Transcript: Community Broadband Bits Episode 5

This is Episode 5 of the Community Broadband Bits Podcast. Chris interviews Catherine Rice of SEATOA about local authority and community networks in North Carolina. Listen to this episode here.

Christopher: This is Christopher Mitchell with the Institute for Local Self-Reliance talking about community broadband networks on the Community Broadband Bits Podcast. Today we're talking with Catherine Rice, the president of SEATOA; the Southeastern Association of Telecommunications Officers and Advisors. Catherine has been one of the strongest voices in North Carolina to preserve local authority over broadband and documenting the ways in which AT&T, Time Warner Cable, CenturyLink and others have hurt local communities by raising prices and generally refusing to upgrade their networks. Without Catherine fighting for North Carolina, CenturyLink and Time Warner Cable could've had their monopolistic legislation for far fewer campaign contributions that it ultimately took. Here's the interview with Catherine Rice: I'm here with Catherine Rice, president of SEATOA. Thank you for coming on the show.

Catherine: Oh, it's a pleasure, Chris.

Christopher: SEATOA is a branch of NATOA and I'm hoping you can start with a little description of what SEATOA is.

Catherine: Well, SEATOA is as you said, a chapter of NATOA. We consist of local governments of broadband planners and community programmers in the four states of North and South Carolina, Tennessee and Georgia.

Christopher:You've been very active in defending the right of local communities in North Carolina to build their own broadband networks if they decide that's a wise investment. Can you tell me a little bit about the background of why that's important and how Time Warner Cable has been fighting against you on this?

Catherine: Sure, and it's important to know the context of North Carolina's population. First, Chris, half our population live in rural areas. As globalization first took hold in the last 25 years of the 20th century, North Carolina lost its tobacco, its textile, and its manufacturing jobs overseas to Asia and Mexico. In the first part of the 21st century, in two North Carolina towns those local governments did what they're supposed to do. They had to figure out how to keep their citizens employed and how to maintain the community's quality of life. Both of those towns concluded that the only way they could compete in this kind of world market ... Really the only way they could open up their labor market to the world and tap their strongest resource, which is North Carolina's ability to innovate, was to build the next generation of roads into their communities; that being fiber to the homes.  Both Wilson and Salisbury approached the local incumbents and asked them to partner in building this infrastructure, and in both communities, ultimately the offer was declined. Rather than partner or upgrade their outdated networks, what Time Warner, CenturyLink and AT&T did was go to the state legislature for the next four years and push for legislation that would effectively prohibit community broadband. In 2007, which was the first year they hit us with the bill. Mind you, in 2006, they had succeeded in getting their industry completely deregulated by our state legislators. The next year they came back with HB 1587 which was titled, "The Local Government Fair Competition Act." I remind you, these are multi-billion dollar companies and these are very tiny high-unemployment towns. The next year was 2009. H 1252 that was called, "The Level Playing Field Bill," an act to regulate competition. We succeeded in flipping that to a study bill as well. Then, in 2010, in the fall a bill that was subtitled the, "No Competing System Bill," which we subtitled the "Moratorium Bill." SB 1209. That was sponsored by the industry again. We were able to push that to the side. Then we had a huge event which was in November. There was a change in the control of our house and our senate. 100 years of democratic control went to republican majority. In January of 2011, HB 129, which was named the "Level Playing Field Local Government Competition Bill," an act to create jobs, was introduced. The first bill we saw was in February. The Senate version was in draft 17; that's the first draft we saw. That bill was introduced in both the House and the Senate around February and it became law May 21st.

Christopher: You mentioned that the state government switched hands from historically being at least divided to being wholly in the hands of a republican majority. Was that an important part of this change that Time Warner Cable was finally able to make?

Catherine: Oh yeah, absolutely. And it wasn't just Time Warner Cable, it's also CenturyLink, who is very heavy-handed in this last version that became law. We were able to get a careful analysis of these bills when they were introduced every year under democratic leadership, under a democratic majority. When it flipped to republican control, that all disappeared. I think that this bill was probably the second one introduced in the brand-new legislative year with a brand-new majority. It really did feel like the money that was used to get people elected was going to be rewarded with a bill. It certainly felt that way; we couldn't touch it. We just couldn't touch it at all. Yet, it kept getting refined and more refined by both CenturyLink and Time Warner as the bill went through committee.

Christopher: Right, I recall them saying that they were working on compromises and they were trying to, the people who were pushing the bill, they said were compromising and it sounded like you weren't the one they were compromising with.

