Transcript: Community Broadband Bits Episode 120: Responding to Crazy Talk

Thank to Jeff Hoel for providing the transcript for Episode 120 of the Community Broadband Bits podcast with Christopher Mitchell and Lisa Gonzalez - Responding to Crazy Talk regarding the FCC Petitions from Chattanooga and Wilson. Listen to this episode here.

00:04:

Lisa Gonzalez: Hey, everybody. This is Lisa Gonzalez, from the Institute for Local Self-Reliance. Welcome to the Community Broadband Bits Podcast. And I'm here with Chris. Hey, Chris, what's going on?

00:14:

Chris Mitchell: Hey, Lisa. You know, I've been traveling quite a bit lately.

00:18:

Lisa: That's right.

00:18:

Chris: I was just in Seattle and Mount Vernon, and before that I was in the New England area. A lot of people are doing some interesting things. And I was kind of curious. When I've been away from the office, has -- there hasn't been any crazy talk, has there been?

00:31:

Lisa: Oh, Chris, there's always crazy talk. [laughs]

00:34:

Chris: Well, then, maybe we should talk about some crazy talk today.

00:37:

Lisa: Yeah. Yeah. You know, everybody who listens to the podcast knows that there's a big issue going on with the FCC right now. And what they're doing is -- they're examining some petitions and taking public comments. Because the cities of Chattanooga, Tennessee, and Wilson, North Carolina, filed some petitions. And we've talked about this before, also. Because there are state barriers that are preventing them from expanding and serving the communities around them. There's been all sorts of articles in the news -- opinions -- about how they can or cannot do this, how the FCC has no right.

And we've seen four different arguments over and over again. And I was thinking this would be a good time for you and me to talk about those four basic arguments. What do you think about that?

01:23:

Chris: Yes. Let's do that.

01:25:

Lisa: OK. Um, well, the first argument -- and the one that I see more than any other argument -- is, the organizations that want to block the FCC from allowing Chattanooga and Wilson to expand, always say that the FCC does not have the authority to remove or prevent these state laws. They don't have the authority to restore local telecommunications authority. Let's share some of our thoughts on that: whether or not we think they do.

01:54:

Chris: Well, Lisa, as you know, only one of us is a lawyer, and it's not me. [laughs]

01:57:

Lisa: Yes. Yes. Yes.

02:00:

Chris: You have the law degree. I think we can dismiss this in a rather easy fashion. Which is to say that the courts will ultimately decide whether or not the FCC has the authority.

02:11:

Lisa: Um-hum.

02:11:

Chris: You and I think that it does. The Congress told the FCC that if it found that broadband was not being expanded -- particularly high-speed broadband was not being expanded -- sufficiently fast, then it would have extraordinary authority to remove barriers.

02:31:

Lisa: Um-hum.

02:31:

Chris: And it would have authority beyond what it had already granted it. And it didn't do a really good job of defining that authority. And the FCC, after being told by a circuit court judge -- of the DC Circuit Court judge, Judge Silberman -- said specifically, that kind of power would allow you to remove laws that are preventing municipalities from building out. So, you know, we know at least one high-level judge who thinks that this is pretty clear.

I think Jim Baller made some great arguments in the petitions. He laid it all out. And I think, ultimately, the FCC will hopefully rule in favor of these two petitions. And then, undoubtedly, the folks that have all of the lawyers -- that aren't you...

[laughter]

... all the OTHER lawyers, they will challenge this in the courts. And the courts will decide. So, you know, I feel like there's a strong case to be made that the FCC has the authority. But ultimately it's going to be -- we'll wait and see what the courts say.

03:24:

Lisa: I think it's also worth mentioning -- and Jim brought this up in the petitions also -- is that the Telecommunications Act actually gives the FCC the responsibility to encourage expansion, and to do the things that they need to do to make it happen. And those state laws are not in line with that responsibility.

03:49:

Chris: Exactly. Yes. The FCC needs to use any device it can to try an encourage the better expansion of these networks.

03:57:

Lisa: So, a lot of the organizations that are filing comments, that are opposed to granting the petitions, are going a step further, and they're saying these state laws in Tennessee and North Carolina are not barriers but are actually but are actually protective measures that the states are taking, to help protect the taxpayers.

04:17:

Chris: Well, it's really quite interesting that the states would be trying to protect taxpayers from having affordable, reliable, and faster Internet access. I -- you know, it doesn't seem like a very smart move, certainly. But -- you know, when we filed our comments, with a number of different organizations, back in August, on the original comments on these petitions, Common Cause joined in and helped write a section, specifically about how all these state laws passed. And it wasn't about protecting taxpayers. It was cable and telephone companies lobbying, and lying through their teeth about why they were doing it, to try and restrict competition.

04:53:

Lisa: The organizations that are advancing that argument are the ones who helped WRITE those state laws.

