Striking a Balance on Municipal Broadband

broadbandby John Szczesny

Changes in latitudes, changes in attitudes… towards municipal broadband, that is. As officials in the Roanoke Valley move forward with plans for a municipal fiber network the state of North Carolina is busy suing the FCC to prevent its local governments from doing the same.

To be fair, municipal broadband is no cakewalk in Virginia. Commonwealth regulators at the SCC require localities to essentially tax their own operations in an amount they would charge an incumbent Internet Service Provider (ISP) for such things as licenses, pole attachments, and street opening permits. They also prohibit cross-subsidizing telecommunications from other government operations, except when no other competitors are vying to offer similar services. Municipal networks must provide open access to other providers. And they can forget about cable TV.

Rules like these typically raise hackles from those on the left who see no problems with municipal broadband, since they relish the expansion of government control.  In their view such telecom legislation is nothing more the genesis of greedy cable companies, and while there’s no denying the influence of the cable lobby in state legislatures — apparently cable companies run the show in N.C. — there are, in fact, dangers in stripping all restraints from municipal network providers.

As long as government entities have a monopoly power on taxes and absolute control over land use, there is a need to hold them in check. Just ask the incumbent providers. Too many communities have abused their authority by exacting unreasonable fees for right-of-way permitting, and have bogged down network deployments through bureaucratic inertia. Much like developers seeking zoning approvals, the ISP network is viewed as another revenue stream.

Virginia regulators will need to find a middle road so municipal networks can fill voids where private sector ISPs are not competing, while also ensuring that municipalities and their network partners aren’t conferred unfair advantages.

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33 responses to “Striking a Balance on Municipal Broadband

  1. There is a basic tension between the need for high-speed networks that cover virtually all of the inhabited parts of the United States and the economics of serving remote and low-population areas. This is true whether broadband is provided through fiber optic cables or 4G LTE wireless connections. Absent subsidies, private providers are less likely to spend the capital necessary to deliver high-speed access in those markets.

    This, in turn, along with the desire of residents for broadband access, pushes some communities to consider and support municipal networks. In these very small markets and with the consent of local taxpayers, a reasonable argument can be made in favor of municipal broadband. When no one else will make the investment, there might be room for public investment.

    However, the call for municipal networks extends beyond those remote and small markets to larger markets where the private sector is willing to invest in broadband. That raises a problem in my mind and opens the doors for unfair taxpayer subsidies of the public network. IMO, the FCC’s approach is too broad. It should not be permitted to preempt state laws except in the cases where history shows there is not and will not be any private investment. The Commission would be better off preempting states and localities that unduly burden the construction of wireline and wireless broadband networks.

    • The FCC is pre-empting because NC passed a law basically outlawing municipal broadband, at the behest of broadband providers who were big campaign contributors. That hurts rural localities, it hurts small businesses, and it hurts residents trying to get a better education or start a business online. In this case, I am all for the FCC’s intervention. What NC did was wrong.

      I am not in favor of most economic development projects, as I mentioned earlier today. However, not having broadband is like not having electricity – and if municipalities see fit to subsidize broadband, to create opportunities for education and economic development that benefit all county residents, go for it. If less expensive broadband revitalizes businesses, I’m fine with municipal broadband in cities, too.

      This is far more like paying for roads or the police than like subsidizing a sports team.

    • TMT- 4G LTE wireless networks are not broadband as the speeds are nothing like those on fiber connections, which is true broadband (as in high speed internet).

  2. re: ”
    Rules like these typically raise hackles from those on the left who see no problems with municipal broadband, since they relish the expansion of government control.”

    Good Lord.

    It’s like Bacon never knew about the Rural Electrification Program or if he did he considered it a liberal govt power grab.

    Harry Byrd – farm-to-market secondary roads – another leftist socialist plot no doubt!!

    • The REA and related programs funded projects only where there was no available private investment to produce power or telephone service. As I wrote, in those markets, it may make sense to invest public dollars. But there are also pushes to offer taxpayer supported broadband networks in competition with private investment. That is not a good idea and quite hostile to business, IMO.

