Sen. Chip Rogers, a new-found friend of Comcast, AT&T, Charter Cable, Verizon, and the Georgia state cable lobby.

A new bill designed to hamstring local community broadband development with onerous government regulation and requirements has been introduced by a Republican state senator in Georgia, backed by the state’s largest phone and cable companies and the astroturf dollar-a-holler groups they financially support.

Sen. Chip Rogers (R-Woodstock), is the chief sponsor of the ironically-named SB 313, the ‘Broadband Investment Equity Act,’ which claims to “provide regulation of competition between public and private providers of communications service.”  The self-professed member of the party of “small government” wrote a bill that creates whole new levels of broadband bureaucracy, and applies it exclusively to community-owned networks, while completely exempting private companies, most of which have recently contributed generously to his campaign.

SB 313 micromanages publicly-owned broadband networks, regulating the prices they can charge, the number of public votes that must be held before such networks can be built, how they can be paid for, where they can serve, and gives private companies the right to stop the construction of such networks if they agree to eventually provide a similar type of service at some point in the future.

Even worse, Rogers’ bill would prohibit community providers from advertising their services, defending themselves against well-financed special interest attacks bought and paid for by existing cable and phone companies, and requires publicly-owned networks to allow their marketing and service strategies to be fully open for inspection by private competitors.

Rogers’ legislation is exceptionally friendly to the state’s incumbent phone and cable companies, and they have returned the favor with a sudden interest in financing Rogers’ 2012 re-election bid.  In the last quarter alone, Georgia’s largest cable and phone companies have sent some big thank-you checks to the senator’s campaign:

• Cable Television Association of Georgia ($500)
• Verizon ($500)
• Charter Communications ($500)
• Comcast ($1,000)
• AT&T ($1,500)

A review of the senator’s earlier campaign contributions showed no interest among large telecommunications companies operating in Georgia.  That all changed, however, when the senator announced he was getting into the community broadband over-regulation business.

It is difficult to see what, besides campaign contributions, prompted Rogers’ sudden interest in community broadband, considering Georgia has not been a hotbed of broadband development.

Rogers claims cities like Tifton, Marietta and Acworth have tried unsuccessfully to be public providers and that the legislation “levels the playing field for public and private broadband providers.”  Hardly, and the senator’s dismissal of earlier efforts fails to share the true story of broadband expansion in those communities.

The new owner of Tifton's CityNet carries on the tradition the city started providing broadband to a woefully underserved part of Georgia.

Tifton: Either the city provides broadband or no one else will

Tifton’s misadventure with the city-owned CityNet, eventually sold to Plant Communications, was hardly all bad news.  When city officials launched CityNet a few years ago, much of the community was bypassed by broadband providers.  Today, the new owner Plant continues competing with bottom-rated Mediacom, which admitted in 2001 it bought an AT&T Broadband cable system that “underserved” the residents of Tifton.  At the same time, the Tifton Gazette, which has loathed CityNet in editorials from its beginnings, freely admits the network brought lower prices and competition to Tifton residents over its history:

At the same time, having CityNet here has meant increased competition and therefore lower service rates for residents. We would probably have had to wait longer for high-speed Internet to make it to Tifton, and the system makes it possible for local governments to receive services here.

That’s a far cry from Rogers’ claim that the “private sector is handling [broadband] exceptionally well.”

“What they don’t need is for a governmental entity to come in and compete with them where these types of services already exist,” Rogers added.

In fact, in Tifton they needed exactly that to force Mediacom to upgrade the outdated cable system they bought from AT&T.

The Curious Case of Marietta FiberNet: When politics kills a golden opportunity

On track to be profitable by 2006, local politics forced an early sale of the community fiber network that was succeeding.

In Marietta, the public broadband “collapse” was one-part political intrigue and two-parts media myth.

Marietta FiberNet was never built as a fiber-to-the-home service for residential customers.  Instead, it was created as an institutional and business-only fiber network, primarily for the benefit of large companies in northern Cobb County and parts of Atlanta.  The Atlanta-Journal Constitution reported on July 29, 2004 that Marietta FiberNet “lost” $24 million and then sold out at a loss to avoid any further losses.  But in fact, the sloppy journalist simply calculated the “loss” by subtracting the construction costs from the sale price, completely ignoring the revenue the network was generating for several years to pay off the costs to build the network.

