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Circuit Court to FCC: You Can Restore Local Authority to Build Community Networks

As we noted yesterday, the DC Circuit of Appeals has decided that the FCC does not have authority to implement its Open Internet (network neutrality) rules as proposed several years ago.

But the court nonetheless found that the FCC does have some authority to regulate in the public interest, particularly when it comes to something we have long highlighted: state barriers to community owned networks. For example, see North Carolina and recent efforts in Georgia.

States have been lobbied heavily by powerful cable and telephone companies to create barriers that discourage community owned networks. Nineteen states have such barriers (see our map with the states shown in red), largely because communities have nowhere near the lobbying power of massive cable and telephone companies, not because the arguments against municipal networks are compelling.

For those who remember a certain Supreme Court decision called Nixon v Missouri, the Court has once weighed in the matter of state barriers to community networks. In the '96 Telecom Act, Section 253 declares "No State or local statute or regulation, or other State or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service."

However, the Supreme Court decided in 2004 that Congress was insufficiently clear in its intent to preempt state authority - that "any" did not mean "any" but rather meant something else. In making this decision, it ignored a legislative history with plenty of evidence (see Trent Lott for instance) that suggested Congress meant "any" to mean "any."

ANYway, we lost that one. States were found to have the right to limit the authority of communities to build their own networks. But we have long felt that a different grant of authority gave the FCC the power to overrule state limits of local authority to build networks, Section 706.

Preemption Map

And this is where yesterday's decision comes in. Circuit Judge Silberman concurred in part and dissented in part - but more importantly for us, he explained Section 706. Read along with your own copy from here [pdf].

The statute directs the Commission to “encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans . . . by utilizing . . . price cap regulation, regulatory forbearance, measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment.”

As I said, we have long felt the FCC had the power to remove state barriers that limit local authority to build fiber networks under its section 706 authority but we did not know whether the courts would read it in the same way. In describing the difference between its authority to promote competition vs. its power to remove barriers to infrastructure investment, he notes:

An example of a paradigmatic barrier to infrastructure investment would be state laws that prohibit municipalities from creating their own broadband infrastructure to compete against private companies.

The footnotes cites this Wired article for further information. It's "kind of a big deal."

We now have a clear roadmap: Section 706 gives the FCC the authority to remove barriers to infrastructure investment and to promote competition. Restoring local authority to build networks achieves both. The Nixon v. Missouri decision is irrelevant, based on a different section of law. And we have plenty of evidence that when allowed to build their own networks, communities can do a wonderful job... that is what we have been documenting for years.

New York Times on Internet in America, Genachowski Legacy

Eduardo Porter has an important column today in the business section of the New York Times, "Yanking Broadband From the Slow Lane." He correctly identifies some of the culprits slowing the investment in Internet networks in our communities.

The last two paragraphs read:

Yet the challenge remains: monopolies have a high instinct for self-preservation. And more than half a dozen states have passed legislation limiting municipalities from building public broadband networks in competition with private businesses. South Carolina passed its version last year. A similar bill narrowly failed in Georgia.

Supporting these bills, of course, are the nation’s cable and telephone companies.

Not really "supporting" so much as creating. They create the bills and move them with millions of dollars spent on lobbyists and campaign finance contributions, usually without any real public debate on the matter.

Eduardo focuses on Google Fiber rather than the hundreds of towns that have built networks - as have most of the elite media outlets. Google deserves praise for taking on powerful cable and DSL companies, but it is lazy journalism broadly that has ignored the networks built by hundreds of towns - my criticism of the press generally, not Eduardo specifically.

FCC Logo

The person who deserves plenty of criticism is former FCC Chairman Genachowski. From the article:

According to the F.C.C.’s latest calculation, under one-third of American homes are in areas where at least two wireline companies offer broadband speeds of 10 Mbps or higher.

We have 20 million Americans with no access to broadband. The rest are lucky to have a choice between two providers and even then, most still only have access to fast connections from a single provider.

When the National Broadband Plan was unveiled, we were critical of it and believed it would do little to improve our standing. Even its architect, Blair Levin, is annoyed at how Genachowski failed to implement even the modest proposals put forth.

Back in the NYT piece, we find this:

Mr. Genachowski contends that broadband deployment is on the right track. He points to the growing number of high-speed broadband deployments like Google Fiber and municipal projects around the country, as well as to AT&T’s announcement that it will expand the footprint of its U-verse network — the number of homes to which service is available — to 33 million. This uses fiber part of the way and, AT&T claims, can attain up to 75 Mbps.

