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Time Warner hopes to soon return to enjoying the high prices and profits that came with its local monopoly. All it needs is to use pending legislation to stomp out pesky municipal projects.  (Source: Travel Webshots)

Time Warner's payoffs to Republican senators in the form of campaign donations have almost paid off -- a bill passing crippling limitations on municipal internet projects has almost passed.  (Source: North Carolina Congress)

N.C. local governments like Greensboro have passed resolutions condemning the bill, in a last ditch bid to prevent its approval. They are outraged at the measure, which would give the state government a "blank check" to kill voter-approved municipal projects.  (Source: City of Greensboro)
Seven towns pass measures condemning Republican proposal which could rob them of the right to self-governance

We've extensively discussed the controversy and conflict surrounding Bill H.129 [PDF].  In the face of legislation that could cripple their locally funded, voter-approved services, seven towns in North Carolina are striking back, publishing resolutions that condemn the effort.

The towns are urging state Republicans to reconsider the effort they are pushing, which looks to give the State government "blank check" authority to kill decisions made by the local government -- essentially robbing municipalities of their right to self governance.

I. Buying a Bill -- Did Time Warner "Purchase" Legislation?

The local resolutions label the pending legislation a "Time Warner" bill.  Time Warner Cable Inc. (TWC) enjoys a monopoly on high speed cable internet across much of the state.  So is the company responsible for the bill?

Well, it certainly seems that way.

As early as 2008 towns in North Carolina devised the idea of bucking Time Warner's monopoly by creating local services.  They discussed the idea with residents and received enthusiastic endorsement.  Communities including Wilson, North Carolina (Greenlight, Inc.), Salisbury (Fibrant), Davidson (MI-Connection), and Morganton (CoMPAS Cable TV & Internet) launched projects.  

Getting loans from the private sector and hiring private contractors the cities set out to create viable services, which eschewed the price gouging of local internet, phone, and cable TV providers.  

Time Warner and other local monopolies like landline service provider CenturyLink were bitterly opposed to the plans.  They funneled hundreds of thousands of dollars in campaign donations and lobbying money to try to "convince" politicians that the services should be banned.

Initially their argument was that local governments were too incompetent to implement a cash-flow positive service and that the services would go under, saddling locals with huge debts.  That didn't happen.  The services were incredibly popular and quickly approached a positive cash flow.  Time Warner and others saw their monopoly grip locally dissolving.  

In response Time Warner switched tactics and began to attack the "fairness" of the service.  They argued that was unfair for local citizens to be able to vote to use local taxes or revenue from other services (e.g. water, etc.) to fund the internet project.  They also questioned whether municipalities should be allowed to seek loans from the private sector.

Initially Time Warner and others divided their lobbying efforts between both the Democratic and Republican parties on a state level.  While their supported politicians tried to drum up support for the measure in 2009, but saw the effort stall.

So in 2010 they focused their efforts to almost exclusively lobbying the Republicans.  

The effort paid off.  One of the representatives that Time Warner and its allies (Century Link, AT&T) paid $6,250 to in campaign donations -- Rep. Julia Howard (R-Davie, Iredell) -- proposed H.129.  And it passed in the Republican-controlled House of Representatives by a healthy margin.

Time Warner, in statements to the media lavished praise on the legislation passed by its fundees.  In a company statement it wrote, "The bill is intended to create a level playing field so, If local governments want to provide commercial retail services in direct competition with private business, they can't use their considerable advantages unfairly."

II. Citizens Fight Back

Even as the Senate equivalent of H.129, Bill 87, sits in the Judiciary Committee 1, the measure is seeing active debate.  An U.S. Federal Communications Commission (FCC) Commissioner recently condemned the bill and similar propositions in Arizona and South Carolina.

Faced with the possibility of state government choking their services, local municipalities are also fighting back.  Chapel HillGreensboroRaleighMomeyerAshevilleRockingham, and Bladenville have all passed resolutions condemning H.129 and Bill 87.

