In most states, telephone companies are required to serve everyone and when there are problems with the service, the state can mandate that the company fix them. But AT&T and ALEC are leading the charge to let these massive companies decide for themselves who should have access to a telephone, taking state regulators out of the loop.

These big companies use several arguments we are well familiar with - that mobile wireless is already available (in many rural areas, it actually is not available) and there is plenty of competition. If only that were the case.

I was thrilled to see David Cay Johnston cover this in a column on Reuters:

AT&T and Verizon, the dominant telephone companies, want to end their 99-year-old universal service obligation known as "provider of last resort." They say universal landline service is a costly and unfair anachronism that is no longer justified because of a competitive market for voice services.

The new rules AT&T and Verizon drafted would enhance profits by letting them serve only the customers they want. Their focus, and that of smaller phone companies that have the same universal service obligation, is on well-populated areas where people can afford profitable packages that combine telephone, Internet and cable television.

What happens when the states hand over authority to these companies? David has an answer:

AT&T and Verizon also want to end state authority to resolve customer complaints, saying the market will punish bad behavior. Tell that to Stefanie Brand.

Brand is New Jersey's ratepayer advocate whose experience trying to get another kind of service - FiOS - demonstrates what happens when market forces are left to punish behavior, she said. Residents of her apartment building wanted to get wired for the fiber optic service (FiOS) in 2008. Residents said, "We want to see your plans before you start drilling holes, and Verizon said, 'We will drill where we want or else, so we're walking,' and they did," Brand told me.

Verizon confirmed that because of the disagreement Brand's building is not wired. And there's nothing Brand can do about it. Verizon reminded me the state Board of Public Utilities no longer has authority to resolve complaints over FiOS.

Better broadband is not just about technology. FiOS is an advanced fiber-optic network that crushes any cable or DSL network but Verizon still is not accountable to the community. This is exactly why communities are smarter to find ways to build networks that are democratically accountable rather than hoping a private company will make the necessary investment.

The Progessive States Network has been tracking these bills and recently alerted its readers to the threat from these bills:

A rash of backward thinking appears to be taking hold in a number of states that might be better spending their time considering how to create modern technology jobs and skills at home. Some states are considering how best to deploy modern high-speed Internet to ensure their local economies and residents are ready to compete in the global marketplace. But in other states, legislators are debating whether telephone service should be offered at all - leaving many observers wondering whether they would prefer to live in the 19th century, before Alexander Graham Bell's invention became ubiquitous.

Fortunately, consumers and advocates in many states can still stop this horrible legislation - as Kentucky did (with some assistance from the Rural Broadband Policy Group).

Under the bill, AT&T, Windstream and Cincinnati Bell would no longer have to provide basic landline services to all homes and businesses if a competitor were available to provide them. If there were no competitor, a company could provide cellphone service instead.

Opponents, including Tom FitzGerald, executive director of the Kentucky Resources Council, have argued that such a change would be a burden on the poor and the elderly who either can’t afford cellphones or are simply uncomfortable with them.

This came up recently in Mississippi:

A bill before the Legislature would wipe out the obligations of AT&T and some other phone companies to serve expensive customers and would limit the Public Service Commission's remaining authority over those firms.

Public Service Commissioners Brandon Presley, a Democrat, and Leonard Bentz, a Republican, are fighting the move, saying customers need regulators' intervention to get their problems fixed. Other phone companies are opposed to the bill, saying it could cut the connection fees collected by small rural telephone companies.

Minnesota has been considering a similar bill that has bipartisan support. Unfortunately, few in the state have realized just how bad this would be for rural and older residents.

California is considering a bill RIGHT NOW.

"IP enabled communications services include not only broadband internet and online media services, but also the basic voice telephony services that we all use every day," said Sean McLaughlin, executive director of Access Humboldt and a Knight Media Policy Fellow with New America Foundation. "We are concerned that the Public Utilities Commission, along with Counties, Cities, Community Services, School and other special Districts will be hamstrung by SB 1161, prevented from protecting consumers, and hindered from developing community broadband projects that meet our local needs and interests."

