Stop the Cap! reader Jeff from Palo Alto, Calif., dropped us a line over the weekend asking about a story published last week by the Salisbury Post regarding a bill that would banish community-owned broadband providers in the state of North Carolina.  The legislation, custom-written by Big Telecom companies, could eventually spell doom for truly competitive service from community-owned providers like Fibrant, based in Salisbury.

“I got the impression that it said Salisbury was agreeing not to oppose the proposed legislation, in exchange for being exempted from it,” Jeff writes. “That seemed like a long-term victory for Time Warner. Am I missing something?”

The reporter who accepted propaganda at face value from the cable industry certainly did.

The article, “Lawmakers Eye Blocks on Fiber Optic Systems,” was replete with demonstrably false statements from both Time Warner Cable and a high-powered cable industry lobbyist less-menacingly-labeled “a lawyer for the N.C. Cable Telecommunications Association.”  (Perry Mason he isn’t.)

In fact, communities across the state continue to oppose this special interest favoritism, bought and paid for by the telecommunications industry.  But getting people acquainted with the facts is a problem when reporters don’t bother to fact-check some of the rhetoric from the cable industry, which at times leaves some with the ludicrous impression they are “the little guy.”

Rep. Marilyn Avila — The Representative for Time Warner Cable

The Post seems to suggest local officials are negotiating passage to the lifeboats before Rep. Marilyn Avila’s legislative gift to Time Warner Cable becomes the legal iceberg that sinks community broadband in the state.

In reality, city officials are pointing out they harbor no resentment towards any telecommunications company operating in the state.  In fact, they welcome them to participate by securing space on their advanced networks at competitive rates in public-private partnerships.

Unfortunately, they are up against Avila’s “bull in a china shop” bill that would cut the legs out from community-owned networks before such partnerships can become reality.  In fact, Avila’s abdication of her responsibilities to her constituents for the benefit of Time Warner Cable is even worse because it could ultimately harm the state’s credit rating and image if such networks can be run out of business at the behest of a competitor.

For a “small government conservative” to write a bill laden with regulations, rules, and taxes anathema to the “free market” is a testament to just how willing she is to abandon her principles when Big Cable comes calling.

Avila has suggested that existing community-owned networks are exempt in the current language of the bill.  That statement is patently untrue because the micro-management regulations found within it would apply to all community broadband networks, but exempt privately-owned ones.  That’s fair, right?

For mayors in communities with these networks, securing a strong exemption is part of a full-court press against this bill.  If it were to become law, keeping a pre-existing network in business becomes an important priority.

Mayor Susan Kluttz told the Post she is hopeful state lawmakers will rewrite the bill to exempt Salisbury and other cities with networks that are up and running.

But the mayor is smart enough to also realize at least some of the people at the table do not have the city’s best interests at heart when it comes to Fibrant.

Sources tell Stop the Cap! there are several members of the General Assembly, Republicans and Democrats, who are more than a little unhappy with Avila’s attempts to ram the bill through.  Not only does the water-carrying look bad inside (and outside) of the state, it will also destroy the potential of expanding broadband service to many poorly reached parts of North Carolina.

“This bill guarantees Time Warner will hold the keys to the broadband kingdom in North Carolina for years to come,” a well-placed source told us.  “Even public-private partnerships to develop broadband in rural areas of the state are directly threatened by her bill.”

Citizens across North Carolina are calling and writing legislators in opposition, but Avila doesn’t show signs of moving away from her pro-cable bill so far.

“Empty promises are being made to some legislators that suggest if they support this bill, Time Warner will magically wire unserved areas for service,” sources tell us.  “The company that had no intention of wiring these areas over the past two decades will continue to ignore them whether this bill passes or not.”

Indeed, Time Warner Cable and other companies use a standard business calculation when determining whether or not to wire outlying communities.  If too few customers live within a square mile radius, they don’t receive cable service.  Nothing has ever changed that unless it is mandated in a formal local franchise agreement.  At AT&T’s behest a few years ago, such local franchise agreements were banished from the state.  Rural residents in places like Caswell County pay the price as large sections of the county go without broadband service.

The implications are dire:

Jobs -are- threatened by Avila’s legislation.  They belong to the those who manufacture spools of fiber and the equipment that utilizes it, the contractors who install, maintain, and service the network, and the customer support staff that deal with customers on a daily basis.

