order to put together its channel lineup. Even a community network with 100,000 subscribers has little power over the companies with channels like ESPN, the Disney Channel, Discovery, MTV, Food Network, and others. Thus, it will have to pay more for those channels than massive networks like Comcast that have many millions of subscribers and therefore a stronger negotiating position. LUS has noted that video programming is the "largest single on-going cost" it incurs in the network.

Enter the NCTC. By forming a cooperative, many small providers (public and private) were able to gain negotiating power over content owners and even hardware manufacturers to cut costs to members by buying in bulk. In recent years, the size of NCTC rivaled that of major national providers like Charter and Cox cable. All three parties stood to gain by bringing Cox and Charter into NCTC in 2009. The addition grew NCTC significantly -- only Comcast has more subscribers currently.

The advantages of NCTC are quite significant and worth reiterating because it is a reminder of the ways in which massive private companies have the playing field tilted in their direction. Without access to NCTC, communities have to pay more for the same content and equipment (NCTC savings may start at 15%-20%. From the complaint:

NCTC market power also enables it to obtain much bigger, better, more flexible, and less costly packages, than any individual small cable operator or any smaller buying group can obtain. Video programming distributors typically dictate terms to small cable operators on a take-it-or-leave-it basis. Aside from the price per channel, these terms often dictate the tying of related channels to the ones the operator wants, requiring mixes of standard and high-definition channels, placing channels at specified positions in the line-up, and locating channels in the most popular basic and expanded basic programming tiers. In other words, in order to get the “must-have” video programming that they need to be competitive, small cable operators must typically pay for many channels they do not want, incur substantial costs for extra equipment to support these unwanted channels, and pay fees based on the number of subscribers in the largest programming tiers, rather than in smaller tiers based on subscriber interests and preferences. NCTC has the clout to negotiate much more flexibility for its members in all of these areas.

NCTC also provides its members another advantage over non-members: they do not have to negotiate individual arrangements with 300 or more video programming distributors. Since each such arrangement involves multiple issues, the time, burden, and cost involved in individual, one-on-one negotiations is enormous. Moreover, this assumes that the programming distributors are willing to deal with small cable operators one-on-one on a timely basis. Often they are not.

Communities that are denied entrance to the NCTC have a much harder road when it comes to competing with massive entrenched incumbents. Philip Dampier of Stop the Cap! wrote about this issue, noting that NCTC has strayed from its original purpose:

As someone who personally was involved in the passage of that legislation [1992 Cable Act], the ironic part is we were fighting -for- the NCTC back then. Of course, those days the cooperative was made up of wireless cable providers, utility co-ops, municipal co-ops, and other independent cable systems that were constantly facing outright refusals for access to cable programming or discriminatory pricing. Satellite dish-owners were also regularly targeted. NCTC was a friendly group in the early 1990s but has since become dominated with larger corporate cable operators, especially Cox Cable and Charter Communications.

Recently, NCTC began discriminating against publicly owned networks, refusing to let Wilson (North Carolina), Chattanooga (Tennessee), and Lafayette join NCTC. There was no explanation for the discrimination against muni networks, so LUS is asking the FCC to force the NCTC to admit them.

The specifics may be found in the Official Complaint:

LUS alleges that the Defendants are violating Section 628 of the Communications Act, 47 U.S.C. § 548, and the Commission’s implementing rules, 47 C.F.R § 76.1001 et seq., by engaging in unfair, deceptive, and anticompetitive conduct that has the purpose and effect of preventing LUS from becoming a member of NCTC and thereby obtaining the huge quantity discounts, and other benefits that NCTC negotiates for its members. These discounts and benefits total millions of dollars annually.