Absurd. First of all, the supposed AT&T expansion is playing with numbers. If anyone actually gets U-Verse from this new deployment, it will be fewer than 1.5 million people but we really have no way of knowing because neither the states or the FCC really keeps track of these deployments. They just take AT&T's word for it.

As for 75 Mbps, talk about cherry picking data. Most people live far enough away from the DSLAM or have old enough copper wires that they will not even come close to that number. And this is only for downstream - the upstream capacity remains a fraction of that. This is a fantasy in a fantasy but these numbers are repeated by media sources because they come from AT&T.

I'm rather surprised Genachowski did not also take credit for AT&T's pretend fiber press release in Austin or the overblown CenturyLink pilot in Omaha. Communities engaged in the hard work of building a network received scant attention until they had a ribbon cutting where Chairman Genachowski would appear suddenly supportive and trying to take some measure of credit.

FCC Revolving Door

Genachowski likely felt more comfortable with AT&T, CenturyLink, and a few other big corporations because they share his preference for press releases rather than doing the hard work that needs to be done. We look forward to seeing which of these firms he joins as a lobbyist of some sort ... after a stint at a nonprofit to make it less obvious, of course. Wouldn't want to be as obvious as former FCC Commissioner Baker.

Lest I go too far in attacking our former FCC Chairman, we do remain thankful that once in awhile he did stand up the big corporations and meekly request a reasonable concession.. Most recently, he spoke out against legislation in Georgia to revoke local authority to build networks. For years, FCC Commission and acting Chair Mignon Clyburn has fought to preserve local authority and we were pleased to see her get some backup from the then-Chairman. He didn't actually use his power to actually do anything, but it was nice of him to think of us.

As we move forward with the new FCC under Chairman-nomineer Wheeler, we hope to see real progress on expanding fast, affordable, and reliable Internet access to everyone. Given his industry background, we cannot help but be nervous. And the utter disaster Obama has been for a public interest media and telecom agenda does not help either.

As this NYT article confirms, communities are smart to pursue their own strategies in solving this problem, not waiting for DC to sort anything out. And if DC can be bothered to take any action on telecom, it would be smart to start by removing barriers for communities that want to invest in themselves.

Utah State Auditor Reviews UTOPIA, Ignores State Role in Handicapping Network

Just this week, the Office of the Legislative Auditor General of the State of Utah released a report to the Utah Legislature on UTOPIA. The report, titled A Performance Audit of the Utah Telecommunications Open Infrastructure Agency rehashes prior criticisms of UTOPIA and tells the abridged story of the Auditor's understanding of UTOPIA's financial troubles.

While one can accept the report as truthful, it certainly is not comprehensive. Jesse Harris, of FreeUTOPIA notes that leaving out certain pieces of information taint the presumed impartiality of the report. From Jesse:

The Legislative Auditor General has published an audit of UTOPIA, and, as expected, it drags a fair amount of ancient history back into the spotlight.  The report concludes that additional accountability will alleviate the problems that UTOPIA has experienced, but it missed the mark on a number of points.

The Audit Scope and Objectives are spelled out in the beginning as:

Members of the Utah Legislature asked for an audit of UTOPIA so residents of UTOPIA member cities might know how the organization has used its funds. Legislators also asked for a review the organization’s general management practices. To address their concerns, we developed an audit plan to review the following areas:

  • The size and use of UTOPIA’s debt financing
  • The causes leading to UTOPIA’s current financial 
condition
  • UTOPIA’s management and board governance practices

While there are many bar graphs, pie charts, and dollar signs in the report and it seems to meet the scope and objectives, financial information alone does not explain UTOPIA's troubles. The first place to look is close to home.

From the beginning, UTOPIA has had to overcome difficult odds in a hostile legislative environment. As we note on our Community Broadband Map, the State of Utah effectively requires that community networks function as wholesale-only. The mandate puts them at a significant financial disadvantage from the beginning, severely limiting the amount of revenue they can collect early in the life of the network.

Another state law prevents community networks from bonding for more than 50% of the cost of the network. The only choice, thanks to the Utah Legislature, was to plan on using revenue from the early phase to complete further expansion of the network. The 50% rule, combined with the wholesale-only requirement prevents the robust expansion needed to breath life into a new network. Auditor staff failed to examine the effects of these two laws taken together.

