Transcript: Community Broadband Bits Episode 072

Thanks to Jeff Hoel for providing the transcript for Episode 72 of the Community Broadband Bits podcast with Chris Mitchell, Lisa Gonzalez, and John Farrell on the forth episode of 'Crazy Talk' series. Listen to this episode here.

 

00:09:

Lisa Gonzalez:  Hi., and welcome again to the Community Broadband Bits Podcast, from the Institute for Local Self-Reliance.  I'm Lisa Gonzalez.

Recently, Christopher joined WUNC in North Carolina on a local radio show, "The State of Things," hosted by Frank Stasio.  Marian Norton, a resident of Chatham County, and Scott Pryzwansky, a public relations executive from Time Warner Cable, also joined the conversation.  During the discussion, the panel discussed why North Carolina was recently ranked last in the country for the rate of Internet subscription.  During the 14-minute conversation, Time Warner Cable offered a variety of talking points.  We think the timing is perfect for another episode of our "Crazy Talk" series.  This week, we invited our colleague John Farrell to give another view on Time Warner Cable's claims.  John is the Director of the Democratic Energy program here at ILSR, and he has extensive experience studying how policies relate to utilities.  Here are Chris and John and I as we listen to specific excerpts from the October radio show.

01:08:

Chris Mitchell:  Welcome to another edition of the Community Broadband Bits Podcast -- today with super-special guest John Farrell.

01-16:

John Farrell:  Hello.

01:16:

Chris:  John Farrell is a coworker that I hassle on a near-daily basis.  I leave him alone most Fridays, because he does not come into the office.  John is my colleague here.  He does a lot of our work on energy.  And he knows a lot about cable and Internet type stuff, because he's a big geek like me.  So he's going to join us for this episode of our "Crazy Talk," Volume 4.  Lisa is here as well.

01:38:

Lisa:  Hello.

01:38:

Chris:  And we're going to start with a recording of a cable executive, a guy from Time Warner Cable who is the head of their public relations for the east coast.  And he and I were on an interview recently.  He said a few things that I wanted to go back in and challenge.

01:55:

Time Warner Cable guy:  According to the map, almost 98 percent of North Carolina has access to broadband of a download speed of at least, you know, 3 Mbps.  And, you know, that speed level, you know, if you browse the web, Facebook a bit, you know, even if you're watching Netflix, you'll be fine on that speed level.

02:19:

Lisa:  So, I remember reading the other day that North Carolina was one of the worst states, in terms of people using the Internet.  Is that just because people aren't taking it?  Apparently it's there.

02:34:

Chris:  The reason that we had this interview was because of that report.  The Federal Communications Commission had released a report, in terms of ranking citizens by how many people were subscribing to a minimum threshold of speed.  And North Carolina went from second-last to last, from 2011 to 2012.  So that's why we all came together for this show.  But now we know, according to Time Warner Cable, that 98 percent of North Carolina has access to these great speeds.  And so, John, I'm curious how you react to hearing a claim like 98 percent of a state that has pretty significant rural and mountainous territories -- they all have really good access to the Internet.  Do you believe that?

03-13:

John:  Well, I think that 98 percent of us also have access to a Porsche, but -- you know, we can all visit the dealership, we can all sit in there until they give us a dirty look and ask where the money is.  You know, having access is one thing.  Being able to afford that connection is quite another.  And, second of all, I think I would just be very skeptical of that claim.  I think most companies that are, you know, providing what is in this country a very high-margin service, like Internet service, don't focus a lot of their attention on areas that cost a lot of money to build out infrastructure to.

03:48:

Chris:  The reason that this 98 percent figure exists, though, is because of these oddities in terms of how they do it.  And so, if I told you that 98 percent of the country has something, and the reason that I came to that number was to say that I counted census blocks, and if one person in a census block has it, then everyone in that area, I'm going to assume, has it.  So that's one thing, which is, the map itself systematically overstates the data, because of the methodology they use to produce it.  The next --

04:19:

John:  So, you're saying, Chris, that if one person in my neighborhood had access to the Internet, on this map, they would be counting everybody who lives there as having the same access?

04:28:

Chris:  That's right.  Even if you did not have that access, this map would say you DO have the access.