05:00:

Chris: Yes. Exactly. And not only that, but, I mean, if you want to protect taxpayers, well then we should probably not have the Universal Service Fund or the Connect America Fund, which are paid for with taxes, one way or another -- whether it's on your phone bill or whether it's, you know, something you send in on April 15th -- at least it's money that's raised from the public. And in the absence of Wilson or Chattanooga expanding, we're going to see taxpayer dollars being used, ultimately, to have AT&T, or some other private company, build out the network. Now, we could use less taxpayer dollars, by having Wilson and Chattanooga build out these networks in areas that the private sector doesn't even want to build. And Chattanooga and Wilson aren't going to use taxpayer dollars. And so, you know, what we find ultimately is that this argument about taxpayer dollars is totally false. If you want to save taxpayer dollars, the best thing we can do is cut these massive subsidies to big companies -- like Frontier and Centurylink and AT&T -- that are doing a terrible job of serving rural areas. Municipal broadband networks, for the most part, use NO taxpayer dollars. And to the extent that they do, I would say that they're much better stewards of these funds than these big companies that do a terrible job of providing service, and a really bad job of doing customer service. They don't care about these regions at all.

06:20:

Lisa: And that goes down to, what are the motivations for both the private sector and the public sector?

06:29:

Chris: Exactly. And I'll say one thing further: the idea that these laws are not barriers. Well, if they're not barriers, why are Wilson and Chattanooga not expanding?

06:37:

Lisa: Right. Right.

06:37:

Chris: You know, the idea that -- the state tells Chattanooga, thou shalt not expand under any circumstances, and then these people are, like, that's not a barrier. It's hard to imagine a bigger barrier. [laughs]

06:48:

Lisa: Right.

06:50:

Chris: There's no worse ....

06:51:

Lisa: I suppose you could build a wall up, with barbed wire on the top...

06:55:

Chris: I mean, maybe that would be a bigger barrier. You know, that would use some taxpayer dollars. So...

07:01:

Lisa: And as we talk about the private sector, we should talk a little bit about a couple of articles that came out over the weekend, that just kind of carry on these same arguments. And one of the ones I thought was interesting, it was titled, "Government Broadband Signals Heavier Public Debt." And one of the things that the author talked about, and one of the phrases he used was "fierce private-sector competition." And I thought that was interesting, especially when Comcast and Time Warner Cable say that it's OK, we don't compete with each other.

07:34:

Chris: In the past, we've certainly heard from top officials at Comcast, as well, telling Wall Street, you know, we really have only one competitor and that's Verizon FiOS. We don't really see the other guys as being competition.

07:44:

Lisa: Very convenient. It's a very convenient argument when you want it.

07:47:

Chris: Right. Right. Well, it's really nice to be a big company that can say one thing to Wall Street and then say another thing to, you know, CNN or the other big mainstream outlets, like the New York Times, and know that that will be reprinted. The New York Times won't bother to actually go and see what they've told Wall Street and say, hey, isn't this conflicting? You know, it's really nice to be a big company that has that sort of "insulation," for some reason. I don't know why.

Um, I just want to say, before we finish this off, that we should credit David Noll?** for -- a dedicated listener and reader of Muninetworks.org -- who sent in these articles to us and asked us to respond to them.

08:26:

Lisa: Yay, David!

08:28:

Chris: But the idea that the private sector is so competitive is obviously false. We know that. And it's really a sign of just how out of touch some in DC are, that they feel they can make that argument and get away with it. It's really quite crazy.

08:45:

Lisa: And you know what else I thought was interesting -- is, again, the articles that David sent in said the same thing that everybody else says. And I know it is this motivation -- repeat it, repeat it, repeat it, and eventually people will think it's the truth. And that is that the municipal network landscape is full of failures. And it's always the same very small number of networks that are held up as failures. And I also think it's interesting what the definition of "failure" is, from these people who make that claim.

09:20:

Chris: Sure. It's always shifting. We'll hear them, on the one hand, saying that they're all failures. And it's really quite odd, because you -- we just ran a story on The Dalles, and -- in Oregon, which is right on the border with Washington, and how they built a network called QLife, and it resulted in some significant investment in the area, from Google and other datacenters. And they've actually paid of the debt of that network three years early. And so, you know, this idea that all of them are failures is very clearly indefensible. We've talked about so many networks that are successful.

And so, they'll go after some of them. We really dealt with this in our reply comments quite handily. In fact, there's this big report from the New York Law School, which is a real joke of a law school. I mean, frankly ....

10:03:

Lisa: Oh, yeah. Davidson and Santorelli.

10:06:

Chris: Yes. So -- Let's just first tell everybody, don't go there. This is -- The Atlantic had a great story about this place. It's -- You know, some law schools, basically there's a racket, to rack up a ton of student debt, get a bunch of students loans that are backed by the government, and then know that their graduates aren't going to be able to find good jobs. And the New York Law School is one of those kinds of schools that came up in the article -- in the Atlantic -- that really discussed this.

