It's a new year, but most of us are still stuck with the same old DSL and cable monopolies. Though many communities have built their own networks to create competition and numerous other benefits, nearly half of the 50 states have enacted legislation to make it harder for communities to build their own networks.

Fortunately, this practice has increasingly come under scrutiny. Unfortunately, we expect to see massive cable and telephone corporations use their unrivaled lobbying power to pass more laws in 2012 like the North Carolina law pushed by Time Warner Cable to essentially stop new community broadband networks.

The FCC's National Broadband Plan calls for all local governments to be free of state barriers (created by big cable and phone companies trying to limit competition). Recommendation 8.19: Congress should make clear that Tribal, state, regional and local governments can build broadband networks.

But modern day railroad barons like Time Warner Cable, AT&T, etc., have a stranglehold on a Congress that depends on their campaign contributions and a national capital built on the lobbying largesse of dominant industries that want to throttle any threats to their businesses. (Hat tip to the Rootstrikers that are trying to fix that mess.)

We occasionally put together a list of notable achievements of these few companies that dominate access to the Internet across the United States. The last one is available here.

As you read this, remember that the FCC's National Broadband Plan largely places the future of Internet access in the hands of these corporations. On the few occasions the FCC tries to defend the public from their schemes to rip-off broadband subscribers, Republicans (joined by a number of Democrats) threaten to overrule what is supposed to be an independent agency to defend the corporations that just happen to be donors to their campaigns.

Back when most assumed AT&T would be able to push its horribly anti-competitive takeover with T-Mobile through an impotent federal government, a few stories exposed the tip of the iceberg of AT&T's astroturf efforts, as with this report from the Center for Public Integrity:

“It is important that we, as Christians, never stop working on behalf of the underserved and forgotten,” the Rev. R. Henry Martin, director of the clinic, wrote to FCC Chairman Julius Genachowski in June. “It might seem like an out-of-place endorsement, but I am writing today in order to convey our support for the AT&T/T-Mobile merger.”

...

Not included in Martin’s letter to the FCC was the fact that his organization had received a $50,000 donation from AT&T just five months earlier. Indeed the Shreveport-Bossier Mission is one of at least two-dozen charities that were recipients of AT&T’s largesse and have written in support of the T-Mobile buyout, which will cut the number of national wireless companies from four to three.

When AT&T's wasn't able to buy enough influence with legitimate groups willing to sell out the interests of their members (who would pay more for their communications in a less competitive environment), it would simply create its own groups to push its interests:

Tallahassee Mayor John Marks brought an Atlanta nonprofit to the city as a partner in a $1.6-million federal-grant project, saying it would put high-speed Internet into the hands of poor people.

What he didn't say, and now says he didn't know, was that the Alliance for Digital Equality (ADE), in its first three years of existence, was nearly 100-percent funded by AT&T and spent most of its money — four of every five dollars — to pay board members, consultants, lawyers and media companies to push the global communication giant's positions on Internet and wireless regulation. Nor did Marks disclose, initially, that ADE had paid him $86,000 over several years as a member of its board of advisers.

We continue to see these massive companies abuse their market power to increase their prices, knowing that their lobbying arms will continue pushing legislation to stop communities from building their own networks.
Time Warner Cable hiked its rates in North Carolina immediately after passing its legislation to stop communities from building networks. Mediacom raised its prices while it attempts to sabotage efforts in rural Minnesota to build networks in unserved areas. And invented new fees to rip off its subscribers while trying to disrupt a rural fiber-to-the-farm initiative that slightly overlapped some territory in which they have long refused to invest.

Even as profits on cable broadband services approach Exxon proportions, Time Warner Cable has pushed for usage-based pricing to further overcharge subscribers, but mostly to strangle enormously popular competitors like Netflix. CenturyLink is not far behind, with usage caps prioritizing its own video content over competitors.

