North Carolina faces a moratorium on municipal broadband deployment.  On Wednesday, Senators David Hoyle and Daniel Clodfelter will introduce a bill expected to stall community broadband projects across the state.  The bill, which has yet to be seen by the public, should appear in the Revenue Laws Study Committee, co-chaired by Clodfelter.  We have heard the bill faces mere minutes of consideration before a quick vote, in hopes of moving it forward before the public finds out what elected officials are doing on their behalf.

Proponents of the moratorium argue that municipal broadband harms private industry and reduces tax revenue the state earns from those businesses.  But their argument lacks something — merit.  Missing from the debate are the actual numbers from the state’s largest telecommunications companies.  How much tax revenue does Time Warner Cable, AT&T and CenturyLink (formerly EMBARQ) generate?  We don’t know and the two senators (and the companies involved) aren’t saying.

Municipal broadband projects bring numerous benefits to North Carolina communities:

• jobs (taxpayers);
• high tech businesses moving into the state (taxpayers);
• entrepreneurial innovation that creates new small businesses (taxpayers); and
• benefits to the education and health care sectors (future taxpayers and keeping current taxpayers alive and healthy).

Make no mistake — a moratorium is just a stall tactic to protect current provider profits and avoid competition, all while giving them more time to organize a push for a permanent ban on such projects.

Why are Hoyle and Clodfelter only concerned with protecting incumbent telecom companies?  What about the rest of us?

Please join us tomorrow at the Legislative Office Building in Raleigh, and perhaps we can ask them.

Action Alert — We Need Your Attendance!

• Where: Legislative Office Building, Raleigh
• When: Wednesday May 5th at 9:30am, Room 544
• Why: Just having consumers in the room make elected officials nervous, especially when they are about to introduce a bill the public has never seen five minutes before a vote to move it forward in the short legislative session starting May 12th.

GOOGLE AND SEVEN INDUSTRY GROUPS OPPOSE NC MUNICIPAL BROADBAND MORATORIUM

Raleigh, NC – May 4, 2010   Google, Intel and six other private sector groups announced strong opposition today to a North Carolina municipal broadband moratorium being considered by the General Assembly’s Revenue Laws Study Committee, calling it “a step in the wrong direction,” “counterproductive” and “conspicuously in opposition to national broadband policy.” Legislation to prohibit municipal broadband deployments in the state is expected to be introduced and voted on tomorrow May 5. At least 45 individual communities in North Carolina, including Raleigh, Cary, Chapel Hill, Carrboro, Greensboro, Asheville and Wilmington, recently applied to partner with Google on its announced plans to build ultra-high speed fiber to the home systems.

In a strongly-worded letter to North Carolina’s House and Senate leadership, Google, Intel, Alcatel-Lucent, the Fiber to the Home Council (FTTC), American Public Power Association (APPA), Atlantic Engineering, Telecommunications Industry Association (TIA), and the United Telecom Council (UTC) stated that such a bill would harm both the public and private sectors. “It would thwart public broadband initiatives, stifle economic growth, prevent the creation or retention of thousands of jobs, and diminish quality of life in North Carolina. In particular, it would hurt the private sector in several ways: by undermining public-private partnerships; hamstringing the private sector’s ability to sell its goods and services; interfering with workforce development; and stifling creativity and innovation.”

“Enactment of a counterproductive municipal broadband moratorium would put North Carolina conspicuously in opposition to national broadband policy,” the letter states, and continues: “The Federal Communications Commission’s National Broadband Plan also admonishes states not to interfere with community broadband efforts where local officials do not believe that the private sector is acting quickly enough to meet community broadband needs.  Consistent with these expressions of national policy, communities across America are doing their share to contribute to the rapid deployment of broadband to all Americans.”

Those words echo a similar statement by FCC Commissioner Mignon Clyburn just last week in Asheville, NC. Commissioner Clyburn equated such a moratorium to denying citizens “the opportunity to connect with their nation and improve their lives” and called such a move “counterproductive,” one which could ” impede the nation from accomplishing the [National Broadband] Plan’s goal of providing broadband access to every American and every community anchor institution.”

A bill supported by Time Warner Cable and AT&T, the municipal broadband moratorium is being pushed by Senators Hoyle (D-Gaston) and Clodfelter (D-Charlotte Mecklenburg) for the alleged purpose of protecting the private sector and associated state tax revenues. But opponents to the bill argue the bill would hurt the private sector and even these representatives’ local constituents. Such a moratorium would terminate the City of Charlotte’s recent plans to build a multi-million dollar municipal network to provide broadband service to its public safety, educational, government institutions and the unemployed through the use of federal ARRA broadband funds. The bill also has the potential to make both Gaston and Gaston County less attractive to Google with whom they submitted an application to partner for a fiber to the home network.