The auditors gloss over efforts by the incumbents to deliberately disrupt UTOPIA. For instance, Qwest dedicated its significant might to preventing UTOPIA to access poles that it had a right to use. From the audit:

After eighteen months, UTOPIA and Qwest finally resolved their dispute over access rights. By that time, however, UTOPIA staff report that the agency’s construction contractors had moved on to other locations and the financial resources had been committed elsewhere. As a result, the financing was no longer available to complete the partially built neighborhoods. The result is a patchwork of service with some neighborhoods receiving services and with other, adjacent neighborhoods without service. 

UTOPIA Logo

It should read, "Qwest was able to delay UTOPIA's rollout by 18 months by forcing an unnecessary court proceeding. During that time, UTOPIA had little choice but to strand some of its investment and move on to areas where Qwest could not use legal tactics delay UTOPIA." The audit uses neutral language to avoid the important question of why they had a dispute to resolve -- it was because Qwest was using dirty tricks to bleed UTOPIA dry. And it worked.

There is no separation between pre-2008 and present UTOPIA. There are many examples of what hindsight can label as bad management decisions, but not enough examples of the implemented fixes. The report casually mentions a few - "stranded assets" being recovered and connected and efforts to better market the service to increase subscription rates. The Auditor could have and should have included more instances of remedial management action to give an up-to-date picture for the state legislature.

The Auditor's four recommendations revolve around management policy, practice, and greater accountability. Accountbility is always a good thing, but adopting those recommendations may or may not improve UTOPIA's financial health.

The report should have also included a recommendation to the Utah State Legislature - to remove state barriers and let local communities decide for themselves if they need, want, and can invest in broadband. Perhaps if UTOPIA was not restricted from day one, this report would not exist today.

In all, the report only considers part of the reasons for UTOPIA's struggles. There is no balancing discussion of the benefits UTOPIA has brought to its communities in return for the public money they have had to spend on the network. Those connected to the network have access to some of the fastest connections in the nation at very competitive prices. Residents and businesses can choose among more providers than literally 99% of America

None of this excuses the prior management of UTOPIA, which indeed made many mistakes. But to focus only on those mistakes only explains a piece of how UTOPIA arrived in such a deep financial hole.

Provo to Write off Some Debt of Struggling iProvo Network

Provo built a city owned FTTH network after its public power utility started connecting its substations with fiber-optic cables in the early 2000's. iProvo ultimately developed along similar open access lines as UTOPIA, but unlike UTOPIA, Provo did not actually want to operate on a purely wholesale model.

iProvo was forced into the wholesale-only model, where the publicly owned network offered wholesale services to independent ISPs that then resold service to residents and businesses. Comcast and Qwest (now CenturyLink) recognized the threat posed by municipalities building next generation networks -- particularly in communities that did not even have full DSL and cable coverage from the giant providers that long delayed upgrades, knowing that subscribers had no other options.

Comcast and Qwest went to the state legislature and did what they do best -- bought influence and pushed through laws to essentially prohibit publicly owned networks from offering direct retail services, knowing that the wholesale-only approach had proved a very difficult model to work financially.

UTOPIA had long had a vision of making the open access, wholesale-only model work (that proceeded to largely fail, for a variety of reasons -- only to start turning around in recent years) but Provo, with its public power utility, was denied its preferred model of offering services directly.

iProvo was built at a cost of $40 million and has operated in the red since, though a number of postive externalities from the network was not included in those calculations. For instance, City Departments had access to much higher capacity connections than were available previously and were not charged for them (a poor practice in our estimation). For more details on iProvo, I recommend a video of a discussion in 2011.

At any rate, iProvo was then sortof sold off to a private provider (sort of because the city is still on the hook for the debt) in large part because private providers are not as crippled by state law. Unfortunately, the network has already developed a bad reputation for many (thanks to the state law preventing Provo from being able to ensure a good subscriber experience).

And now Provo is poised to write off $5.4 million debt, one of the worst case scenarios in community networks. Electicity ratepayers will shoulder the burden:

The new "Telecom Debt Charge" is set to run 15 years — until the iProvo bond is repaid — and costs homeowners $5.35 per month and commercial customers $10 per month plus 2.3 percent of their electricity bill.

This is not a done deal - the City Council will decide the matter on January 17, so the citizens still have an opportunity to raise their voices on the matter.

