Community Broadband Battles Private Telecom

Efforts to bring decent-quality Internet service to out-of-the-way corners of America often founder from private companies claiming they can't handle competition from public utilities.
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On May 20, North Carolina adopted a law that will restrict local communities' ability to build their own broadband infrastructure, a long-running priority of regional telecom giant Time Warner Cable, which argued that private companies shouldn't have to compete with public utilities to get you on the Internet.

The legislation was deeply controversial and went down to the wire — activist Harvard law professor Lawrence Lessig published an open letter to Gov. Bev Perdue begging her to veto the bill in the eleventh hour. She declined.

Now the law is the latest obstacle to what was becoming an innovative local policy solution for hard-to-reach communities stuck on the other side of the digital divide. These rural areas often aren't served by large telecom companies, or they receive service from a monopoly that offers high prices and unreliable high-speed access.

"The result is that leaders in a number of communities have said, 'We really need to build something ourselves, because if we don't, we're not going to be competitive, we're not going to be able to grow small businesses, we're not going to be able to get existing businesses to relocate here, and people generally aren't going to want to live here if we don't have fast, affordable and reliable access to the Internet,'" said Christopher Mitchell, director of the Telecommunications as Commons Initiative at the Institute for Local Self-Reliance.

That argument has a bit of tea party logic to it — if local communities decide they want to spend their own money building local infrastructure, faraway state capitals (or Washington, for that matter) shouldn't be able to tell them they can't.

But the idea is also framed as an unfair attempt by government to crowd out private enterprise. And so, while Mitchell has counted 54 towns across the country that now own citywide fiber networks, he's also identified 18 states that have put up barriers preventing more municipalities from joining them — usually at the lobbying request of large telecom companies.

THE IDEA LOBBYMiller-McCune's Washington correspondent Emily Badger follows the ideas informing, explaining and influencing government, from the local think tank circuit to academic research that shapes D.C. policy from afar.

THE IDEA LOBBY
Miller-McCune's Washington correspondent Emily Badger follows the ideas informing, explaining and influencing government, from the local think tank circuit to academic research that shapes D.C. policy from afar.

Economic studies support the rationale of local communities that have found few other options. Researchers have found that publicly owned networks tend to serve markets that private telecommunications companies do not, and that those municipal providers don't pose a significant competitive threat to their private rivals.

A 2005 study suggested Lake County, Fla., doubled its economic growth, relative to comparable counties, after offering municipal broadband to local businesses and institutions. And a 2008 survey of the small town of Kutztown, Pa., revealed that local residents had cumulatively saved $1.5 million in six years from the lower rates offered by a municipal network and the competition that it spurred among other local providers.

That finding reflects the most common result of such networks, Mitchell said: that broadband prices fall by about 15-20 percent.

"In most areas, we've seen increased investment from the incumbent once the community has built their network, and that's what economics predicts," Mitchell said. Those companies, after all, don't want to lose customers. "And yet we often see the incumbents claiming they would have less incentive to invest if a city built a broadband network. But they can't point to any real empirical evidence of that."

All but three or four of the cities with municipal broadband have fewer than 50,000 people, Mitchell said. Chattanooga, Tenn., is the largest. The rest are mostly small, conservative-leaning towns in the South — not the profile many might associate with this idea.

"These are not places with very liberal city councils," Mitchell said. "That's a common misconception, that somehow this is a right versus left issue. Historically, it really has not been. It's been an issue of economic development, about creating jobs."

That raises the question, though, of what happened in North Carolina. The controversial bill there was passed by the state Legislature along strict party lines, with Democrats opposing it and Republicans voting in favor (although the governor who declined to veto it is a Democrat). That result also mirrors the political trend that's developed in reaction to the idea across the country.

"[Bipartisanship] changed because there's so much rhetoric right now that's just anti-government," Mitchell speculated. "I half wouldn't be surprised if we saw groups forming to privatize streetlight operations, there's so much anti-government rhetoric. The idea that government would tell you where and when to stop your car actually seems controversial today."

Opponents of the idea seem torn between two arguments: On the one hand, municipalities are so strong, they'll run private companies out of business, but on the other, they're so incompetent, they'll wind up bungling taxpayer money. These lines of attack are, of course, contradictory.

In the aggregate, though, the number and size of the towns even interested in pursuing this idea hardly seems worth the effort that's been marshaled to stop them. The only thing that may protect their ability to make this decision themselves may be federal legislation.

"The vast majority of communities simply don't have local governments that want to take this on," Mitchell said. "And for those who have taken it on, generally, it's been local governments that feel they have to, as opposed to want to. In many cases, they've begged incumbents to invest so they don't have to take on this challenge."

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