04:35:

John:  That sounds like cherry-picking.

04:37:

Chris:  Well, whatever it is, it's really bad map-making.  [laughs]  You know, there's an additional claim here, that we don't have a clip of, but the Federal Communications Commission, for years, has been saying that 80 percent of America has access to 100 megabit speeds or greater.  That's because, John, you and I are both in Comcast territory.  Comcast uses a technology called DOCSIS 3 for its cable modems.  This technology, under the right conditions, allows 100-megabit connections.  However, Time Warner Cable also uses DOCSIS 3 connections, but they only go up to 50 megabits per second.  The FCC says 80 percent of America has access to 100 megabits when major service providers aren't even providing that.  You have to take any of these statistics, particularly when they come from industry, with a really big grain of salt.  These people are LYING through statistics.  And the danger is that we're going to see public policies shifting.  Because if you believe that 98 percent of America already has access to the Internet, well then you don't need to put any money into making sure that we connect everyone.  I mean, the problem's pretty much solved.

So, let's go on to the next clip.

05:50:

TWCg:  You know, unlike municipalities, who can use a, you know, a property tax, or electric utilities, to pay for their operation, water bills to pay for their operations, we can't do that.  So, you look at an area like Chatham County, which is a predominantly rural community.  I mean, there can be great distances between homes.  And it can be cost-prohibitive.  But remember, too, that we are not the only provider.  This is a competitive field.  Satellite companies provide Internet capabilities as well.  So, you know, at Time Warner Cable, at any rate, we are always looking for ways to expand our services.

06:27:

Chris:  So this is one of my favorite -- this is one of my favorite transitions, right?  This is a very competitive field.  We don't invest there.  And we know that other people aren't investing there.  But there's satellite, which is something, right?

And this is where we had -- the woman who was on the show, the local resident, she did a terrific job of explaining that several of her neighbors have satellite, and -- But the satellite doesn't work well.  It's not a substitute for broadband.  You can't do the things on the Internet you want to do with that.

07:02:

John:  Chris, if you don't mind, I would like to address one point there.  I work a lot in the electric sector for doing research on renewable energy.  One thing that I was stuck by was this notion that cities are going to be using property taxes to pay for operations for electric or water utilities.  That is not true at all.  Property taxes are used to fund general services like libraries, police, and fire.  Utility services are paid for by utility customers, whether or not it's a private or a public utility.  And so I'm not quite sure what he's driving at there.  He seems to be implying that, for some reason, cities are more resourced than Time Warner Cable, in order to build out Internet connections to people.  But ultimately it's going to be user fees that pay for those connections, whether it's Time Warner Cable or the city.  And I think what he's basically trying to say is, it's not -- we can't make as much money serving rural areas as we can serving urban areas, where people are close together, and it's cheap for us to connect them.  So we can make our money back way faster in an urban area than we can in a rural area.  I don't see why that's an argument for why a city is somehow better resourced, or, ultimately, for why Time Warner Cable needs to prohibit cities from competing with them in any area.

08:12:

Chris:  I think that's a terrific point.  And the problem is that that kind of an answer, that you just gave, is not often presented to the public, or to the legislature, right?  You have -- This guy, for Time Warner Cable, is one of hundreds of people for Time Warner Cable, who are constantly lobbying legislators, they're working the media, they're making sure their message is getting out there constantly.  Cities have maybe one lobbyist in a state capital.  And that person is working on a multitude of issues.  And so there's no honest discussion.  And what you have instead is this guy from Time Warner Cable engages in what I like to think of as monkey debate.  Because he throws a lot of crap up in the air.  And it doesn't really matter how much of it sticks.  The point is, he can always throw more crap than you can field.  And that's what it comes down to ultimately.

09:00:

John:  So, you know, I guess, maybe getting back to that question of resources, one could ask this cable public relations person whether or not they could, you know, retire a few lobbyists and make a few more investments in broadband.