“North Carolina should be lowering barriers to public broadband initiatives rather than establishing new ones, so that we and other high technology companies can spread and prosper across this beautiful state,” the letter states. At least 45 individual communities in North Carolina, including Raleigh, Cary, Chapel Hill, Carrboro, Greensboro, Asheville and Wilmington, recently applied to be partners with Google on its announced plans to bring  fiber to the home to between 50,000 to 500,000 households in an effort to unleash advanced scientific, educational, medical and environmental applications through these ultra-high speed networks, now being deployed throughout the world and in China. North Carolina already has two municipalities, Wilson and Salisbury, deploying these fiber systems to their residents.

Jay Ovittore, co-Director at Communities United for Broadband says, “A moratorium or any other barriers to “real” next generation broadband deployment would be a leap in the wrong direction for North Carolina’s citizens and for North Carolina’s economy.”  Communities United for Broadband is a citizen run advocacy group that promotes the exchange of ideas between communities, both rural and urban, to find the best solutions for their broadband needs.  You can find Communities United for Broadband on Facebook at http://bit.ly/aW6skP and on Twitter at http://twitter.com/CUFB

For more information:

www.broadband4everyonenc.com

http://groups.google.com/group/nc-public-broadband

http://stopthecap.com/2010/04/28/fcc-commissioner-mignon-clyburn-speaks-in-favor-of-municipal-broadband-projects-at-seatoa-conference/

http://www.muninetworks.org/

The Fiber to the Home Council also sent a separate letter to North Carolina Governor Bev Perdue.

You can continue to write the legislators who are pushing this industry written legislation.  Trust me they are hearing you. Be nice, but let them know you do not want a moratorium on muni-broadband, it will hurt economic development in our state and you want what the rest of the world enjoys for broadband access.

• Sen. Daniel Gray Clodfelter (Co-Chair) Mecklenberg [email protected] (919) 715-8331 Democrat (704) 331-1041 Attorney
• Sen. Peter Samuel Brunstetter Forsyth [email protected] (919) 733-7850 Republican (336) 747-6604 Attorney
• Sen. David W. Hoyle Gaston [email protected] (919) 733-5734 Democrat (704) 867-0822 Real Estate Developer/Investor
• Sen. Samuel Clark Jenkins Edgecomb, Martin, Pitt [email protected] (919) 715-3040 Democrat (252) 823-7029 W.S. Clark Farms
• Sen. Jerry W. Tillman Montgomery, Randolph [email protected] (919) 733-5870 Republican (336) 431-5325 Ret’d school teacher
• Rep. Harold J. Brubaker Randolph [email protected] 919-715-4946 Republican 336-629-5128 Real Estate Appraiser
• Rep. Becky Carney Mecklenberg [email protected] 919-733-5827 Democrat 919-733-5827 Homemaker
• Rep. Pryor Allan Gibson, III Anson, Union [email protected] 919-715-3007 Democrat 704-694-5957 Builder/TWC contractor
• Rep. Dewey Lewis Hill Brunswick, Columbus [email protected] 919-733-5830 Democrat 910-642-6044 Business Exec (Navy)
• Rep. Julia Craven Howard Davie, Iredell [email protected] 919-733-5904 Republican 336-751-3538 Appraiser, Realtor
• Rep. Daniel Francis McComas New Hanover [email protected] 919-733-5786 Republican 910-343-8372 Business Executive
• Rep. William C. McGee Forsyth [email protected] 919-733-5747 Republican 336-766-4481 Retired (Army)
• Rep. William L. Wainwright Craven, Lenoir [email protected] 919-733-5995 Democrat 252-447-7379 Presiding Elder

Don’t forget to thank those we have identified as on our side of the issue, for being forward thinking and truly representing the people:

• Sen. Daniel T. Blue, Jr. Wake [email protected] (919) 733-5752 Democrat (919) 833-1931 Attorney
• Sen. Fletcher Lee Hartsell, Jr. Cabarrus, Iredell [email protected] (919) 733-7223 Republican (704) 786-5161 Attorney
• Sen. Josh Stein Wake [email protected] (919)715-6400 Democrat (919)715-6400 Lawyer
• Rep. Paul Luebke (Co-Chair) Durham [email protected] 919-733-7663 Democrat 919-286-0269 College Teacher
• Rep. Jennifer Weiss Wake [email protected] 919-715-3010 Democrat 919-715-3010 Lawyer-Mom

Back in May of 2009, I started a series called Follow the Money to illustrate the large amounts of money the telecommunications companies spend on legislators to push their agendas for them.  You can always tell how most legislators will vote if you simply follow the money.

