Tuesday, June 21, 2011 at 12:00PM The So-Called “Level Playing Field” for Broadband Networks
Community and Municipal Networks Face Tough Opponents
As North Carolina goes, so goes the country? Could be—at least that's the fear of some communities and municipalities who had high hopes for building and operating their own broadband networks. But a recent legislative ruling in North Carolina has dealt a serious blow to such networks, and may force rural customers, schools, libraries, hospitals, and governments to keep existing within the “broadband gap.” The Tar Heel State is just one of many places where battles between public and private broadband networks are heating up. Hanging in the balance are rural areas, where reliable broadband can be scarce.
Still, despite months of public protest and voracious debate, the North Carolina Legislature passed HB129 on May 23. The controversial bill, dubbed the "Level Playing Field/Local Government Competition Bill,” restricts the North Carolina cable broadband market to commercial providers—a move that limits (and may even destroy) municipal broadband networks in the state. The new law effectively prevents local governments from dipping into the consumer broadband provider business. It also places deployment restrictions and imposes tax burdens on cities seeking to create their own high-speed networks.
Additionally the law changed the state's definition of broadband so that the so-called “broadband gap” would be less noticeable. Now broadband service will be declared as “widely available” even if a single resident in a particular census block has access to broadband. Analyst Phillip Dampier noted that such service “could be 768kbps DSL from CenturyLink. If one person has the service, the thinking goes, everyone can get it, even if they can't.” In other words, Dampier says, the North Carolina legislature attempted to cover up North Carolina’s broadband crisis by “changing the definition of the word ‘crisis‘ into ‘accomplishment.’ Instead of allowing communities to provide service in unserved areas, simply declare all areas as being served, thereby negating the need for community broadband.”
A few towns and cities in North Carolina—such as Wilson and Salisbury—have already begun operating their own municipal broadband. As fully-functioning networks, they will be exempted from the new law, but still adamantly oppose what they see as unfair regulation. “Essentially this bill is a cable monopoly protection bill,” said Doug Paris, assistant city manager of Salisbury. “It protects Time Warner Cable and ensures they will continue to do what they’ve been doing for decades, which is serving where they want to serve and not serving where they don’t want to serve.”
Time Warner (NYSE:TWX) and CenturyLink (NYSE:CTL) have tried to pass similar law in North Carolina for four years, hoping to ban municipal broadband networks entirely. But with the passage of HB129, the companies had to settle for a law that instead saddles proposed municipal networks with overwhelming bureaucratic obstacles. The likely outcome is that municipal broadband projects will be stunted if not completely abandoned.
The question remains whether municipal and community-owned networks are sustainable in the first place and whether they pose unfair competition to incumbent providers. Cable companies and others claim that public entities should not compete with private business and that such competition gives an unfair advantage to public owned networks. But proponents of such networks cry foul. Often municipal networks serve a different customer demographic than private communications providers, and some have been financially sustainable. In Salisbury, for example, subscribers have reached 1k even though the network just went online in 2010—a milestone that indicates interest among unserved and underserved customers in the area. The town of Wilson initially had to borrow $28m for its network, but according to the city's Public Affairs Manager Brian Bowman, the city now has enough subscribers to make the network fiscally sustainable for another year.
Other towns and cities in North Carolina won't be so fortunate, though, and some have admitted that their plans for community broadband are on hold, in light of this recent law. John Bjurman, CTO of Chapel Hill, said that the law effectively ends the city's plans for its own network, even while the city has already put fiber in the ground. The law requires that municipalities calculate service costs and taxes as the same level applicable to private companies, which would make planned networks like the one in Chapel Hill financially out of reach.
In the end, North Carolina's battle may be a taste of what's to come across the country. Christopher Mitchell, director of the Telecommunications as Commons Initiative, estimates that at least 54 towns, nationwide, own their own fiber networks, while 18 states have marshaled a fight against such networks. [See “Community Broadband Preemption Map” here]. Mitchell argued that community networks don't compete with incumbent providers and are constructed for a town to remain technologically relevant, attract and retain business, and in some cases stave off job losses. Mitchell writes, “The result is that leaders in a number of communities have said, ‘We really need to build something ourselves, because if we don’t, we’re not going to be competitive, we’re not going to be able to grow small businesses, we’re not going to be able to get existing businesses to relocate here, and people generally aren’t going to want to live here if we don’t have fast, affordable and reliable access to the Internet.’”
It's possible that each state will have to face these battles one-by-one, as federal regulation seems unlikely and the number of community-owned fiber networks is on the increase. But there's also the chance that the energy behind these debates and discussions will spur new solutions: Perhaps, just perhaps, these battles will prove that it's necessary to forge public-private partnerships between traditional providers and the towns and cities still living in the broadband gap. In the meantime, it's clear who won this show-down in North Carolina: large communications providers, with deep pockets and political sway.