In reality, Marietta FiberNet had been generating positive earnings every year since 2001 and was fully on track to be in the black by the first quarter of 2006.

So why did Marietta sell the network?  Politics.

Marietta’s then-candidate for mayor, Bill Dunway, did not want the city competing with private telecommunications companies.  If elected, he promised he would sell the fiber network to the highest bidder.

He won and he did, with telecommunications companies underbidding for a network worth considerably more, knowing full well the mayor treated the asset as “must go at any price.”  The ultimate winner, American Fiber Systems, got the whole network for a song.  Contrary to claims from Dunway (and now Rogers) that the network was a “failure,” AFS retained the entire management of the municipal system and continued following the city’s marketing plan.  So much for the meme government doesn’t know how to operate a broadband business.

Acworth: Success forces the city to sell to a private company that later defaults

Acworth CableNet: Too popular for its own good?

But of all the bad examples Rogers uses to sell his telecom special interest legislation, none is more ironic than the case of Acworth, Ga.  The Atlanta suburb suffered for years with the dreadfully-performing MediaOne.  Throughout the 1990s, MediaOne spent as little as possible on its antiquated cable system serving the growing population, many working high-tech day jobs in downtown Atlanta.  MediaOne had no plans to get into the cable broadband business, while other cable systems around metro-Atlanta had already begun receiving the service.  That left Acworth at a serious disadvantage, so local officials issued $6.8 million in tax-exempt bonds to construct Acworth CableNet.  Demand was so great, the city simply couldn’t keep up.

As Multichannel News reported in 2002, “the Atlanta suburb of Acworth, Ga., isn’t selling because business is bad. Rather, officials said they’ve received so many requests for service from outside the city limits that they’ve decided to sell the operation to an independent company that may expand beyond Acworth’s borders.”

That is where the trouble started.  The city contracted with United Telesystems Inc. of Savannah, Ga., a private company, first to lease and then eventually buy the cable system, maintaining and expanding it along the way.  But in 2003, United Telesystems defaulted on its lease-sale agreement, forcing the city to foreclose on the system and ultimately sell it to a second company.

Acworth’s “failure” wasn’t actually the city’s, it was the private company that defaulted on its contract.

So much for Rogers’ record of municipal broadband failure.

The Hidden Problems of Industry-Funded Research Reports

In fact, many of Rogers’ talking points about his new bill come courtesy of the industry-backed astroturf group, the “Coalition for the New Economy.”  With chapters in the Carolinas, Georgia, and Florida, this tea-party and AT&T/Time Warner Cable-funded group takes a major interest in slamming community broadband.

Most of their findings come courtesy of a shallow dollar-a-holler study, The Hidden Problems with Government-Owned Networks, by Dr. Joseph P. Fuhr, Jr., professor of economics at Widener University.  The report, mostly an exercise in Google searching for cherry-picked bullet points highlighting what the author sees as weaknesses and failures in community broadband, even slams success stories like EPB Fiber.  The Chattanooga, Tenn., network just earned credit for helping to attract hundreds of millions in new private investment and jobs from Amazon.com, but Fuhr’s conclusion is that EPB operates without any “real business plan concerning EPB’s investment.”

Fuhr and his friends at Heartland Institute even misrepresent EPB as delivering only 1Gbps service at $350 a month in an attempt to illustrate municipalities are out of touch with the private broadband marketplace.

Christopher Mitchell at Community Broadband Networks dismisses the bill as more of the same from a telecommunications industry that wants to tie down community broadband networks in ways that guarantee they will fail:

In short, this bill will make it all but impossible for communities to build networks — even in areas that are presently unserved. The bill purports to exempt some unserved areas, but does so in a cynically evasive way. The only way a community could meet the unserved exemption is if it vowed to only build in the least economical areas — meaning it would have to be significantly subsidized. Serving unserved areas and breaking even financially almost always requires building a network that will also cover some areas already served (because that is where you can find the margins that will cover the losses in higher expense areas).

The bill is presently in the Senate Regulated Industries and Utilities committee.  Stop the Cap! urges Georgia residents to contact state legislators and ask they oppose this special-interest legislation that is designed primarily to protect the broadband status quo and provider profits in Georgia, instead of allowing communities to manage their broadband needs themselves.  After all, they are accountable to the voters, too.

