Monday, May 05, 2014

Incumbent ISPs don't like municipal competition

We have all heard that cable companies have a "franchise" that allows them to operate in the city in which we live. Cable companies pay an annual franchise fee to the cities in which they operate in return for the easements that allow use of the utility poles and underground conduits. This fee is often a large sum of money that cities enjoy, but ultimately comes at the expense of consumers.

This arrangement can create perverse incentives that allow the cable company to run without any meaningful competition. I know this from personal experience. When I moved into my home, there was no cable option. I had only Centurylink offering a measly 5mbs connection, and of that, only 3mbs was guaranteed. Uptime was a serious problem with them. But since Comcast wasn't available at my address, I was stuck. About a year and half later, I managed to get Comcast at my house with 12mbs, but there was still no better option.

Cable companies have been aggressively using their lobbying power to curtail any kind of competition. Their franchise allows them to run almost completely unopposed because the terms of the franchise exclude competitors. This is a fact frequently omitted in discussions of net neutrality.

In Utah, some of the largest cities spent years begging for better and faster service from Comcast and Centurylink to no avail. So fed up, the cities created Utopia, a municipal broadband service that would meet the needs of the cities and help them grow into the 21st century.

I could have had Utopia with a 100mbs connection for about $45 a month, but they had run out of money to build out and stopped about one and half blocks from my home. Worse, even after setting up with Comcast, Centurylink only offers 5mbs to this day. Centurylink seems to be acting as if they have ceded this territory to Comcast.

The advent of Utopia was not welcomed by the incumbents, Comcast and Centurylink. Centurylink sued Utopia over access to the utility poles and during the proceedings, moved for discovery on 29,000 utility poles, one at a time. Centurylink was willing to play dirty in court and created very expensive delays for Utopia, which never fully recovered from that.

Litigation is only one front. Several investigations have shown that cable companies have also been working with ALEC, the American Legislative Exchange Council, to write model legislation that prevents the building and adoption of municipal broadband. Utah happens to be the first state to pass such legislation, but only after Utopia got started. So there will be no other Utopia-styled networks in Utah. Cities will not be able to create their own networks to compete with Comcast and Centurylink, even if the incumbents refuse to provide better service. The incumbents just don't quit, either, as they have new legislation in the works to turn the screws on the cities against municipal broadband in Utah.

The legislation created by ALEC has been passed in more than 20 states and more are sure to follow with their gerrymandered GOP majorities in place, ready to do the bidding of big business. I note with interest that the membership list of ALEC could not be found on their website, and judging by the tone of their rhetoric, ordinary citizens like you and I are not included within the term "private sector". No, no. ALEC membership is reserved for large commercial interests.

There is a recent development that actually came as a surprise. Tom Wheeler, the poster child of the cable industry now chairman of the FCC, has stated that he has the power to preempt state laws that make it more difficult for municipalities to build their own networks. Wheeler has made an interesting point: if cities can grant franchises to telecoms, why can't they build their own networks to compete with them?

I believe that Wheeler can preempt state laws on the municipal broadband restrictions under the Commerce Clause. The Commerce Clause of the constitution grants Congress exclusive jurisdiction over interstate matters. If he really means what he says, he can easily apply his power to the 20 state laws he is contemplating by showing that they are incursions upon the power of Congress to regulate interstate commerce. I would sure like to see him try it.

Maybe then, we can all see gigabit internet access as a utility rather than an entertainment service as the cable companies would have us believe.
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