Catherine: Well, I can tell you about the very first meeting. Representative Avila held a meeting because the public push-back was so loud. We were in a room and the city representatives were on one side, and the industry representatives were on the other. She spent the first 3 or 4 minutes criticizing the city in whatever way she could think of. Then she said, "Now I really don't feel like I'm a communication specialist, so I need to have this meeting run by a person I think is really an expert in communications. I'm going to hand the meeting over to Marc Trathen." Marc Trathen is one of the top lobbyists for Time Warner Cable. He actually runs the North Carolina Cable Television Association out of his office, and he was going to run the meeting. That negotiation wasn't much of a negotiation. I have a feeling that's really how it was every time even Wilson and Salisbury went into those kinds of meetings. You can see it in the law, there's micro detail on literally what streets Salisbury can and can't serve.

Christopher: The rule of money, I think, is really important in terms of campaign contributions in this. You're right, I often simplify this to talking about Time Warner Cable. You're right to correct me and remind us all that AT&T, CenturyLink, and other cable providers all put money in. The National Institute on Money in State Politics had a follow the money report in which they documented the ways in which the private carriers Time Warner Cable, CenturyLink, and others put so much money into the political process. We also know from an article in the New Yorker, that Art Pope put a ton of money into this. It really seems like, in North Carolina, the legislature was focused on representing the interests of a few major corporations rather than the interests of the public. I'm curious if you have any examples of people who have been left out and are not getting the broadband they need even after this bill was passed, when supposedly it would create jobs and new investment?

Catherine: I do, but just to follow up on your comment, in North Carolina, you are correct. The problem absolutely is Art Pope. Everyone knows he controls the leadership of the new republican majority. We were told when we were lobbying against H 129 by one republican representative who was trying to be helpful. He said, "You know, if you want to change this bill, talk to Art Pope." We thought he was kidding, but he was not. I really encourage anybody listening to this podcast to go to artpopeexposed.com. It talks all about him. As you mentioned, there's an October 2011 New Yorker issue called, "State For Sale," where you learn that he's actually a very close friend of the Koch brothers. Together they formed and run various front groups. Americans for Prosperity is one, Heartland Institute is another. Heartland is very heavily funded by these large billion-dollar private sector companies.  Ironically, Pope inherited his fortune by inheriting a chain of dollar stores. They're called Variety Wholesalers, and they specifically locate these stores in African-American and low-income areas in North Carolina. It's pretty ironic to see that that money is actually being used to pursue policies which directly target the removal of those people's ... Pretty much their civil rights to participate in our democracy. Art Pope has another group that he's the 80% funder for. It's called the John Locke Foundation. John Locke employees are all over the offices of the leadership in our Senate and our House. They, not so long ago, formed with the Americans for Prosperity another group called the Coalition for a New Economy. Guess what one of the top issues is for the southeastern chapter of the Coalition for a New Economy? It's against municipal broadband.

Christopher: Right. They were very active in Georgia and South Carolina and we suspect they're going to be pushing in Florida to make their laws even worse.

Catherine: That's big money. That's big money, Chris. There's just got to be a lot of education and a lot of organizing at the grassroots level to educate people on what this all really means for their lives. That gets into your other question which is, "How does it translate in people's homes?" Like I said, half of North Carolina is rural, and these are the areas where these large companies have admitted publicly they have no interest in serving them. I've heard them tell rural county managers, "Hey, your homes in your county are too far apart and your people don't make enough money for us to invest."  What we're seeing is parents having to drive their kids, every day, 20 minutes away to find a cell tower where they can use an AirCard and upload their kid's homework every day and then 20 minutes back. I've had people who won't let me talk about their situation because they're worried that if it gets out that their home doesn't have broadband they won't be able to sell their house. There are school districts that know that parents are sitting in their parking lots feeding off of theWi-Fi. Those school districts are tempering their adoption of digital training in their curriculum because they know that even while they're giving these kids free computers, the kids are going home and they can't use them.

Christopher: Right.

Catherine: When your child is trying to get an education in order to compete in this global market where all these other people are getting plenty of speed and plenty of access to the internet, developing the software, and understanding the software, we are hurting ourselves.