Access Humboldt has echoed concerns of The Utility Reform Network (TURN), Mendocino County Board of Supervisors, Rural Broadband Policy Group, and the California Broadband Policy Network, in opposition to SB 1161. TURN is actively organizing statewide consumer opposition to the bill - joined by national organizations such as Free Press and the Rural Broadband Policy Group.

The LA Times has just noted the incredible power of AT&T's lobbyists in Sacramento.

At the 2010 event, AT&T's president and the state Assembly speaker toured Pebble Beach together in a golf cart, shaking hands with every lawmaker, lobbyist and other VIP in attendance.

The Speaker's Cup is the centerpiece of a corporate lobbying strategy so comprehensive and successful that it has rewritten the special-interest playbook in Sacramento. When it comes to state government, AT&T spends more money, in more places, than any other company.

Despite AT&T's massive power in California, there is still time to stop this backward-moving legislation.

We are running a guest commentary today. Eric Null is a third-year law student at Cardozo Law School in New York City. He is passionate about corporate and intellectual property law, as well as technology and telecommunications policy. Follow him @ericnull or check out his papers.

While researching a paper about municipal broadband networks, I was struck by the tremendous benefits that municipal networks can provide. It can be the first high-speed Internet link for an area without broadband, or it can provide some much-needed competition in areas that currently have access to broadband, but for some reason that existing access is unsatisfactory (e.g. price, service). Municipalities, in theory, can run the network for the benefit of the public rather than with a vicious profit maximization motive. Indeed, municipal networks bring many benefits. But first, a little history.

In the United States, cable providers have set up regional monopolies for themselves, and “competitors” such as DSL and satellite are characterized by slower connection speeds and it is arguable that they are actual substitutes to cable access. Certainly within the cable industry, any “competitive” cable company attempting to compete with incumbents is met with high costs of building new infrastructure and lack of customer base. Municipalities can pick up where smaller, private entities cannot succeed. Municipalities have had a long history of investing in critical infrastructure, and they have the mentality for long-term planning that private companies simply cannot enjoy. A large company like Verizon likely has to justify any expansion of its network to its investors and ensure them that the venture will return a profit relatively quickly. Not so with municipalities; a city network allows its citizens to benefit indirectly (and directly) over the long-term. Thus, city governments can be a formidable competitor in the telecom and cable industries.

Some states, regrettably, have banned or restricted the practice. In Nixon v. Missouri Municipal League, the Supreme Court interpreted so-called vague language in the Telecom Act of 1996 to allow states to ban or restrict municipal networks through state law. (47 U.S.C. § 253(a) states that “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.” The Court interpreted “entity” not to include municipalities.) Nothing could have pleased incumbents more. In a number of states (including Wisconsin, North Carolina, and Virginia) incumbents fought tooth-and-nail to convince state legislatures to preclude municipal networks pursuant to this decision—or, short of that, to restrict municipalities in some way that raises entry costs. Incumbent mobilization has been daunting and impressive.

Where are we today? Almost twenty states either severely limit or restrict municipalities from erecting networks. Municipalities within those states must work that much harder to avoid legal sanction when starting a network, and the extra barriers may act as a complete disincentive to starting one at all.

Network Neutrality

At the end of 2010, the FCC announced its Open Internet regulation, forcing broadband Internet service providers (ISPs) not to block traffic, not to unreasonably discriminate between traffic, and to be transparent about their network management practices. The response was cacophonous, many viewed it as not going far enough, including this author; others thought the regulation did too much, including the House of Representatives.

