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NC Governor Bev Purdue

A comparison of broadband download speeds
Governor Bev Purdue says that she will neither sign nor veto H.129

It looks as though the big telecoms that provide internet service in North Carolina -- Time Warner Cable, AT&T, etc. -- will score a major victory in their assault on municipal internet. This victory has been made possible thanks to Governor Beverly Perdue's indecisiveness on the matter.

I. Governor Beverly Purdue Chooses Inaction over Ruffling Feathers

Purdue issued the following statement on Friday in regards to House Bill 129 (H.129):

I believe that every school, household and business in North Carolina – no matter where they are – should have access to efficient and affordable broadband services.

There is a need to establish rules to prevent cities and towns from having an unfair advantage over providers in the private sector.  My concern with House Bill 129 is that the restrictions the General Assembly has imposed on cities and towns who want to offer broadband services may have the effect of decreasing the number of choices available to their citizens.

For these reasons, I will neither sign nor veto this bill.  Instead, I call on the General Assembly to revisit this issue and adopt rules that not only promote fairness but also allow for the greatest number of high quality and affordable broadband options for consumers. 

Since Governor Purdue has chosen not to sign the bill, it will automatically become law in North Carolina. 

II. H.129: “No Soup for You!”

H.129 would put restrictions on cities that currently provide internet service to its citizens (Wilson, Salisbury, Morganton, Davidson, and Mooresville), and would significantly hinder any efforts by other cities to pursue their own municipal internet services.

H.129 ensures that companies like Time Warner Cable and AT&T will continue to be the dominant players in most N.C. markets, even with higher pricing and speeds that often lag far behind what cities themselves can provide for its residents.

Some of the provisions in H.129 state that cities: 

  • Shall provide nondiscriminatory access to private communications service providers on a first-come, first-served basis to rights-of-way, poles, or conduits owned, leased, or operated by the city unless the facilities have insufficient capacity for the access and additional capacity cannot reasonably be added to the facilities.

  • Shall not use city resources that are not allocated for cost accounting purposes to the city-owned communications service  to promote city-owned communications service in comparison to private services or, directly or indirectly, require city employees, officers, or contractors to purchase city services

  • Shall not subsidize the provision of communications service with funds from any other noncommunications service, operation, or other revenue source, including any funds or revenue generated from electric, gas, water, sewer, or garbage services.

  • Shall not price any communications service below the cost of providing the service, including any direct or indirect subsidies received by the city-owned communications service provider and allocation of costs associated with any shared use of buildings, equipment, vehicles, and personnel with other city departments.

Companies like Time Warner Cable say that they simply can't compete with the lower-priced offerings from municipal-based services. For example, 10Mbps Road Runner service will cost you $57 per month. A competing plan from Greenlight (run by the town of Wilson) only costs $35 per month.

III. Citizens Suffer, Lawmakers and Telecoms Reap the Benefits

This “non-action” by Governor Purdue represents a significant blow to N.C. residents who live in underserved communities when it comes to broadband access, or are simply looking for cheaper alternatives. The rise of municipal internet in N.C. was a direct result of the major telecoms dragging their feet when it came to providing services or boosting broadband speeds. Then, when the cities decided to take matters into their own hands, the telecoms stopped dragging their feet and started running to lawmakers for help

However, this outcome shouldn't be too surprising. Rep. Julia Howard (R-Davie, Iredell) proposed H.129 and sure enough, she received $6,250 total in campaign donations from Time Warner, CenturyLink, and AT&T. Likewise, Time Warner's political action committee (PAC) has provided over $214,000 to state lawmakers since 2008. As for Governor Purdue, she received $3,000 in her winning gubernatorial campaign in 2008 from Time Warner. Time Warner also gave $10,000 to the Democratic Governor's Association -- which Purdue hosted -- in April.

Reuters recently reported that the United States ranks ninth out of 29 countries when it comes to broadband adoption (63 percent penetration). In addition, download speeds lag behind other countries. New York City residents, for example, average download speeds of 11.7 Mbps. Residents in Seoul, South Korea, however, are enjoying average download speeds of 35.8 Mbps.

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RE: Did you guys even read her comments?
By foolsgambit11 on 5/22/2011 7:59:10 PM , Rating: 3
I think people here, including Brandon, realize that it doesn't matter what she says as much as what she does. If she really wanted the legislature to revisit this bill, she would have vetoed it, but instead she's doing nothing, which is effectively the same as signing it into law.

That being said, I'm confused about exactly which part of this bill people are having problems with (including the governor, who leaves that point very vague in her statement). The bill, as outlined here, breaks down to:

1. Governments must let private companies run their lines along any place the government runs theirs, so long as there's room (ensuring equality of access). This was generally the case before the bill, where private communications providers could use easements designed for 'utilities'. This is to ensure local government doesn't change this policy to strangle competition, and is a reasonable safeguard.

2. Government can't make people, including its employees, buy the city plan over the private plan, and all advertising for the city plan must come out of the city plan's coffers. Again, reasonable safeguards to ensure equality between private and public services, and protection of people's freedom of choice. Totally reasonable.

3. The city plan can't take money from other parts of government. From the wording, it appears that the communications service could borrow money, either through a municipal bond or even a loan from the city's coffers, but the budget for the city plan's operation must balance itself in the long run. This is pretty reasonable, although it does prevent municipalities from taking advantage of economies of scale, and so might be considered a little unfair. But that's debatable. The biggest concern I have with this provision is that the wording seems to disallow a levy - I think people should be allowed to vote to fund the development of public communications infrastructure, if they so choose, just like they can vote to fund the installation of a privately-operated toll road or bridge.

4. The city plan must charge a price that actually covers its expenses, including its 'fair share' of any government property and personnel it uses. Seems almost redundant at this point. The city has to run their communications service like a business, including accounting for costs which are shared with other city services. I assume (though I could be wrong) that the city would be charging the private companies the same amount it charges its public provider for any use of government buildings, etc. allowed by #1 above. Not only is that fair, but it should keep the government honest in its bookkeeping, since it would be less likely to undercharge its communications provider for use if it was receiving identical funds from several other communications providers for the same usage.

I'd say the bill seems pretty reasonable. The biggest concern I have is that the private communications companies will use this bill as a foothold to launch frivolous lawsuits against local governments, questioning (for instance) their accounting practices regarding shared assets, and ultimately leading to government deciding it's not worth it to provide the service anymore.

Sorry for the wall of text, by the way.

RE: Did you guys even read her comments?
By farsawoos on 5/23/2011 11:30:53 AM , Rating: 2
A very apt post!

Certainly, after reviewing the bill itself ( it becomes clear that much of what the bill introduces is fairly reasonable and, as far as my very limited legal understanding goes, doesn't directly harm any otherwise competitive agreements into which municipalities would normally enter.

I do have a couple of questions for some of you legal hawks, though:

1. The bill seems to invoke reference to the Umstead Act ( ), which I find a bit puzzling. The Umstead Act basically says that the State, any office or division of the State, or any employees of stewards of the State cannot engage in the sale of goods and services otherwise rendered/offered by private enterprise with a list of exceptions. Fine ... except THE first exception in the list is "Counties and Municipalities." If that's the case, why invoke it in the text of H.129?

2. There's a section of H.129 that defines "payments in lieu of taxes." I say again that I'm not a legal type, so there's a lot of political and legal nuance that escapes me, but why does it seem to me that this document basically says "You don't pay taxes, but you pay what you WOULD pay in taxes as simply a fee." This includes a non-tax amount that equals local and State property taxes, income taxes, franchise taxes, etc. Why not simply say they pay taxes? What's the legal difference here between paying taxes and simply paying that same monetary amount in "fees"?

And just a comment to close... I found this little ditty towards the end of particular interest:

In considering the probable net revenues of the proposed communications 16 service project, the Commission shall consider and make written findings on 17 the reasonableness of the city or joint agency's revenue projections in light of 18 the current and projected competitive environment for the services to be 19 provided, taking into consideration the potential impact of technological 20 innovation and change on the proposed service offerings and the level of 21 demonstrated community support for the project. 22
(5) The city or joint agency making the application to the

I may not truly understand the real-world impact of this addition to the bill, but I find myself skeptical of any techniques brought to bear by either side to determine the "impact of technological innovation." :/

By farsawoos on 5/23/2011 11:31:36 AM , Rating: 2
Oops! That first link didn't work for some reason. Corrected below:

RE: Did you guys even read her comments?
By AMDJunkie on 5/23/2011 11:52:20 AM , Rating: 2
This is a bill about making a "fair, level playing field" between public and private internet providers, but anyone who actually goes through your points and then the law will see how if anything, it gives far too unfair advantage to the private provider:

Like #2: Government can't make its employees chose its service over a private providers', but in municipalities that already have only a private provider, they are functionally locked in to a private monopoly instead of a government monopoly. What's the difference between being told you only have the government service option to choose from or being told you only have the private service option to choose from? And if the private option is the only one available, government isn't able to step in and create the competition necessary for this heralded theory of economics called "capitalism" requires. Even if residents aren't currently being served by "broadband" (apparently defined by this law at the absurdly low 756Kbps), all a private broadband provider has to do to gain exclusive franchise to lock out a municipal network from ever serving those citizens is claim that they intend eventually to serve them. That's right, just state with nebulous plans that you will roll out service eventually to those saps.

The municipal networks in this bill cannot service any areas outside the borders of the city even if residents request the service too, even if they're de facto suburbs or unincorporated land counted in census population of the metropolitan area.

And #3: It makes sense not to throw good money after bad - except that's how businesses drum up attention for new services all the time. Exhibit A: The cable company here advertising that they can offer VOIP for cheaper than a dedicated landline (tangent: why can't the internet just provide the internet first and foremost, instead of being threatened to be segmented into services we already have available and deep-packet sniffed into oblivion?). I doubt either the advertising, or the introductory pricing, are hindering them from picking up a subscriber base that will, once hitting a certain number, provide a profit to be made.

Also, the bill allows cable companies to charge under their costs in areas that do have municipal networks, while recouping their losses in places that don't by keeping prices high there. Time Warner is a national company; the prices in Florida aren't going to go down because they can keep funneling money from that area into North Carolina, to try and trample these municipal carriers. So, competition wins for the consumer, like it should; until the cable company strangles out the hamstrung municipal network from charging any lower than them to retain subscribers, and magically the cost of services has to go up once they're out of the picture. Back to square one.

4. Not only must the city have a plan that covers expenses, but it also is forced to pay the same fees and taxes as the cable operators. Yes, government is paying tax to itself. And basically make sure that there's no difference in your bill from the municipal company than from the private company. Thus, why switch? Let inertia kill the public option because the public option is, after the bill, nickle and dimed back up to the price of the private one, fairly or not. I'll quote Lawrence Lessig from this article:

But the same might be said of companies that would like to provide private roads. Or private fire protection. Or private police protection. Or private street lights. These companies too would face real competition from communities that choose to provide these services themselves. But no one would say that we should close down public fire departments just to be 'fair' to potential private first-responders.

By mcnabney on 5/23/2011 2:06:31 PM , Rating: 2
The key weapon in the bill impacts financing. All of the other language is meant to serve business talking points and spin.

Muni-Internet can't use funds collected from other sources or borrow against existing assets. That kills them right there. It would be like telling someone to buy a house, but they can't report their income to get financing. Most private internet providers received some sort of government aid - like government-backed loans (zero risk for the business), but municiple ISPs would have to miracle up their investment dollars.

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