Tag: "level playing field"

Posted March 1, 2011 by christopher

As the North Carolina Legislature considers HB129 and S87 to greatly limit community broadband networks (we analyzed the bill here), it is worth taking a step back to understand why companies like Time Warner Cable provide broadband that is unreliable and comparatively both slow and costly without having other companies come in to offer a better product. The problem is basic economics: the problem of natural monopoly.

Ever wonder why you generally don't have a choice between two major operators like Comcast and Time Warner Cable? They have carved up the market due to the costs and difficulty of directly competing with one another.

Some folks have a choice of cable companies -- RCN and Knology, for instance, have been successful overbuilders in a few regions (though they went through troubles far worse than most public networks that have been termed "failures").

But for the most part, overbuilding an incumbent cable company is all but impossible -- especially for a private sector company looking for a solid return on investment inside a few years. In the face of a new cable entrant, massive companies like TWC start lowering prices, offering cash or other enticements, and lock both residents and businesses into contracts to deny the entrant any subscribers.

Companies like TWC can do this because they have lower costs (through volume discounts for gear, content, and even marketing synergies as well as because they long ago amortized the network construction costs) and can take losses in one community that are cross-subsidized by profits from non-competitive areas. New entrants, both private and public, have higher costs as well as a learning curve.

This is why we have so little broadband competition. Without competition, the few providers we have invest less and charge more, which is other countries are rapidly surpassing us (not because we have large rural areas, nonetheless a popular straw man).

In the face of this reality, communities have built their own networks for a variety of benefits, including creating competition or changing the dynamic of a duopolistic "market." Massive incumbent providers responded by claiming competition from communities was unfair and using their lobbying power to...

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Posted March 1, 2011 by christopher

A coalition of private companies, including Alcatel-Lucent, American Public Power Association, Atlantic-Engineering, the Fiber to the Home Council, Google, Intel, OnTrac, Telecommunications Industry Association, and Utilities Telecom Council, have released a letter opposing HB129/S87 in North Carolina. The bill would create considerable barriers to community broadband networks and public-private partnerships, effectively outlawing both given the restrictive language. We examined this bill here>. This the text of the letter they released:

February 25, 2011
via email

Representative Thom Tillis
Speaker of the House
Room 2304
16 West Jones Street
Raleigh, NC 27601-1096

Senator Phil Berger
Senate President Pro Tempore
Room 2008
16 W. Jones Street Raleigh, NC 27601-2808

Dear Representative Tillis and Senator Berger:

We, the undersigned private-sector companies and trade associations, urge you to oppose H129/S87 (Level Playing Field/Local Competition bill) because it will harm both the public and private sectors, stifle economic growth, prevent the creation or retention of thousands of jobs, hamper work force development and diminish the quality of life in North Carolina. In particular, this bill will hurt the private sector in several ways: by curtailing public-private partnerships, stifling private companies that sell equipment and services to public broadband providers, and impairing educational and occupational opportunities that contribute to a skilled workforce from which businesses across the state will benefit.

The United States continues to suffer through one of the most serious economic crises in decades. The private sector alone cannot lift the United States out of this crisis. As a result, federal and state efforts are taking place across the Nation to deploy both private and public broadband infrastructure to stimulate and support economic development and jobs, especially in economically distressed areas. North Carolina has been the beneficiary of these efforts, as MCNC, with its $148 million award, is now building a state-of-the-art fiber optic network that will cross 106 counties and make available low-cost, internet connections to numerous high-cost, low-density, communities that the state’s private providers have...

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Posted February 17, 2011 by christopher

As we predicted, Time Warner Cable is pushing a new bill in North Carolina to limit competition and local authority to build broadband networks (Save NC Broadband is alive again). H129 purports to be An Act to Protect Jobs and Investment By Regulating Local Government Competition with Private Business - [download a PDF of the bill as introduced].

This bill is another example of state legislators refusing to allow communities to make their own decisions -- imposing a one-size-fits-all policy on communities ranging from the metro area of Charlotte to small communities on the coast and in the mountains. Many of the provisions in this bill apply tough constraints on the public sector that are not applied to incumbent providers, but this analysis focuses only on a few.

Let's start with the title:

An Act to Protect Jobs and Investment by Regulating Local Government Competition with Private Business

There is no support anywhere in this bill to explain what the impact of community networks is on jobs. Nothing whatsoever. There is a claim that "the communications industry is an industry of economic growth and job creation," but ignores the modern reality that that the communications industry goes far beyond the private sector. In fact, the recent history of massive telecommunications providers is one of consolidation and layoffs. It is the small community owned networks that create jobs; larger firms are more likely to offshore or simply cut jobs.

Certainly all businesses depend on communications to succeed. Unfortunately, they are often limited to very few choices because the of the problem of natural monopoly. This is why many communities have stepped up, including three in North Carolina (two of whom offer the offer the most advanced services in the...

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Posted February 9, 2011 by christopher

In South Carolina (the state TWC Forgot), AT&T is pushing harsher restrictions on any publicly owned broadband system in an attempt to derail one or more broadband stimulus projects. South Carolina already greatly restricts community broadband networks, likely one of the reasons no incumbent there bothers to upgrade in a similar time frame as the rest of the country.

This should be seen a significant overreach -- AT&T is trying to shut down County efforts to improve middle mile access -- whereas most preemption tends to heavily restrict community last-mile networks. This is a whole new world of anti-competitive policy to favor AT&T (not dissimilar from what AT&T wants to do in Wisconsin and Fairpoint did in Maine).

The bills would force Oconee County to follow guidelines as a broadband service provider that would likely cripple the county’s current three-year project to construct 245 miles of broadband cable, county administrator Scott Moulder said.

...

Oconee County’s goal is to be a so-called “middle mile” provider, Moulder said, essentially providing a network that would allow private broadband providers to extend their service into areas they aren’t serving. In most cases, those are areas where the private providers have found it is not financially feasible to install their own infrastructure.

AT&T, Moulder said, has been asked to be a partner in the project as a retailer, but the company’s current actions are a rebuff.

The Oconee project is meant to attract additional independent service providers to invest in projects, not the County itself. But that hardly matters to AT&T, which wants to preserve the present lack of competition in order to maximize their gains at the public expense.

The Bill, S 483 is viewable here and contains the same old tired arguments claiming...

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Posted November 1, 2010 by christopher

I recently heard that the only place one finds a free lunch is in a mouse trap. As we sift through the lessons from the broadband stimulus programs, we have learned that the federal government preferred funding private projects rather than those that are structurally accountable to the community.

Before the first round of stimulus applications were due, many communities recognized the costs of applying were too high for them. Now, some are recognizing the high costs of complying with the many federal rules that come with accepting federal grants and loans (as detailed by Craig Settles).

And now, North Carolina's city of Wilson has found that applying for the broadband stimulus may have disadvantaged its FTTH network. Though the application was not accepted, the city has had to turn over its full application (chock full with proprietary information) to its competitors.

This is yet another example of ways in which the "playing field" is tilted against the public. The Wilson Times explained the situation and settlement.

The application included a proposed expansion of the network to provide reduced-cost or no-cost broadband lines to homes of Wilson County school children, a health network, increased lines for police and other improvements that would enhance the network in the city, Goings said.

When the North Carolina Telecommunications Association (with prominent member Time Warner Cable - incumbent cable provider competing with Wilson's Greenlight) asked to see the full application, the City refused to turn it over -- even after a court ruled against the City. The City argued the application contained key information regarding the policy and utilities that should not be made public for security reasons. When the Department of Homeland Security ignored the City's requests to intervene, the City was compelled to release the documents.

This is a particularly interesting juxtaposition as privately owned telcos and cablecos regularly argue against having to disclose any information about about their networks as a security...