What was the problem the FCC was trying to address? Increasingly, ISPs want to create a “smarter” network (as opposed to the traditional “dumb,” non-discriminating network that treats all traffic equally regardless of content) that will filter, on its own, “harmful” traffic (spam, viruses) and anything else the network owner wishes to filter. But, as the FCC Order states, ISPs have an incentive to discriminate against certain traffic opportunistically: ISPs can threaten any content provider with slowed speeds or blocked access over its network unless that provider pays an extra fee, so-called pay-for-priority contracts. (For example, assume Comcast tells Amazon it will not carry the website unless Amazon pays Comcast X% of its profits, or $X per year.) Larger content providers could arguably afford this. Smaller content providers and up-starts certainly cannot. Either way, this is not a result that will benefit Internet commerce or the free and open exchange of ideas and content. It is axiomatic that most (read: all) large content providers were at one point a small up-start, often created by college students in a dorm or in a garage. If ISPs were able to strangle content providers with pay-for-priority contracts or similarly stifling plans, they could be artificially cutting-off future YouTubes, Facebooks, Apples, and Microsofts. Working in the counter-factual is difficult, but it is at least feasible that opportunistic use filtering technology favors the status quo at the expense of future innovation.

One potential solution to this content filtering threat is municipal broadband. While private ISPs may have a motive to filter content to gain a competitive advantage and increase profits, municipalities may not have to run the network for such a narrow benefit. Instead, a city government could run the network in a way that favors the public interest and the prosperity of its citizens—such as making it widely available for a low (or no) price, or using it to promulgate emergency warnings akin to the (failed) FCC/FEMA National Emergency Alert System test late last year, but on a much smaller scale (think about cities in Hurricane Alley). If municipalities running their own networks were to pledge to leave Internet traffic alone and to deliver packets under the current best-efforts system, the network neutrality issue could be solved for citizens of cities electing to enact this type of plan. Users would have increased choice. Even if the private ISP provided faster speeds to certain content, the user could still choose the municipality’s network instead if the user decided that he or she preferred the non-discriminating best-efforts system. This could provide a reprieve from the contentious network neutrality debate by allowing municipalities to own the network and to make the rules it wants.

Some may argue that the public interest lies in the “free market.” But unregulated markets thus far led to the Summer of Love (where the large telecom companies split the U.S. into different regions to establish regional cable monopolies (see p. 250 in link), skyrocketing prices (at much higher rates than inflation), and little rural buildout. If municipalities agreed to keep their pipes open to all content providers and users, it could avoid opportunistic filtering by private ISPs and monopoly rents that result from one high-speed (cable) provider. In other words, the Internet and access to it would be cheaper and more open, consumers would be happier, innovation would flourish, and local businesses could compete on a level playing field (to name just a few benefits). Another benefit is bridging the digital divide.

Bridging the Digital Divide

The digital divide has in some sense worsened as wealth and income inequality in the United States has been exacerbated. While it seems that many, including the poor and many minority groups, own smartphones, the affluent own them in much higher numbers. The poor that do have access to these technologies have access to only a limited supply and are often lower-quality, and low-income users do not use as much bandwidth as the affluent.

What is the problem here? The problem is that in the information age, the most valuable commodity is information itself. The Internet is used by hundreds of millions around the world to learn about breaking news, to take online classes (MIT now offers certificate programs through online courses), to view funny or interesting videos on YouTube, to debate politics, and to read super-interesting blog entries about municipal broadband (for more, see Brett Frischmann’s Network Neutrality chapter in his upcoming book, Infrastructure). Increasingly, low-income individuals are being left behind because they are less likely to learn about breaking news, take online classes, or access most things others with high-speed cable connections can access with ease. If low-income individuals do not have access to the information that can inform and inspire, how are we supposed to live the American dream?

Municipal broadband can provide a solution: affordable or free broadband Internet access for everyone. St. Cloud, Florida, despite ending its service, reported that those who used its Wi-Fi network were often the same people who were unable to afford private ISP service in St. Cloud. This was clear when the city determined it would shut down the service, and those citizens loudly voiced their opposition. “St. Cloud is not a hick town anymore . . . . We’re country folks, but we’re not backwards. One of the reasons for that is our Internet.” Corpus Christi, Texas, also provides free Wi-Fi successfully, which allows anyone in the 147-square mile town to access the Internet for free at a high speed. The Digital Divide Committee in Lafayette, Louisiana, determined in 2005 that municipal broadband can help bridge the digital divide. That is still very much true today: with more affordable (or free) services, lower income citizens are better able to access the high-speed Internet.

