Municipal Broadband Networks Slammed in North Carolina

North Carolina law will prevent local governments from dipping into the consumer broadband provider business, several opponents say.

by / May 25, 2011

A bill that handcuffs municipalities from building their own broadband networks has become law in North Carolina.

Gov. Bev Perdue refused to sign or veto the controversial legislation, House Bill 129, instead leaving the measure’s fate to the state’s General Assembly. Without her signature and any further changes, the bill was officially enacted on May 21, effectively preventing local governments from dipping into the consumer broadband provider business. The bill places deployment restrictions and imposes tax burdens on cities seeking to create their own high-speed networks.

Perdue’s inaction was the latest setback for supporters of community broadband access in North Carolina, who argued that HB 129 — called the “Level Playing Field/Local Gov’t Competition” act — unfairly caters to the interests of big cable companies.

Cable providers Time Warner and CenturyLink lobbied strongly in support of the bill, claiming that when local governments act as broadband providers, it hinders the private sector’s competitiveness in the broadband market.

Perdue’s public statement on the matter indicated that while she understood concerns on both sides, her belief is that the bill’s restrictions may decrease the number of broadband choices for citizens.

“I call on the General Assembly to revisit this issue and adopt rules that not only promote fairness but also allow for the greatest number of high quality and affordable broadband options for consumers,” Perdue said in a press release.

A North Carolina local government official with knowledge of the state’s political landscape believes Perdue’s “middle of the road” stance was a protest indicating that she didn’t like the bill. The source said that if Perdue had vetoed the bill, it would likely have been overturned, as the governor didn’t have enough support in the republican-controlled state legislature to sustain the veto.

North Carolina Rep. Marilyn Avila, R-Wake, one of the bill’s primary sponsors, in comments this past March to WRAL TV, said the bill was not “anti-competitive” to cities, but admitted it would be difficult for cities to establish their own networks. At press time, Avila didn’t return a call from Government Technology seeking comment on Perdue’s decision.

“The FCC has been clear about its intent to enable more broadband in the U.S., not less — and I think that’s important to note,” said Brian Bowman, public affairs manager of Wilson, N.C., which has its own community broadband network. “The federal policy and the state policy are [now] not the same.”

FCC Commissioner Mignon L. Clyburn blasted HB 129 in April, calling it a “significant barrier to broadband deployment.”

This is the fourth time a broadband measure of this type has been attempted in North Carolina, Bowman said. The previous three tries were in 2007, 2009 and 2010.

“Essentially this bill is a cable monopoly protection bill,” said Doug Paris, assistant city manager of Salisbury, N.C., another city with its own broadband service. “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.”

Christopher Mitchell, director of the Telecommunications as Commons Initiative for the Institute for Local Self-Reliance, a nonprofit economic and community development consulting group, agreed and said that there is “almost no chance” another community in North Carolina will be able to build a new broadband network under the law.

“The Legislature, in passing laws like this, shows just how out of touch they are,” Mitchell said.
“It’s very clear to me that North Carolina’s legislators don’t understand the difference between a slow DSL connection and a modern, reliable fiber-optic connection. They don’t understand that what Time Warner and CenturyLink are selling isn’t helping communities be competitive in the modern era.”

Municipalities weren’t the only ones lobbying against HB 129. Harvard Law School professor Lawrence Lessig was among those who opposed the bill. In an open letter to Perdue on May 20, he called the measure “terrible policy.”

“No economy will thrive in the 21st century without fast, cheap broadband, linking citizens and enabling businesses to compete,” Lessig said in the letter.

Current Networks Exempted

A few cities in North Carolina that already have fully-functioning municipal broadband networks have been exempted from HB 129, including Wilson and Salisbury. Wilson built out its network in 2008 and has roughly 6,000 homes and businesses paying for Internet, cable, TV and phone services.

Salisbury’s network came online in 2010 and will have its 1,000th subscriber later this month. Wilson borrowed $28 million for its network, and according to Bowman, the city has reached the point where there are enough subscribers to make the network sustainable through the next fiscal year.

Other cities that began the process of installing the fiber-optic cables on which the networks run weren’t so fortunate. Chapel Hill asked to be exempted from the law, having already implemented the cables for an initial internal fiber network for city offices.

While permitted to finish the city-use network, John Bjurman, interim CTO of Chapel Hill, said HB 129 effectively ends any thought the city had of extending broadband service it to citizens, due to the bill’s requirement that municipalities calculate services costs and taxes at an equivalent level that is applicable to private providers.

On its face that stipulation may seem fair, but opponents of the bill said cable companies typically pay much less than what is applicable to them, so the requirement actually puts municipalities at a disadvantage.

“Who this bill really harms is small towns and rural areas where there is no service,” Paris said. “Chapel Hill and Fayetteville have put fiber in the ground and those assets are now stranded. They will never be able to reach their full potential.”

Brian Heaton

Brian Heaton was a writer for Government Technology magazine from 2011 to mid-2015.