09:15:

Chris:  If there were advantages that cities and counties would have, in terms of serving rural areas, I think we should be encouraging them.  Because we need connections out in these rural areas.  And we have Time Warner Cable saying, we're not interested in investing in Chatham County, because it is too rural for us.  And so, Time Warner Cable, like you said, should not be getting in the way.  The problem for Time Warner Cable is, it's afraid that if Chatham County -- that if a place in Missouri, if, you know, a rural Minnesota town -- builds a network, that will be a good example.  And that urban areas will be following.  Because in rural areas that have these incredibly-fast, low-cost fiber networks, well, cities should be able to that just as well.  And so, there's a real threat to Time Warner Cable's business model if others start to prove that you can build these models.

And we saw the same thing with electrification.  The private sector did not want to see cities building networks, did not want to see coops doing it.  Because they did it better.  They did it at a lower cost.  They did not rip off their ratepayers in the same way.  And so, this is fundamentally an issue that goes back, time and time again, when it comes to an essential infrastructure, and a debate between public and private.

10:30:

John:  So maybe you could clarify for me, Chris.  One thing I don't understand is, what I hear you saying is that not only is Time Warner [Cable] saying they don't want to serve this rural area but they would like to prevent that rural area from serving itself adequately.

10:42:

Chris:  Well, they don't say that explicitly.  They say, oh, we think that they should just have to follow these other rules if they're going to do it.  And we're going to come to that right now, I think, in this next clip.

10:44:

TWCg:  Cities don't pay property taxes.  They don't pay income taxes.  They don't pay taxes on inputs to their services.  The right-of-ways.  So, there's a list of them that go on and on.  So, again, it's not about preventing local municipalities at all from providing their services.  It's welcomed.  But the issue is, doing it on a level playing field, with everyone else.

11:17:

Chris:  I don't know if you heard that, Lisa, but it's "welcomed."  Time Warner Cable LOVES to see cities build their own networks.

11:26:

Lisa:  So, level playing field.  Wow!  You know, I mean, cities have all the advantages.

John, you're Time Warner Cable.

11:33:

Chris: Ha ha, you're Time Warner Cable.

11:36:

Lisa:  Chris, you're City A.

11:37:

Chris:  Kind of generic, but I'll take it.

11:38:

Lisa:  Yeah.  Well, it's the beginning of the Yellow Pages, OK?

John, you know, what is it that he's doing that's --

11:49:

John:  [role-playing TWC] I don't see what the trouble is, and the complaint that cities have about the kind of legislation that we're talking about to level the playing field.  I mean, there seems to be this idea that because we make billions in profits, or that because we have customers in suburban areas, that give us profits that we could invest in a different place, or that we have all these other services that we are providing, and all this other money that we could bring into a city, that that somehow gives us a big advantage.  And that simply isn't true.  Whereas cities obviously have these advantages of not having to pay taxes when they're providing services, and they have access to the city right-of-way, that we would otherwise have to pay for, and I think it's --

12:31:

Chris:  [role-playing City A] John, I think we should be clear here that, when cities are building these networks -- City A, for instance -- I have a utility that is building the network.  And that's owned by me, certainly.  But they do have obligations to pay fees.  In many cases, a utility owned by the city pays more, in terms of what we call in-lieu-of taxes than does a private company such as yourself.  I would really challenge the idea that we don't pay fees and taxes.

You know, beyond that, I would say that, I remember the last time someone in my city raised taxes, and they lost their job.  How many executives at Time Warner Cable have been fired for raising rates year after year?

13:11:

John:  [role-playing TWC]  You know, we're making a lot of investments in a lot of different places, Chris.  And sometimes that means that rates have to increase, in order to bring those services to different places.

13:22:

Chris:  [role-playing City A]  Sometimes, I think you should be called Time General Cable, because you refuse to make any specific arguments.  It's always these abstract ideas.

[end role-playing]

This is what passes for my pathetic humor in the office.  And it's legendary.

[laughter]

13:36:

John:  You know, Chris, I think that, ultimately, what the cable company is asking for here is that the city be relieved of all of the potential advantages it might have in providing a network, because ultimately it's about protecting their market share, and their ability to access the customers who are the most profitable.  And that's why you don't see arguments from the cable company about competing in rural areas, because they know it's more expensive to serve, and it's not profitable for them to do so.  but when it comes to cities, which are the places where they can make the most money, because they can provide the most services at the lowest cost.  Now, whether they actually charge the least is another story.  They don't want to have to compete with the few of the advantages that the city might be able to put up against all of those resources that they have -- from other states, from other communities within that state -- that they can pour in, to make investments, to make themselves competitive.