Municipal networks only go so far. A lingering problem is the inability of the poor to afford the technology to access the network. That is why some municipalities (Philadelphia, Lafayette) made it part of their mission to provide the tools to the people that need them, including computers, software, and training. Though, even without these programs, municipal networks still provide cheap Internet access, increasing the chances of bridging the digital divide.

Much, Much More

Social and economic benefits abound when a municipality implements a network. Bristol, Virginia, and Chattanooga, Tennessee, are seeing businesses move to their cities in part because of the excellent municipal network. Corpus Christi, Texas, has seen the spring break tourism sector boom while still being able to ensure the safety of visitors through constantly streaming video cameras. Santa Monica, California, lowered telecom costs for local businesses by 67% by leasing capacity directly to local businesses. That competition lowered private ISP prices by 20%. Many municipal networks include smart systems that increase government efficiency (Corpus Christi’s network, for example, began as a system for Automated Meter Readers after a meter reader was bit by a dog). Hospitals use the networks for tele-medicine in Santa Monica and Bristol. Best of all, municipal broadband networks can be run by people who actually prioritize the well-being of customers, rather than distant shareholders. Bristol employs local citizens for customer support, meaning customers are treated with respect. As a gauge, six of the top nineteen most hated companies are telecommunications or cable companies. Having exemplary customer service can go a long way toward making citizens happy.

Many benefits accrue as a result of municipal broadband. Just ask Bristol or Santa Monica: both municipalities have setup consulting organizations to help other municipalities in their attempts to create city networks. The benefits contribute to a healthy, vibrant community and an efficient government. Municipal broadband can be the gateway to social and economic prosperity. A municipality would be silly not to at least consider providing broadband access itself.

Barriers to This Potential Solution

First, Nixon v. Missouri Municipal League is a significant barrier to this solution. Incumbents have secured their effective monopoly in many regions of the U.S. in the shadow of this decision. A simple solution would suffice: Congress should amend the Telecom Act of 1996 to expressly include municipalities within the definition of “entity” such that states would not be able to enact legislation preventing them from offering broadband services. However, this would be very difficult—read Lawrence Lessig’s book Republic, Lost to figure out why. (Hint: money distracts Congress, and who has all that money?) Therefore, the best we can hope for at this point is to convince state legislators not to ban or inhibit municipal networks. But again, ask Lawrence Lessig about this—he fought valiantly, but unsuccessfully, against the North Carolina municipal network law erecting significant barriers to municipal networks.

Second, there is only a limited, concerted effort to actually bring municipal broadband to unserved or underserved areas (Local Institute of Self-Reliance and New America Foundation’s Open Technology Initiative are both working to spread municipal networks, but we need more). Municipal networks are significant undertakings, and without outside help to plan these complicated networks, the amount of work and planning required can be intimidating for a small municipality (that is, if a city network on is the municipality’s radar in the first instance). Many municipalities either do not know this is possible, do not know where to begin, and/or do not know what such a network would look like. A significant coordinated effort to inform and execute such networks would be a tremendous boon for the growth of municipal networks, and could go a long way in solving network neutrality, the digital divide, and many other issues.

Third, there is simply not enough attention being paid to this issue, and the attention that is being paid is largely from the incumbent side (someone has to fight/smother the little guy, after all). There is only a small number of public interest organizations dedicated to this issue. Perhaps more organizations (or people within these organizations) would help give the idea some publicity and help launch it, or perhaps it would not. Either way, ask the typical citizen whether he or she knows what municipal broadband is, and chances are you will get a blank stare. But, ask him or her to comment on Internet, phone, and cable prices, and you will get a diatribe about the horrific provider. There is a disconnect here—people see and live the problem, but cannot see, and definitely do not live, the solution.