The TeleCompetitor coverage of this lawsuit notes NCTC has been selective in the past with membership:

This type of charge is no news to some IPTV operators, many of whom claim access to NCTC has also been denied to them. NCTC, a traditionally closed-lip organization, has never offered any official response to these claims. In my communication with them, they’ve always said they’ve never blocked any company from joining because of who they may compete with. But they do admit to a selective admission process, reviewing each applicant individually to ensure they meet NCTC ‘criteria’ before offering membership. That criteria is a ‘gray area’ to say the least. There is also a pretty significant membership fee to join – a fee that some operators claim is an additional barrier to entry.

However, NCTC has specifically noted it has concerns relating to municipalities. Despite opening itself to new members, it ignored the applications of Chattanooga, Wilson, and Lafayette for months at a time. When rejecting their applications eventually, it offered no explanation.

After NCTC was notified that Chattanooga and Wilson would be joining the LUS complaint for this anti-competitive behavior, NCTC decided to admit both Wilson and Chattanooga but not Lafayette. The only discernible difference between LUS and the others? Wilson and Chattanooga compete with Time Warner and Comcast (respectively) and neither is a member of NCTC. Lafayette competes with Cox, the single largest member of NCTC.

So long as massive scale is rewarded in broadband and cable networks, competition will be elusive. Only by ensuring small providers can join groups like NCTC can competition even have a chance. If the FCC wants to encourage competition, it will quickly require NCTC to admit LUS on fair terms.

A local editorial notes the LUS has already spurred competition locally:

Time Warner Anti-Competition Bill in North Carolina Gets Introduced: S1209

The latest attack on publicly owned broadband networks in North Carolina now has an official name - S1209: No Nonvoted Local Debt For Competing System and will apparently be debated in committee next week.

This bill is meant to stomp out any competition from community-owned broadband networks - the only real threat to Time Warner and other absentee-owned incumbent operators in the state. Not only would this bill create high hurdles for communities that want to build broadband networks, it also could prevent existing networks from upgrading or expanding. The community-owned networks in Wilson and Salisbury are the most advanced broadband networks in the state.

It is not clear, but the law may even bar communities from building networks with federal funds, as under the broadband stimulus projects, for instance. A coalition of local governments, concerned citizens, and private businesses (some noted here) are coming together to stop this attempt to keep North Carolina locked into the last-generation networks of AT&T and Time Warner.

In previous years, similar efforts to prevent community networks all suggested that local governments derived unfair advantages because they could finance their networks with tax dollars (though very few community networks have taken that approach). Now the same people are arguing that local governments should only be able to finance networks with taxpayer-backed bonds - a dead giveaway that those pushing to limit community broadband have no higher principle than protecting incumbent operators from competition.

As we have chronicled in coverage of North Carolina, several newspapers have come out against this bill - most recently the Winston-Salem Journal:

The Journal has long argued that government borrowing without a vote of the people is both unwise and unconstitutional. But that is borrowing backed by the "full faith and credit" of the borrower, in this case, the people of the jurisdiction involved. So, if that is what the telecoms want, we support them.

But that protection is already written into the state constitution. When governments borrow for public utility infrastructure, they generally pledge as collateral only the facilities that will be built and the revenues produced by the utility involved. In these cases, that would mean the equipment needed for the Internet service and the revenues it generates.

...

These communities can't wait until it will be profitable for a private company to serve them adequately. So, using the democratic process, they are asking their local governments to establish service for them. This is reminiscent of the early 20th century when small towns in this state developed their own electrical grids rather than wait for the big utilities to do so.

Well said.

Time Warner Reverses Direction in NC, Fights Competition with New Strategy

Time Warner, AT&T, and other incumbents have radically changed their strategy to prevent broadband competition in North Carolina via new restrictions that are being debated in the Legislature currently. This switch in strategy offers more proof that they stand on no principle aside from protecting their monopoly.

The famous HB 1252 in North Carolina is back... but different. In the past, the telcos and cablecos have argued that municipal broadband networks are unfair to them because the city could use tax dollars in some way to build the network (ignoring that most publicly owned networks do not use any tax dollars). Now, these companies are pushing a bill to require financing backed by taxpayer dollars. Seems like an odd switcheroo.