Courtesy: WCVB Boston

Correction: In an effort to concatenate two stories regarding Springfield, we erred in reporting about Springfield’s move to sell its municipal cable operation to Knology.  That story referred to Springfield, Fla., not Springfield, Mass.  We appreciate one of our readers bringing this to our attention, and we regret the error. –PMD

Comcast customers in Massachusetts are hopping mad over the latest round of rate increases from the state’s largest cable operator — the second in 10 months in some areas.  Higher cable bills for customers will start arriving by early spring.

City officials in Boston expect eastern Massachusetts customers will face up to 2.9% more for basic service this spring.  In western Massachusetts, Springfield city officials finally resolved a prolonged legal battle with the cable operator and granted the company a 10-year franchise renewal that preserves senior discounts for existing customers.

Boston mayor Thomas M. Menino said an examination of Comcast’s cable rates over the past few years proves deregulation “has failed” consumers across greater Boston.  Menino says basic cable rates have increased by 80 percent in the three years since the city’s rate control agreement expired.

Menino wants restored authority to regulate cable rates, and has asked the FCC for permission to bring back the city’s oversight powers.

[flv width=”480″ height=”290″]http://www.phillipdampier.com/video/WCVB Boston Cable Rates Going Up For Some Customers 1-17-12.mp4[/flv]

WCVB in Boston talks with city mayor Tom Menino about the latest round of rate increases for Comcast customers.  Some Boston locals are responding by dumping cable television altogether.  (2 minutes)

Comcast basic service will rise another 4.9 percent this spring, bringing the mostly local-broadcast-channel cable service to $16.58 a month.

The only other major cable provider in Boston, RCN, which serves mostly apartment buildings and other multi-dwelling units, is not planning to increase its prices on the lowest price tier. However, RCN already charges more than Comcast — $17.50 — for comparable service.  Other RCN customers face general rate increases this spring.

Verizon says it has no plans to increase prices in Boston either.  That statement was deemed ironic by some, considering the fact the phone company has never provided FiOS fiber-to-the-home cable service inside the city of Boston.

All affected providers blame increasing programming costs for the rate hikes.

[flv width=”480″ height=”290″]http://www.phillipdampier.com/video/WGGB Springfield Cable Rates Going Up 1-18-12.mp4[/flv]

WGGB in Springfield led a recent evening newscast with news Comcast and competing satellite providers are increasing rates in western Massachusetts, with local residents increasingly questioning the value of their cable-TV services.  (2 minutes)

Years ago, phone companies could not simply raise rates willy-nilly.  They had to justify rate increases before an oversight body, usually on the state level.  But after spending millions to lobby state lawmakers to deregulate the phone business, AT&T is set to recoup their investment with a dramatic 25 percent rate increase for landline phone service in the state of California.

Some residential customers have kept basic landline service as a last resort, switching to “measured service,” where customers pay a small charge for every call they make or receive a calling allowance that covers several calls a day.  Measured service can deliver substantial savings over traditional flat rate service.  But now AT&T is targeting these “budget customers” for some stunning rate hikes.

Starting March 1st, AT&T is raising rates by nearly 25% for measured service — from $12.37 to $15.37 a month — a $3 increase.  After your calling allowance is exhausted, each additional local call will cost three cents per minute.

Customers with flat rate service will also pay AT&T $1.05 more — $21 a month (before taxes, fees, and surcharges) for basic flat rate, unlimited local calling.

Best of all (for AT&T), the company does not have to explain or justify the rate increase.  That attitude was evident when reading the Los Angeles Times‘ account of the rate hike, complete with an arrogant, shoulder-shrugging AT&T spokesman:

Lane Kasselman, an AT&T spokesman, said fees for measured and flat-rate calling plans are going up because, well, because.

“Goods and services go up,” he told me. “That’s how our economy works.”

The increase is expected to hit seniors and low income consumers the hardest — they are the biggest constituency of the 10 percent of AT&T customers who choose measured-rate, budget service.  They are also the least likely to have cut the cord on their traditional landline service in favor of a cell phone or competing Voice Over IP provider.