Conclusion

If municipalities were the primary provider of Internet access in America, the Internet would look and feel generally the same as it does today. The difference is in the future. There are two divergent paths ahead: one where the private ISP is able to seize a chokehold over traffic that moves across the Internet’s pipes, capturing every opportunity to monetize on that chokehold; the other is where communities themselves slowly become an increasingly powerful player in the next-generation Internet access industry, and can say to incumbents that their monopolistic behavior will no longer be tolerated. The path we take largely depends on whether citizens are able and willing to make important decisions about how they are governed by their municipality, and whether they can give municipalities a chance to compete with private ISPs. In today’s political culture, deregulation at the federal level is all the rage, which may indicate an increased tolerance for local governments to play a heightened role in the lives of its citizens. It would be one form of pulling us up by our bootstraps.

I recently stumbled across a great point regarding the spectacular failure of the US (mostly the FCC, but Congress should certainly share some of the blame) to properly regulate broadband connections to the Internet. US policy results in a few massive providers dominating the market. Fred Goldstein, a principal of Interisle Consulting Group, wrote the following:

In truly competitive markets that display some degree of commodity-like characteristics, large and small vendors tend to coexist. I'm drinking coffee right now, which is a good example. Maybe Maxwell House and Folgers (and their parent companies) have a large share of the market, competing on price for their swill. But there is plenty of room for others to differentiate their product. Dunkin and Starbucks have built huge chains on their own style of semi-premium product, while another couple of niches of premium and superpremium beans are easy enough to find. Food markets tend to be like this; check out any Whole Foods (a/k/a The Museum of Modern Vegetables) for a supply of priced-above-commodity products. I feel foolish for selling most (not all, thankfully) of my Whole Foods stock when it was in the dumps a couple of years ago.

The same thing happens in many fields. Apple itself sells computers above commodity price levels. There's a whole "high end" audio business catering to those who like to show off how much they can afford to spend. The automobile industry has mass-market commodity cars and several premium tiers.

Internet access in the US lacks that because the natural monopoly on outside plant is not properly regulated. If it were treated here by EU norms, then any number of ISPs could access the wire. Some would just be cheap; some would offer premium help desks among their services. That doesn't happen, however, when the usual number of "competitors" is two. Even more so when those competitors agree that they should divide up markets between themselves rather than overbuild, or (heaven forbid) let outside information providers onto their facilities.

The wire should be regulated. ISPs shouldn't.

Amen. Physical connections are a natural monopoly. Even if the economics supported many physical providers, having so many would be terribly inefficient. Much better to have networks that are owned by the community and have independent service providers competing to deliver services -- just like the roads.

One of the reasons community broadband networks face so many unique hurdles (often created deliberately by states in response to cable/dsl lobbying) is because of the many ways in which campaign finance corrupts our national and state governments.

Community broadband networks are focused on meeting community needs, not sending lobbyist armies into Washington, DC, and state capitals (though one of things we do at the Institute for Local Self-Reliance is offer help to those that do push pro-community agendas in these areas).

To understand why DC is so focused on furthering the corporate agendas of AT&T, Comcast, Time Warner Cable, and others, is to understand the revolving door. (Also, understanding capture -- which we have explained previously.)

In short, many of the people who make decisions about telecommunications policy in DC have worked, will work, or are presently working for the massive companies that effectively control access to the Internet in most of America's communities.

The good folks at Geke.US have created the following Comcast Venn Diagram illustrating a small piece of the DC revolving door.

Reforming this system is a deep, seemingly intractable problem. But for those looking for answers, a good place to start is with the work of Lawrence Lessig. I just finished his Republic, Lost, which offers a grand tour of the problems resulting from the present system of campaign finance.

You can also see a number of his presentations here.

His organization, the Rootstrikers aim to get to the root of problems rather than being distracted by trying to fix symptoms of deeper problems. This is precisely what we do with our focus on community networks.

Many focus solely on resolving digital divide issues, improving rural access to the Internet, lowering the cost of broadband, or the various other problems that result from narrowly-focused private corporations owning and controlling essential communications infrastructure with inadequate regulations.

Solving the problem of ensuring all Americans have fast, affordable, and reliable access to the Internet (a goal remarkably consistant with the FCC's supposed mission enshrined in law by the Communications Act), would be remarkably easier in a world where Congress and state legislators were not corrupted by the influence of the campaign finance system. This is why we emphatically support efforts (like those of Lessig) to reform that system.