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Posted October 18, 2010 by christopher

As Salisbury prepares to officially launch its publicly owned FTTH network offering triple-play services, it offers lessons for other communities that want to follow in its footsteps. As we wrote a month ago, Fibrant has candidly admitted it cannot win a price war with incumbents. Companies like Time Warner Cable have a tremendous scale advantage, which allows them to price below cost in Salisbury because the large profits from all the non-competitive markets nearby can subsidize temporary losses.

On October 10, the Salisbury Post ran a story "Fibrant can't match cable company specials." Alternative possible titles for the article could have been "Cable Co cuts prices to drive competition from market," or "Time Warner Cable admits customers pay different prices for same services." Interestingly, when Fibrant unveiled its pricing originally, the headline read "Fibrant reveals pricing" rather than "Fibrants offers speeds far faster than incumbents."

A lesson for community networks: do not expect the media to cover you fairly. The big companies have public affairs people with relationships with the press and they often buy a lot of local advertising. This is not to say all local media is bought off -- far from it -- but local media will have to be educated about the advantages of community networks.

Quick question: When you hear this quote, who do you first think of?

"We always work with customers to meet their needs and budget."

The cable company, right? Well, that is Time Warner Cable's claim in the above Salisbury Post article. Later in the article, a local business owner expressed a different sentiment: "Time Warner has the worst customer service I have ever dealt with."

The business owner goes on:

“Fibrant may have these same kind of issues, however I can actually go to the source to deal personally with someone who is vested in the community, not spend two hours on the phone and never solve the problem as I do with TWC,” he said.

“Even if pricing is higher, I would make the change. Price is important, but quality and service is tantamount.”

Speaking of the services...

...
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Posted September 23, 2010 by christopher

A few weeks ago, the Herald Tribune ran a number of articles about broadband by Michael Pollick and Doug Sword that discussed some community fiber networks and efforts by Counties in Florida to build their own fiber-optic networks.

The first, "Martin County opting to put lines place," covers the familiar story of a local government that decides to stop getting fleeced by an incumbent (in this case, Comcast) and instead build their own network to ensure higher capacity at lower prices and often much greater reliability.

Martin County, FL

"We decided for the kind of money these people are asking us, we would be better off doing this on our own," said Kevin Kryzda, the county's chief information officer. "That is different from anybody else. And then we said we would like to do a loose association to provide broadband to the community while we are spending the money to build this network anyway. That was unique, too."

The new project will use a contractor to build a fiber network throughout the county and a tiny rural phone company willing to foot part of the bill in return for permission to use the network to grab customers of broadband service. The combined public-private network would not only connect the sheriff's office, county administration, schools and hospitals, but also would use existing rights of ways along major highways to run through Martin's commercial corridors.

Michael Pollick correctly notes that Florida is one of the 18 states that preempt local authority to build broadband maps.

However, they incorrectly believe that Martin County is unique in its approach. As we have covered in the past, a number of counties are building various types of broadband networks.

This is also not the first time we have seen a local government decided to build a broadband network after it saw a potential employer choose a different community because of the difference in broadband access.

From there, Michael Pollick and Doug Sword...

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Posted June 15, 2010 by christopher

Lafayette Utilities System has filed a complaint with the FCC following what seems to be a rather arbitrary decision by the National Cable Television Cooperative (NCTC) to deny Lafayette as a member. This is a crucial issue for communities that want to build fiber-optic networks, so we will dig in and offer an in-depth explanation.

It all starts with the business model. Fiber-optic networks are fantastically expensive and are expected to be financed entirely with revenues from subscribers. Though communities typically want fiber-optic networks for the broadband capacity, they find themselves having to offer cable television services also to ensure they will attract enough subscribers to make the debt payments on the network.

Unfortunately, cable television services are the most difficult and expensive part of the triple-play (broadband, telephone, cable tv). A community network has to sign deals with different content providers in order to put together its channel lineup. Even a community network with 100,000 subscribers has little power over the companies with channels like ESPN, the Disney Channel, Discovery, MTV, Food Network, and others. Thus, it will have to pay more for those channels than massive networks like Comcast that have many millions of subscribers and therefore a stronger negotiating position. LUS has noted that video programming is the "largest single on-going cost" it incurs in the network.