Verizon Wireless tried to sneak a new fee past subscribers by announcing it just before Christmas but backed down after outraged consumers reacted. One has to wonder whether it would have backed down in a world where AT&T took over T-Mobile, resulting in 3 out of 4 wireless customers being with Verizon Wireless and AT&T. Four competitors isn't the robust competition envisioned by Adam Smith, but it still beats the duopoly dynamic that results from even less competition.

Speaking of less competition, the recent deal between Verizon and cable companies is troubling. We already knew that FiOS was all but dead, but this deal truly puts a fork in it:

I'll assume that neither cable operators or Verizon are going to let us see the deal fine print to confirm the Times guess, but the logic fits Verizon's strategy. Verizon already cherry picked the most valuable FTTH upgrade markets, and has shown total disinterest in further upgrades. This deal allows them to save money on FTTH upgrade costs, instead soaking up remaining customers with LTE -- which we noted was the plan some time ago. This deal is very bad news to the rural telcos without the cash for large-scale upgrades (CenturyLink, Frontier, Fairpoint, two of which Verizon sold aging DSL networks to), and for satellite broadband providers.

The future of next-generation networks is now only community networks, cooperatives, and some small private networks.

We've long argued that phone and cable companies have systematically overstated their coverage in mapping efforts as part of their effort to blunt any sensible public policy that would result in all Americans having a choice between fast, affordable, and reliable connections to the Internet. The New England disaster called FairPoint is back in the news for overstating the number of subscribers that have access to DSL. The company has not met the requirements it agreed to when purchasing Verizon's lines a few years ago.

And in the continuing saga of Comcast's growing domination over the information people can access, Bloomberg TV is fighting Comcast's practice of discriminating against channels in which it has no ownership stake. Comcast has long strongly encouraged those who want to put television channels on its lineup to give Comcast a piece of the action, not unlike a mobster encouraging a small business to pay protection money. It wants to continue expanding its role as a gatekeeper to the Internet, particularly in the many areas where people have no real choice from other high speed providers.

And perhaps the best example of why we should not trust these massive corporations to run essential infrastructure is the revelation that AT&T defunded 9-11 call centers in Tennessee to gain a market advantage over competitors, a practice they were previously caught doing, leading to settlements out of court.

These corporations are not evil, they are following a sensible mandate to maximize their shareholder value. It is our government that is not sensible -- entrusting them with the future of Internet access without even bothering to enact the most basic regulations. Communities must continue to wise up and ensure they have the access they need to modern communications -- access that reponds to their needs, not those of distant shareholders.

A common misconception is that local governments award exclusive (or monopolistic) franchises to cable companies and that is why the US has so little cable competition.  However, no local government has done this since the 1996 Telecommunications Act 1992 Cable Act made the practice illegal.

But even before the '96 Telecom Act '92 Cable Act, local governments tended to award non-exclusive contracts to cable companies because they wanted more competition, not less -- as illustrated in this article about Cox preparing to renew its franchise agreement with New Orleans.

Federal laws and Federal Communications Commission decisions also have sharply curtailed the city's negotiating ability.

Even if other companies were seeking permission to provide cable to local customers, said William Aaron, a legal adviser to the council on telecommunications issues, council members could not arbitrarily refuse to renew the Cox franchise. The council could do that only on the basis of certain limited criteria, such as that the company has not lived up to the terms of the 1995 agreement.

Cox has had a nonexclusive franchise to operate in Orleans Parish since 1981, meaning that other companies also can apply to provide cable services, though none has done so. The franchise was renewed in 1995.

For years, state and federal policies have limited local authority to require just compensation for access to the valuable right-of-way because the cable and telephone companies pretended that they would invest more and create competition if local authority were preempted.

Local authority has been significantly preempted in many communities without any real increase in competition or lowering of prices. No surprise there - another victory for companies better at lobbying than providing essential services.

This is the first in a series of posts by Rita Stull -- her bio is available here. The short version is that Rita has a unique perspective shaped by decades of experience in this space. Her first post introduces readers to the often misunderstood concept of the Right-of-way, an asset owned by the citizens and managed mostly by local governments.

