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Utilities

The Municipal Menace?

My favorite recent headline about the ongoing legislative brouhaha over municipal networks is this one, from a publication called The Escapist: "Tenn. Congresswoman Valiantly Protects ISPs from Evil Municipal Broadband."

That sarcasm is a reference to an amendment attached by US House of Representatives Rep. Marsha Blackburn (R-Tenn.) to the fiscal 2015 Financial Services appropriations bill that would keep regulators from modifying state laws prohibiting municipalities from building and operating broadband networks. The amendment was approved 223-200 in the House last week, but a final version of the bill must still be passed by the House and Senate and signed by President Obama to become law.

The topic is a hotly debated one of late, as more municipalities and municipally owned utilities, frustrated by what they consider to be less than acceptable levels of broadband service, take matters into their own hands and build networks, usually funded by bond issues approved by taxpayer vote. Such activity in Blackburn's own home state of Tennessee is frequently cited as the model for municipal network deployment, thanks in large part to the success of EPB Fiber Optics , the unit of the municipally owned utility in Chattanooga that has operated a gigabit network there for four years and is currently seeking to expand its network into other parts of the state.


For ongoing updates on Gigabit Cities and the municipal network debate, visit Light Reading's Broadband/FTTx content channel.


Blackburn's aim is to prevent the Federal Communications Commission (FCC) from pre-empting state legislation, particularly in the 20 states that have laws regarding municipal broadband (including Tennessee). FCC chairman Tom Wheeler, along with several Democratic members of Congress, contend that municipal networks shouldn't be blocked by state laws and that the FCC has and will exert the authority to pre-empt them. (See Dems Urge FCC Action to Protect Muni Nets.)

It's a partisan debate, with legislators who share Blackburn's view largely standing behind the concept of states' rights. "Twenty states across our country have held public debates and enacted laws that limit municipal broadband to varying degrees," Blackburn said on the House floor last week. "States have spoken and said we should be careful and deliberate in how we allow public entry into our vibrant communications marketplace. Inserting the FCC into our states' economic and fiscal affairs sets a dangerous precedent and violates state sovereignty in a manner that warrants deeper examination."

For obvious reasons, incumbent service providers want to stomp out competition from municipal networks, both to protect their own market dominance and because they believe the public funding foundation of most municipal networks makes the competitive playing field uneven. Whether they are successful in that effort remains to be seen -- but with so much momentum of late from municipalities and utilities in the Gigabit Cities realm, it seems likely that telecom and cable providers will have city-backed competition to contend with for some time.

Is there a role for local governments and municipal utilities in the broadband game, or should municipal leaders stick to running their cities and stay out of the telecom fracas? Perhaps more time and more experiments like Chattanooga -- rather than more legislation and litigation -- will help identify the best solutions.

See these stories for more muni musings:

— Jason Meyers, Senior Editor, Utility Communications/IoT, Light Reading

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jasonmeyers 7/22/2014 | 11:18:20 AM
Qualified Contenders? Some observers -- even some who support municipal involvement in broadband competition -- believe cities' involvement should stop at facilitating a more competitive environment. The thought is that municipalities have rights of way and could construct dark fiber networks, for example, that might up the competitive ante in their regions -- but that the role of city government should be to run the city, not to sell broadband services to consumers. What are your thoughts? 
Duh! 7/22/2014 | 11:43:30 AM
Questions Question for telecom attorneys: the Telecom act gives the FCC authority to preempt state laws on a lot of issues... if I recall, there has to be some nexus to Interstate commerce?   Can they make a case for this? 

Why an incumbent be threatened by a new competitor (public or otherwise) entering a market in which they choose not to participate?  Is it really worth so many silver bullets? 

This is not Marsha Blackburn's first attempt at micro-managing the FCC.  She must know that these amendments are not going to make it beyond Conference. Does she have a genuine policy interest?  Does she object to the FCC's existence?  Or is she just trying to rack up brownie points with campaign donors?   

 
jabailo 7/22/2014 | 12:47:53 PM
Re: Qualified Contenders? Optical Broadband is becoming so commonplace it is almost like a utility.   Governments provide water, electricity, natural gas through regulated companies because these are all natural monopolies.   Somehow this is has not yet applied to Internet telecommunications (although it did in the POTS days pre-Ma Bell breakup).

