April 1, 2011 By Brian Heaton
A bill that would place restrictions on the establishment of municipal broadband networks is gaining traction in North Carolina. The proposed legislation, House Bill 129, was passed by the state’s House of Representatives in an 81 to 37 vote on Monday, March 28, and is making its way through the state Senate.
The bill, which has sparked controversy across the state, is called the “Level Playing Field/Local Gov’t Competition” act. The legislation would require communities to alter the way networks are financed and deployed. One section of the bill mandates that a municipal network not price services below their actual costs. The intent of the language appears to be an attempt to protect companies from unfair competition, even though private companies regularly offer incentive deals to attract customers.
For example, some companies might offer high-speed Internet for free for the first three months. That typically would be subsidized by profits from other areas of the company. If H129 becomes law, municipalities would be prohibited from offering the same deals through their own broadband networks.
Another requirement would be that municipal networks calculate their service costs, including all taxes, at the equivalent level that would be applicable to private providers. On its face that stipulation may seem fair, but the bill’s opponents say private companies ultimately end up paying much less in taxes than what is normally applicable, which would put municipalities at a disadvantage.
The bill has had a polarizing effect in North Carolina. Sponsored by state Rep. Marilyn Avila, R-Wake, supporters claim the legislation will protect jobs and promote investment. But those against the bill are adamant that it will devastate the economic future of the state and make it essentially impossible for cities to build their own community networks.
Avila, in comments to WRAL TV, said that H129 was designed to protect businesses from “predatory” local governments and establish a framework for muni-networks.
“It is not anti-competition,” Avila said. “The cities can enter into [broadband service]. It is not going to be easy, though, It’s going to be tough.”
At press time, Avila did not return repeated calls from Government Technology seeking comment on H129 and municipal broadband networks in the state.
Christopher Mitchell, director of the Telecommunications as Commons Initiative for the Institute for Local Self-Reliance, a nonprofit economic and community development consulting group, disagreed with Avila. He said if the bill in North Carolina is signed, he’d classify it as a de-facto ban on community broadband networks, given the wide breadth of restrictions in the bill.
“I don’t believe you’ll see any community surpass the hurdles to build a network if this bill passes,” Mitchell said. “The number of barriers will make it all but impossible.”
Catharine Rice, president of the SouthEast Association of Telecommunications Officers & Advisors (SEATOA), a local government information and support association, said that North Carolina would not be able to compete and attract businesses without community broadband networks.
“It will shut down in a slow-bleed way our existing municipal fiber-to-the-home systems and effectively prevent any new communities from building this infrastructure, even where the private sector is not [deploying] it,” Rice said.
The argument over H129 is based around the services that municipal networks provide. Locally-based broadband infrastructures in the cities of Wilson, N.C. and Salisbury, N.C., are a hit with businesses and residents, according to the bill’s opponents, who said users are able to enjoy significantly better download speeds than private cable outfits. Additionally, community broadband proponents contend that municipal networks are necessary to bring service to more rural areas where high-speed Interenet access is currently nonexistent.
While community broadband networks may sound appealing, they don’t come cheap. There are numerous challenges, both physical and fiscal, that make them difficult to build. In the nation’s western rural mountains, the sparse population drives up the difficulty level and the cost. In established, denser areas, it comes down to many cities not being able to work the costs of building a network into their budgets.
Given the unlikely prospect that community broadband networks would be deployed in a widespread fashion, Mitchell maintained that H129 is “absolute greed” on the part of big cable companies.
“The reality is, you aren’t going to find 90 percent of North Carolina’s towns that are going to do this [if the bill passes] because it’s incredibly difficult,” Mitchell explained. “Towns that have done [a municipal network] are really upfront about that.”
Still, despite the cost, technology is changing and high-speed ISPs Time Warner and CenturyLink, which are lobbying in support of the bill, probably aren’t ignorant to the success of muni-networks in and around North Carolina. From big cable’s perspective, however, building a fiber-optic network throughout their service areas isn’t a cost-effective option.
“It’s not hard to imagine Time Warner looking at [community broadband networks] and saying, ‘how can we compete with that?’” Mitchell said. “From their perspective, they are saying, ‘we need to make sure no one else is building these networks either.’”
Sign of Partisan Times
This type of proposed legislation is isn’t an anomaly in North Carolina. Four similar attempts were made previously, but the bills were killed in the legislative process. This year, however, the makeup of the state’s Legislature may push the bill over the hump.
For the first time in 100 years, the state’s Senate and House of Representatives are controlled by a Republican majority, creating a huge shift in ideology. Early on in committee meetings, H129’s opponents saw Republicans showing concern over the bill, but it was quickly passed and moved to the House.
The change was viewed as “troubling” by Mitchell, who said there typically isn’t a partisan divide on the local level about community broadband networks. He explained that there were just as many conservative towns as liberal towns building municipal networks and was disappointed that politics had entered the fray.
Rice was equally as frustrated, saying there were “more reasonable minds that were in control in prior years.”
Communities throughout the state are starting to see just how serious the issue is. Various cities and counties have passed resolutions against H129, including Raleigh, Greensboro, Asheville, Momeyer, Bladenboro, and Rockingham County.
“People want competition, choice, lower rates and better service,” Rice added. “I think if people knew how these elected officials are voting, they’d be appalled."
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