Large Telecoms Strangle Municipal Broadband, But FCC Intervention May Provide Relief

For many Americans seeking high-speed Internet access for their homes, options are often very limited. In the Raleigh, NC area I have access to exactly two players when it comes to reliable high-speed internet for my home: Time Warner Cable and AT&T. Time Warner Cable’s highest speed tier in my area gives me 50 Mbps downstream and 5 Mbps upstream speeds. On the AT&T front, I can’t even get U-Verse at my address, so I would be limited to 6 Mbps downstream speeds via DSL (reliable information on upstream speeds is quite elusive, although they likely aren’t very good).

With limited choice and often dismal upstream speeds, it’s no wonder that many people are excited to hear that newcomers like Google Fiber are expanding super-fast gigabit internet across the country (albeit it in a strategic and cautious pace). But some Americans also have access to other high-speed fiber internet options that compete with the big guys like AT&T, Comcast, Time Warner Cable, and Verizon: municipal internet.

Municipal Internet: A Silver Bullet?

Some smaller cities have found themselves at the mercy of these large telecoms for Internet access. In the case of the small town of Wilson, NC, town officials first approached Time Warner Cable and Embarq, requesting faster Internet access for their residents and businesses. Both companies, likely not seeing a need to “waste” resources on a town of just 47,000 residents, rebuffed their demands. So what did Wilson do? It spent $28 million dollars to build its own high-speed Internet network, Greenlight, for its residents, offering faster speeds and lower prices than what the big guys could offer.

Time Warner Cable and Embarq wouldn't lend Wilson, NC a hand, so the small town built its own network.

Greenlight provides Internet-only service ranging from 40 Mbps for $39.95 per month to 1 Gbps for $104.95 per month. There are also package bundles available that add TV and phone service.

And wouldn’t you know it; that finally got the big telecoms to respond. However, the response wasn’t to build out infrastructure in Wilson or compete on price; it was to kill municipal broadband efforts altogether in NC, citing unfair competition. In early 2011, House Bill 129 was introduced, which seriously hampered the ability of cities to create brand new broadband Internet networks, and put in place new restrictions to limit the pricing competitiveness of existing services versus private alternatives. Some of these restrictions include:

  • Shall provide nondiscriminatory access to private communications service providers on a first-come, first-served basis to rights-of-way, poles, or conduits owned, leased, or operated by the city unless the facilities have insufficient capacity for the access and additional capacity cannot reasonably be added to the facilities.
  • Shall not use city resources that are not allocated for cost accounting purposes to the city-owned communications service to promote city-owned communications service in comparison to private services or, directly or indirectly, require city employees, officers, or contractors to purchase city services
  • Shall not subsidize the provision of communications service with funds from any other noncommunications service, operation, or other revenue source, including any funds or revenue generated from electric, gas, water, sewer, or garbage services.
  • Shall not price any communications service below the cost of providing the service, including any direct or indirect subsidies received by the city-owned communications service provider and allocation of costs associated with any shared use of buildings, equipment, vehicles, and personnel with other city departments.

NC’s governor at the time, Bev Perdue, had the opportunity to veto the bill, but instead allowed it to become law. In April 2011, Gov. Perdue explained:

I believe that every school, household and business in North Carolina – no matter where they are – should have access to efficient and affordable broadband services.

There is a need to establish rules to prevent cities and towns from having an unfair advantage over providers in the private sector.  My concern with House Bill 129 is that the restrictions the General Assembly has imposed on cities and towns who want to offer broadband services may have the effect of decreasing the number of choices available to their citizens.

For these reasons, I will neither sign nor veto this bill.  Instead, 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.

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FCC Might Just Help Municipal Internet Get Off The Ground

So what are underserved cities and residents to do when large telecoms won’t bolster their networks to offer higher speeds or compete on price, and further strengthen their positions by supporting legislation to crush municipal Internet operations? Well, that’s where the FCC comes in.

A new report from News Observer indicates that the FCC is prepared to side with two towns that ran into roadblocks deploying and maintaining their own high-speed Internet networks. The two towns in question include aforementioned Wilson, and Chattanooga, TN. Action by the FCC would effectively strike down the laws — like those that strangle Greenlight in Wilson — which prevent cities from undercutting established players on price. In the case of Chattanooga, actions by the FCC would allow its municipal Internet service to branch out, skirting existing laws that prevent networks from operating in certain geographical regions.

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The News Observer adds that while Wilson and Chattanooga would just be the initial battlefronts for the FCC’s latest assault, action in these two cities could help topple legislation that has passed in roughly twenty states to favor large telecoms. The move would also be in line with President Obama's call for the expansion of faster and cheaper broadband options for Americans.

The FCC is justifying its actions based on Section 706 of the Communications Act. Section 706 states:

The Commission and each State commission with regulatory jurisdiction over telecommunications services shall encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans (including, in particular, elementary and secondary schools and classrooms) by utilizing, in a manner consistent with the public interest, convenience, and necessity, price cap regulation, regulatory forbearance, measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment.

However, FCC intervention will not come without a fight. Senate and House Republicans are looking to “prohibit the Commission or a State commission from relying on section 706 of the Telecommunications Act of 1996 as a grant of authority” courtesy of a new bill sponsored by Senate Commerce Committee Chairman John Thune (R, South Dakota) and House Energy and Commerce Committee Chairman Fred Upton (R, Michigan).

Last month, the FCC upped the legal definition of “broadband” from 4 Mbps down and 1 Mbps up to 25 Mbps and 3 Mbps respectively. Naturally, American’s ISPs are balking at the reclassification. The National Cable and Telecommunications Association (NCTA) says that 25 Mbps is unneeded, claiming, “Netflix, for instance, bases its call for a 25Mbps download threshold on what it believes consumers need for streaming 4K and ultra-HD video content — despite the fact that only a tiny fraction of consumers use their broadband connections in this manner, and notwithstanding the consensus among others in the industry that 25Mbps is significantly more bandwidth than is needed for 4K streaming.”