Christopher: Yeah, I want to read a quote actually from during this discussion over the bill when your governor was contemplating whether or not to veto it. Which she ended up not doing, Governor Perdue. The vice president of Red Hat, which is a software company, Michael Tiemann, this is a pretty major software company, wrote her a letter and I want to just quote from that. He said, "I spent more than 2 years begging Time Warner to sell me a service that costs more than 50 times more than it should, and that's after I agreed to pay 100% of the installation costs for more than a mile of fiber."  As we see in this letter, and we've seen from your stories, people are not being served in the communities and businesses are not able to expand the way they should be able to. Yet we see these bills coming through, and they limit the authority of communities to build networks. One of the things that they often say is that if a community is truly under-served or not served, that it's exempt from the law. So I want to ask you about the exemptions that we've seen in North Carolina and if we have time, maybe South Carolina. 

Catherine: Well, this is why I say that CenturyLink needs to be given full credit for its overreach. There is an exemption in our law, and it's a joke. The reason I say it's a joke is because what the exemption is is if your area's un-served, you are not subject to these onerous regulations that they've put on communities that want to provide their own broadband. That definition is that if 50% in the households by census block, do not have access to 768 KB service down, or only can get high-speed internet access through satellite, then they're considered exempt.  The reason I say it's a joke is because CenturyLink knows because it's involved in the NTIA mapping process. That they do not measure census blocks by household. They do no measure broadband by households, they measure it by census block. Such that, if there's one home in a census block that the industry who's providing the data ... If they conclude that they can provide that service within 7-10 business days, that home is considered served. Even if it's not served. If there's one home in that census block that's served, they get to say that all the households in the census block are served. What you get is an enormous exaggeration on the level of homes being, well, area being served.

Christopher: Right, and to spell that out, what would I have to do if I was a local government or community and I wanted to build a network in an area that I recognized there was a need and there was a tremendous amount of un-served? What would I have to go through in order to make that proof to the legislature that the area was un-served?

Catherine: In that sense, what you have to do is your own survey. It would be home-by-home survey, which is very, very expensive. You would have to collect your own data because the inside data right now is so over-exaggerated. The other problem with that is, even if you were able to call together thousands of kind of spots of these census blocks, you don't get to incorporate higher-density areas that it takes to actually make the system viable. The industry knows this. You have to couple higher-density areas with lower-density areas in order for the numbers to work. The exemption is dead in the water.

Christopher: Right, and we see a similar exemption, in quotation marks, in South Carolina, don't we?

Catherine: Yes, and believe it or not, it's actually worse. I had to read this one a couple times. It was like a little bit of time that passed between when our bill became law and when this bill was introduced in South Carolina. They looked at it really carefully, because they introduced basically with our bill. They figured out, "Oh, we didn't go far enough." What I noticed in the South Carolina law is that there are two exemptions. The first exemption is you have to prove you're a persistent poverty county. What that is is in a county where 20% of the population exceeds the national poverty rate for 30 years. You have to show you're a persistent poverty county. If you're a persistent poverty county, you have to show that 75% of the households in the census track have no access to 768 KB down; otherwise known as the FCC's broadband tier 1 service, or they only get satellite service.  The other exemption is any other kind of county. In any other kind of county, you have to show that 90% of the households in each individual census block do not have access to 768 KB down or only have broadband through satellite service. The other trick, and I've just told you about the problem with trying to measure by household; the data is not out there, so they'd have to get their own data. The exemptions have drop dead dates which have nothing to do with when the filing is made with the local community. It has to do with certain FCC actions.

Christopher: You know, the face you've gone through it, is one of the things that they're trying to do is waste your time because we know that no one is going to try to build a network under these conditions. They just come up with these incredibly convoluted things that the only purpose seems to be is for them to allow themselves to tell reporters lies and know that the reporters don't have the time or the capacity to understand what is being said with incredibly difficult language. I'm impressed that you were able to figure that out because we spent some time looking at it, and in the end I just got a headache.

Catherine: Well Chris, you know it's really concerning that they set these deadlines based on whether or not the FCC changes their definition of broadband tier 1. That's outside of anything a community is offering. If the FCC decides that people need more speed in order to participate in modern life; if they change that definition at all, then the exemptions have even a shorter lifetime.

Christopher: You're right, it's an important point. It's just so incredibly frustrating that they get to write all of these rules and that they're so convoluted that it's almost impossible for it to be a transparent process for the average person to understand the impact on them and the future of their communities.

Catherine: I think if you look at the language in the laws, it's so micro-designed by the industry that it tells you who had the influence over these legislators.

