When it comes to expanding access to the Internet across the US, the federal government has long looked first to the private sector, ignoring hundreds of years of experience showing that unaccountable private companies cannot be trusted to sufficiently invest in or govern essential infrastructure.

Inevitably, they price access to high and invest too little as they maxmize their profits -- thereby minimizing the profits of all other parts of the economy.

So let's take a little survey of the progress we see from these companies.

We have long railed against the Verizon -> FairPoint fiasco in New England that left Verizon much richer at the expense of residents and businesses in rural Vermont, New Hampshire, and Maine particularly. Well, FairPoint creditors have realized the depth of Verizon's scam and are suing Verizon for $2 billion. Read the complaint [pdf].

According to the complaint (pdf), Verizon not only made out like a financial bandit up front, but took advantage of regulatory delays to strip mine the assets of anything of value, including core IP network components, business services, and localized billing and support assets required to support the three states. Verizon then billed out their support assistance for millions per month during the very rocky transition, during which time 911 and other services saw repeated outages, resulting in millions more in refund penalties.

Karl Bode is right to criticize the state authorities that allowed this fiasco to occur. Their inability to regulate in the public interest has hurt everyone stuck in the mess. While we can expect powerful companies like Verizon to try to game the system at every opportunity, there is no excuse for making it so easy for them.

As long as we are talking about Verizon shedding its rural investments, let's take a look at how Frontier is doing since it inherited thousands upon thousands of FiOS customers as part of its recent deal with Verizon. Frontier has decided the best approach is to transition those customers from the next-generation FTTH network to an older, slower, less reliable, DSL alternative. Find me another country where a major company is moving customers away from fiber-optic connections. This is a national embarrassment.

Rather than investing in better technology, Frontier has literally doubled down on DSL by marketing a second DSL line to customers. Connect one computer to one line and the TV/video game unit to another one. Of course, it turns out they are lying (or incompetent) when it comes to how much they are charging for it...

In other words, that $13.50 1.5 Mbps (if you're lucky) DSL line is actually closer to a $50 1.5 Mbps DSL line once Frontier gets done slamming you with additional fees. These kinds of below-the-line fees have been a mainstay at phone companies for decades, essentially allowing them to engage in false advertising and covertly jack up the advertised price post sale. It's a practice that has yet to see any real attention of regulators, even those ceaselessly professing dedication to "transparency." It helps that Frontier serves a lot of uncompetitive markets where users have no other options, resulting in "deals" like this one.

Let's move on to the nation's largest cable company, Comcast. We recently noted Comcast's dubious distinction as the least trusted company in America. It was simultaneously the second least trusted. I'm guessing we won't see that award plastered on the side of the vehicles their poorly compensated contractors drive around.

Occupy Philly, the City of Brotherly Love offshoot of Occupy Wall Street, recently demonstrated at the Comcast Center to bring attention to Comcast's corporate tax dodging. Hey -- I thought Comcast routinely said it wasn't fair that non-profit entities don't pay taxes!

Finally, the big cable companies in general have been singled out in a study showing that Americans lost $38 billion in wages last year while waiting for technicians and delivery people. Cable companies were the worst at making people wait - prompting one person to say "SCAMCAST should be their name."

There is plenty more of examples like the above, but I'm done writing about them today. Just recall that the federal government prefers that this group of unaccountable corporations build, own, and operate the most important utility of the 21st century. We prefer local ownership that is accountable to communities. Time Warner Cable has actually been sued for its terrible customer service!

Where would be without humor?  I just hope Time Warner Cable isn't inspired to add more bogus charges to their bills following this article.  A sample:

$17.23 — Basic service

$37.35 — Standard service

$40.81 — Actual service

$12.50 — Federal taxes

$11.75 — Federal taxes, part two

$6.85 — New York City taxes

$5.35 — Fort Wayne, Indiana, city taxes

$3.45 — Singapore Nuclear Defense Fund

$16.30 — Twenty-five-per-cent gratuity

$13.99 — DVR (disabled video recorder)

...

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.

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: 

If you the take a look at our community broadband map, you'll see that Texas has only one citywide wired network owned by the public: Greenville. The story behind it is the same story we hear from just about every other community - but they actually spelled it out on their history page.

In 1999, Greenville, Texas' economic development leaders were unable to attract certain businesses and on the verge of losing existing companies due to a lack of high speed Internet.

In response, Mayor Sue Ann Harting asked SBC for a commitment to deploy DSL. That request was denied. The city's cable franchise, Time Warner, also declined to commit to cable modem Internet deployment.

Greenville found itself in a situation similar to one that many towns had faced years ago when railroads changed transportation. If the railroad was not routed through a town, that town just might die. What would happen to Greenville if the information superhighway did not come through the city?

Incumbent cable and telephone companies, their lobbyists, and associated "think tanks" like to claim that communities are somehow "duped" into building publicly owned networks. The truth is that just about every community wants to avoid the hassle of building a network but incumbents refuse to invest sufficiently to keep the community competitive for economic development and a high quality of life.

They build networks when backed into a corner, not because they want to. Fortunately, all that hassle almost always pays off with far more benefits than problems over the long term as communities transition from depending on some distant corporation to solving their own problems locally.

In fact, the results are often like that of Greenville:

Greenville citizens were not willing to take that chance. They took destiny into their own hands by amending the city charter to allow their revenue-only supported, municipally-owned electric system to build a hybrid fiber coaxial system to make high speed Internet available to everyone. Digital cable TV was offered as an option on that same system.

Once the citizens had committed to this venture, the city's incumbent telephone and cable franchises found ways of deploying that high speed Internet that they had only recently declared not feasible in Greenville.

In 2001, citizens began connecting to the city's state-of-the-art system that accessed all 10,000 of the homes and business in Greenville. Public acceptance has been very good, with more than 4,500 of those homes and businesses (as of June 2005) now choosing the new municipal services after less than four years in business. Financially, this non-tax supported venture was seeing black ink earlier than expected.

Public acceptance readily came from slightly lower cost to the consumer plus faster Internet speeds and more cable TV channels than the incumbents offered. (The existing cable company wasn't even offering ESPN 2 in 2000). Consumers also welcomed the chance to have these multiple services placed on one bill with "one-stop" local customer service to handle all of the municipal services - one inclusive bill for water, sewer, garbage, electric and cable TV and Internet as options.

After the community built its network, the incumbent providers finally upgraded their services and undoubtedly lowered their prices. The local Chamber of Commerce has this to say about the public investments:

Greenville is fortunate to have its own non-profit, locally operated municipal electric, digital cable television, high speed Internet, water, and wastewater utility systems. 

Unfortunately, Texas is one of the four states that have made it all but impossible for other communities to copy Greenville's success. And as long as AT&T can dump millions into the Legislature, that law will be hard to change.