One of the strengths providers like GreenLight and Fibrant bring to their respective communities is their networks are open to all-comers.  Time Warner Cable, AT&T, and other phone companies can obtain access on both to serve their own customers — business and residential.  The impetus for building these networks was to benefit everyone.

The only adversarial players here are cable and phone companies that want to own, manage, and control everything themselves.  The companies that spent years telling communities they saw no need to enhance service now want to legislate away the chance for others to try.

“We have several Republicans who read Time Warner’s claims about this bill, then looked over the inadequate broadband landscape in their districts back home, and are coming to the conclusion this is one bad bill,” one pro-broadband lobbyist told us.  “But this is still going to be a very hard fight unless ordinary consumers make their voices heard loud and clear.”

Fact Checking

The most disturbing thing about the Post story is the complete lack of fact checking the industry’s arguments, most of which are simply flat out false.  A few examples:

Melissa Buscher, Time Warner Cable’s vice president of communications for the Carolinas claimed the city of Wilson raised pole attachment fees by 300 percent after launching GreenLight, Wilson’s community-owned network.  Buscher suggests that is an example of cross-subsidizing networks.  In her mind, mean and nasty Wilson officials jacked up the fees  just to put the cable company at a competitive disadvantage.

But the facts tell a different story.

Wilson’s pole attachment fee, unchanged since 1975 while other communities around the nation raised them year after year, was adjusted well before GreenLight opened its doors for business.

“Before 2007, Wilson’s pole fee had stayed the same since 1975,” city spokesman Brian Bowman said. “The attachment fee increase was not related to GreenLight. The old fee schedule was outdated.”

How much money are we talking about here?  The old rate was $5 per pole annually.  Today it’s $15 per pole per year.  That means Time Warner will have to pay $246,000 a year instead of $82,000 in Wilson — petty cash to a multi-billion dollar cable company.

Time Warner itself provided data nearly five years ago in a Tennessee study on pole attachment fees that proves Wilson is hardly being arbitrary and capricious.  The cable company was paying up to $13.64 per pole four years ago in North Carolina.  The Tennessee Cable Telecommunications Association has been complaining as late as last year over average pole attachment rates of $14.86 per pole in that state, adjacent to North Carolina.

The irony of a cable company that has nearly tripled its basic cable rates over the same period of time complaining about rate increases is lost on them.

Buscher also claims their new competition in Wilson and Salisbury is run by the same city governments that regulate them:

“Cities have unfair advantages,” Buscher told the Post, noting when cities get into the broadband business, they become not only a regulator for incumbent providers, but also a competitor. “If municipalities want to get into a business already offered by the private sector, we welcome the competition, but we want to level the playing field.”

The only thing Time Warner wants to level is the competition from community networks that deliver better broadband service than they offer.

In reality, thanks to industry lobbying in the 1990s, the cable industry is almost completely deregulated.  No local, state, or federal government regulates broadband — where it is offered, at what speeds and at what prices.

There is no conflict of interest on the regulatory front.

Time Warner Cable and the North Carolina Cable Telecommunications Association: Waltzing Partners in a Dance of Deception

The North Carolina Cable Telecommunications Association, which helps deliver a one-two punch for Big Cable’s agenda, delivered the next false claim:

“Fibrant and GreenLight have lower operating costs.”

In reality, Time Warner Cable’s enormous size and scope provides them with benefits and cost saving opportunities across their national footprint that neither community provider can match:

• Volume discounts for programming, equipment, and other infrastructure;
• The power of incumbency, which makes them the default choice for most customers who must be compelled to switch providers;
• Access to grants and agreements like “payments in lieu of taxes” to protect cable jobs. Time Warner hardly pays “rack rates” for taxes across its entire footprint;
• Time Warner’s construction costs were mostly incurred in the 1990s when cable systems were last rebuilt.  Suddenlink Cable CEO Jerry Kent said it best: “I think one of the things people don’t realize [relates to] the question of capital intensity and having to keep spending to keep up with capacity,” Kent said. “Those days are basically over, and you are seeing significant free cash flow generated from the cable operators as our capital expenditures continue to come down.”  That isn’t true for community networks just opening for business or still in the initial construction phase.