Through the wonders of public records searches at the North Carolina State Board of Elections, I am able to see the PAC contributions that legislators have received.  I can also cross reference this information with the dates the legislators are in session and the Secretary of State’s online lobbyist database.  In North Carolina you can take PAC money from a PAC who has a registered lobbyist so long as the General Assembly is not in session. If you take the contribution while in session, the state’s General Statute says it must be forfeited to the state’s General Forfeiture fund.

In this Moratorium Watch 2010 edition I want to focus on two North Carolina legislators leading the charge to ban or restrict municipal broadband projects — Sen. Daniel Clodfelter (D-Mecklenburg) and Sen. David Hoyle (D-Gaston).

Clodfelter is the co-chair of the Revenue Laws Study Committee.  In just 24 months, he took in a total of $16,000 in PAC contributions from big telecom companies and their friends:

• $1500 from North Carolina Cable PAC
• $1000 from Sprint/Nextel
• $1500 from Embarq
• $500 from the NC Association of Broadcasters
• $5500 from Time Warner Cable
• $5000 from AT&T
• $1000 from North Carolina Broadcast PAC

Senator “Obsolete Fiber” Hoyle dwarfed Clodfelter over the past 24 months:

• $3500 from Sprint/Nextel
• $4500 from Embarq
• $8250 from Time Warner Cable
• $4000 from AT&T
• $2000 from Electricities (Drew Saunders is a lobbyist with Electricities and was a primary sponsor on the Level Playing Field bill for big telco a few years back)
• $1500 from North Carolina Broadcast PAC
• $1500 from North Carolina Cable PAC

That’s $25,250 for Hoyle from companies with an active interest in the telecommunications debate in this state.

When you consider more than $40,000 was spent to boost the campaign coffers of just two state legislators, it’s not hard to see big money is involved statewide.  It doesn’t even have to arrive in the form of a PAC contribution.  Clodfelter just had a $29 million Time Warner Cable headquarters building placed in Mecklenburg County.  Hoyle helped procure the Apple Data Center, located 22.5 miles north of his district in Maiden, NC.

When cross-referencing Hoyle’s PAC contributions with the state lobbyist database, I found several possible conflicts that warrant investigation, and I will bring my concerns to the North Carolina State Board of Elections.  If my complaint is upheld, perhaps Hoyle’s concerns about the need for additional state revenue could be eased knowing some potentially improper contributions made to his campaign were turned over to the General Forfeiture fund.  Hoyle has already announced he is not running for re-election so he doesn’t need the money anyway.

Once you count that money, it’s easy to discover why some of our state legislators are actively working against our own best interests here in North Carolina.  The corporate campaign contribution, which can be likened to legalized bribery, makes it difficult to convince legislators to always vote with their constituents’ best interests at heart.  Whenever legislators are willing to cash corporate contributions and vote against consumer interests, we’ll be here to call them on it.  Until this country gets corporate money out of government, it’s all we’ve got.

Today’s merger between CenturyTel (soon to be CenturyLink) and Qwest will combine 10 million Qwest customers and 7 million from CenturyTel into a single company serving 37 states in every region of the country except the northeast and much of California and Nevada.  CenturyLink gains access to Qwest’s highly valued portfolio of services sold to business customers and Qwest gets a partner that can help manage its $11.8 billion debt and help grow the last remaining Baby Bell, formerly known as US West, into a national player capable of withstanding ongoing erosion of landline service.

The deal will impact consumers and businesses, and will challenge regulatory authorities to consider the implications of ongoing consolidation in the traditional telephone service marketplace.  It brings implications for broadband service strategies for both companies, which we’ll explore in greater detail.

Breaking Up Was Too Hard to Do, So Let’s Put It Back Together

Ultimately, the genesis of this, and most of the other big telecom deals that we’ve witnessed over the past few years comes from the 1996 Communications Act, which deregulated large parts of the telecommunications industry and triggered a massive wave of consolidation that is still ongoing.  That legislation was the antithesis of the 1984 court ruling which ultimately led to the breakup of AT&T and the Bell System monopoly in 1984.  When President Clinton signed the 1996 bill into law, it allowed much of the Bell System to eventually recombine into two major entities:

• AT&T ultimately pieced itself back together with the acquisitions of:

