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
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)
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
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
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
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
Hill, Greensboro, Raleigh, Momeyer, Asheville, Rockingham,
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.
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
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
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
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
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
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: