[opendtv] Why the F.C.C.’s Municipal-Broadband Ruling Matters, Too - The New Yorker

From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
Date: Sun, 1 Mar 2015 22:12:48 -0500

As expected, the FCC adopted new net neutrality rules last Thursday. While most
of the coverage of these rules has been focused on the reclassification of
Internet services as a Title II Telecommunications service, rather than an
information service, the order also attempts to overturn laws in Tennessee and
North Carolina that prevent municipal broadband systems from expanding into
neighboring communities.

I am rather sensitive to this issue, as I live in an unincorporated area of
Alachua County, Florida, for which our utilities are provided by the City of
Gainesville owned Gainesville Regional Utilities system. GRU provides water,
electric, and sewer services, and in some areas fiber optics based broadband.
The broadband services are only available to bulk accounts like apartment
complexes and businesses near their fiber trunks.

The problem is that GRU is a cash cow for the City of Gainesville; the annual
revenue transfer to the city is about $35 million. In addition, Alachua County
piles on a utility tax for GRU services. In essence, we are paying city taxes,
but are not city residents and cannot vote in city elections.

This problem had been exacerbated by the decision of city commissioners,
several years ago, to build a biomass (wood) fired power generation facility,
owned by a private company that sells the power to GRU. The same company built
a similar facility in Austin, Texas, which was later sold to Southern Company,
a large producer of power across southern states.

The city of Austin had the foresight to include a clause in their contract that
allows them to buy power from other providers if they offer lower rates. As a
result, that biomass facility is sitting idle, as the cost of biomass power is
at least three times that of other sources such as coal and natural gas.

The Gainesville City commissioners thought they were doing us a favor, building
a power generation facility we did not need, based on the assumption that the
cost of natural gas and coal fired electricity production would skyrocket over
the next decade. And they conveniently forgot to include a provision that would
let us opt out of paying for the expensive biomass power.

Bottom line, we are saddled with a $30 BILLION contract for power for the next
30 years. As a result we have the highest electricity rates in the state, and
these rates will continue to increase every year to help pay for the contract.
To place this into proper perspective, the plant had to shut down for a week
for an upgrade - GRU saved $2.5 MILLION in power generation costs for that week.

As you might suspect I am not happy with paying city taxes via the GRU revenue
transfer to the city, or paying a premium for electricity.

How does this relate to the FCC decision to overturn state laws, which will
clearly face legal challenges?

Chattanooga TN, and Wheeler N.C. both operate profitable broadband systems, the
profits from which help reduce local taxes. Both compete with commercial ISPs.
And both wanted to expand their profitable broadband services to neighboring
cities, until the state legislatures said NO. It is likely that the expansion
of service would have been profitable, and would have increased choice for the
residents of these communities. It is less clear whether these municipal
systems have a cost advantage over commercial competitors, and what role these
commercial competitors had in getting the state legislators to shut down the
expansion of these municipal competitors.

And there is another side to the municipal broadband coin; there have been a
number of failures of municipal broadband systems costing taxpayers millions,
although the success rate for municipal broadband is improving as demand
increases.

But the question remains: should cities be able to compete with commercial
broadband systems by expanding their service areas to neighboring communities,
allowing them to generate revenues that help to reduce taxes for their
residents.

It's great when it works... Really sucks when the local politicians screw up.

Regards
Craig

Here is an analysis of this issue from New Yorker magazine:

http://www.newyorker.com/business/currency/fcc-municipal-broadband-ruling-matters-net-neutrality

Why the F.C.C.’s Municipal-Broadband Ruling Matters, Too

Tom Wheeler, the chairman of the Federal Communications Commission, seemed
fired up on Thursday morning when he took his seat in room TW-C305 at F.C.C.
headquarters. For months, anticipation had been building for the commission’s
decision, planned for later that morning, on the fight over net neutrality—that
is, whether Internet providers should be able to charge Web companies to get
their content delivered to customers at faster speeds than usual, or whether
all content should be treated equally. It would be an unusually high-profile,
not to mention political, decision for the F.C.C., and the commissioners had
got into the spirit; two of the Democrats who were expected to vote with
Wheeler, also a Democrat, in favor of net neutrality—the equal treatment of
content—had shown up wearing blue. Net-neutrality advocates were standing by,
planning, after the expected decision in their favor, to fly a Grumpy Cat
banner over the Philadelphia headquarters of Comcast.

Wheeler began the meeting by considering a different issue, one that has
received far less attention than net neutrality but which could also have broad
implications for how people in American cities use the Internet—and, that, like
net neutrality, is expected to be disputed in the courts. It began when the
cities of Chattanooga, Tennessee, and Wilson, North Carolina, petitioned the
F.C.C. to take on laws in their states that restricted them from providing
broadband Internet service, on their own or through a partnership, to
neighboring towns. The F.C.C.’s decision would have implications beyond those
cities, as other municipalities—from small towns to cities like Austin, Texas,
and Provo, Utah, both of which have built networks in partnership with
Google—are increasingly looking to build their own broadband systems, often
using fibre-optic cables that can deliver Internet at much faster rates than
the traditional broadband service typically offered by cable companies.

Currently, some twenty states ban or restrict municipal broadband. In certain
states, these laws have been influenced by lobbying from traditional Internet
providers, though lawmakers worry, too, that if local broadband systems fail,
taxpayers will be forced to bear the cost of wasted investment. There have been
high-profile failures in the past—or, at least, cases in which the investment
hasn’t yet proven worthwhile.