BellSouth — serving the southeastern United States

Ameritech — serving the upper Midwest

SBC/Southwestern Bell — serving Texas and several southern prairie states

Pacific Telesis — serving California and Nevada

• Verizon became a regional powerhouse by combining:

NYNEX — serving New England and New York

Bell Atlantic — serving mid-Atlantic states

The remaining orphaned Baby Bell was US West, which comprised Mountain Bell serving the Rocky Mountain states, Northwestern Bell which covered the Dakotas, Minnesota, the prairie states not covered by SBC, and Pacific Northwest Bell which managed service for Oregon, Washington, and northern Idaho.  US West was subjected to a hostile takeover in 2000 by an upstart telecommunications company that was laying fiber optic cable in the late 1990s alongside the railways its owner, Philip Anschutz, also happened to own.  Qwest assumed control of US West that summer and rechristened it with its own name.  Owned by a Bell outsider, Qwest has always been the company that didn’t quite fit with the rest.

The company gained respect for its enormous fiber backbone that weaves across many American cities, including several in the northeast.  It is best known for its services to business customers.  On the residential side, the story is less impressive.  The company’s customer service record is spotty and the company has accumulated an enormous amount of legacy debt left over from earlier acquisitions.  Despite the company’s repeated efforts to find a partner, it took until today for it to finally find one.  There are several reasons for this:

1. Qwest’s service area is notoriously rural and expensive to serve.  Outside of its corporate headquarters in Denver, the majority of its service area is either mountainous or rural.  Even today, Qwest serves only 10 million residential customers, almost matched by CenturyTel’s own seven million largely rural customers scattered across the country.
2. Qwest’s history has been littered with financial scandals, starting with a series of deals with disgraced Enron from 1999-2001.  That was followed with charges of fraud and insider trading in 2005.
3. Qwest does not own its own wireless division and its previous efforts to deliver television service to customers were largely unsuccessful.  That made Qwest’s ability to withstand erosion in its core business – landline phone service, more difficult.
4. Qwest’s debt is downright frightening for would-be suitors.

Why Does CenturyTel Want to Buy Qwest?

CenturyTel claims such a transaction allows a combined company to become a larger player on the national scene.  By combining Qwest’s good reputation in the business telecommunications sector with combined efforts to deliver broadband products including high speed Internet, the company thinks the combination can’t be beat.  CenturyTel envisions packages of video entertainment, data hosting and managed services, as well as fiber to cell tower connectivity and other high bandwidth services to deliver replacement revenue lost from disconnected landlines.  It also believes it can realize cost savings from the merger and keep the company relevant on a stage dominated by Verizon, AT&T, and a few large cable companies.

But there are other reasons.  For the three super-sized independent phone companies that Americans are growing increasingly familiar with — Frontier Communications, Windstream Communications, and CenturyTel, their business models depend on their ability to constantly engage in deal-making and acquisitions.  All three companies have built their businesses on investors who see their stocks as “investment grade” financial instruments that dependably return a dividend back to shareholders.  As we’ve seen in countless quarterly financial results conference calls, all three companies are preoccupied answering questions from Wall Street about the all-important dividend.  TV personalities like Jim Cramer has specifically recommended these telecom stocks based, in part, on their dividend payout.  If that dividend dramatically shrunk or stopped, the share price for all three stocks would likely plummet.

One of the side effects of companies dependent on dividend payouts is their constant need to be on the lookout for additional merger and acquisition opportunities.  Here’s how it works.  Let’s say CenturyTel’s debt load and reduced revenue, caused by customer defections to cell phones or cable phone service, delivered a bad fiscal quarter for the company.  Cash flow was down, and company officials simply couldn’t keep the dividend payout at the same level as the previous quarter.  Since many people hold CenturyTel stock specifically because of the dividend, a downward turn in that payout could cause some to sell their shares, driving the stock price downwards.

One way around this is to seek out a new merger or acquisition target.  By bringing two companies together, preferably one with a healthy cash flow, suddenly the big picture changes.  Your balance sheet now reflects the combined revenue from both companies, which incidentally makes the percentage of debt versus revenue look a lot healthier.  Cash flow immediately improves, especially if you can slash redundant costs.  Come next quarter, that dividend payout is right back up in healthy territory.

Sometimes companies become so preoccupied with their dividend and corresponding stock price, it can lead them to pay out more in dividends than a company earns in revenue.  While that’s great for investors, it is unsustainable in the long run.

Many critics of telecommunications companies employing this strategy claim it’s evidence that a company is biding time and unwilling to invest in innovation for the future.  Some also believe dividend payouts shortchange customers because they can eventually bleed a company’s ability to invest in service improvements, research and development, and capital investments to maintain their network and expand service.