Christopher: Right. You're absolutely right. You had done some work on looking at the reaction of Time Warner Cable from Wilson. I realize I'm just coming out of the blue with this, but I'm curious if you remember the benefits that Wilson was seeing in terms of price compared to its neighbors who also had Time Warner Cable serving them.

Catherine: We did an interesting study a couple years ago because when, in 2006, the state legislature deregulated the cable industry, they deregulated it with a promise from the industry that prices would go down, customer service would go up. Pay channels would flourish. Cities would continue to be financially whole. In my community, I noticed that my cable prices kept going up, so we did a little study. What we looked at was Time Warner serves not only Wilson, but it also serves Raleigh and all of these small communities surrounding Raleigh. They're all served by the same headend, with the same fiber-optic backbones with all the same programming.  We looked at Time Warner's pricing in the communities that didn't have municipally provided cable systems compared to Wilson. What we saw was an enormous phenomenon that in Wilson, Time Warner's rates were somewhere in the range of sometimes, 80%-90% lower than what we were being charged in Raleigh and surrounding communities. It really looked like we were subsidizing. Time Warner was taking our higher rates and subsidizing their rates in Wilson so they could drop their rates in Wilson lower than Wilson's and put Wilson out of business. What you see is that municipal systems actually provide this kind of competitive force that we've been told the industry should be engaged in. It actually works with municipal systems, not that that's their incentive, their incentive is very much to increase the quality of life in their community. It is legitimate competition and the industry knows it, and that's why they want to get rid of these guys.

Christopher: I want to encourage people to learn more about exactly what happened in North Carolina because the role of a few very powerful corporations controlling a legislature I think should concern all of us. We wrote about it quite a bit referencing some of the excellent work that you did with SEATOA. If you go to muninetworks.org, and you look for our tags and you click on North Carolina, you'll find tens of stories covering this. It's really an important issue, it's not going away. We're going to see it in more states in the near future. I hope people can be prepared for it. Thank you so much for coming on the show, Catherine.

Catherine: Chris, is there one more point I could make?

Christopher: Please.

Catherine: It's really important that people understand this from an international perspective. What we're seeing is that the industry is basically bulldozing through these pro-monopoly, what I would call anti-advanced technology laws because of their deep pockets; because they have the money to finance the campaigns of these legislators. They've concluded that it's much less expensive for them to hire lobbyists who push through these fake realities in these committees than to maintain or even upgrade their outdated plant. In the meantime, what we end up with, is as the Open Technology Institute report has shown; in the United States, we're paying a lot more for a lot less than the rest of the world. What concerns me is, while we're holding back our technology here in the U.S., China is building out fiber to the home with a vengeance. That's where North Carolina lost its jobs, and now they're building out fiber to the home with a vengeance. I think their plan is to get to 300 million homes by 2015. From an international perspective, this is seriously hurting our country.

Christopher: Yes, that is a very important point, and I'm glad you brought it up. Communities in North Carolina, South Carolina in particular need to be aware because other places may be able to rely on Verizon's FiOS to at least get beyond the basic DSL and cable architecture. In North Carolina and South Carolina, communities are among the only ones who've been building these networks. Also, co-ops and some non-profits in your rural areas have done a good job, but the big private carriers, they have been refusing to do the proper investment. Thank you so much, Catherine, and we'll look forward to ... I'm sure we're going to have you on again. You're a terrific guest.

Catherine: Thank you so much, Chris, and thank you for caring.

Christopher: Thank you. That was Catherine Rice, the president of SEATOA. After our conversation ended, she wanted to make sure I alerted the audience to AT&T's admission that it had no solution to the rural broadband problem, something that we wrote about on muninetworks.org around the time Georgia's legislature was considering restricting local authority back in February-January 2012ish. Similarly, Verizon has stopped expanding FiOS. With the private sector publicly admitting it has no solution for rural America, these state limitations on local authority have a very real and very negative consequence. She wanted me to say that, "Industry's control of our state legislature is leading to a failure to develop the level of infrastructure that will allow us to compete with places like China who are full steam ahead with fiber to the home. It is seriously harming our country's future economic survival. Forget about being leaders, we can't even follow. We are in the internet age, we are no longer in the manufacturing age."  To learn more, visit our show page on muninetworks.org where we have links to some of the materials discussed in this show. If you have any questions or comments, please tell us directly. E-mail podcast@muninetworks.org. Thanks to my colleague Lisa Gonzales for putting this show together. Fit and the Conniptions for the music licensed using Creative Commons. The song is called, "Storm's Over."