Frontier Communications, a private industry player, discovered all of the benefits in programming costs go to large players like Time Warner, Comcast, Verizon and AT&T when claiming they were forced to raise rates $30 a month because they could not get the same volume discounts big cable and phone companies receive.

Marcus Trathen, the lobbyist running the NCCTA, hopes his fear, uncertainty and doubt campaign will be proven correct with the passage of Avila’s bill.  As law, it assures all of the competitive advantages go to the billion dollar incumbents, and any failures will be among the community providers that compete with them:

“Cities are particularly ill-suited to competition in a technology-based industry,” Trathen said in an e-mail to the Post. “Technology changes in an instant.”

Just not for Time Warner customers in Wilson and Salisbury.  The genesis of these, and other, community-based networks come from provider intransigence to deliver the kind of broadband service consumers and businesses increasingly seek, at an affordable price.

Fibrant delivers 15/15Mbps service today in its standard broadband package.  Time Warner Cable delivers 10/1Mbps service.  When Fibrant and Greenlight were first proposed, Time Warner delivered even lower speeds.

The industry cannot have it both ways.  On the one hand, they claim community broadband is an economic failure delivering redundant service and mis-managed by government officials who do not understand the business of broadband.  On the other hand, these companies and their respective mouthpieces are literally spending tens of millions of dollars lobbying for legislation to keep these “failures” from ever getting off the ground.

As we’ve always said on Stop the Cap!, following the money always leads you to the truth.

South Korea has launched a nationwide broadband upgrade to rid themselves of 100Mbps service for $38 a month, claiming those speeds and prices are no longer sufficient for Korea’s new digital economy.

By the end of 2012, South Korea intends to connect every home in the country to the Internet at one gigabit per second and slash the monthly price to just $27 a month.

That’s more than 200 times faster than speeds enjoyed by most Americans, who pay an average of $46 a month — nearly double Korea’s planned price. Even more galling for Canadians — those speeds and prices are for completely unlimited access.

Stop the Cap! reader John in Victoria, B.C., thinks South Korea’s broadband improvements call out just how ludicrous Canada’s Internet Overcharging schemes really are.

“If the Canadian Radio-TV and Telecommunications Commission ultimately allows $2 per gigabyte in overlimit fees, we would have to pay $5,184,000 per month for the same thing,” John says. “If this comparison doesn’t make people want to chuck the CRTC, what will?”

For the government of South Korea, which is spearheading the Internet expansion effort, broadband has become a national priority for the fast-growing Korean economy.

[flv width=”640″ height=”447″]http://www.phillipdampier.com/video/Hello CJ TV.flv[/flv]

Korea’s CJ HelloVision cable system delivers TV programming, broadband, and phone service at speeds and prices that make North American providers look ridiculous.  Bonus: That sure looks like Sarah Palin making a cameo appearance in this animated video.  (1 minute)

South Korea historically trailed Japan’s economic post-World War II revival for decades, but no more. The country, which used to be poorer than the Communist People’s Republic of Korea to the north, has grown to the world’s 13th largest economic power, and has designs on being a world leader in the transition to the digital/information economy. They are already ahead of North America, with an advanced broadband platform that can sustain concepts like cloud computing that are just getting off the ground in Canada and the USA.

Only the most rural parts of Korea still rely on copper phone wires delivering DSL service, now considered archaic. Most of the country is now wired for fiber optics, making a transition from 100Mbps-1Gbps relatively simple. With new laser technology, existing fiber cables can transmit faster speeds, and when fiber is laid in the country, extra strands are buried for future use. The costs of burying 10 or 100 or 1,000 strands come mostly from labor, not the wiring.

Private electronics companies are strong proponents of the infrastructure upgrades, and service providers are on board to deliver the service. That is in marked contrast with providers in the United States and Canada who consider expensive upgrades an unnecessary proposition.

“Providers in the USA and Canada defend their existing networks as ‘good enough for average residential use,’ something that would be laughed away here in Korea or in Japan,” Dr. Park Sung-Jin, a Korean broadband researcher who travels between Seoul and Los Angeles tells Stop the Cap! “Large providers like AT&T cannot afford to lose their propaganda arguments of broadband sufficiency because if they did, they would lose face and be forced to transform broadband in the USA at the expense of their enormous profits.”

