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An Analysis of HB 1252: ‘The Entrenched Monopoly Protection Act’

Jay Ovittore May 4, 2009 Community Networks, Editorial & Site News, Public Policy & Gov't 4 Comments

j0189616The first fallacy of HB 1252 can be found in its name, Level Playing Field/Cities/Service Providers. Would a level playing field exist where companies like Time Warner Cable and Embarq are exempted from the rules enacted in the bill, because they are private providers? No. The bill states very clearly all of the restrictions are on municipalities, all of the freedom from the restrictions go to private industry. This bill does not create a level playing field – it empties it of municipal projects leaving Time Warner and Embarq exactly where they are today, enjoying the fruits of a duopoly.

What do you think Time Warner would do if they had to follow these rules and regulations? They would fight the bill as anti-competitive, which it is. HB 1252 does one thing very well – preserves the de-facto duopoly for the companies that already provide service.

Sure, you could argue that municipalities could still technically set up service under this bill. But, what taxpayer is going to allow their City Council or County Commission to borrow money like a private business? Prohibited from consideration are bond initiatives and grants from foundations, as well as access to the $4.7 billion in stimulus money from the American Reinvestment and Recovery Act (ARRA), to provide state of the art broadband to underserved parts of our country. So one could say that HB 1252 is prohibiting the Reinvestment and Recovery of North Carolina’s economy.

Congress’ own studies and research shows ARRA funding is critical to the deployment of rural broadband, which simply will exist in no other way. In this part of the country, outside of the largest cities we are are all underserved by cable and telephone broadband providers. What community wouldn’t if the incumbent providers capped and limited usage at radically higher prices.

Then we have Section 1b(6). This section for municipal providers says: “The North Carolina Utilities Commission may adopt rules and regulations to ensure compliance with the provisions of this subdivision, and all records demonstrating compliance shall be filed with the North Carolina Utilities Commission and made available for public inspection and copying.” Utilities Commission! Since when is broadband and cable viewed as a utility? It was determined to be unregulated by the FCC, because of deregulation legislation passed in 1996. If municipal broadband will be viewed as a utility in North Carolina, then all private industry providers should have to comply as well. In either case, I don’t think this is necessary to deem broadband and cable as a utility, if there was sufficient competition in the first place.

All the language in the bill about cities not being able to cross-subsidize doesn’t apply to the private industry either. The private industry does cross-subsidize. Time Warner Cable does not separate its cable, broadband, and digital phone businesses. In fact, the company markets all three in product bundles specifically designed to attract customers to their entire package of services. The results of these bundle sales help each product’s numbers look better on financial reports. Broadband continues to account for a large amount of those profits — Time Warner Cable made $1.1 Billion in the first quarter of this year on broadband service alone. Broadband is hardly suffering a downturn from the economy..

Miring local government with a nightmarish set of regulations and burdensome paperwork is a recipe for an accounting nightmare and unnecessary expenses that private providers do not have. How could any local municipality convince residents to go along with the blizzard of requirements that have one design — to discourage communities from getting into this business in the first place.

Municipalities that want to build networks not only benefit their communities, but help to create new jobs, both inside the provider and outside among customers benefiting from it. Not just customer service jobs, but technical jobs, infrastructure construction jobs and accounting/administrative jobs related directly to providing service, not dealing with bureaucratic stumbling blocks enacted by HB 1252. Creating new high technology jobs in North Carolina is vital to the economic recovery. The Bureau of Labor Statistics reports that has North Carolina has 10.8% unemployment, fifth highest in the country.What high tech business incubator would locate in a community where providers have stubbornly refused to provide the level of connectivity that makes those business developers successful? HB 1252 will protect some jobs — those that enjoy the largess from monopoly pricing and the savings realized from insufficient network investment.

Why are overseas economies not fairing as badly as ours? They have higher speeds and better broadband networks. Why are we lacking in innovation compared to most other developed countries? They have higher speeds and better broadband networks. What will HB 1252 do for us having any hope at higher speeds and better networks? I am being kind by saying eliminate the possibility.

What is at risk here in North Carolina is bigger than North Carolina. It will eventually effect our whole country if the industry uses this kind of legislation as a guide for future legislative endeavors in other states. If HB 1252 passes and is enacted into law, we can point the finger at the people who got us in this economic mess in the first place: providers pushing us further down the technological and economic spiral that always comes from a broadband backwater.

avila

Marilyn Avila (R-NC)

This is not a partisan issue either. Both parties are responsible for this irresponsible bill. From Wake County (where Raleigh is located), the bill is sponsored by Rep. Ty Harrell who is a Democrat and Marilyn Avila who is a Republican. On the Senate version of the bill (SB 1004), the only two sponsors are David Hoyle who is a Democrat and Debbie Clary who is a Republican. Party labels and partisan politics mean nothing to what should be a shared goal among all of us: getting both bills stopped.

The first fallacy of HB 1252 can be found in its name, Level Playing Field/Cities/Service Providers.  Would a level playing field exist where companies like Time Warner Cable and Embarq are exempted from the rules enacted in the bill, because they are private providers?  No.  The bill states very clearly all of the restrictions are on municipalities, all of the freedom from the restrictions go to private industry.  This bill does not create a level playing field – it empties it of municipal projects leaving Time Warner and Embarq exactly where they are today, enjoying the fruits of a duopoly.

Here is some other coverage of this legislation:

  • The Independent Weekly out of Raleigh ran this piece on Ty Harrell.
  • Raleigh’s City Council passed a resolution in opposition to HB 1252/SB 1004).  You can view it here.
  • Danville, VA’s local paper had coverage too.

I urge you to contact the legislators involved in this horrible piece of legislation.  Tell them why this bill is bad for North Carolina and for the country as a whole.  There is a comprehensive list of legislators and their contact info at drop.io/ncbroadband.  Doing nothing guarantees you a one way ticket to the broadband backwater you’ll deserve if you don’t get involved today!

This guest editorial was written by Jay Ovittore, who lives in North Carolina.

Currently there are 4 comments on this Article:

  1. Ty Harrell says:

    The only thing I have asked you and others to do is trust me. As hard as it may seem, this entire bill has more to it than meets the eye. Hopefully, you’ll hear what happens with the bill tomorrow in the Public Utilities Committee.

    Many thanks for your attention and consideration.

    Best wishes,
    Ty

  2. Jay Ovittore says:

    Ty,

    It is hard for me to trust you when:
    A; You have taken money from Time Warner Cable PAC and the EMBARQ Employees PAC.
    and B: When in your own committee meeting, when asked a question on the bill you wrote, deferred to Time Warner Cables Lobbyist.

    We know each other pretty well Ty. I must say I am disappointed that you would call yourself progressive and then pen this drivel.

  3. Great analysis! The Independent, though, is based in Durham, not Raleigh.

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