The history of iProvo suggests a few things.

  1. State laws that cripple local authority to build essential infrastructure are poor public policy. Unfortunately, it is great policy for a few giant companies that use their lobbying power to restrict competition any way they can.
  2. Even with its advantages (not being crippled by state law), a private provider could do no better than the public provider. Surveying community networks nationally, which are often built it the areas hardest to serve with broadband, community networks have a better track record than the big privately owned cable and phone networks.

Border to Border Broadband in Minnesota

Minnesota's Governor Dayton has already done more for expanding broadband access in Minnesota than predecessor Pawlenty who took the "stay quiet and hope for the best" approach to expanding access in our state.

After being prodded by the legislature (including now-Lieutenant Governor Prettner-Solon) Governor Pawlenty appointed an industry-heavy "Ultra High Speed" Broadband Task Force that exceeded the expectations of many, including myself, with its report [pdf]. I give a lot of credit to a few members, especially "Mikey" and Chairman Rick King of Thomsen Reuters, for that report given the constraints of the environment in which it existed.

Minnesota's Legislature and Governor Pawlenty then created some goals for 2015 and generally ceased any work on ensuring Minnesota could meet the goals. However, some departments (like the Department of Commerce) are using that language to prod broadband providers to consider what steps they can take to get us closer. Despite my frustration, I want to recognize those who are doing all they can to expand access to this essential infrastructure.

Fast forward to this week, when Governor Dayton announced a new Task Force that is supposed to really do things (as opposed to the more common Task Force approach of creating the appearance of doing things).

I am heartened by many of the appointees. There are some terrific people, especially some terrific women who are too often under-represented in technology) that will work very hard to bring real broadband to the Minnesotans that either need their first option or a better option.

And they have their work cut out for them. The state has few options to compel investment from a private sector that sees little reason to invest in an industry with so little competition (St Paul has one high-speed provider: Comcast, and one slower, cheaper alternative - CenturyLink).

For instance, rural Kanabec County took the Ultra High Speed Task Force's recommendation and asked its incumbent to partner in providing better broadband. That went over about the same as every other community that has sought a partnership with a big out-of-state incumbent provider. At least CenturyLink did respond, not all incumbent providers have the grace to do so:

Kanabec County Logo

“After receiving your letter I requested that my management team report back to me on the costs associated with your request for a minimum 10 MB speed to every home and business within the county. For proprietary reasons I’m unable to share with you the estimated costs of meeting this goal in Kanabec County.”

The letter continued, “However, I can tell you that it represents many millions of dollars at a significant cost per household or business passed that under current business models do not generate a return on the investment.”

The Task Force will hear strong voices from within and without its members calling on it to reduce government barriers to private sector investment, whether by gutting local authority over rights-of-way or other means. I encourage it to tell the state to first, get out of the way of communities that want to build their own networks.

Any community that has the willingness to invest in itself should have that right. There is no reason for the state to prefer that massive out-of-state companies with poor track records in Minnesota build networks rather than the communities themselves. The community has a much greater incentive to invest today and tomorrow in modern technologies. Whereas private companies are looking for handouts to serve places like Sibley County, Sibley County is just looking for the state to get out of the way.

Requiring a 65% referendum for a community to build its own network is ludicrous -- and it is Minnesota law. We are the only state in the nation with a supermajority requirement for a community to build essential infrastructure. I just wrote about Longmont, where their massively successful referendum campaign got 60% of the vote -- a loser in Minnesota. Despite absolutely no support from any local leaders, Comcast was able to get 40% support by simply outspending the grassroots community broadband movement $300,000 to $5,000.

Removing this barrier to local authority for community broadband will not bring border to border broadband -- many communities simply do not want to take on the responsibility of building a next-generation networks -- but it will certainly bring us closer, and it will bring much better networks to those communities that are willing to step up and invest in themselves.

Photo by Jackanapes, used under creative commons license.

Community Networks Provide Cable/Broadband Competition That is Otherwise Unlikely

You can also read this story over at the Huffington Post.

How can it be that the big companies who deliver some of the most important services in our modern lives (access to the Internet, television) rank at the top of the most hated? Probably because when they screw up or increase prices year after year, we have no choice but sticking with them. Most of us have no better options.

But why do we have so few choices? Government-sanctioned monopolies have been outlawed since the 1996 Telecommunications Act. Unfortunately, the natural tendency of the telecommunications industry is toward consolidation and monopoly (or duopoly). In the face of this reality, the federal government has done little to protect citizens and small businesses from telecom market failings.