“In Asia, we would never allow our providers to dictate the national broadband policies of the country, and our discussions are long past arguing over what speeds are correct,” Park says.  “Now we’re arguing about how to bring the cost down.”

Japan delivers 1Gbps broadband service for $70 a month, a price scoffed at by Choi Gwang-gi, the 28-year old Korean now in charge of the Korea’s expansive broadband plans.

“I can’t imagine anyone in Korea paying that much,” Choi told the New York Times. “No, no, that’s unthinkable.”

A pilot gigabit project initiated by the government is underway with 5,000 households in five South Korean cities. Each customer pays about 30,000 won a month, or less than $27.

“A lot of Koreans are early adopters,” Mr. Choi said, “and we thought we needed to be prepared for things like 3-D TV, Internet protocol TV, high-definition multimedia, gaming and videoconferencing, ultra-high-definition TV, cloud computing.”

[flv]http://www.phillipdampier.com/video/200Mbps Broadband.flv[/flv]

Hello Broadband delivers a silly advertisement for its soon to be obsolete 200Mbps broadband service.  (1 minute)

Meanwhile, according to Dr. Park, North American providers like Bell, Rogers, and Comcast are spending millions trying to convince lawmakers in both countries that such speeds are wholly unnecessary.

“The United States and Canada are the worst, with providers spending countless millions themselves and through their lackey trade associations and illicit ‘consumer groups’ working for them trying to convince lawmakers American broadband isn’t so bad after all, but it is,” Park says. “They routinely claim any country that is ahead of the U.S. or Canada is a ‘special case’ because of urban density or government subsidies, but that can’t explain away all of the disparity in speeds and accessibility, only money and monopoly profits can.”

Both Romania and Latvia now beat Canada and the USA in broadband speeds and pricing, and North America’s dominance in a digital economy could be at risk.

Closer to home Don Norman, co-founder of the Nielsen Norman Group in Fremont, Calif., told the Times Korea is on the right track.

“The gigabit Internet is essential for the future, absolutely essential, and all the technologists will tell you this,” said Norman. “We’re all going to be doing cloud computing, for example, and that won’t work if you’re not always connected. Games. Videoconferencing. Video on demand. All this will require huge bandwidth, huge speed.”

In Canada, such predictions have given companies like Bell an excuse to engage in a national Internet Overcharging scheme they claim will help pay for building these kinds of future networks. But other countries around the world now deliver speeds Canada only promises their citizens, without overcharging them to pay for it.

“Charging for broadband traffic would be like you or I charging for the wind — it has no real value except in the eyes of the people who stand to profit from it,” Park said.

Will people notice a difference between 100Mbps and 1Gbps? Koreans say they will, according to the New York Times.

One of the customers already connected to Mr. Choi’s pilot program is Moon Ki-soo, 42, an Internet consultant. He got a gigabit hookup about a year ago through CJ Hellovision, although because of the internal wiring of his apartment building his actual connection speed clocks in at 278 megabits a second.

But even that speed — about a quarter-gigabit — has him dazzled.

“It is so much more convenient to watch movies and drama shows now,” he told the newspaper.

[flv width=”368″ height=”228″]http://www.phillipdampier.com/video/Giga Internet.flv[/flv]

This Korean language promotional video for Giga Internet, the marketing brand for 1Gbps broadband, still dazzles the imagination for those who lack the ability to follow the words.  As you watch, consider how America’s typical DSL service provider leaves millions of Americans with a ‘covered wagon’ 3Mbps broadband solution.  (6 minutes)

[flv width=”480″ height=”340″]http://www.phillipdampier.com/video/SK Broadband.mp4[/flv]

A stylish ad for SK Broadband, declaring new high speeds will let users “See the Unseen.”  (1 minute)

Walt Mossberg, a columnist for the Wall Street Journal, delivered some stinging remarks about how large telecom and media companies deliver broadband services and programming to North Americans.

“We really suck at broadband,” Mossberg complained during opening remarks at Beet.TV’s first executive summit held at the Embassy of Finland in Washington.  “We have terrible, terrible broadband.”