      • I disagree. 99.999999% of businesses benefit from better broadband access. We also have public police, instead of private security, and public schools available for those who choose to use them, even though that competes with private schools, and so on.

        This is a case where the public benefit is so large, I really have absolutely no problem whatsoever with municipal involvement. I would object if the municipality gave itself a monopoly – but offhand, that’s my only caveat.

    • Larry, how did I get sucked into this?

    • Larry- I wrote this blog. You’ve taken my comment out of its context to suggest I consider muni broadband a govt power grab, which is not the case at all if you read my piece in full.

    • LarryG, as TMT notes, the REA electric cooperatives originally came about where the private sector did not step up to the challenge of rural electrification. A logical consequence of that line of thought is that the 1930s REA law should have required that the REA coop MUST sell its business to any private investor that comes along and wants to buy it. Indeed you can make the case that some formerly rural, now suburban areas still served by REA coops would be better off today if Dominion could buy out the coop; I’m sure they’d like to. But that isn’t happening today, of course, thanks to vested interests. I think it’s reasonable to think about imposing sunset limits on government-owned broadband systems before they are built — if there’s a private ISP solution and if the problem of access to broadband by the poor can be solved separately.

      • I disagree. Price matters too, and reasonably priced broadband is a huge economic driver – it literally benefits every single resident.

        To me, this is in the very small list of things like police, public roads, and public schools, that is fine for the locality to do.

  3. sorry I got the wrong man.

    same crime:

    ” Rules like these typically raise hackles from those on the left who see no problems with municipal broadband, since they relish the expansion of government control. ”

    same question –

    was Rural Electrification a leftist expansion of govt control?

    how about farm-to-market roads? another leftist govt power grab?

    I DID read it in full and IF you had not written that passage about leftist and govt power grabs it was decent.

    but then, like Bacon, you can’t resist these iane partisan swipes

    I see the broadban issue in the same way as rural electrification and phone service – and even farm-to-market roads came about.

    and back then – I’m quite sure there were no folks shouting “leftist govt power grab” (though I could be “corrected” – got evidence? those folks were ordinary people (of all political stripes I bet) , who wanted those services when the private sector did not find them suitable to their own business plans.

    Don’t you think – a very similar thing is going on with modern-day broadband?

    do you think it’s own leftist and govt power grabbers who want broadband?

    I don’t think you can claim to be a victim of context here – you laid the context then underlay it with a political philosophy to delineate your position on it – right? Fair point?

    it seems these days- there is almost no issue that is not partisan,eh?

  4. Re: “The Commission would be better off preempting states and localities that unduly burden the construction of wireline and wireless broadband networks.” Do you have a definition of “undue” in mind?

    Re: “larger markets where the private sector is willing to invest in broadband,” frankly I don’t understand why VA’s requirement for equal treatment of e.g. pole attachment fees is a big deal; from the municipality’s point of view isn’t that merely an accounting entry if it owns the pole (as for a street light), and a payment required whether or not there’s such a law if it is someone else’s pole? Seems to me that sort of “equal treatment” requirement in State law is something that’s needed to limit, if not totally prevent, the subsidization problem with municipal systems competing unfairly in locations where there’s a good private option available.

    On a broader point, it seems to me the availability of a private investment owned system to deliver broadband often helps only those customers who can afford it, and in our modern cities there are many who can’t but very much need it to get along and to improve themselves. Do you have a problem with a municipality choosing to offer broadband free to all within its boundaries simply as a public service, like sidewalks and streetlights? Admittedly this amounts to a subsidy for quality-of-life and educational purposes and it would impact private ISPs, but there’s nothing hidden about it, and you never actually said you were against it.

    • taking John S at his word:

      ” …. the left who see no problems with municipal broadband, since they relish the expansion of government control. ‘

      sorta makes one wonder if govt itself and representing the interests of those who elect it – is a bit of a liberal scheme… eh?

      and yes – down my way – govt DOES think requiring development to build sidewalks IS .. NOT an appropriate role of govt. Roads, yes, by all means, even if you have to walk in the road but sidewalks – nope.

