Lawmakers push through bill blocking public broadband

Republican lawmakers on the NC House Committee on Public Utilities pushed through legislation today that would impose onerous conditions on municipalities that want to provide public broadband service to their citizens.

The committee gave a favorable report on the bill by voice vote despite the fact that sponsors said it is likely to include changes before it reaches the Finance Committee due to ongoing efforts to resolve differences between the telecom industry and three North Carolina cities that already provide public broadband service to citizens.

Rep. Julia Howard (R-Davie, Iredell), a sponsor who also serves as senior chair on the finance committee pledged that the next iteration of the bill will include language exempting those municipalities.

As noted in the bill’s title, the primary purpose of the legislation is to regulate “local government competition with private business.”

“In terms of cities wanting to do this in the future, they’re actually not prohibited from doing that; they just have to do it with private industry,” said Rep. Marilyn Avila (R-Wake), one of the bill’s prime sponsors, who is a former event coordinator and administrative director of the conservative John Locke Foundation.

Opponents such as the NC League of Municipalities argue that the bill places “prohibitive restrictions on cities and towns that seek to provide communications services to their local residents and businesses that are unserved or underserved by private providers,” and that cities need the ability to provide modern communications infrastructure for economic development and public safety free of burdensome regulation.

The league argues in a recent white paper that, far from leveling the playing field, the legislation tilts it in favor of private telecom companies. Both House and Senate bills are officially named “Level Playing Field,” but the league argues a more accurate title would be “Block Broadband to NC Communities.”

“The bills saddle cities and towns – even those who want to partner with private-sector companies – with unique new rules, numerous reporting auditing, accounting and rate-setting requirements that the industry knows will stop broadband deployment by cities and towns,” the league argues.

The city of Winston-Salem is among municipalities that have gone on record in opposition to the legislation, Rep. Larry Womble (D-Forsyth) said. And on Tuesday the Raleigh City Council passed a resolution opposing the Level Playing Field bill and other legislation "that would have a chilling effect on local economies and would impede or remove local governments' ability to provide broadband services to enhance economic development and improve the lives for their citizens."

Among the restrictions that would be placed on publicly owned broadband are prohibitions against cities advertising their services on public access channels and against using revenue generated from other services such as garbage and water to subsidize broadband. Cities would be prohibited from pricing broadband service to customers below cost, and would be required to pay an amount equivalent to what a private provider would pay in property taxes to county and state government.

Representatives of the telecom industry, including Time-Warner Cable regional vice president Jack Stanley, spoke in favor of the bill. Time-Warner Cable and CenturyLink, another company lobbying for passage of the legislation, both provide broadband services in North Carolina. A representative for the NC Chamber of Commerce also spoke in support.

A consortium of information technology companies, including Google, Intel and Alcatel-Lucent, expressed opposition to the bill to the respective Republican leaders of the House and Senate on Feb. 25, writing, "The United States continues to suffer through one of the most serious economic crises in decades. The private sector alone cannot lift the United States out of this crisis. As a result, federal and state efforts are taking place across the nation to deploy both private and public broadband infrastructure to stimulate and support economic development and jobs, especially in economically distressed areas."

The IT companies also argued that imposing burdensome regulations on local government would hurt private companies that are in a position to sell equipment and services to cities providing broadband access.

The cities of Salisbury, Morganton and Wilson currently provide public broadband service and are negotiating to be exempted from the legislation so that they may protect their investments. While the legislation is designed to defend private industry from unfair competition from government, the exemptions would place the three cities on different footing than other municipalities across the state.

Rep. Avila and Rep. Larry Brown, a Republican from Kernersville who is cosponsor of the bill, said they would like to see language added to require a referendum before municipalities deploy public broadband service. The most recent version of the bill stipulates, in contrast, that cities would not be required to obtain voter approval to discontinue or sell off public broadband.

“My city council spent years studying this,” Mayor Susan Kluttz of Salisbury told lawmakers. “It was something legal that we could do. We had to look at what to do to face the loss of textiles in our community, unemployment rising to 13 and 14 percent, competing with Kannapolis’ biotech center….”

Kluttz said her city asked Time-Warner Cable at AT&T to provide broadband to its citizens, and only reluctantly decided to launch the service as a public utility when the private companies refused to provide a time frame for moving into the market.

“We do not see this as a private versus public issue,” Kluttz said. “I see this as a money versus public service issue. Please allow us to serve the public with what we know they need.”

Jay Ovittore, a lobbyist for the Southeast Association of Telecommunication Officers and Advisors who lives in Greensboro, said cities in neighboring states have used public broadband as an economic development tool. For example, Bristol, Va. has a municipal broadband system 25 times as fast as what Time-Warner Cable provides, he said, while Volkswagen officials said their recent decision to site a new plant in Chattanooga, Tenn. was based, in part, on the fact that the city’s public broadband system is the fastest in the country.

Industry representatives countered arguments by opponents that the bill will deny residents in rural parts of the state access to broadband.

“This bill is not about service to rural areas and unserved areas, said Marcus Trathen with the NC Cable and Telecommunications Association. “This bill is about areas where there is broadband, and cities seek to go into competition with private business.”

The bill exempts from regulation “unserved” areas, defined as having at least 90 percent of households with either no access to high-speed internet service or access only through satellite providers.

The legislation has bipartisan backing, with Rep. Becky Carney (D-Mecklenburg) and Rep. William L. Wainwright (D-Craven, Lenoir) signed on as prime sponsors, but most of the rhetorical firepower during the hearing today came from Republican members. Republican cosponsors include Rep. John Blust and Rep. John Faircloth, both of Guilford County, along with Rep. Brown of Forsyth County.

Brown said he in an interview today that he doesn’t believe local government is capable of operating broadband service at a profit because of an inability to compete with the efficiencies of scale achieved by private industry, and taxpayers would remain in a position of having to subsidize the venture.

“If the citizens want to do it I think there should be some kind of referendum,” he said. “If the city does it, they should put up projected expenditures and revenues. If the voters vote for it, when those elected officials come up for re-election, I think they’ll be replaced because they’ll lose money and therefore taxes will go up. Nobody wants to pay for more taxes.”

Some Democrats such as Pricey Harrison (D-Guilford) complained that the Republican-controlled legislature is rushing bad legislation through without ample debate.

Rep. Harry Warren, a first-term Republican lawmaker from Rowan County, found himself in the awkward position of going against his leadership. After all, one of his important constituents is the city of Salisbury.

“We’re being asked to pass a bill out of this committee to another committee,” he said. “I don’t like the idea of voting on something so we can find out what’s in it later. It kind of gives me chills.”