“The typical consumer either has been lured into broadband by a DSL service that in Finland would not count as broadband — 768kbps is not broadband,” Mossberg said.  “If [the government] adopted a regulation not allowing Verizon to call that crap broadband, it would help.”

Mossberg added that cable modem service in the US and Canada is so slow, it is the object of pity and pathos in countries like Japan and Korea, and we’re overcharged for it.

[flv width=”480″ height=”388″]http://www.phillipdampier.com/video/Verizon Should Stop Calling DSL Broadband 2-17-11.flv[/flv]

Mossberg’s comments come as part of a discussion about the online video revolution, which he says is being hampered by copyright controls, outdated advertising models, and broadband providers delivering sub-standard service.  (8 minutes)

Consumers across North Carolina can celebrate their successful effort to protest legislation that would effectively ban community-owned broadband networks in the state.

Thanks to an outpouring of phone calls and e-mails this afternoon, legislators have been forced to delay placing the controversial legislation on the agenda for tomorrow’s planned meeting.  Our sources tell us the reason for the delay was “all of the unwanted attention” the bill was getting from outraged citizenry.

But victory may be short-lived.  The proposed legislation has been re-inserted on the agenda for a meeting to be held next Wednesday.  That means one more week for you to keep the pressure on.

Use this time to tell your friends and family to contact legislators and let them know in no uncertain terms this bill needs to be killed for good right now.  One week, one month, or one year — there is no good time for this kind of corporate welfare to become law in a state that has a long way to go to achieve top-rated broadband service.  North Carolina’s economy depends on robust, world-class broadband.

The state’s phone and cable companies are spending their money on lobbyists to defeat competition, not bring the kind of service communities in Wilson and Salisbury now enjoy.

North Carolina residents:  Rep. Avila’s H129, brought to you by Time Warner Cable, is being jammed through the state legislature tomorrow with no public input, no real review, and no thought for the ordinary voter in the state.

The House Public Utilities Committee will “discuss” the measure during Wednesday’s Public Utilities Committee meeting at 12 noon, in room 643 of the Legislative Office Building in Raleigh, quickly followed by a vote.  Bought and paid for by the state’s cable and phone companies, this bill will guarantee every resident in the state will face relentless rate increases, unchecked by competition.  Even worse, the state of the art broadband networks that finally deliver the kind of quality broadband the state deserves will be forced to shut down because of the ludicrous conditions the legislation requires for them to continue.

That means no more fiber broadband for your state — just the same old slow cable and DSL service that has left North Carolina far back in national broadband rankings.  Even worse, without community-owned networks, the chances of a competitor arriving to bring better service at lower prices are practically zero.

For rural North Carolina, H129 is nothing less than total devastation.  It will destroy any chance for rural communities to take care of the broadband needs of their citizens big cable and phone companies have ignored for years.  Make no mistake — H129 spells disaster for every North Carolina resident who isn’t an executive of a cable or phone company.

No citizens have asked for H129 to be introduced. It, like all of its predecessors, is a creature of Big Telecom — custom-written to do their bidding at your personal expense.  With a wined-and-dined Republican majority (some of whom were flown out to San Diego for a telecom-paid vacation seminar, complete with a BBQ bash), the only thing that stands in the way of this nightmare becoming law is you.

Every legislator knows there is a price to be paid for special interest legislation like this.  If it threatens to cost them enough votes to put their re-election at risk, they will bury the legislation or openly vote against it.  If they believe you are not paying attention, they’ll vote yes and gratefully accept the cable company’s next contribution check for a job well done.

You have less than 24 hours to make sure they know you are paying attention, and you will not support any legislator who votes against your best interests.

Tell them to vote NO on H129. Representative Steen is the Committee Chair and can be reached at [email protected] or 919-733-5881.

Here is a complete contact list for your convenience.  Click on the representative(s) to get their direct contact information.  Phone calls are most effective followed by e-mail.  Feel free to pursue both.