AT&T hints that the rate increase is partly to push customers into multi-service bundles that include phone, Internet, and television service.  By hiking the price of individual services, the bundled price suddenly seems to deliver the best “savings” for customers.

Critics call that price pumping — artificially raising the price of a-la-carte services to create phantom savings for the company’s higher-revenue bundled service packages.

A San Francisco advocacy group calls it something else.

“It’s extortion, pure and simple,” said Regina Costa, telecom research director for the Utility Reform Network, or TURN, a consumer group. “There’s no proof that these price increases are justified.”

Thanks to California’s deregulation of the landline phone business, no proof is required.

When Massena, N.Y. town supervisor Joseph D. Gray balked at Time Warner Cable’s demands for a 15-year franchise renewal agreement, especially after the cable company never bothered to show up at a hearing on the subject, he thought he could send a message by supporting a renewal expiring after just one year.

But there was a reason Time Warner never bothered to show up to defend their performance in northern New York State over the last decade of increasing rates and unwanted channels shoveled at subscribers — they did really have to answer to local officials.

Gray assumed playing some hardball with the cable company might get their attention and bring them to the table to discuss the demands of local Massena residents he hears from all the time.  At the top of the list is a-la-carte cable — paying only for channels you want.

No deal.

Gray

Mr. Gray has since admitted in conversations with the Watertown Daily Times he is frustrated by the town’s inability to effect “any real change.”

This despite the state cable franchise law which declares communities have the right to establish and negotiate “cable-related community needs” as part of the final contract with cable operators.

In fact, the cable industry has spent millions lobbying federal and state governments to deregulate their operations, even though most communities are served by just one cable operator.  While phone companies have made limited progress competing in larger urban areas, most of upstate New York is left choosing between a satellite provider or a cable company — usually Time Warner Cable.

That lobbying paid off in the 1990s when the federal government swept away considerable government oversight of cable operations.  While municipalities technically still control the basic franchising process, those dissatisfied with service from an existing provider rarely find other companies willing to take over.  That leaves Massena stuck with Time Warner Cable, who isn’t giving an inch on how they package their programming.

“We can make some gains for the community. Can we get free service for a couple of municipal buildings? Probably,” Mr. Gray told the newspaper. “They continue to say there’s nothing they can do about programming, there’s nothing they can do about bundling.  That’s from the programmer.  Until we get … a la carte, where people get the channels they want, we’re never going to satisfy people.”

One of the things we have tried to teach readers over the last few years is how important it is to follow the money trail when encountering a group, politician, or researcher counter-intuitively arguing “up is down” or “right is left.”  So when a business columnist in the Press of Atlantic City slammed rural broadband as a service provided “to a group of people who mostly don’t want it,” we started digging:

The FCC claims this effort will give 7 million rural people reliable access to high-speed Internet connections. So the hundreds of millions of urban and suburban Americans who wish their Internet was faster and more reliable will pay for 2 percent of us to get just that.

Or maybe we’ll be paying for redundant, overpriced telecom work by companies that donate to rural politicians.

Federal stimulus spending in response to the recession already included $7.2 billion for this same purpose. An analysis by Navigant Economics of three big projects under that Broadband Initiatives Program found:

Even “areas in which very high proportions of households were already served by multiple existing broadband providers” were eligible for subsidized broadband work.

The author’s suspicion that money was involved in all this was correct, but he completely missed who was boarding the money train.

Navigant Economics, the “research group” that produced the inflammatory report slamming rural broadband funding, happens to count AT&T as one of its important clients.

The group, a subsidiary of Navigant Consulting, provides economic and financial analysis of legal and business issues to law firms, corporations and government agencies.

In fact, Navigant pitches its services to a range of corporate clients:

Navigant Economics provides economic analysis in litigation and regulatory proceedings involving competition issues. Our experts have provided testimony in proceedings before District Courts, the Department of Justice, the Federal Trade Commission, the Federal Communications Commission, the Federal Energy Regulatory Commission, and numerous state Public Utilities Commissions.