14:29:

Chris:  Absolutely.  I think you hit some of the key areas.  I would just fill in some specifics, and just say that, you know, when Time Warner Cable is advertising in North Carolina, it advertises across the entire state.  They have these enormous -- they don't have to worry about advertising to one city.  They don't bother doing that, right?  Their work crews go across many jurisdictions.  The costs for the second-largest cable company in the nation to deliver a product are far less than they are for any city.  Time Warner Cable has more employees than many of these cities have residents even.  So, when it comes down to it, there's NO advantage.  Even if we were to concede that cities have some advantages that Time Warner Cable does not -- of which there are few of the claimed ones -- even then, Time Warner Cable's other advantages still dramatically outweigh any advantages a local city has.

The idea that any of these level-playing-field bills create a level playing field is crazy.  There's no reason that Time Warner Cable would be advocating for a level playing field.  That would be doing a disservice to its shareholders, which demand that it seeks every advantage it has.

15:32:

John:  I had one other thing on the level playing field, that I think is important.  If you were thinking about making a large investment in public infrastructure -- in essential infrastructure, you know -- maybe it's roads, maybe in this case it's a fiber optic network -- the Internet being the center of our economy, you would want -- your ideal process -- you would want to be allowing citizens to weigh in on that process.  You would want them to be able to vote about having that process.  Well, if a city does a network, the citizens do get to vote.  When Comcast is doing infrastructure, they don't have a vote.  You would want to have public hearings.  You would want to have public conversations about what's happening, what's in the best interest of the city.

16:11:

Chris:  Ten years later, you'd want to have a conversation about whether it was time to upgrade it.

16:15:

John:  Absolutely.  And, again, when it's the public sector, when it's the city providing that service, it's a transparent and open dialogue.  When it's the private sector, it's not.  And not only that -- not only is there that unlevel playing field, in the manner that the private sector gets to keep its secrets, but it also means that when we talk about competition, that the private sector has access to everything the public sector is trying to do, because it's public documents.  And the reverse is not true.  And so, what we really need is a bill that will level the playing field by taking away some of the advantages of the private sector.

I should get going, Chris, but thanks so much for having me.

16:51:

Chris:  I really appreciate your coming in, Time General Cable.

16:55:

John:  Yes, sir!

16:57:

TWCg:  By enacting this bill, H29, you know, the North Carolina General Assembly sent a strong message to the private sector, I think, that North Carolina is business-friendly and encourages the private sector to do what it does best: invest capital and create jobs for our North Carolina's citizens.  And in addition, H29 puts in guidelines to protect taxpayers from being saddled with debt without first having a voice, as well as bringing greater transparency to local governments.

17:24:

Chris:  You know, I would accuse him of reading from some pre-formatted talking points, if not for the fact that he doesn't actually know what bill he's talking about.  For several occasions in that interview, he said H29, when it was H129.

17:38:

Lisa:  Right.

17:38:

Chris:  And it was a bill that, in the previous year, the senator who sponsored it admitted candidly that Time Warner Cable had written.  So, this is a bill that Time Warner Cable came up with.  And then North Carolina meant so much to them they couldn't even remember it a few years later.

17:56:

Lisa:  The bill sent a message to the private sector that North Carolina was going to be business-friendly.  Now, I suppose you could argue that.  But if I'm a business, and I'm in North Carolina, I want the best kind of access I can get.  So, is that what we got out of this?

18:17:

Chris:  Well, it sure doesn't seem that way.  And, you know, one of the major businesses in the Triangle, or a major employer, Red Hat, which does distributions of the Linux operating system -- GNU/Linux, for those out there who appreciate the subtleties in life -- they sent a note to the governor when this bill was being considered, and begged her not to sign it.  And in that letter, the vice president that wrote letter said, and I quote, "I spent more than two years begging Time Warner to sell me a service that cost 50 times more than it should, and that's after I agreed to pay 100 percent of the installation costs, for more than a mile of fiber."  That is NOT business-friendly.

19:00:

Lisa:  No, not at all.