As one might expect from companies like AT&T and Time Warner, who have no respect for the public process, the bill was kept top secret until debated in committee, giving only the side filled with monied interests and lawyers an opportunity to prepare. The bill (that we have made available here as there is no official version yet) would not just place significant restrictions on new publicly owned networks, but would also handcuff existing networks like Salisbury and Greenlight in Wilson.

To reiterate, this bill will damage the most advanced broadband networks available in North Carolina today. Sounds like North Carolina wants to take up Mayor Joey Durel in Lafayette on his offer to welcome the businesses moving from North Carolina to Lafayette with a big pot of gumbo.

Fascinating that after an FCC Commissioner noted that the US Broadband Plan recognizes the right for communities to build their own broadband infrastructure, North Carolina is deciding it prefers to preclude any broadband competition, sticking with its last-century DSL and cable. Just fascinating.

The Salisbury Post has been watching and recently published a scathing editorial against the bill. This is one paragraph, but the whole editorial is well worth reading.

Yet, if the HB 1252's intent becomes reality, such areas will be severely hobbled in their near-term ability to tap into the broadband revolution. Private telecommunications companies — in this case, primarily Time-Warner — will determine where services will go and when they will go there. Such decisions will be driven by short-term profits, not a long-range vision of community progress. That's like letting one or two asphalt companies determine the future of North Carolina's roads.

I won't go too deeply into the bill because Jay Ovittore at Stop the Cap has already done that. He rightly notes that the bill is an attempt to require a referendum before any new network or refinancing or upgrading of an existing network. These referendums are dominated by incumbents who drop hundreds of thousands into any community to prevent competition.

How can a local city or county government respond to the misinformation barrage? They can’t. Public officials can’t spend taxpayer dollars to promote such projects or refute industry propaganda. They can’t even financially assist a citizen-run campaign.

That’s a fight with ground rules only Don King could love.

Expanding on Jay's analysis, I would only add that each community is different. Charlotte has different resources and opportunities than Boone. Laws that require all communities to use the same funding mechanism are utterly illogical save for the intention to strait-jacket communities and leave them at the mercy of whatever the private sector wants to offer. Across the country, we have seen a variety of approaches to funding successful broadband networks. Laws that force every community to use the same financial tool or business model result in fewer communities actually building the networks they need. Those that do build networks under such policies have to jerry-rig the network to conform, resulting in greater likelihood that the project will encounter problems.

To do all of this to protect massive Fortune 500 companies (with millions of subscribers) from towns with thousands of citizens, is madness. Time Warner and AT&T do not need the protection of legislators in Raleigh. But citizens throughout North Carolina do need broadband networks that put their interests above distant shareholders.

Good people in North Carolina are organizing against this - from contacting legislators to passing resolutions in towns to getting statements from businesses. If you can help, drop me a line and I can put you in touch with them. The bill may still be stopped in committee.

Update: Follow up coverage here.

North Carolina Considers Pro-Monopoly, Anti-Competition Broadband Bill

Stop the Cap! sounded the alarm that North Carolina is once again considering a bill to prevent competition by effectively banning communities from building their own networks.

The Communities United for Broadband Facebook page notes:

The cable industry will be pushing a bill to stop communities from investing in fiber optic infrastructure on April 21st at 9:30am in Raleigh before the Revenue Laws Committee in room 544 of the Legislative Office Building found at 46 W. Lane St, Raleigh, NC.

This bill is being pushed by the private cable and telephone companies that are threatened by the publicly owned FTTH networks already in Wilson and Salisbury. North Carolina has a number of communities that have been inspired by the Gigabit promise of Google and are considering how they can build their own network if Google does not choose them. This bill will prevent communities from building the infrastructure they need to succeed in the future.

I should note that Craig Settles is working with the Communities United for Broadband folks. They have a great slogan: Picking up Where Google Leaves Off.

