Friday, March 4, 2011
Cue head explosion: More on the broadband bill
House Bill 129 is enormously complicated, and is ostensibly about putting limits on the ways cities can build broadband Internet systems, and thus compete with private companies such as Time Warner Cable.
As noted earlier this week, the bill forbids cities from using tax dollars to build the system under most plausible scenarios, and would make them cough up "payments in lieu of taxes" on the system, much like a private company would pay regular taxes.
The bill also intends to make cities hold a referendum before borrowing money to build their system. But there are a number of other provisions I not covered this week that, city folks say, were designed to make it overly difficult for cities to get into the business, or for cities with existing systems to continue operating.
The SouthEast Chapter of the National Association of Telecommunications Officers did a bill analysis to break down the sections it considers to be the most limiting. It's 16 pages, more than five times longer than the bill itself.
But by excerpting the analysis you get a picture of the hoops private companies want cities to jump through to offer broadband services. Said Jay Ovittore, SEATOA's legislative representative on this matter: "I guarantee if this bill passes you will see massive rate increases from Time Warner Cable."
Some examples of what SEATOA doesn't like (in italics) followed by some analysis from me:
From the bill itself: A municipal provider may “provide communications service only within the jurisdictional boundaries of the city providing the service." While that may make sense when a city acts like a city, the stated intent of this bill is to level the playing field between cities and private companies. Clearly this clause would give private companies an important advantage over cities.
From SETOA's analysis: "The bills run roughshod over the well-established federal restrictions on state authority and, for the first time ever, charge the NC Utilities Commission (NCUC) with regulating rates charged by municipal utilities and fees collected by cities for any communications service." For me, the question here is: Who do you figure those regulators will be friendly to?
From SETOA's analysis: "The city is required to publish notices in a newspaper of general circulation for four consecutive weeks prior to each hearing (a total of eight newspaper notices). In no other situation are cities subject to such excessive, onerous, and unreasonable notice obligation, giving rise to the implication that nothing is more important to the state." That is a stringent notice requirement. One could argue this speaks to the bill's intent.
Ovittore also said the bill will make it harder for a range of municipal projects to get funding from banks, due to the uncertainty it creates. A few cities, including Wilson, already have their own broadband service. Ovittore argues that, if the state shows a willingness to rewrite the rules for those systems to help private businesses now, who's to say the state won't eventually do that in other areas, such as garbage service?
Now, this bill is going to be renegotiated before it goes further, sponsors have said. And cities clearly have significant advantages over private companies now when it comes to providing Internet service, or other utilities for that matter. (Note: Digdeeper makes some good points about advantages large companies have over small cities in the comments.)
Bill proponents have also put together a summary of various public broadband projects, and it's not pretty. It shows millions lost on municipal Internet projects around the country, leaving local taxpayers on the hook. I haven't had time to confirm the summary's figures, but it appears to be well sourced.
At the bottom line are questions of philosophy. Given that it doesn't make financial sense for companies to provide high-speed Internet service to everyone, and particularly to rural customers, should cities be allowed to do so? And given a city's inherent advantage over private companies, how many rules can you put on them to level the playing field before it is onerous to the point of discouragement, leaving a few large cable companies to charge whatever they can get?
Comments (4)
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"Dig Deeper" is "spot on". As a former cable corporate-level VP (I left the industry - of my own volition 2 1/2 decades ago), I can substantiate every one of the points made, as I've done it myself (in my former life) vis-a-vis municipally-owned cable systems. The approach taken is from Chapter 1 of the industry's book "How to Maintain Control and Tilt the Playing Field in Our Favor". Also (representing the public sector for the past 2 1/2 decades) I've had to deal with the telecommunication industry's legislative efforts to preempt existing codified local authority in recent years in NC, SC, AL and GA. In all but Georgia we were successful, but only because of very strong Grass Roots efforts and some legislators who showed true courage by opposing their own party leaders. It often takes courage not to do the expedient thing. This matter in NC underscores the fact that the industry is completely amoral (though not necessarily immoral) and their only loyalty is to their bottom line. The terms "doing the right and honorable thing" and "civic responsibility" are not listed in the industry's lexicon of philosophies, nor are the terms "disingenuous", "duplicitous" and "misleading".
Rusty Monroe - The Center for Municipal Solutions
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Being able to use tax receipts to subsidize a utility is different than squeezing one group of customers to compete for another. Plus, cities control rights of way and a host of other regulatory methods. It's a structural advantage, though you make good points about the abilities Time Warner has.
Ok now will you Democrats get off your butt here in Durham and understand that we need to help fund Democrats across the state. Unless you want more of this and unless you want more of our legislators having absolutely no impact on what is becoming law in our state.
Mr. Fain: Your say this "And cities clearly have significant advantages over private companies now when it comes to providing Internet service, or other utilities for that matter."
How exactly is that? TWC is a multi-billion dollar company. It raised all the rates of its subscribers in the Raleigh communities, so it could lower the rates in Wilson. That's cross-subsidy to the nth degree. It can siphon money out of North Carolina with consistently high rate increases and use it to build infrastructure in its California systems. Cities in NC can't and won't do that. When TWC wants to develop a new product, it just loans money to itself. Can cities do that? When TWC buys programming for its cable systems, it gets massive discounts because it buys for 2 million subscribers. Cities of 20,000 households can't do that. When TWC wants to crush its competition, it predatory prices (below cost) and hires a high paid team of lobbyists to push through legislation it writes - Cities clearly can't do that. And when Time Warner Cable tells you cities are failing at municipal broadband and should be stopped, why don't you wonder about that? If it were true, TWC would get all the subscribers from a failed Wilson or Salisbury SO THEY SHOULD NOT CARE. That tells you these systems are successful. These companies don't care about the taxpayer; they care about profit. And these municipal fiber systems have advanced technology that is holding TWC more accountable. The math equation is simple - cheaper to hire a lobbyist and push legislation through that stops competition than upgrade your infrastructure.
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