19:01:

Chris:  Turning essential infrastructure over to a company that's headquartered not just out-of-state but across the country is not business-friendly.  That is creating a hostile environment for businesses that desperately need fair rates for Internet access, reliable networks.  I mean, you know, some of these towns have built networks over Time Warner Cable because they don't work when it rains, because Time Warner Cable has not bothered to invest in the essential -- you know, in essential maintenance over the years.  So, the idea that this was a good move on the part of the legislature, I think, is crazy.  Particularly when the whole reason we had this conversation is because fewer people in North Carolina are subscribing to what we describe as a basic broadband connection than anywhere else in the country.  It's not because people aren't subscribing to broadband.  It's because broadband is SLOWER in North Carolina than it is anywhere else in the country.

19:58:

Lisa:  You had this conversation on the radio, and there was the government relations fellow from Time Warner Cable, and a woman who lives in the area.  Was there anything in the conversation that was surprising to you?

20:13:

Chris:  Well, quite frankly, I was surprised at how little the gentleman from Time Warner Cable knew about Internet,  You know, he called it "M-B-Ps."

20:21:

Lisa:  I noticed that, too.  And I was surprised.

20:23:

Chris:  It was -- I don't know -- I assume he knows what a megabit is.  I mean, maybe he doesn't -- he could be an old cable guy.  But he really didn't know what he was talking about.  And the biggest surprise, to me, was that they didn't send one of the people from North Carolina, that actually wrote the bill, to defend it.  These guys really are living in a bubble.  And they don't know what communities need.  They just -- they're doing anything they can to protect whatever service they happen to be offering.  And it's dangerous.  Because state legislators listen to these guys.  And so, one of the things that people really need to realize is that you cannot depend on a Time Warner Cable, a Cox, a Charter.  Even a Comcast, which is far superior to the other major cable networks, I think, in terms of their professionalism.  Although, you know, I hate to praise them, in the sense that people will think, oh, well, they're doing a good enough job.  NO, they're not.  We need better than what Comcast is doing.  But if I'm going to be stuck with a cable company, I'm glad it's Comcast, versus Time Warner Cable.  Because at least Comcast is being more competitive, and investing more than its competitors.

I said "competitors."  I should have said compadres...

21:32:

Lisa:  [laughs]

21:32:

Chris:  ... because there's nowhere where Time Warner and Comcast are competing.  They make damned sure of that.  So, I just want to say that I think local communities really have to make sure that they're aware the private sector is at best going to keep them mediocre.  Any local government that wants to get ahead, and be more competitive in the region, in the nation, or internationally really has to look at building its own network or working with a local provider.  You know, the scale is what's important here.  Big companies that are located out-of-state are not going to invest.  We are worried about local private companies because big companies tend to by successful local companies.  That's why we stress public ownership, cooperatives, and other such arrangements.  Because it's harder for Wall Street to gobble up those successful companies.

So these are some of the things that come up time and time again.  And that's how we respond to some of the claims we've heard from Time Warner Cable.

22:34:

Lisa:  Um hum.  If somebody's listening and they've heard some other conversations, and, you know, they think, wow, Chris hasn't really talked about this much, what should they do?  Should they --

22:45:

Chris:  They should find a pigeon, tie a little note around its leg, --  I would be -- I'm always happy to get feedback and to get suggestions for what we should talk about.  And people should write in to us, broadband@muninetworks.org .  They can leave a comment on the blog.  They can try to intercept us as we're leaving the office.  You know, whatever they want to do to try and get us a message, we're happy to get.

23:09:

Lisa:  Great!  Sounds good.

We want to thank John Farrell for taking time out of his work day to join us.  We also want WUNC for arranging the interview.  The program is available at WUNC.org .  We also want to encourage you to contact us if you feel there's an argument that needs to be addressed.  Feel free to e-mail us at podcast@muninetworks.org .  If you have other ideas for the Broadband Bits Podcast, please send them our way.  We're always looking for new and interesting material related to telecommunications.  You can follow us on Twitter, where our handle is @communitynets .  This show was released on November 12th, 2013.  Thank you to the group Mudhoney for their song, "The Neutral," licensed using Creative Commons.  Have a great day, and thanks for listening.

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