As consolidation continues, the number of new buyout opportunities begins to shrink, and one shudders to think what happens when there is no one else to buy.  How long is this business model sustainable?

Both CenturyTel and Qwest also recognize the impact of ongoing disconnections from landline service, now averaging 10 percent of their customers a year.  Those departing customers are now relying on their cell phones or alternative calling services like cable company “digital phone” service or broadband-based calling from companies like Vonage or Skype.

The one service they hope can stem customer defections is broadband.  Unfortunately, telephone companies are increasingly losing ground against their cable modem competitors, who have an easier time increasing broadband speeds for customers now seeking online video and other high bandwidth applications.

Of course, one of the benefits of being a “rural phone company” is the fact cable competition is often unlikely.  In fact, some of the lowest erosion rates for landline service are in rural communities where the telephone company is the only game in town.  There is plenty of money still to be made offering high priced slow speed DSL service in communities with no cable competitor and spotty wireless broadband that is often slower and usage-limited.

All three of these big independent players are well aware of this, and maintaining a strong position in relatively slow speed DSL service also protects another revenue stream — Universal Service Fund revenue given to rural providers to equalize telephone rates.  CenturyTel recognizes the increasing likelihood much of that money will be diverted to stimulating broadband expansion, something the phone company is more than willing to do if it means preserving their subsidies.

The new combined Qwest-CenturyTel company hopes the merger can help both survive obsolescence.

For Qwest, a debt reduction may make it possible to spend more to deliver fiber-to-the-curb service, similar to AT&T U-verse.  That could increase broadband speeds and prompt them to reconsider their earlier decision to abandon IPTV in the western half of the country.

CenturyTel can continue to offer traditional DSL service with a more incremental upgrade approach in its more rural service areas, but tap into Qwest’s fiber network to reduce backhaul expenses and potentially pick up new business customers by offering Qwest-branded business services.  Company officials strongly hinted that, at least for now, CenturyTel’s existing customers will continue to find the video portion of their “triple play” package delivered by DirecTV satellite service, so no IPTV for them.

What Does This Mean for Employees of Both Companies?

Mergers like this always generate great excitement over “cost savings” made possible by the merger.  Much of these savings typically come from employee expenses.  When you hear “cost savings,” think layoffs and pay cuts for all but top management.  Based on past precedent, Qwest employees can anticipate some serious job losses if this transaction closes, especially in the business office.  The combined company will be henceforth known as CenturyLink, with headquarters remaining in Monroe, Louisiana.  That is potentially bad news for Qwest’s employees in Denver.

The transaction is expected to generate annual operating cost savings (which CenturyTel calls “synergies”) of approximately $575 million, which are expected to be fully realized three to five years following closing.  The transaction also is expected to generate annual capital expenditure “synergies” of approximately $50 million within the first two years after close.  That means spending less on infrastructure improvements.

Billing and customer service are traditionally handled by CenturyTel when a company joins the CenturyTel family.  North Carolina customers can attest to that as EMBARQ, an earlier CenturyTel target, finally moves to CenturyTel’s billing system in the coming weeks.

For the sake of pushing the merger through state regulatory agencies, cutbacks in unionized technicians who handle service installations, repairs, and maintain the lines are not expected.  The Communications Workers of America issued a statement today that mildly acknowledged the merger announcement, saying the union “looked forward to serious negotiations with both companies” regarding employment security and assurances of aggressive high speed broadband rollout throughout both companies’ territories.

What Does This Mean for Qwest and CenturyTel Customers?

In the short term, nothing.  This merger will take at least a year to complete, assuming regulatory approval in every state where a review is required by state officials.  In 2011, should the merger be approved, Qwest customers can anticipate transition headaches as the Denver-based company winds down operations in favor of CenturyTel.  Billing and customer service will both be impacted.  Long term plans for major projects are likely to be stalled until the merger settles into place.  CenturyTel business customers will eventually see Qwest’s strong business products line become available in many CenturyTel service areas.  Eventually, some larger CenturyTel-served cities may find Qwest’s more advanced DSL service arriving on the scene delivering faster speeds.

Although CenturyTel has hinted it may review whether it’s now large enough to operate its own wireless mobile division, for the near term, expect the partnership to resell Verizon Wireless service to continue.

What is the View of Stop the Cap! on the CenturyTel-Qwest Merger?