      Sorry John S – … you and Bacon seem to have the same disease and yes if you want to throw down your view of govt and the left – then others should have the ability to comment on it. In my mind – it certainly does go to the underlying view of the role of govt in issues like this.

      Adbar has, in my view, a good question. so what say you in response?

      is municipal broadband sorta like sidewalks?

      • Fair enough, but both the sidewalks and broadband are paid for out of taxes. Subsidizing some folks just means other folks pay more, whether that’s in the form of taxes or higher service charges.

        Also, I have no problem with you calling me out on my view of govt/ the left Larry. But saying I have this partisan disease because of how you interpret one sentence of my blog is over the top, IMO.

        • Johns – if you had left out the left love expansion govt comment – your post would have had a different meaning to me.

          but that comment revealed that you have a bias towards these kinds of services which until up until recently were never a partisan issue but instead a legitimate issue for people of all political stripes as some think sidewalks serve the vast majority at some point – just like roads do and thus are a legitimate cost to everyone.

          we’ve had this argument in one county locally whether the county has a responsibility for insuring that people pay for landfills and some now apparently consider that as a govt subsidy but when you point out that people will dump trash into ditches and vacant lots that govt still has to go pick up – (and people pay taxes to do ) then the “subsidy” folks end up in a bit of a quandary about it.

          I do not think – discussions about the role of govt need to be partisan. I think there can and are legitimate considerations and I think – here is the part that I react to – making these things overtly partisan by using words like “leftist” and “love expansive govt” really do pollute public policy issues these days.

          as soon as someone put the imprimatur of partisan politics on it – it just screws up any chance of a legitimate debate.

          we can respectfully agree to disagree I suspect but I will still make my view known – in discussion that turn needlessly partisan in my view.

        • Broadband is one of the few government investments that really does have a large multiplier – because businesses need broadband to function.

          By making broadband available, people do pay more taxes, not because you’re taxing them at a higher rate, but because they can make more – start businesses, people, and grow. All those things result in paying more taxes.

          This is not a zero sum game, and treating it like one hurts rural areas, badly. This is a HUGE problem for people who want to start small businesses in rural parts of the state – what is available (satellite, usually) is of poor quality, unreliable in bad weather, and extremely expensive. I speak from personal knowledge on this one.

      • It has nothing to do with government control, and I’m not all that liberal, as LarryG will gladly attest.

        It’s the driver of educational and business opportunity in today’s world. With broadband, you have huge potential to create, innovate, learn, and grow. Without it, your opportunities are stunted.

        This is central to modern life. The closer we get to everyone having the ability to access broadband, at a reasonable price, the stronger our state economy will be.

    • Good questions. Undue I would define as unreasonable under the facts. Something that effectively creates a barrier to entry. For example, if VDOT were to refuse permission to a private company to use VDOT RoW under reasonable rates, terms and conditions. Section 253(a) of the Communications Act of 1934, as amended, reads: “No State or local statute or regulation, or other State or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service.” Making a service provider follow the National Electric Code would be a reasonable restriction.

      Pole attachments are pretty easy since Congress regulated them under Section 224 of the Communications Act. The FCC has standards and a complaint process. The bigger problem in my mind is the ability of a government agency to use tax dollars, rather than fees for services, to recover capital and operating costs. The municipal light trucks are used both for electric service and broadband. How are the costs allocated? I’ve spent many years working on telecom cost allocation issues. In a competitive market, they are quite important. Again, I’m talking about situations where the local government wants to compete against one or more private service providers that don’t have access to tax dollars. In a market where there are none of the latter, I can much more room for a municipal network.

      If forced to allow government competition, I think the locality should, at a minimum, be required to form a corporation to build an operate a competitive broadband network. A cost allocation manual would also be required, along with annual audits to prevent cross-subsidies.