Enter the NCTC. By forming a cooperative, many small providers (public and private) were able to gain negotiating power over content owners and even hardware manufacturers to cut costs to members by buying in bulk. In recent years, the size of NCTC rivaled that of major national providers like Charter and Cox cable. All three parties stood to gain by bringing Cox and Charter into NCTC in 2009. The addition grew NCTC significantly -- only Comcast has more subscribers currently.

The advantages of NCTC are quite significant and worth reiterating because it is a reminder of the ways in which massive private companies have the playing field tilted in their direction. Without access to NCTC, communities have to pay more for the same content and equipment (NCTC savings may start at 15%-20%. From the complaint:

NCTC market power also enables it to obtain much bigger, better, more flexible, and less costly packages, than any individual small cable...

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Posted May 10, 2010 by christopher

This is a great inside look at how one community built a globally competitive broadband network (probably the best citywide network in the US) and the barriers they faced from incumbent providers Cox and BellSouth.

Terry Huval, the Director of Lafayette Utilities System in Louisiana, spoke to the U.S. Senate Committee on Small Businesses Entrepreneurship on April 27, 2010, on the topic of: "Connecting Main Street to the World: Federal Efforts to Expand Small Business Internet Access." Huval's full testimony is available here.

Huval's presentation told the back story of LUS Fiber, focusing on the barriers to publicly owned networks in Louisiana.

The FCC National Broadband Plan, on page 153, includes Louisiana as one of 18 states that “have passed laws to restrict or explicitly prohibit municipalities from offering broadband services.” While the Louisiana law did not prohibit Lafayette from providing broadband services, its mere presence provided, and continues to provide, a fertile playground for BellSouth (and its successor AT&T), Cox and their allies to create mischief, resulting in discouraging local governments from stepping in to provide these services even when the private telecom companies refuse to do so.

Louisiana, as with many other states including North Carolina, has powerful incumbents that claim there is an "unlevel playing field" and that local governments have too many advantages in building broadband networks (incomprehensibly, they simultaneously claim that local governments are incompetent and publicly owned networks always fail). But state legislators - who hear constantly from the lobbyists of these wealthy companies, have passed laws to discourage publicly owned networks.

Huval details just some of the disadvantages the public sector faces in comparison with the private sector (we detail many other disadvantages in our "Breaking the Broadband Monopoly report).

For example, while Cox Communications...

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Posted April 25, 2010 by christopher

Time Warner continues to fight for monopoly protections in North Carolina with legislation to hamstring municipalities, preventing them from building the essential broadband infrastructure they need. While I was in Lafayette at FiberFete, the North Carolina Legislature was considering a bill to preempt local authority, essentially shutting down the prospect for any cable and broadband competition in the state.

Jay Ovittore has covered this legislation in depth.

Salisbury small businessman Brad Walser, owner of Walser Technology Group testified that North Carolina community’s new municipal broadband network Fibrant would meet his company’s needs for broadband capacity not available from commercial providers. Walser noted Salisbury is suffering from an unemployment rate exceeding 14 percent. Advanced broadband, he believes, could help the city attract new businesses that will help create new, high paying jobs. Fibrant is expected to launch later this year.

Folks from Chattanooga also testified about the benefits of publicly owned networks. The public outcry on the issue has been helpful:

All of your e-mails and calls have been getting through to the legislators. This kind of attention makes them nervous and I ask you to continue. I can assure you that we here at Stop the Cap!, along with Communities United for Broadband, Broadband for Everyone NC, and Save North Carolina Broadband are going to ratchet up attention on this issue.

If you live in North Carolina, definitely read the bottom of the post on how to help.

Unfortunately, the state legislature seems to have more nitwits than anyone who knows anything about networks: one State Senator suggested wireless will be replacing fiber soon - one wonders how the wireless tower will connect to the Internet... magic?

North Carolina could become the 19th...

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