The question is how stable is the technology, and are there significant innovations yet to come.   The problem with government run institutions (and the reason we deregulate) comes because their direction is stability and hence tend to squelch innovation.   What about wireless broadband technologies, for example?   Won't these impact fiber and wired technologies?

 
KBode 7/22/2014 | 1:45:07 PM
Re: Qualified Contenders? I like how Blackburn (and company) claims to be protecting states rights, but is ok with large companies literally writing state telecom law that often completely obliterates the rights of these local communities to make these decisions for themselves. I still think the opponents of municipal broadband need to understand that the best way to stop cities from getting into the broadband business is to deliver well-priced, high-quality services in the first place so these communities don't feel forced to build their own networks.
jasonmeyers 7/22/2014 | 2:13:32 PM
Re: Qualified Contenders? KBode, that's an excellent point. In many cases I think they may not even have the municipalities in question on their radar, which is another issue entirely. 
Carol Wilson 7/22/2014 | 2:29:26 PM
Re: Qualified Contenders? Blackburn is a mouthpiece of Big Telecom, that seems clear. 

It hasn't made sense to me, for a very long time, the way AT&T, Verizon, Comcast, etc. invest heavily in lobbyists to get state laws and federal regulations tilted in their direction. It's such a vestige of their past.

That money and effort could be much better and more productively focused on figuring out cost-effective ways to serve these customers, up to and including public-private partnerships and even letting municipalities build fiber networks, as long as they are public access. All of the big boys have the services to deliver, and could do so over any fiber network. But they seem unable to view the world except from a limited legacy perspective. 

At the same time that legacy network operators want to be freed from carrier-of-last-resort rules and allowed to abandon copper networks they say are too expensive to maintain, they want to prevent anyone else from building a fiber optic network. It's hard for anyone not to view that thinking as anti-consumer to the maximum degree. 
KBode 7/22/2014 | 2:46:09 PM
Re: Qualified Contenders? "That money and effort could be much better and more productively focused on figuring out cost-effective ways to serve these customers, up to and including public-private partnerships and even letting municipalities build fiber networks, as long as they are public access. All of the big boys have the services to deliver, and could do so over any fiber network. But they seem unable to view the world except from a limited legacy perspective."

A-men. Imagine how many fiber to the home connections that could have been run with the money spent on lawyers, lawsuits, lobbyists, disinformation campaigns, think tanks, etc?
brookseven 7/22/2014 | 3:49:02 PM
Re: Qualified Contenders? Guys,

The RBOCs and big MSOs are in the money making business.

IF they can spend a few million on lobbying instead of putting in networks and make more money....they will.

You think they would do it if they thought they would make more money the other way?

seven

 
KBode 7/22/2014 | 4:17:35 PM
Re: Qualified Contenders? It's certainly possible. Verizon stopped lobbying against municipal broadband builds several years back and instead invested in FiOS, much to the chagrin of the myopic, impatient investors who'd rather you just milk a network and a customer base until you face rotting lines and open revolt (at which time the investors just flee anyway). 

And, to come full circle, what we're talking about is having the FCC undo some of these awful protectionist state bills they've imposed to give rights back to the local communities.
brookseven 7/22/2014 | 4:28:40 PM
Re: Qualified Contenders? Kbode,

Investors believing something is true is very different than the company believing something is true.  You have accurately quoted investor opinion about FiOS.  The Verizon regime at the time believed there was more money in not losing the core consumer base in the urban and suburban parts of the network.  That is why they wanted to do FiOS.

I am also unaware of any FiOS cities doing significant 2nd fiber builds.  Verizon DSL only spots...why yes they are!  AT&T is the primary overbuild followed by Centurylink.

Companies don't need to agree with their investors.  But they do need to act in what they think is their biggest profit.

seven

PS - Remember in all these scenarios CAPEX is limited and it is going other places than Wireline.  Particularly small city and rural broadband.
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