But local governments have stepped up and built incredible next-generation networks that are accountable to the community. These communities have faster speeds (at lower prices) than the vast majority of us.

Most of these communities would absolutely prefer for the private sector to build the necessary networks and offer real competition, but the economics of telecom makes that as likely as donuts becoming part of a healthy breakfast. In most cases, the incumbent cable and telephone companies are too entrenched for any other company to overbuild them. But communities do not have the same pressures to make a short-term profit. They can take many years to break even on an investment that creates many indirect benefits along the way.

One might expect successful companies like AT&T and Time Warner Cable to step up to the challenge posed by community networks, and they have. Not by simply investing more and competing for customers, but by using their comparative advantage – lobbying state legislatures to outlaw the competition. As we noted in our commentary and video last week, massive cable and telephone companies have tried to remove local authority to build networks.

These companies frequently claim they are at an unfair disadvantage when they have to compete against a broadband network owned by the local government. This claim resonates strongly with some politicians, particularly those who happen to receive a lot of campaign contributions from big telco and cable companies -- as recently demonstrated in Wisconsin. They say they just want a "level playing field."

We decided to take a deeper look. We compared Time Warner Cable to Salisbury, North Carolina -- which built one of the newest community fiber networks – to see who is at a disadvantage.

TWC v Salisbury Fibrant InfoGraphic

Big companies like Time Warner Cable have some big advantages over any community that decides to build a network. Of course, communities do not build their own networks on a lark, they do it because they need fast, affordable, and reliable networks for economic development and maintaining a high quality of life.
But a better comparison goes beyond simply the scale of the competitors in order to complete a more meaningful comparison. For that, we created our “Level Playing Field” video, attached below.

There should be no doubt that massive incumbent cable and phone companies have a monopoly on the “unfair” advantages in telecommunications. Fortunately, community networks have a host of local advantages and often superior technology with which to invest in the networks they need. The question is whether Congress and the states will protect the right of communities to choose for themselves if a local community network is necessary.

Video: 
See video

Sibley County Discusses Joint Powers Agreement for Rural Fiber-to-the-Farm

Last night, local officials from all over Sibley County gathered in Arlington to learn about the potential fiber-to-the-farm broadband network they could build as early as 2012. Dave Peters, from Minnesota Public Radio, attended and discussed the meeting on MPR's Ground Level blog.

More than 50 elected officials -- county commissioners, city council members, township board supervisors -- gathered in the Arlington Community Center last night to inch ahead a plan to lay fiber optic lines to every home and business in the county plus those in and around neighboring Fairfax in Renville County.

It's an ambitious plan that would require the community to borrow $63 million and then pay off those bonds with revenue from the service. The county-owned operation would offer the usual cable-phone-Internet triple plays, and backers are promising that right out of the gate it would be at a speed of 20 megabits per second, upload and download. That's quite a bit faster than what area residents get now via DSL or cable or wireless.

If the project will move forward, the communities will have to form a Joint Powers Board and seed it with some start-up funds. The next steps will be to do a pre-subscription campaign to get a real sense of how many residents would take service from a new network. Responses are non-binding but will give a better measure of support as well as create an additional sense of responsibility for the project. From Dave Peters:

By the end of February, the 10 governments -- Sibley and Renville counties and the cities of Gaylord, Arlington, Winthrop, Fairfax, Henderson, Gibbon, Green Isle and New Auburn -- will each decide whether they want to create a joint powers board.

The best scenario is that all communities would join. But if one or a few do not, the project may be able to continue as long as some of the remaining communities are willing to take additional risk (which would be rewarded with a higher percentage of net income down the line). As long as the JPA is able to continue, all communities will still be passed by the network and residents able to subscribe. The exception is Sibley County itself; if the County does not join, the project would be hard-pressed to run the fiber out to the farmers and residents outside town limits.

A representative from Frontier attended and passed out some financial data from Windom (I did not see it) - likely suggesting that Windom has "failed" because it has not yet broken even financially. But, as we have frequently discussed, these networks (especially small, rural networks) take many years to break even. I doubt the Frontier rep included a discussion of how many jobs Windom's network has created or preserved, or the many other benefits that have accrued as a result of the network.