So, it's important to understand where this argument is coming from. And then, when you actually look at the argument, you find that it's totally full of holes. We debunked it entirely in our comments to the FCC. And I suspect that we'll eventually put that into some sort of format that other people will be able to see. But the key point is this: these municipal networks generally succeed, on all metrics. Which is to say that generate far more benefits than they do costs. And, to the extent that they are expected to pay off, then they do quite well. And I say that because, you know, St. Cloud, Florida, is sometimes brought up as a failure. Well, this is a city that decided to provide free Wi-Fi. And, you know, over a thousand people were using it. You know, if you're providing free Wi-Fi, it's not a business model that expects to break even. You know, they're providing a public amenity. And the fact that the network didn't pay for itself was designed. And so, to come back and to say, see, these networks always fail, look at how St. Cloud's network didn't pay off. Well, there was no intention to pay off. They weren't collecting money from anyone.

11:41:

Lisa: And I believe, if I remember correctly, there were a lot of things that that community had to change, because of just -- the economy had given them a lot of trouble. And there were other places where they had to cut back. And, you know, when they went to go and cut back the Wi-Fi network, the people in the community didn't like that.

12:06:

Chris: Yes. There were some people that protested it.

12:08:

Lisa: Yeah. I mean, they were willing to pay to keep it going. But it was -- you know, they had a lot of economic trouble in St. Cloud.

12:17:

Chris: Absolutely. When the big recession hit, a number of cities had to tighten their belts. And they decided at that point, with their revenue stream, that their Wi-Fi network was something that had to go. And, again, that's not a failure. Cities have to make decisions all the time as to what to prioritize. And something you can prioritize in a good year may be different from something you can prioritize in a bad year. Those are the sorts of decisions that they make. Elected officials are elected to make those decisions.

And so I just -- I bring that up as a reason that we need to be careful how we're evaluating these networks. When you look at the metrics -- the reasons the networks were built -- overwhelmingly, they meet them. Some of them take longer to break even financially than forecast, because the private sector may dramatically cut the rates of their networks, so that it's harder for the municipal network to get enough subscribers to meet its projections. But that, itself, is, yet again, a benefit of the municipal network, because then you have thousands -- tens of thousands -- of people that have more money in their pockets every week.

13:24:

Lisa: Sure. They're benefiting whether they're using it or not.

13:26:

Chris: Exactly. And so, you know, it's just one of those things that one has to be careful when figuring out. Now, there are some networks that have struggled, and that we would say are currently failures. However, those networks could very well, you know, generate so many benefits over the next ten years that that would balance out the failures, and the problems that they've had. Because this is a very long-lived infrastructure. And we know, from over one hundred years of utility -- of municipal electric utility in particular -- you know, investment, that cities are perfectly capable of offering these very technical services. Over time, it will become less technical. And they do a great job of making sure that they're reinvesting and providing a high-quality, low-cost, reliable product.

14:13:

Lisa: On that note, I think we should finish up. What else? Anything else that we should offer?

14:18:

Chris: Well, I think for people who are listening to crazy talk, you'll probably be really interested in a paper we're just releasing, called, "Correcting Community Fiber Fallacies." Which is a series, but in particular, we looked at a report from Steven Titch, a guy who's long opposed any kind of municipal networks, as long as someone would cut him a check to take that position. And we've responded, point by point, to the claims he makes in an article -- a long paper that he wrote, attacking Lafayette, Louisiana.

14:48:

Lisa: As I recall, that was a really big job.

14:50:

Chris: Yeah. There was a lot of points to discuss. And I think this is a -- you know, it's a -- on the left is his paper, on the right is our response, on each page. And I think this will be a tremendous resource for people who want to understand how some people will oppose their networks, and how they can respond. And, frankly, they can make the judgment call, whether the arguments that we present are stronger, or whether Steven's arguments are stronger.

15:16:

Lisa: As they should.

15:17:

Chris: Exactly. I mean, I think they should take a look at it. And I think this could be a great tool for anyone that's considering whether or not a municipal network could be a wise investment for their community.

15:29:

Lisa: Great.

15:30:

Chris: Thank you, Lisa, and I'm looking forward to seeing you in the office for sometime soon.

15:32:

Lisa: OK. Sounds good.

Look for our report, "Correcting Community Fiber Fallacies: The Reality of Lafayette's Gigabit Network." The report will be available soon at munitneworks.org and ilsr.org . Thanks again to David Noll?** for sharing the articles we addressed in the podcast. And thank you for listening.

Send us your ideas for the show, like David did. E-mail us at podcast@muninetworks.org . Follow us on Twitter. Our handle is @communitynets . This week, we want to thank Jessie Evans for the song, "Is it Fire," licensed using Creative Commons. Have a great day.

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