South Carolina's H3508 has passed the legislature, been signed by Governor Nikki R. Haley, and has revoked local authority to build the broadband networks they need to create new jobs. Last week, we noted some of the coverage about the bill.
After reviewing the language of the bill, we are astonished at how far the Governor and the South Carolina Legislature have gone to protect AT&T's monopoly, to the detriment of the many businesses and citizens who desperately need better access to the Internet -- whether to be more productive, competitive, or just take advantage of educational opportunities.
South Carolina is near the bottom of adoption rate in the U.S. and has a higher than average number of residents living below the poverty line. Communities with fast, affordable, and reliable access to the Internet are seeing new jobs. Those stuck on slow DSL are watching jobs wither away.
We continue to be amazed at state legislatures that are prioritizing laws to make it harder to expand broadband rather than easier. The only explanation is the vast amounts of money big companies like AT&T and Time Warner Cable spend in campaign contributions.
This bill is designed to prevent local governments from building next-generation networks, even when the private sector has refused to invest. It may also put an end to projects already in the works (even those that have received BTOP or BIP funding).
H3508 is not an outright ban against municipal networks, but it might as well be. South Carolina had already discouraged community broadband networks in Article 23, Chapter 9, Title 58 of its 1976 Code. This bill ramps up the unfavorable conditions to make such investments all but impossible.
Much of telecommunications is regulated by states and the federal government, which means that local governments already have to follow the same rules as companies like AT&T and Time Warner Cable. To the extent that local governments have authority, they are required by law not to favor their own network. But South Carolina has decided to impose still more regulations only on local governments if the community decides to build its own network.
It would be impolitic to advance a bill that simply says local governments cannot invest in the essential infrastructure needed for the modern economy. So these bills are instead crafted to appear reasonable while effectively demanding that communities capture a leprechaun riding a unicorn before they can build a network.
In the coverage of this bill, few have examined the "exemptions" in depth, so that is where our coverage will focus. The "exceptions" contained to the onerous provisions of this bill are nearly impossible to qualify for and provide insufficient certainty as to how long they would apply.
You've Been 'Served'
South Carolina continues to use a 1990's definition "broadband service" of 190kbps in at least one direction. Possibly the worst broadband definition we have seen. But for the purposes of this bill and defining who is "served," they have adopted the FCC's "Basic Broadband Tier 1" as a benchmark. Currently, that is at least 768kbps in at least one direction.
Some of the regulations uniquely imposed on publicly owned networks will be relaxed if the community network can obtain "unserved" designation for a specific geographic area it wishes to serve. Designation must come from the South Carolina Public Service Commission and can only be achieved in one of two ways:
1. If the county is a "persistent poverty county" (a USDA definition) AND at least 75% of the households in a 2010 census tract have either no broadband service or only access to service from a satellite provider - In rural areas, census tracts usually include large geographic areas of many census blocks, often cross county lines, and can be arbitrarily drawn, so meeting this requirement appears quite difficult. Another difficulty is that maps depicting broadband access systematically overstate coverage, often claiming some households have access when they actually cannot connect.
As 3G wireless connections (from AT&T, Verizon, or others) exceed 768kbps in one direction, we would be surprised to find multiple connecting census tracts with 90% of households lacking "broadband." Of course, a dramatically overpriced wireless service with small monthly bandwidth caps is useless for doing homework, remote education, economic development, and pretty much anything beyond email and very basic web surfing.
2. If at least 90% of the households in the county have no broadband service or only access to service from a satellite provider - Here, the requirement shifts to census blocks, which greatly tightens the requirements. Blocks are the smallest unit of census measurement, more akin to city blocks in town, but can be much larger in rural areas. Even the 2011 North Carolina bill didn't go this far, defining "unserved" as census blocks where "at least 50% of households have no broadband service or only access to satellite service."
Catharine Rice, President of SEATOA, applied some pragmatic perspective in an email to us:
Unserved areas are defined by census blocks. So you'd have to cull together tens of thousands to make a network viable, and all of them would have to qualify as unserved... So if 11% of the homes have [basic tier 1 broadband service as defined by the FCC] (not enough speed to even download a Netflix video), that Census block is 'served.'
Also the real show stopper here is that the NTIA federal broadband maps do not measure areas by households. More specifically, the NTIA rules allow this: if one home in a census block could have broadband in 7-10 business days (as determined by the carrier reporting the data), the entire Census block is considered to have broadband. So a SC community would have to do its own broadband census survey, and that aint' cheap.
Hard to Get, Easy to Lose
Even if a county is able to qualify as "unserved" and could legally pursue a municipal network for their community, the designation is easily challenged by a resident or a competitor ISP. All it takes is an objection, the opportunity for a hearing, and testimony to stop the petition for "unserved" designation. This part of the process can halt development by at least 90 days. Time can be a killer for network planning and the big telcos know that. Theoretically, AT&T can hire a "Petition Buster" to routinely file objections and use time to destroy plans for networks. This is a common tactic used by big corporations that maintain big teams of lawyers -- they prefer to spend a little to block new competition rather than a lot to compete in a competitive market.
Exception Today, Gone Tomorrow
One of the most troubling components of the new law is the time restrictions that apply to the "exceptions." New broadband networks, both publicly and privately owned, require years to build and leave the "startup" phase.
If a county is designated as "unserved," a government entity offering service is only exempt from the crippling additional regulations for one year if that area loses its "unserved" designation. Bear in mind that these unserved areas are where the business case for broadband does not exist. So if a community can somehow build a network in this area, it will quickly lose its exemption if AT&T decides to put a 3G tower up in the area.
This is not an exemption. It was an opportunity for elected officials to pretend they didn't just give AT&T an unofficial monopoly in return for generous campaign contributions. We will be very surprised to see any community proceed with a network given the uncertainty and increased advantages this legislation gives the biggest carriers (who have refused to invest in South Carolina).