The proposals argue that the proposition does anything but create a "level" playing field, instead handing Time Warner unique advantages.  Writes the Raleigh town officials:

If enacted the proposed legislation would not have leveled the playing field but instead would have hindered local governments from providing needed communications services, especially advanced high-speed broadband, in underserved areas and imposed burdensome obligations on local governments that private broadband providers would not have to meet.

And Greensboro argues:

North Carolina law has long permitted local governments to engage in public enterprises, and there is no justification for treating communications enterprises differently from other public enterprises that are essential for healthy local economies. Historically it was government that funded much of the current corporate telecommunications infrastructure in the United States and government paid for and developed the Internet on which these providers depend for their profit.

III. What are the Cities so Upset About?

Clearly from the tersely worded rebuttals from local governments, the state legislature's proposals are tremendously unpopular in the communities they would affect.  Some of the resolutions are outright accusative, saying Time Warner essentially created and promoted the bill.

The bill offers several provisions that the local governments find outrageous.  

Most notably it would create a state panel that any municipal project would have to be approved by.  No provisions of oversight or objectivity are mentioned for the panel.  And no specific restrictions or disapproval are mentioned.

In short, the measure gives this state panel a blank check to kill voter-approved municipal service projects.

The legislation also includes strict new restrictions on funding.  Under the plan local governments could not use their profits from water or other services to fund expansion of their municipal networks.  

It also makes it difficult for them to obtain loans (even if the project and its funding were voter approved, municipalities would have to hold special elections every time they wanted to take out a loan.

As state and federal governments freely spent and loaned money to telecoms like Time Warner and AT&T to help them expand their networks over the course of the twentieth century, the local governments are upset that they do not have the same privileges.

Likewise, they are upset that the bill forbids them from offering promotional pricing beneath the cost of service.  This is a common practice about telecoms, who later jack up the subscription fees to much higher rates.  It is unclear why the proposition to "level" the field would forbid municipal service from having the same sales rights as a commercial service.

IV. What's Next?

The bill looks likely to be approved by the Senate Judiciary committee.  The committee is led by Sen. Peter S. Brunstetter (R-Winston-Salem), who has worked as a corporate lawyer with the Womble Carlyle investment group.  Mr. Brunstetter seems very supportive of the measure, which is somewhat unsurprising given his background.

About the only real challenge on the committee might come from its Vice Chair, Senator Thom Goolsby (R-New Hanover), a criminal defense and injury attorney who also teaches law, given how the bill seemingly sets up mechanism which could rob municipalities of their self-governance rights.  But given his party's strong support of the measure, it's likely he too will cave and support its passage.

The real battle lies in the state senate.  If the bill can pass the senate, it will be nearly home free.  But Democrats in the senate plan on fighting the measure.

V. A National Precedent

North Carolina is far from the only state whose telecoms enjoy local monopolies or oligarchical controls on high-speed service (in these regions alternatives like tethering or DSL offer dramatically slower speeds).  Telecoms gain much of their revenue from these monopoly regions.  Studies have shown that in regions with only one or two service options, prices unsurprisingly are the highest.

While critics tend to point to a couple of unpopular, unsuccessful, or overpriced municipal offerings there's been far more success stories -- which is the driving force behind the N.C. protest.  

At the end of the day, the beauty of municipal projects is that at any time the citizens can vote the politicians supporting them out of office and install new officials who will scrap the project and sell any infrastructure to recoup loans.  At the end of the day, the projects are entirely dependent on public support.

Given the services' general success and popularity it is likely that telecoms will fight hard in other states to stomp out this growing movement before it spreads further and threatens their bottom line.

The battle in N.C., in this regard, is a precedent setter than may dictate the tone in other states.  At the end of the day the question boils down to:

  1. Should local citizens have the right to self governance?
  2. Should local services enjoy the same privileges as corporate services?
Local citizens in N.C. argue that the answer to both questions is a resounding "yes", but Time Warner and their sponsored Republican legislators argue the answer should be "no".




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