The House Public Utilities Committee

Chairman	Rep. Steen
1st Vice Chairman	Rep. Brubaker
2nd Vice Chairman	Rep. Cook
3rd Vice Chairman	Rep. Hager
Members	Rep. K. Alexander, Rep. Blackwell, Rep. Brawley, Rep. Brisson, Rep. Collins, Rep. Dockham, Rep. Earle, Rep. Gill, Rep. Harrison, Rep. Hastings, Rep. Hilton, Rep. Hollo, Rep. Howard, Rep. Jeffus, Rep. Johnson, Rep. LaRoque, Rep. Lucas, Rep. Luebke, Rep. McComas, Rep. McLawhorn, Rep. T. Moore, Rep. Owens, Rep. Pierce, Rep. Pridgen, Rep. Samuelson, Rep. Setzer, Rep. Tolson, Rep. E. Warren, Rep. H. Warren, Rep. West, Rep. Womble, Rep. Wray

QUESTIONS THAT NEED TO BE ASKED ABOUT REP AVILA’S ANTI-BUSINESS, ANTI-LOCAL BROADBAND BILL

Will the industry be subject to the “level playing field” requirements of H129/S87?

NO. The industry would cease providing broadband services if they were subject to the requirements of this bill, due to the onerous burdens it places on broadband providers.The federal government and North Carolina deregulated broadband and cable services years ago; this bill re-regulates those services only if they are provided by local communities. The purpose of this industry-sponsored bill is to slant the competitive playing field in the industry’s direction and prevent local communities from providing their residents the broadband they need.

Why does the industry want local governments subject to the requirements of H129/S87?

So local broadband networks don’t develop Industry spokesmen say if local governments want to enter the broadband business they must play by the same rules as the private sector. Cable and broadband services were deregulated years ago and community broadband systems are subject to the same broadband rules as the private companies. This bill is designed to remove business and consumer choice and access to broadband services.

Is this bill actually good for the private sector?

NO. This bill will harm the private sector. The real private sector, local businesses, depend on access to reliable, advanced broadband infrastructure to sell goods and services.Yet large portions of our state remain unserved by the large telecoms or are served by unreliable, dated technology.  So local communities have stepped in to build the critical reliable infrastructure that will let their private sector flourish. This bill is only good for the large out-of-state telecom corporations whose monopolies benefit from being able to charge our local businesses higher rates due to lack of choice. North Carolina needs more broadband providers, not less.

Will this bill prevent public/private broadband partnerships, like Google Fiber?

YES. §160A-340.4 limits the funding, construction or improvement of any community broadband to general obligation bonds which impose severe limits on private sector investments in the system.  This bill will stop even public/private attempts to compensate for a lack of local broadband service.

Are the cable and telephone industry really interested in the welfare of taxpayers?

NO. The industry does not care about local taxpayers; they care about profit. If Time Warner Cable cared about taxpayer burdens,why have they raised cable rates on businesses and residential taxpayers every year? §160A-340.4 of the bill, actually shifts the financial risk of local systems directly to taxpayers by requiring that community systems are funded directly on the backs of taxpayers via general obligations bonds. §160A-340.1(b) also removes the requirement that the public vote before the sale of a community system occurs!

How do we ensure public accountability on public broadband projects without H129/H87?

The General Assembly has already established: (1) rules governing Public Enterprises (NCGS Chapter 160A, Article 16); (2) strict rules in the Budget and Fiscal Control Act governing all municipal budgets and expenditures, including hearing and disclosure requirements (NCGS Chapter 159, Article 3); and (3) strict oversight of municipal borrowing by the Local Government Commission (NCGS Chapter 159); and municipalities are subject to public document “Sunshine” laws, which Time Warner Cable has repeatedly used to obtain access to municipal financial and strategic planning decisions. In contrast, North Carolina’s telephone and cable companies are not required to publicly reveal any information about their systems.

Are portions of H129/S87 unconstitutional?

YES. The big telecoms want you to vote for a bill that is in contravention of NC’s state constitution. Their bill violates § 2(3) of Article v of North Carolina’s Constitution, which exempts all municipally-owned property from taxation by requiring municipalities to pay property taxes on broadband and other communication systems by renaming the property tax a “payment in lieu of taxes.

Will H129/S87harm public safety networks?

YES. Public Safety networks are typically regional communication networks of Counties, Cities, and Towns who pay fees and receive federal grants to cover operational costs. This bill would shut them down by limiting their service areas and imposing restrictive rate-setting and financial limitations;it will also make them ineligible for Homeland Security, ARRA and Farm grants.