      We need to keep in mind that the Communications Act generally assumes private capital is invested to build and operate a network. And most telecom companies pay their employees reasonably well, both in terms of wages and benefits. There’s plenty of complaints about businesses not paying employees well. Should taxpayers help force down compensation for private sector employees? Or if municipal service were free, cost them their jobs?

      Universal service is important. Section 706 of the Telecommunications Act of 1996, along with Sections 214 and 254 of the Communications Act, make universal service and access to advanced services a national policy. We all pay surcharges on our bills to expand and maintain universal voice service, which is being reformatted to provide access to broadband. This includes low income individuals. Many service providers nationwide offer discounted high-speed Internet service to families with students who qualify for free lunches. Several years ago, I worked with Fairfax County, FCPS, Cox and a number of community members to help develop Cox’s plan with a trial to serve a low-income apartment community. And studies show many lower-income families subscribe to Internet access when packaged with cable TV. Are we done? No, but I think we are better off following the path we are on, rather than try to drive out private investment by creating “free” broadband service offered by the government.

  5. Let me also point out – even today – the cost to provide electricity to less dense areas looks to be essentially subsidized by those who live in more dense areas – if the charges for the electricity are the same.

    or maybe the guys who are knowledgeable about the utilities who comment here know otherwise.

    I would admit a good bit of ignorance… on the subject.

    Are people charged different rates for electricity according to density?

    Did the electric co-ops come about because Dominion did not want to serve the less dense areas?

    Are the electric and phone Co-ops subsidized?

    could we do co-op type broadband as an alternative to the for-profit companies?

    • LarryG, FYI, there was a time when electric utilities commonly had urban and rural zones with different rates based on the different costs of the distribution systems in those zones. Around the 1950s they got rid of those distinctions because of the difficulty of keeping the zone boundaries up to date and the complaints of customers near the boundary, but mostly because the distribution system became an ever smaller and less consequential piece of the total cost of retail electric service.

      • Many telephone companies also had urban and rural zones within exchanges, including small towns. The townsfolk paid a lower rate than did the outlying farmers.

  6. No, not a fair point. I laid out both sides of the argument with the acknowledgement that municipal broadband DOES serve a need. You just can’t get beyond one sentence of what I wrote, but I stand by it.

  7. and if you REALLY want to ramp up this discussion – about people, neighbors, creating their own shared Wi Fi networks and saving money on the cable internet connection… along with the cable companies preference to charging differentially for separate services carried by internet (as opposed to folks paying for internet then using various services powered by internet as one wants (like electricity) – i.e. net neutrality – we might could have an even more interesting discussion – that maybe does not have to be partisan at all (though I admit it could be made so and has).

    these are substantial and hefty public policy issues – all politics aside because as Acbar has pointed out – some of these services are so fundamental and basic to life in the US that having them providing on a supply/demand , for-profit market basis – has “issues”.

    And again – these are NOT new concepts nor have they in past been framed largely as left/right partisan issues – wedge issues… that almost immediately force people into corners and – nowdays – basically gridlock it from any kind of compromise or resolution.

    these public policy issues now are said to be “intractable”… even the folks on one side or the other – cannot agree among themselves what their sides agreement is to present to the other side as their unified party position! The parties themselves are fractured!

    Immigration, health care, taxes, government services, education, regulaions etc.. it’s all now – not only a partisan food fight but inter-party internecine disagreements leading up to the partisan disagreements!

    The solution now is not compromise – nope It’s essentially “wait until I guys get full control of govt and do it the way we want”. “We’ll just wait until the next election when we take control”!

    • Larry- re: neighbors sharing wifi.. yes, you’re feeling around the crux of the issue on Net Neutrality which I’d argue is cord cutting.

      We need to forget partisanship for a minute, what we’re really talking about is an battle for the future of the internet being waged between the Techies and the Telcos. And its all about content distribution and emerging OTT (Over the Top) platforms.

      Which is also why the Internet Association (Amazon, google, facebook, yahoo, ebay, et. al.) is siding with the FCC to defend Net Neutrality (and has enjoined the NC suit). These guys are the future of the internet but they have to use the pipes of the old-guard ISPs to deliver their content. The tension has been brewing between the techies and the telcos ever since Verizon throttled Netflix users (allegedly).

