Local Governments Seek Relief

Throughout 2011, local CIOs pled with technology vendors to lower their fees to align with municipal budget shortages. With local tax revenue depressed, likely for the long term, CIOs insist that vendors should accept lower profits from local governments as an unavoidable reality. Many of these CIOs are still waiting, however, for large vendors — particularly software providers — to agree and help determine a “new normal” that would satisfy both sides.

CIOs have asked companies to cut ongoing service and maintenance fees, but vendors insist that those fees fund the product upgrades and service quality on which customers rely. Cost-cutting pressure from government is especially frustrating for sales representatives who frequently say they have no control over the charges. Those fees are part of the company’s overall financial strategy, which concerns shareholders and other considerations larger than any single customer.

An alternative suggested by some CIOs is for multiple local governments to share applications, hardware and services regionally. The combined purchasing power, they predict, would result in lower fees and better efficiencies for all involved. It’s not a new idea, and it already can be found in spots around the country. Most governments, however, run their own IT, and vendors incentivize sales representatives around that preference. Given the difficulty of getting governments to share control of IT systems, vendors have been reluctant to create new sales models for such arrangements.

In 2012, however, a new normal may finally materialize between local governments and vendors. Some analysts believe that dwindling federal stimulus money and continuing reductions in state funding will give local CIOs new motivation to share IT. If that leads to actual commitments to local government collaboration, it could trigger new vendor sales models for accommodating them.

Watch for vendors to use those changes as an occasion to push for revamped contract terms and conditions. Particularly troubling to companies are indemnity clauses that make them financially liable for problems beyond their control and for mistakes made by government customers. Also, expect deeper discussions between vendors and governments about the impact these contracts have on vendor adherence to federal rules, like the Sarbanes-Oxley Act. Sales representatives say that better understanding of those restrictions would help CIOs see why companies often can’t change fee structures and sales models as quickly as governments would like.   — Andy Opsahl, Features Editor Community Broadband Loses Ground

The battle between community broadband supporters and big telecommunications providers in the United States intensified in 2011. A variety of measures were passed or made inroads in state legislatures to restrict the ability of municipalities to build and run their own high-speed networks.

Local governments and telecoms have fought over community broadband networks for years. Municipalities want the flexibility to build out high-speed broadband and deliver the service to citizens at a low cost, while the private sector has cried foul, alleging that tax breaks and other issues give local governments unfair advantages as a broadband provider.

— Andy Opsahl, Features Editor

Community Broadband Loses Ground

North Carolina was a prime battleground in the community broadband war over the last several years, with four different bills being presented — and failing — to restrict the creation of new networks. But in 2011, the Level Playing Field/Local Govt. Competition Act was passed and ultimately outlawed new municipal networks in the state.

Arkansas also enacted “barrier to entry” legislation, and similar measures were introduced in Wisconsin and South Carolina. The former was delayed into the future for a final resolution to the community broadband issue, while the latter did not pass.

There were moves, as well, to strengthen local authority over community broadband. Legislation was introduced in 2011 that would have made it easier to build, own and operate municipal broadband networks in Washington,Tennessee and New Hampshire. Those bills were defeated, however.

Christopher Mitchell, director of the Telecommunications as Commons Initiative for the Institute for Local Self-Reliance, a nonprofit economic and community development consulting group, said to the extent that there is momentum for new barriers, it stems from political posturing.

Mitchell contends big cable and telecom companies are using tea party groups as cover to push their monopoly position. “Groups like the misnamed ‘Americans for Prosperity’ get a ton of money from big businesses and show up to rally, suggesting that there is a grass-roots base supporting big cable and telco political positions,” he said.

Jim Baller, president of the Baller Herbst Law Group, a firm that specializes in communications, hesitated to speculate on where community broadband battles would loom in 2012. But he said a new wave of bills was possible.

“As far as 2012 is concerned, the opposition could mount anywhere,” Baller explained. “We saw that in 2005, following the enactment of Pennsylvania’s barrier to entry. We saw legislation proposed coast-to-coast, north-to-south and we have to be prepared for it to happen again.”

— Brian Heaton, Staff Writer