In the process of knitting a baby blanket, a whole ball of yarn became tangled into this mess. . . .

. . . reminding me of the time, in the early eighties, when I was the second cable administrator appointed in the U.S., and found myself peering into a hole in the street filled with a similar looking mess—only made of copper wires, instead of yarn.

Why talk about yarn and copper wire in the same breath on a site dedicated to community broadband networks? Because it was the intersection of ‘art and cable’ that got me started in the ‘telecommunications policy’ arena, the same kind of thinking that continues today in our tangled telecom discussions: Is it content or conduit, competitive, entertainment, essential, wireless, landline, gigahertz, gigabits?

I transferred from the Recreation Department to launch the city’s cable office as an experienced government supervisor with a Masters in Theater. My employer and I thought cable TV was the ‘entertainment’ business and I had the requisite mix of experience and skills to manage one of the first franchises awarded in 1981.

Yikes. Imagine my surprise on discovering that cable was a WIRE LINE UTILITY using PUBLIC LAND, which each citizen pays TAXES to buy, upgrade and maintain! And, our three-binders-thick, cable franchise was a ‘legal contract’ containing the payment terms for use of our public rights-of-way, as well as protection of local free speech rights. I was thirty years old, a property owner who had never thought about who owned roads, sidewalks and utility corridors.

Rights-of-way are every street plus about 10 feet of land on each side. That land belongs to everyone in the community. Rights-of-way are a shared public asset—sometimes called part of our common wealth.

The reason we all own rights-of-way, over four million miles of it, is so essential services such as roads, water, gas, electric, and telephone are available, universally—another legal concept—new to me — meaning ‘used by and available to everyone’. We co-own roads and utility corridors to transport ourselves, our goods and services and now our information—essentials required for survival in a developed nation.

Local, state and federal governments manage land assets on our behalf, as follows:

• 75.2%: 3 million miles of rights-of-way are managed by local governments—towns, cities, counties, villages, parishes, townships.
• 20.5%: 820,000 miles of rights-of-way are managed by state governments.
• 4.3%: 172,000 miles of rights-of-way are managed by the federal government.

Important Business Notes Regarding Rights-of-Way

1. To be in business, phone and cable companies must locate their lines in public rights-of-way. Wireless companies must connect towers for ‘signal backhaul’ via landlines. So wireless carriers also use rights-of-way. Customers can’t buy cable, phone, mobile or any Internet services—can’t stream videos—without an Internet Service Provider (ISP) owning or buying ‘landline’ capacity.
2. Telecom is a natural monopoly. The first telecom occupant in the rights-of-way gains tremendous advantage, making it difficult for competitors to finance duplicate infrastructure. In the past, when the threat of competition reared its ugly head, operators used their market dominance, as the incumbent in the rights-of-way, to drastically slash prices, retain customers and force nascent competitors out of business. Once the competitor is eliminated, rates can be doubled or tripled, leaving consumers without the option of changing providers.

Arguably, rights-of-way are the most valuable land asset in the nation. Now that you know you’re the proud owner of four million miles of rights-of-way, what do you think telecom occupants pay to use it?

Do you know that:

• Phone companies generally hold hundred year leases, some in perpetuity, and pay nothing to use rights-of-way. Only the old basic phone rate is regulated. Offered in a duopolist market, most revenues are generated from unregulated phone-line services. Your phone company charges whatever it wants for business and residential service packages, late fees, security deposits, etc., while paying nothing to use your rights-of-way. This reality means that we, as taxpayers, subsidize phone companies by giving them free land.
• Originally, cable operators, because they were offering entertainment services, set the precedent for paying a fair price to occupy rights-of-way. In the late 70’s/early 80’s, as a result of the mostly non-exclusive, franchise competitive-bidding wars, operators agreed to pay the following to use rights-of-way:
  • Up to 5% of gross revenues,
  • Dedicated institutional networks (I-Nets),
  • Public, education and government (PEG) access channels and funding for facilities, equipment, video production training.

