Last year we noted that a bill to expand local authority to invest in publicly owned broadband networks would return in 2012. HB 1711 is in Committee and causing a bit of a stir. "A bit of a stir" is good -- such a reaction means it has a chance at passing and giving Washington's residents a greater opportunity to have fast, affordable, and reliable access to the Internet.

Washington's law presently allows Public Utility Districts to build fiber-optic networks but they cannot offer retail services. They are limited to providing wholesale services only -- working with independent service providers to bring telecom services to the public.

Unfortunately, this approach can be financially debilitating, particularly in rural areas. Building next generation networks in very low density areas is hard enough without being forced to split the revenues with third parties.

Last year, House Bill 2601 created a study to examine telecommunications reform, including the possibilty of municipality and public utility district provisioning. The University of Washington School of Law examined the issues and released a report [pdf] that recognizes the important role public sector investments can play:

Broadband infrastructure is this century’s interstate highway system: a public investment in an infrastructure that will rapidly connect Washington’s citizens statewide, nationally, and internationally; fuelling growth, competition, and innovation. Like highway access, the path to universal broadband access varies with the needs of the local community.

Our primary goal is to expand broadband access. We believe allowing municipalities and PUDs to provide broadband services addresses the most significant hurdles to broadband expansion: the high cost of infrastructure. In conjunction with a state USF, PUDs and municipalities are well placed to address the needs of their consumers.

A secondary goal is to promote a competitive marketplace. We believe that empowering PUDs and municipalities will spur competition which will drive innovation and improved service.

The analysis recognized the weakness of those arguing that only the private sector should be allowed to build this essential infrastructure:

To be successful private providers need to be able to generate profit for their shareholders. However, when an effective competitive marketplace does not exist, private providers only have a weak incentive to expand access to broadband services. In fact, the scarcity of service justifies the collection of high rates from users. In Washington’s urban areas, the barriers to entry are so high that incumbent providers have little trouble keeping new providers from entering the marketplace. Qwest (soon to be CenturyLink) and Comcast, merely vie for existing users, rather than expanding the overall number of ratepayers. In contrast Washington’s rural areas are characterized by low population density and large geographical distances between communities. The lack of concentrated business consumers in a given area translates into weak or non-existent business case for providers to build broadband infrastructure in rural areas. Arguably, rural areas are poised to reap the biggest rewards from broadband expansion, quickly integrating communities into existing networks of private and public service.

Not all public utility districts are pushing for this law to be changed. I asked the Chelan Public Utility District (one of the oldest and largest public services providers in the state, which we have previously covered here) about their position on the legislation. Chelan is not interested in offering retail services but does not oppose changes that would allow other PUDs to do so. They rightly oppose any law that would require PUDs to offer retail services -- something with which we strongly agree. State legislatures should not be telling communities what business model they have to use.

Getting back to HB 1711, it is presently in the Technology, Energy, and Communications Committee. The bill's author, Representative John McCoy has taken the arguments of opponents into account by limiting the impacted public utility districts to those in a county with 300,000 people or fewer. To build a network and offer retail services, a public utility district (or rural port district) would have to gain the approval of its governing board after a public meeting and be subject to state regulation for the services it offers.

The original bill also granted the authority to municipalities to build retail networks -- a right that munis appear to have presently but it is not clear (inviting expensive litigation from big anti-competitive providers). That provision has been removed from the present bill.

Opposition

The bill's opponents may be separated into two groups. The first is the usual gang of big, absentee corporations like CenturyLink, Frontier, and Comcast that typically oppose any legislation that could create competition to their services. They have a ton of lobbying power and very little desire or capacity to solve the rural broadband problem in Washington state.

The second group is more interesting. It is a collection of local businesses that are actually rooted in the community. Many are ISPs that operate on existing wholesale-only networks owned by public utility districts. They are afraid of either being kicked off the network or having to compete against the PUD itself in provisioning services. These are certainly legitimate fears.

Unfortunately, the small providers are also limited in the capacity to build the necessary networks needed to bring modern connections to everyone in the state. Offering service on an existing PUD network requires far less capital than building their own network. If the state wants to move toward a Washington where all residents and businesses have fast, affordable, and reliable access to the Internet, it has to risk upsetting the small ISPs. They do not have the capacity to connect rural Washington; the public utility districts and local governments have not just the capacity, but also the responsibility. It is time for the state to stop making it all but impossible for them to do so.

Get Involved

Local communities must have the freedom to build the networks they need without interference from federal or state capitals. Quoting from the Federal Communication Commissions' National Broadband Plan: "Congress should make it clear that Tribal, state, regional, and local governments can build broadband networks."

This bill will not succeed without a grassroots effort. People in Washington should contact their representatives (you can find them here), particularly those on the Committee:

Former FCC Commissioner Copps recently said, "So it is regrettable that some states are considering, and even passing, legislation that could hinder local solutions to bring the benefits of broadband to their communities. It's exactly the wrong way to go."

Washington is smart to expand local authority in this matter. Local citizens are the best judge of whether a network is necessary and desirable as well as the most responsible business model.

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.

I've censored the following, in protest of a bill that gives any corporation and the US government the power to censor the internet--a bill that could pass THIS WEEK. To see the uncensored text, and to stop internet censorship, visit: http://americancensorship.org/posts/15925/uncensor

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Susan Crawford published an excellent essay in the New York Times presenting her Looming Broadband Monopoly argument as a discussion of the coming digital divide between those with access to next-generation networks and those without.

These numbers are likely to grow even starker as the 30 percent of Americans without any kind of Internet access come online. When they do, particularly if the next several years deliver subpar growth in personal income, they will probably go for the only option that is at all within their reach: wireless smartphones. A wired high-speed Internet plan might cost $100 a month; a smartphone plan might cost half that, often with a free or heavily discounted phone thrown in.

The problem is that smartphone access is not a substitute for wired. The vast majority of jobs require online applications, but it is hard to type up a résumé on a hand-held device; it is hard to get a college degree from a remote location using wireless. Few people would start a business using only a wireless connection.

She identifies the problem as a lack of competition in the market while highlighting the role of lobbying from the wealthy cable companies to keep it that way:

The bigger problem is the lack of competition in cable markets. Though there are several large cable companies nationwide, each dominates its own fragmented kingdom of local markets: Comcast is the only game in Philadelphia, while Time Warner dominates Cleveland. That is partly because it is so expensive to lay down the physical cables, and companies, having paid for those networks, guard them jealously, clustering their operations and spending tens of millions of dollars to lobby against laws that might oblige them to share their infrastructure.

In this essay, her preferred solution is better federal regulation that would require companies that own networks to share parts of their infrastructure with competitors (to significantly reduce the problems of natural monopoly). Unfortunately, she did not explicitly discuss the solution of the communities building their own networks - a topic she has discussed at great length elsewhere in very positive terms. Her essay ties in nicely with the paper we highlighted looking at the growing costs of network exclusion.

While we recognize the benefits of open access policies that require infrastructure owners to share their network rather than monopolizing it and profiting from the scarcity of these essential connections, we believe the best solution is to allow/encourage communities to build publicly owned networks -- particularly those that are open to independent service providers.

Even if the Obama Administration had the courage to take on powerful companies like AT&T and Comcast, the next administration could easily reverse any policies meant to encourage competition. Better to build community-owned infrastructure that is not as susceptible to the massive lobbying dollars of big cable and telephone companies.

Update: For those who saw the a subsequent response to Crawford's column in the letters-to-the-editor from Verizon's Chairman, he flat out lied in several of his rebuttal points.