We provide economic analysis and testimony in connection with mergers and acquisitions and antitrust claims of:

• Anticompetitive horizontal agreements (price fixing, bid rigging, potential anticompetitive effects of joint ventures)
• Unilateral conduct (predatory pricing, refusals to deal, monopolization via patent fraud)
• Vertical restraints (exclusive dealing, requirement contracting, tying and bundling)

We also offer economic analysis and testimony on issues of price and rate of return regulation, mandatory access, quality of service, and benefit-cost analysis, with especial expertise in regulatory proceedings involving communications and the Internet (software and hardware sectors, network unbundling and “net neutrality” issues affecting telecom and cable firms, retransmission consent and other content-related issues, and the range of wireless spectrum issues) and all types of energy markets.

Phillip "Making Sense, Not Dollars" Dampier

The result is what critics refer to as “dollar a holler research” — bought-and-paid-for-results that coincidentally fit the framework of a client’s public policy agenda.  In this case, AT&T (among other phone companies) has fretted about broadband stimulus funding ever since the Obama Administration made it clear the industry would not collectively control the program or reward themselves at taxpayer expense.  In addition to criticizing the decision-making process, phone and cable companies have objected to numerous applicants who applied for grants to build networks serving communities those companies have ignored or under-served for years.

To say AT&T has no vested interest in the outcome of rural broadband would be the first major understatement of 2012.

Martyn Roetter with MFR Consulting said Navigant was giving a bad name to researchers.

“Navigant Economics as well as other economists in academia and the consulting profession seem increasingly prepared to support arguments in favor of their clients’ desires and goals regardless of whether they are reasonable or preposterous,” Roetter wrote. “Unfortunately this behavior tends to blur the distinction between (a) respectable advocacy with findings based on evidence and rational arguments and (b) indefensible nonsense, discrediting both academics and consultants.”

Navigant spent much of 2011 trying to convince regulators and the public that T-Mobile actually doesn’t compete with AT&T, so there should be no problem letting the two companies merge.  Readers win no prizes guessing who paid for that stunner of a conclusion.  Thankfully, the Department of Justice quickly dismissed that notion as a whole lot of hooey.

Navigant’s second ludicrous conclusion is that there is no rural broadband availability problem.  Navigant has a love affair with slow speed, spotty DSL (sold by AT&T) and heavily-capped 3G wireless (also sold by AT&T) as the Frankincense and Myrrh of rural Internet life.  With those, you don’t need any broadband expansion (particularly from a third party interloper).

“The notion that a nominal maximum speed in a shared radio access network is comparable to a nominal maximum speed of a fixed broadband line to a location is a striking example of ignorance, wilful or otherwise, of the very different operating characteristics and capabilities of these two transmission media,” Roetter soberly observed.

But he knows better.

Roetter

Kevin Post, columnist for the Press of Atlantic City, bought Navigant’s conclusions hook, line, and sinker and repeated them in the press.  In fact, he upped the ante parroting the time-honored provider argument that rural America doesn’t need 21st century broadband because, well, they just don’t want it:

This costly effort is aimed at bringing broadband to a group of people who mostly don’t want it, according to a 2010 Pew Internet survey.

Half of Americans who don’t use the Internet told Pew that the main reason is they don’t find it relevant to their lives.

Only one in 10 nonusers said they would be interested in starting to use the Internet sometime in the future.

Actually, the Pew Internet survey came well before Navigant’s outlandish conclusions, and didn’t directly address the rural broadband availability problem.  Instead, Pew was looking at broadband adoption rates, primarily in places that already have one or more broadband providers.  Pew found what providers have already realized themselves: broadband growth and adoption is slowing; everyone who wants the service in urban America already has it or wants it.  Those that don’t are typically older and lack computers or are too poor to afford the asking price.

Post’s suggestion that a Pew Study concluded rural America does not want broadband service is an exercise in fixing the facts.

That’s the magic of the Dollar-a-Holler Echo Machine.  Big telecom companies hire public policy consultants and researchers to find their way to “scientific” evidence proving their corporate agenda, and then feeds the “facts” and “research” to receptive reporters, astroturf “consumer groups,” and politicians to bolster their case.  It’s not AT&T suggesting there is no rural broadband problem — it’s Navigant Economics.

As Roetter writes, “A basic knowledge of wireless markets exposes the […] indefensible nature of the positions outlined above. A policy based on ‘tell me what you want to hear, pay me, and I will reproduce it all regardless of its merits’ is a disservice to professionals who try to remain objective and independent, i.e. professional.”