This project is still very much in consideration -- even if they move forward to create the Joint Powers Agreement, they will need to have a healthy response to non-binding pre-subscription and will then likely have to pass a 65% referendum required by MN law for such telecommunications projects. And then they will have to finance it, likely with non-recourse revenue bonds or a lease arrangement.

They are asking the right questions -- now we will wait to see how the towns and County react to creating the Joint Powers Agreement.

Lafayette and a Level Playing Field

This is a great inside look at how one community built a globally competitive broadband network (probably the best citywide network in the US) and the barriers they faced from incumbent providers Cox and BellSouth.

Terry Huval, the Director of Lafayette Utilities System in Louisiana, spoke to the U.S. Senate Committee on Small Businesses Entrepreneurship on April 27, 2010, on the topic of: "Connecting Main Street to the World: Federal Efforts to Expand Small Business Internet Access." Huval's full testimony is available here.

Huval's presentation told the back story of LUS Fiber, focusing on the barriers to publicly owned networks in Louisiana.

The FCC National Broadband Plan, on page 153, includes Louisiana as one of 18 states that “have passed laws to restrict or explicitly prohibit municipalities from offering broadband services.” While the Louisiana law did not prohibit Lafayette from providing broadband services, its mere presence provided, and continues to provide, a fertile playground for BellSouth (and its successor AT&T), Cox and their allies to create mischief, resulting in discouraging local governments from stepping in to provide these services even when the private telecom companies refuse to do so.

Louisiana, as with many other states including North Carolina, has powerful incumbents that claim there is an "unlevel playing field" and that local governments have too many advantages in building broadband networks (incomprehensibly, they simultaneously claim that local governments are incompetent and publicly owned networks always fail). But state legislators - who hear constantly from the lobbyists of these wealthy companies, have passed laws to discourage publicly owned networks.

Huval details just some of the disadvantages the public sector faces in comparison with the private sector (we detail many other disadvantages in our "Breaking the Broadband Monopoly report).

For example, while Cox Communications can make rate decisions in a private conference room several states away, Lafayette conducts its business in an open forum, as it should. While Cox can make repeated and periodic requests for documents under the Public Records Law, it is not subject to a corresponding obligation – a “show me your plans, but don’t dare ask to see mine” mentality. Louisiana law limits the ability of a governmental enterprise to advertise, but nothing prevents the incumbent providers from spending millions of dollars in advertising campaigns. An important focal point of the legal challenges involved the right or ability of Lafayette to pledge assets of the utilities system as security for the bonds, something that the private corporations do all of the time without the slightest scrutiny. To be sure, the “playing field is not level,” but it is the government which is disadvantaged, not the private companies.

Additionally, Cox and BellSouth engaged in many activities to break the will of the community to build a network. Common tactics are "push polls" and glossy mailings with inaccurate claims to scare people - particularly before a referendum. Usually, they are not this silly, but a Lafayette resident recorded one call:

One of the questions alluded to the city requirements for lawn watering during dry summer conditions. The question generally was phrased as “Since the city only allows you to water your lawn only three days per week, how do you feel about the city offering you cable TV service where you could only watch television three days per week?” The community member and, ultimately, the out-of-state questioner in this push-poll, are both heard chuckling at the ridiculous nature of the questions.

Make no mistake though, these polls are often effective at confusing and scaring people away from publicly supporting a community network.

Lafayette, along with other cities like Chattanooga, Tennessee; Bristol, Virginia; and Monticello, Minnesota, had to spend a lot of time in the courts before building the network.

By the time the Louisiana Supreme Court rendered its decision in 2007, almost three years had passed since the city’s first announcement of this project in 2004. The political and legal battles brought and promoted by the incumbent telecoms cost the city of Lafayette nearly $4 million. Interestingly enough, Cox Communications, which had been increasing its rates several times a year prior to Lafayette’s initial announcement to explore its offering of telecommunications services, decided to freeze its rates in Lafayette between 2004 and 2007. At the same time, Cox continued to increase its rates in other parts of the state. Estimates indicate that Lafayette citizens and businesses saved nearly $4 million due to these deferred cable rate increases, so in a roundabout way Lafayette’s citizens saved in reduced cable TV rates the amount the city spent defending itself in this extensive litigation process.

This quote reveals that quantifying the costs and benefits of publicly owned networks is difficult. Communities often see lower rates from all providers when they build a competitive, publicly owned network. The lower rates to everyone in the community are a tremendous benefit of public ownership.