Wilson Promotes Public Fiber Network in Economic Development Video

The city of Wilson created a video to woo businesses to town - in it, they briefly discuss the publicly owned FTTH network they built, noting it offers the fastest speeds in the state.

A Snapshot of Wilson, NC from City of Wilson, NC on Vimeo.

Wilson's Greenlight Keeps Time Warner Prices Low in Community

Catharine Rice gave a terrific presentation detailing the ways Time Warner has responded to the municipally-owned Greenlight fiber-to-the-home network: raising the rates on everyone around them and cutting great deals to Wilson residents. I saw the presentation on the Save NC Broadband blog which also has a link to her slides - make sure you follow along with the slides.

She details how Time Warner has raised rates in towns around Wilson while lowering their prices and offering better broadband speeds in Wilson. Once again, we see that a community building their own network has a variety of benefits: a superior modern network that is community owned, lower prices on the last-generation network from the incumbent, and some investment from the incumbent.

Now the question is whether Wilson's residents will be smart enough to support the publicly owned network in the face of Time Warner's low low prices - a recognizing that a few short years of low prices (for low quality) are not worth abandoning the publicly owned network and the benefits it has created in the community.

Video: 

Proactive Broadband Communities and NATOA Awards

Craig Settles recently wrote "Debunking Myths about Government-Run Broadband" to defend publicly owned networks (the title is unfortunate as many networks are publicly owned but not necessarily run directly by the government). Nonetheless, he tackles several false claims commonly levied against public networks and offers an entertaining rebuff to those rascally incumbents down in North Carolina that keep trying to buy legislation to protect themselves from competition:

Time Warner tried to get a bill passed in the state legislature this year to prevent cities from offering broadband service. They claimed community networks create an un-fair playing field. Personally, if I ran a bezillion dollar company and a small town of 48,000 with no prior technology business expertise built a network 10 times faster than my best offering, I’d be embarrassed to be associated with the bill. If incumbents want to level the playing field, maybe they should outsource their engineering operations to Wilson.

He revealed an upcoming list of ten smart broadband communities that has since been published here. This is a mixture of communities that have taken action to improve broadband - a variety of models and community types.

Without detracting from this list, I want to note that some networks are missing important context. For instance, Wilson NC, lists an unimpressive number of subscribers currently, but the network is still being built and many who want to subscribe are not yet able to subscribe. Additionally, it would be nice to see the prices offered for each speed tier -- many of these networks keep higher speed tiers much more affordable than do traditional carriers. That said, many kudos to Craig for putting this list out there (he will be putting similar lists up in the near future).

While on the subject of impressive community networks, NATOA has announced its community broadband awards. I am excited to see the city of Monticello recognized for its courage in responding to shady incumbent-led attacks and frivolous lawsuits -- primarily by TDS -- attempting to deny the community the right to build its own network.

Though the other award recipients are also excellent, I want to congratulation MI-Connection for their award of Community Broadband Project of the Year. Years ago, I wrote an op-ed in favor of that network and I am glad to see it succeeding.

MI-Connection was born after the demise of Adelphia Cable. Local towns bought the system and rehabilitated it, offering a publicly owned local alternative for broadband and cable.

Image Credit: Domen Colja - Fotolia.com

Virginia County Looks to Wilson for Muni Network Inspiration

Folks in the Isle of Wight County in Virginia are looking to Wilson, NC, (which runs its own FTTH network called Greenlight) for inspiration as Charter will not expand broadband access locally. Interestingly, industry-backed Connected Nation would not consider these people to be unserved because they could buy wireless broadband cards that offer slow speeds at expensive prices and are still often capped at a monthly transfer of 5 Gigabytes ... which is to say not really a broadband option.

Charter will not expand their cable networks because

Charter requires that an area have a density of at least 30 rooftops per square mile in order to offer service, which leaves large swaths of the county, especially southern and western areas, without access.

Sounds like a good opportunity to investigate a publicly owned network.