From 1980-1985, thousands of local governments monitored the private sector’s deployment of millions of miles of coaxial cable plant in public rights-of-way. In this phenomenal five-year, local, public/private, collaborative undertaking to ‘cable the country for TV’, the U.S. became a ‘wired nation’, as envisioned in Ralph Lee Smith’s seminal book of the same name.

You Did It! … Or did you?

Don’t get all excited about local governments’ successful rights-of-way management – even though it resulted in cable operators wiring the country in five short years. And don’t kid yourself that local governments can effectively leverage their valuable land-use powers in negotiations with telecom incumbents.

Time for a REALITY CHECK:

• Among the wealthiest and most powerful in the country, the telecommunications industry spends tens of millions of dollars, annually, lobbying to retain free use of rights-of-way land.
• Once the country was wired in the early eighties, the cable industry spent the next thirty years lobbying federal and state legislatures to void franchises and eliminate as many payments for using community-owned rights-of-way as possible.

Legal Jargon

Creatively designed telecom regulations confound legislators, confuse consumers, and distort the national discourse. Current regulatory language contorts our understanding of what telecom is and its importance in our lives. Simply stated, telecommunications means the transporting of information on connected networks of boxes (engineering shorthand for computers and switches) and wires, located on poles or under streets.

Today we hear a cacophony of marketers, profiteers, duopolists and plain old crooks – purposely confusing us with: it’s voice - video – data - information – fiber – coaxial cable – wireless - WiFi – broadcast TV – satellite – streaming video - 4G - WiMax - radio – cell phone –- gigahertz – gigabits – megabits – digital - Internet – etc. The list goes on.

As fraught with engineering/marketing jargon as telecom laws are, none address the convergence of digital, Internet and fiber technologies — a convergence that means all information formats—voice, video and data are transported by the same myriad, interconnected wired and wireless networks.

The telecom industry’s lobbying goal is free use of rights-of-way to protect duopolist markets. Twenty states adopted franchising laws depriving local jurisdictions of regulatory authority, thus confiscating communities’ assets and reducing accountability to consumers.

The industry aggressively lobbies for state laws that prohibit or severely constrain jurisdictions use of rights-of-way, specifically to block deployment of next-generation telecom infrastructure: fiber-to-the-premise networks.

Wildly Escalating Telecom Costs for Public Services

When the industry lobbies for state laws that void in-kind services such as I-Nets, the cost can be enormous for the communities they serve. For example: Years ago, a California city, with a population of ninety-thousand, connected thirty municipal facilities, schools, colleges, universities, hospitals and libraries with its institutional network, provided as partial payment for rights-of-way use. When state franchising voided local requirements, the cable operator began billing the city $45,000 a month to use the institutional network. Over the fifteen-year life of the franchise, the operator expects to collect a whopping $8.1 million dollars from the city (thus the taxpayers), instead of paying to use the community’s rights-of-way.

Extorting Future Public Resources

Currently, the industry is lobbying states to PROHIBIT governments from building fiber-to-the-premise (FTTP) networks. Not only do telecom companies refuse to universally upgrade existing wire lines and provide I-Nets, they now want to prevent communities from becoming self-reliant by building their own networks (as in North Carolina and South Carolina, for instance).

Don’t be fooled into thinking that telecom regulations benefit some larger public goal. The U.S. lags behind developed nations in broadband deployment because we are not using rights-of-way to build FTTP infrastructure. We need to ‘catch up’ to competitor nations, where residents, as well as business, buy affordable, bidirectional broadband at gigabit speeds.

We must clean up our tangled regulatory mess, reclaim use of rights-of-way and build the FTTP networks needed to create jobs and compete in a global economy -- starting with JULIET (Joint Underground Location of Infrastructure for Electric and Telecom) [pdf]).