However, the incumbent companies do not always advertise the lower rates directly. These companies can cross subsidize - using their massive profits from communities with no competition - financing large efforts to go door to door, offering special discounts to subscribers to starve the publicly owned network.

Cox has increased its rates in the multi-parish area, which includes Lafayette, and is going door-to-door to offer lower customized pricing to regain customers already being served by LUS Fiber. Apparently the notion of “fairness” espoused by the private companies does not include the increasing of rates to customers in non-Lafayette areas who have very few competitive options which allows Cox to use the resultant higher revenues to offer much lower pricing in Lafayette areas where there is now meaningful competition from LUS Fiber.

Then there is the simple matter of payback. These are powerful companies with massive resources.

In addition, Cox representatives were recently active in attempting to undermine the future of the city’s century-old electric, water and sewer utility system. During a recent rate increase effort for these traditional utilities, Cox representatives were lobbying Lafayette council members to oppose the rate increase in order to adversely affect the utility system’s future viability. All of these examples indicate an underlying strategy to hurt the city simply because the city voters dared to choose to authorize the building of their own telecommunications system.

Building a publicly owned network is a difficult task, but certainly beats the alternative of relying on these companies and their dirty tactics to prevent any competition.

Update: Thanks to Lafayette Pro Fiber for providing time stamps on the video of the committee hearing when Huval speaks.

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.

Update on Salisbury Fiber Network

After focusing on the North Carolina battle at the Legislature (regarding whether cities should be allowed to choose to build their own broadband networks or if they should solely have to beg the private sector for investment), I wanted to check in on Salisbury, which is building a FTTH network.

Salisbury has persevered through many obstacles, including finding financing for the project in the midst of the worst economic downturn since the Depression. They will begin serving customers this August.

After choosing the name "Fibrant" as the name of the network, they have established a slick web presence at fibrant.com. The site has a a blog, but is rarely updated currently.

Earlier in the month, the local paper discussed the ways in which the fiber network will aid public safety. The short answer is video, video, video.

Video can be used for security cameras (both in public places and in private homes) as well as to give officers better situational awareness when they arrive on a scene. But wireless video access is often the key - both so officers can stream video in the cruiser and because wireless video cameras are easier to place (no pesky wires to run) and move around.

Though wireless video is helpful, it creates of a lot of data that is best moved across fast, reliable, wired networks. This is why fiber-optic networks and wireless are better understood as complements than substitutes. A robust fiber architecture greatly eases the problems incurred by creating a wireless network because the wireless nodes will be more efficient if all are tied into a fiber network. Rather than streaming data across the entire city to send a single feed to a cruiser, a local access point will stream it across a smaller footprint.

"They are potentially looking at helmet cams," Doug Paris said, assistant to the city manager. "Those who are sitting outside (the structure) will be able to see what's going on inside."

It would make little sense for the fireman to have wires coming out of their helmets. But that wireless signal from the helmet probably won't propagate to the fire hall or police station. Instead, a wireless access point near the fire can grab the signal and make it available to anyone who needs access to it.

One reason public safety departments may not want to rely on privately owned wireless networks is because they may have dead areas. Consider that wireless carriers may focus investment in the areas that generate the highest revenues -- they may see little reason to ensure their services are reliable in rural areas or warehouse districts, for example. Police officers need access to all their tools everywhere in the community, not just where it is convenient for some company to offer it. Ownership of both the wired and wireless components make a lot of sense to local government.

And finally, just because we cannot get away from it, Salisbury has been involved in fighting back Time Warner's Monopoly Protection Act at the state capital - Raleigh. Both local officials and a private business owner traveled across the state to oppose a bill to prevent communities from building networks.

Local business owner Brad Walser was surprised how much opposition there is to publicly owned FTTH networks:

"I'm a firm believe that fiber optics will open the door to innovation and current high bandwidth applications, such as telemedicine, remote training in education, hoteling and telecommuting," Walser said. "It opened my eyes to how hard the city is having to fight to ensure they can install this fiber network."

He recognized that the unwillingness of incumbent providers to invest in modern networks hurts communities:

"Certain areas within the city limits cannot receive reliable bandwidth. We host websites, e-mails, off-site data storage, and for them to get that data to us, they need a good connection to the Internet."

Around the country, many of us are watching these events in North Carolina, hoping Time Warner and its legion of lobbyists cannot pass a bill to lock communities into their shoddy service.