North Carolina Video of Committee Hearing to Preempt Communities

"My issue is that cities should not be competing with private enterprise." - Senator Hoyle of North Carolina

Given this Senator's opposition to the public sector competing with the private sector, I assume he is fighting just as hard to shut down the libraries (or have Borders and Barnes and Noble neglected to donate enough to his candidacy?), as well as the schools (there are private schools), and the police (security guards are readily available on the private market). This is not merely a snarky attack on someone with whom I disagree, but a nod to the very serious problem that these massive companies can push their protectionist legislation everywhere.

Senator Hoyle, the driving force behind using state law to protect incumbent providers like Time Warner and AT&T from competition in broadband admitted his motivation at the beginning of a video from the recent committee hearing available on Stop the Cap!.

In it, the Senator also makes it clear that he is either unaware of what his legislation does or he is lying about it when he claims it does not affect the communities that have already built the most state-of-the-art networks in the state. His legislation would severely handicap each of them from upgrading despite his false claims that they are exempted. The post on Stop the Cap offers more background and discussion and I encourage readers to check it out.

As usual, I'll add my own short commentary about it. I previously explained why this bill's requirement for cities to use General Obligation Bonds is terrible policy.

Senator Hoyle claims the town of Mooresville did not know what they were doing. Listening to his discussion, it is abundantly clear that he doesn't know what he is talking about. I spoke with folks from Mooresville before they bought the cable system and I have spoken with them since. They got screwed by Adelphia and Time Warner in the deal and have had to take on additional debt. However, the idea that they have failed or were foolish in starting the network because they had an operating loss demonstrates the Senator's ignorance on broadband networks.

When anyone takes over a poorly maintained, old network and invests in massive improvements, they will run a loss in the following year, two years, and maybe longer. The massive front end investment takes time to pay off -- there is no other way to build these broadband networks. This is one of the reasons the incumbents are so slow to invest in upgrades. They maximize their profits by upgrading only slowly because the lack of competition gives subscribers no choice but to wait for better service.

Proponents of this bill are all over the map. They have said that using taxpayer money is unfair competition and that people shouldn't have to pay higher taxes to finance a broadband network. Yet this bill would require cities to use General Obligation Bonds to finance networks, meaning that local governments have to back the bonds with taxpayer money -- No Choice. These are mutually exclusive arguments. And such a law would even prevent local governments from partnering with a foundation or receiving federal loans to build a network. Insane.

With regards to the merits of a required referendum, Senator Stein raised a good point 36 minutes into the video that a referendum on this issue has a very powerful interested party with unique access to advertising to influence the issue. As many have noted, previous referendums all over the country, including Longmont, Colorado; Lafayette, Louisiana; the tri-cities in Illinois; and both North St. Paul and Monticello in Minnesota. A referendum in this situation plays right into the all the advantages of incumbent operators.

For those unfamiliar, my report, "Breaking the Broadband Monopoly," examined the many barriers communities already face to building these networks. Communities do not need extra barriers from the state to pile on the existing barriers to building this essential infrastructure.

Fortunately, this important issue is getting some coverage - the Associated Press recently covered it. We can only hope that outside scrutiny will help bury this legislation, increasing the level of broadband competition North Carolina.

This editorial overstates the ease of building a community network but gets the intent of the legislature correct:

This trend is alarming to corporations like Time Warner and others in the broadband business, because municipal systems don't need to make a profit and can get money for infrastructure easily and at cheap rates. It's not, to use a phrase often used in this growing debate, a level playing field.

That's why the telecommunications industry is backing a bill that will force municipal officials to get voter approval before setting up a network like Wilson's or Salisbury's. The sponsors say they're trying to level the field. In reality, in this time of tight budgets and fed-up taxpayers, it's more like kicking local government off the field and eliminating competition.