      But the telcos/cable providers also want in on content delivery, because that’s where the big bucks are. Google fiber and municipal broadband scare the crap out of them.

      You see, municipal broadband is a proxy war in the context of Net Neutrality which is all about content delivery in all forms.

      • There are some aspects of network neutrality such as restrictions on blocking and throttling. But the restrictions on “paid prioritization” fall of their own weight. Both voice and video packets need priority or the services are crap. Should an additional charge for prioritizing packets be illegal? But does that mean the data service or email packets are subsidizing the priority services? The Techies cannot answer that one.

        Customers have been able to pay more for more capacity and speed since forever. You can look at the Bell System tariffs of 50 years ago and see the a sub-voice grade telegraph circuit was priced less than a voice grade circuit. DSOs (voice grade) were always prices less than DS1 and DS3 circuits, much less optical circuits. And we’ve been dealing in virtual networks for years. Dedicated pipes are often provided on a shared pipe. So why cannot a content provider pay more for a faster pipe? Do we all need to subsidize someone with a new app with below-cost transport so he can make a billion by selling his company? Common carrier regulation is fully consistent with different prices for different capacity/speed. Didn’t the FCC just apply Title II to the Internet and make it a common carrier service?

        And the latest complaint against T-Mobile’s new streaming plan is extremely anti-consumer. Competition is supposed to deliver better services, more choice and lower prices to consumers. Isn’t that what T-Mobile is doing? Keep it up and AT&T and Verizon will soon need to drop prices.

        • Re: paid prioritization, my understanding is that the techies have argued that telcos are manipulating their networks in order to create artificial bandwith issues to support their pricing models. But I’m not a telecom engineer so I’m not sure what to believe when it comes to IP network management.

          As far as T-Mobile, another viable carrier is definitely needed in the wireless industry in order to drive some competition (too bad Sprint is such a mess). So yeah I’d like them to be profitable, and it looks like Legere has T-Mobile heading in that direction. But how is “Binge On” pro-consumer when T Mobile subscribers can only binge on the zero rated apps? Wouldn’t a true consumer friendly policy allow users to choose whatever apps they want?

          Also, Binge On clearly pushes the boundaries of Net Neutrality. It’ll be interesting to see if the FCC does anything about it, but I’m not going to hold my breath on that.

  8. My take is somewhat different. Today, broadband is absolutely vital for a county to have decent economic development, and for its residents to have even a reasonable level of economic and educational opportunity.

    Not having broadband, to a county, is almost as bad as not having roads, police, or electricity. It literally prevents residents from starting businesses, it limits the ability of residents to learn online – and it greatly reduces potential growth in rural counties.

    This is an urgent, vital need that often can only be addressed at the municipal level – because too often ISPs are not interested in providing coverage to all residents – they want to skim the profitable cream and leave the less profitable rest without access.

    Bottom line is that, after the implementation of Optinet in Bristol, broadband interests struck back to protect their own in Virginia. IMHO they overreached, at the expense of most other businesses in rural areas and at the expense of the public.

    I am normally very pro-free market, but in this case, I come down on the side of municipal broadband as a huge growth driver for rural localities.

    • You’re right, and I wonder if rural areas will ever have a viable connection to the internet without it being municipal broadband. Where I stated that the incumbent ISPs aren’t competing, it was in these rural areas I was referring to, but looking back I would’ve underscored this point better.

  9. I’m going to post a couple of links from other takes on the subject – first, here is an article, from Wired, on how to allow both municipal broadband and competition – focusing on some of the concerns in the original post and how to use free market to fix them –

    http://www.wired.com/2013/07/we-need-to-stop-focusing-on-just-cable-companies-and-blame-local-government-for-dismal-broadband-competition/

  10. Some history of the NC anti-municipal-broadband law

    http://www.wired.com/2010/08/cable-writes-pro-cable-laws/

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