Generally speaking, most of the industry consolidation that has been fueled by a deregulatory framework established by the Clinton Administration has not benefited consumers anywhere near the level promised by deregulation advocates.  The three largest independent phone company consolidators — Frontier, Windstream, and CenturyTel are spending more time and resources looking for new acquisitions and schemes to pay out dividends than they are working to enhance service in their respective service areas.  Smaller independent phone companies are deploying fiber to the home networks and answer to the communities where they work and live.  From companies like Frontier, we get Internet Overcharging schemes combined with slow DSL service, tricks and traps from “price protection agreements” that automatically renew, rate increases, and cost cutting.  Windstream plagues some of their customers with extended service outages, and CenturyTel’s promised broadband speeds often don’t deliver.

Unfortunately, bigger is not always better in telecommunications.  While the biggest players like Verizon seek to discard rural American customers, getting one of these three companies instead doesn’t always represent progress.  Our regulators are too often satisfied with basic answers to questions about broadband and service improvements that come with few details and deadlines.  It is just as important to ask what kind of broadband service a company will bring, at what speeds and price, and what usage limits, if any, will accompany the service.

Companies engaged in these mergers hope regulators don’t pin them down to specific service commitments and standards, which could harm the financial windfall these deals bring to a select few.  But they must be the first thing on the table, guaranteeing that customers also get the enjoy the “synergies” these deals are supposed to bring.

CenturyTel Inc. agreed Thursday to buy Qwest Communications International, Inc. in an all-stock deal that values the last legacy “Baby Bell” at nearly $10.6 billion, in one of the nation’s largest telecommunications deals.

The merger would dwarf Frontier Communications’ purchase of Verizon landline service and create the nation’s largest independent phone company with operations in 40 states.

Qwest has been off and on the sales block for years, considered the weakest player among the split-up remnants of the old Bell System.  Qwest has fallen well behind AT&T and Verizon in adopting next generation technology to keep landline service relevant in a changing marketplace.  CenturyTel’s business model, like that of Windstream and Frontier, depends on serving rural areas with basic broadband and phone services, without incurring the costs larger providers have in deploying fiber to the home or fiber to the curb networks needed to compete with cable television providers.

Critics contend the consolidation of independent phone companies has left them preoccupied with their stock value and dividend payouts, unwilling to make substantial investments many believe are essential to keep such companies relevant in the long term.  Cell phones continue to eat away at landline service, and the kind of slow speed DSL service available from most of these players cannot compete effectively against cable and fiber broadband service, except in rural communities where customers have just one choice.

We will have additional coverage on this important development shortly.

Report on Today’s Legislative Meeting

As I have been reporting here, the moratorium on municipal broadband is alive and well in the legislative halls of Raleigh.  Senator David Hoyle (D-Gaston), sponsor of last year’s consumer atrocity HB1252, is back again asking Senator Daniel Clodfelter (D-Mecklenburg County) for a vote May 5th on a proposed moratorium for municipal broadband projects.  Hoyle is not running for re-election.

While no new legislation has surfaced yet, several legislators continue to hint that a new bill is forthcoming.  Be assured any such legislation will be designed to protect today’s monopoly/duopoly marketplace for broadband service in North Carolina.

Senator David Hoyle calls on the legislative committee to introduce and vote for a moratorium on municipal broadband projects in North Carolina. (April 21, 2010) (1 minute, 30 seconds)
You must remain on this page to hear the clip, or you can download the clip and listen later.

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Meeting Highlights:

• Senator Clodfelter opened the meeting stating that he “wants to focus on revenue issues/financing, not whether or not high speed Internet is a good thing.”

• Heather Fennell, from the research division at the General Assembly gave a presentation citing laws that govern cities, the original lawsuit that established precedent for cities to construct municipal fiber networks, what cities have them, and who pays the taxes on different systems.

• Vance Holloman, Deputy Treasurer-State and Local Finance Division spoke next.  He assured the committee and attending audience that North Carolina’s existing municipal systems are in good standing and he expected they would be able to pay down debts incurred from initial construction and deployment costs.  Holloman added the Local Government Commission, which has to approve the financing of these systems, believed these projects represent “solid economic development investments.”  Holloman’s strong presentation should have encouraged legislators to favor economic development from fiber optic broadband, but we had a strong sense several members had already made up their minds made up to oppose these projects.  You will have to convince them to reconsider.

• The next part of this session divided 50 minutes between private commercial providers and municipalities to share their views.

The commercial providers went first, beginning with attorney Marcus Trathen from the law firm Brooks/Pierce.  Today, he was representing the North Carolina Cable Communications Association (NCCCA).  Trathen has also appeared at prior meetings representing the interests of Time Warner Cable.

Trathen’s presentation was about as expected – talking points loaded with misrepresentations and misinformation.  Trathen told the committee the industry does not object if cities build private networks for internal communications (how generous), but doesn’t want those networks competing with NCCCA members.