With respect to the case before the F.C.C., Tennessee lets local electrical
providers add telecommunications services such as cable and Internet anywhere
in the state, but they’re allowed to offer the services only in places covered
by their electrical system. In Chattanooga, this meant that the nonprofit,
city-owned electricity provider, E.P.B., which provided high-speed Internet to
the town’s residents, wasn’t allowed to do the same in some nearby places.
North Carolina also allows local broadband, but imposes so many conditions on
how it can be provided that Wilson, a small town an hour east of Raleigh, was
precluded from expanding its broadband service into neighboring counties.

For some time, American cities haven’t been sure whether they could get around
state-level restrictions like these. But in the past couple of years, there
have been some hints that the F.C.C. might be able to help. The basis for this
hope is a relatively obscure clause in the Telecommunications Act of 1996,
known as Section 706, which deems that the commission should regularly look
into “whether advanced telecommunications capability is being deployed to all
Americans in a reasonable and timely fashion.” It adds, “If the Commission’s
determination is negative, it shall take immediate action to accelerate
deployment of such capability by removing barriers to infrastructure investment
and by promoting competition in the telecommunications market.”

Recently, Wheeler has been invoking this concept to make the case that state
restrictions on how localities can provide Internet service are exactly the
sort of “barriers” that the F.C.C. is meant to remove. And on Thursday, he
seemed to relish discussing the issue—his opinion on the subject has been much
clearer, in the past several months, than on net neutrality, where he has been
criticized for flip-flopping. He described what he considers “irrefutable
truths” when it comes to broadband: “One is, you can’t say that you’re for
broadband and then turn around and endorse limits on who can offer it. Another
is that you can’t say, ‘I want to follow the explicit instructions of Congress
to ‘remove barriers’… to infrastructure investment, but endorse barriers on
infrastructure investment. I think, as they say in North Carolina, that dog
don’t hunt. You can’t say you’re for competition but deny local elected
officials the right to offer competitive choices.” He went on to argue that
local business and residents were suffering the consequences of restrictive
state laws. Finally, before moving on to the net-neutrality issue, he moved
that the F.C.C. preëmpt the state laws in Tennessee and North Carolina. The
other Democrats agreed with him, and the plan passed, as expected, by a vote of
three to two. (Later, the commission voted in favor of net neutrality by the
same margin.)

To those who support the growth of municipal broadband, the decision seemed
eminently just. Some of the areas around Chattanooga and Wilson don’t have
broadband Internet access at all, or else it exists only at low speeds; parents
report driving their children to local churches or to McDonald’s so they can
get online and finish homework assignments. Such efforts, proponents argue,
demonstrate that, although the Internet may once have been a luxury, these days
it’s a form of infrastructure, not dissimilar to water pipes or roads—and that
towns lacking reliable access to it risk falling behind. “Why should it be the
decision of Comcast or any company that the infrastructure that they happen to
own in a community is good enough?” Joanne Hovis, the C.E.O. of the Coalition
for Local Internet Choice, a group of businesses, cities, and others, told me.
“Why shouldn’t a community be able to say, ‘We will work with another provider
or work ourselves to be able to provide better infrastructure’?”

There is a straightforward answer to this question: according to federal law,
states generally have the authority to write laws governing what their cities
can or can’t do. The issues at hand are where the limits to that authority
should be drawn, and where the F.C.C.’s jurisdiction begins and ends. With the
decision, those questions are likely (as with the net-neutrality issue) to end
up in the courts. The executive director of the National Conference of State
Legislatures, William Pound, suggested in a press release on Thursday that the
F.C.C. decision overstepped the commission’s bounds. He said that his
organization “takes the preemption of states very seriously and will continue
to pursue our options to ensure that any action taken by the FCC on municipal
broadband networks are overturned by the courts.” Walter McCormick, the
president of the United States Telecom Association, a trade group whose board
members include executives from A.T. & T. and CenturyLink, said the vote “is a
distraction from the hard work of improving the regulatory climate for all
broadband providers to invest in new and improved infrastructure, and serves
little purpose given the likelihood that it will be overturned by the courts.”

The likelihood of legal action risks slowing plans for expansion, in the short
term. David Wade, the chief operating officer at E.P.B. in Chattanooga, who was
born and raised in a nearby suburb, told me he doesn’t know yet how the
decision will affect E.P.B.’s plans. “There are quite a few legal hurdles,” he
acknowledged. But he told me he believed it was important for E.P.B. to pursue.
When he was growing up, he said, he and his friends played in the streets—games
like Capture the Flag and Kick the Can. Now he lives in Chattanooga, and when
his granddaughters come over, they often spend their time playing games or
watching videos on Internet-connected devices. Not far from Chattanooga,
though, he said, “There are some areas that are really close to us that have no
provider today. We’d like to provide service there as soon as possible.”

The F.C.C.’s ruling could also embolden cities in other states to move forward
with their own broadband plans, but they will have to proceed carefully. The
commission has now staked out its authority to overrule laws in those states
that allow municipal broadband but employ restrictions. In cases where states
have wholesale bans on municipal broadband, however, it could be tougher for
the F.C.C. to supersede the principle of state sovereignty. In other words, in
the states with the most severe restrictions on municipal broadband, the F.C.C.
may, ironically, have less jurisdiction—or even none at all.

[opendtv] Why the F.C.C.’s Municipal-Broadband Ruling Matters, Too - The New Yorker

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