Suddenlink Communications’ Bill Paramore and AT&T lobbyist Herb Crenshaw also spoke, speaking in glowing terms about investments already made to improve service in the state.  Crenshaw claimed AT&T is providing U-verse service in North Carolina after spending $1.2 billion dollars on system upgrades, an amount some have questioned (a 2007 press release pegged it at $350 million.)  Of course, North Carolina’s cable and broadband customers who were promised savings from all this “robust competition” have instead been stuck paying annual rate increases that more often than not exceed the rate of inflation.

Next up were the municipalities.

Kelli Kukura from the North Carolina League of Municipalities started by challenging industry propaganda designed to downplay the benefits of municipal broadband.  Kukura noted at least 30 North Carolina communities enthusiastically applied for Google’s proposed 1 gigabit fiber to the home network, illustrating intense interest in fiber networks.  Google has also been an active proponent of municipal broadband, Kukura noted, reminding legislators the search engine giant defended the rights of municipalities seeking to deploy next generation broadband networks.

Among the communities that have their own municipal systems, job growth grew by an average of 6.4 percent.  Kukura cited broadband success stories in Bristol, Virginia and Wilson, North Carolina.

Salisbury small businessman Brad Walser, owner of Walser Technology Group testified that North Carolina community’s new municipal broadband network Fibrant would meet his company’s needs for broadband capacity not available from commercial providers.  Walser noted Salisbury is suffering from an unemployment rate exceeding 14 percent.  Advanced broadband, he believes, could help the city attract new businesses that will help create new, high paying jobs.  Fibrant is expected to launch later this year.

Some of the strongest testimony came from Colman Keane, senior strategic planner for municipally-owned EPB Telecom. Keane traveled all the way from EPB’s home in Chattanooga, Tennessee to share his experiences confronting a telecommunications industry hostile to the prospect of facing a new competitor.  Keane has seen and heard the industry arguments all before, noting Chattanooga heard the exact same scare stories legislators in Raleigh were hearing today.  Chattanooga also faced a proposed one year moratorium and a blizzard of industry-backed lawsuits, all which were won by the city.

The benefits of fiber optic broadband in Chattanooga include dramatically-improved broadband speeds as well as a more efficient power grid made possible from smart meters that help Chattanoogans reduce their peak power usage, saving money.  I want to thank Colman for making the long journey on behalf of consumers in North Carolina.

• Finally, Raleigh community activist and former city council candidate Octavia Rainey spoke out against municipal broadband, which concerned me.  Rainey spent her time seated with the telecom lobbyists, and her presentation illustrated the impact of astroturf efforts to co-opt good-hearted consumers into the industry cause. I hope to establish a dialogue with Ms. Rainey to share our information with her and learn more about how she reached her views on this subject.  More to come.

The complete hearing of the Revenue & Laws Committee of the North Carolina Legislature on the issue of the financial implications of municipal broadband, chaired by Senator Daniel Clodfelter (D-Mecklenburg County) (April 21, 2010) (2 hours, 8 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

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[Octavia has a long history of community involvement in Raleigh, trying hard to improve her neighborhoods and life in general for area residents, something she is to be applauded for doing.  I suspect Ms. Rainey has formed her views on municipal broadband in part from her close working relationship with AT&T, who has a long history trying to make friends with various community groups in part to win favor for their corporate agenda.  In this case, Octavia admits AT&T’s Cynthia Mitchell and her have become “great partners.”  AT&T provided support in building an area playground and also paid for lunch for volunteers working on the project, adding the company wanted to be a part of the Raleigh community.  There is nothing wrong with that, of course, but one wonders if the conversation also drifted into AT&T’s talking points along the way.

Ms. Rainey also praised AT&T for delivering free Internet service to 290 Raleigh-area families last fall, which would make it ironic if she didn’t support municipal broadband, which has a proven track record of erasing the digital divide and lowering prices for hard-pressed consumers.  These are the people that need some fact-based information about the true benefits of municipal broadband.  — Phillip Dampier]

Today was expected, but disappointing nonetheless.  Hoyle actually suggested that fiber networks may be obsolete in five years and we may be moving to wireless.  If that were true, why is he hellbent on a moratorium and the banning of such networks at the industry’s behest?  Why would the telecommunications industry be concerned about “obsolete fiber networks?”  The only thing obsolete here are the broadband networks owned by big cable and phone companies Hoyle wants to preserve and protect.

Rep. Pryor Gibson, who we noted is a manager for Time Warner Cable Construction agreed to recuse himself from this issue after it became a point of contention and sat in the back corner of the room.

All of your e-mails and calls have been getting through to the legislators.  This kind of attention makes them nervous and I ask you to continue.  I can assure you that we here at Stop the Cap!, along with Communities United for Broadband, Broadband for Everyone NC, and Save North Carolina Broadband are going to ratchet up attention on this issue.

WHAT YOU CAN DO TO HELP

Continue writing and calling the legislators below and asking them to oppose a moratorium on municipal broadband.  Make plans on May 5th to come to Raleigh and be part of the crowd that opposes the moratorium.  I will post meeting details as they develop.

Please thank the legislators we have identified on this committee as friends of our cause:

• Sen. Daniel T. Blue, Jr. Wake [email protected] (919) 733-5752 Democrat (919) 833-1931 Attorney
• Sen. Fletcher Lee Hartsell, Jr. Cabarrus, Iredell [email protected] (919) 733-7223 Republican (704) 786-5161 Attorney
• Sen. Josh Stein Wake [email protected] (919)715-6400 Democrat (919)715-6400 Lawyer
• Rep. Paul Luebke (Co-Chair) Durham [email protected] 919-733-7663 Democrat 919-286-0269 College Teacher
• Rep. Jennifer Weiss Wake [email protected] 919-715-3010 Democrat 919-715-3010 Lawyer-Mom

The rest of the lot either doesn’t support North Carolina consumers or have not yet made their views known on this issue.  We must pin them down and identify those elected legislators that represent the people versus those representing big cable and phone interests.  Be sure to tell them you will interpret any support for a moratorium on municipal broadband to mean they are opposed to competition, opposed to lower prices for consumers, opposed to job creation and economic growth, and obviously for the cable and phone interests that will stop at nothing to keep these systems from being built.

Ask them how they could possibly support keeping North Carolina 41st in the country in broadband rankings, why they are against reducing the 11.2 percent unemployment rate (10th worst in the country) in North Carolina, and how they can justify a vote that guarantees exactly more of the same.  If you are from a city that applied for Google Fiber, remind your legislator passing this kind of hostile moratorium delivers a strong message this state is not serious about the next generation of broadband, and Google should look elsewhere.

Above all, note now that they understand the true implications this moratorium will have on constituents, you are confident there is no way they could ever support such a bad idea.  Their delivery of a strong “no” vote reminds you why you supported them in the last election and will consider doing so again in the next.

Always be polite, professional, and persuasive in your correspondence, but deliver a clear and firm message that supporting a moratorium is completely unacceptable.  Finally, be sure to ask them to get back in touch with you regarding their position on this issue as soon as possible.  Then let us know!

• Sen. Daniel Gray Clodfelter (Co-Chair) Mecklenberg [email protected] (919) 715-8331 Democrat (704) 331-1041 Attorney
• Sen. Peter Samuel Brunstetter Forsyth [email protected] (919) 733-7850 Republican (336) 747-6604 Attorney
• Sen. David W. Hoyle Gaston [email protected] (919) 733-5734 Democrat (704) 867-0822 Real Estate Developer/Investor
• Sen. Samuel Clark Jenkins Edgecomb, Martin, Pitt [email protected] (919) 715-3040 Democrat (252) 823-7029 W.S. Clark Farms
• Sen. Jerry W. Tillman Montgomery, Randolph [email protected] (919) 733-5870 Republican (336) 431-5325 Ret’d school teacher
• Rep. Harold J. Brubaker Randolph [email protected] 919-715-4946 Republican 336-629-5128 Real Estate Appraiser
• Rep. Becky Carney Mecklenberg [email protected] 919-733-5827 Democrat 919-733-5827 Homemaker
• Rep. Pryor Allan Gibson, III Anson, Union [email protected] 919-715-3007 Democrat 704-694-5957 Builder/TWC contractor
• Rep. Dewey Lewis Hill Brunswick, Columbus [email protected] 919-733-5830 Democrat 910-642-6044 Business Exec (Navy)
• Rep. Julia Craven Howard Davie, Iredell [email protected] 919-733-5904 Republican 336-751-3538 Appraiser, Realtor
• Rep. Daniel Francis McComas New Hanover [email protected] 919-733-5786 Republican 910-343-8372 Business Executive
• Rep. William C. McGee Forsyth [email protected] 919-733-5747 Republican 336-766-4481 Retired (Army)
• Rep. William L. Wainwright Craven, Lenoir [email protected] 919-733-5995 Democrat 252-447-7379 Presiding Elder

The future of North Carolina’s economic growth is at stake here.