Senator Hoyle's legislation lays the foundation for cable and phone companies to spend hundreds of thousands of subscriber dollars to mail smear campaign pieces like this one from Comcast.

(This piece is written by Jay Ovittore and Phillip Dampier.)

The good news is that all the pushback on an all-out-moratorium on municipal broadband was successful and Senator David Hoyle (D-Gaston) withdrew the idea.  The bad news is he had an even worse idea to replace it.

Hoyle Wednesday unveiled a new draft bill that hopelessly ties up municipal broadband projects into knots of red tape that, if passed into law, will bury municipal broadband projects in North Carolina indefinitely.

Hoyle sprung his telecom-industry-friendly legislation on the public after getting plenty of input and encouragement from the state’s cable and phone companies who already knew what was in it because they helped craft it.

For a retiring state senator who doesn’t have to worry about the next election, what better parting gift can you give to your friends in the cable and phone industry than a bill that preserves the comfortable duopoly they’ve  enjoyed for years.

Hoyle and those supporting the legislation will argue their bill doesn’t ban municipal broadband — it simply places conditions on such projects before they can go forward.  But what are those conditions?

Section One of the draft bill requires local governments to get funding for “external communications services” (ie. municipal broadband) by way of a General Obligation Bond (a GO Bond).  In North Carolina, that requires a taxpayer-funded referendum to be held for public input at the next election.

On the surface, getting public approval for municipal broadband isn’t a bad idea — no local government official expecting to win re-election would ever proceed on such projects without voter support.  But this requirement also gives plenty of advance notice to incumbent providers that a new player could be invading their turf.

We know what that means.  A well-funded opposition campaign to demagogue the project.  Local cable companies can insert an unlimited number of free ads during every advertising break to slam the proposal.  Phone companies can release a blizzard of opposition mailers to convince consumers it’s as scary as Halloween — all tricks and no treats.

How can a local city or county government respond to the misinformation barrage?  They can’t.  Public officials can’t spend taxpayer dollars to promote such projects or refute industry propaganda.  They can’t even financially assist a citizen-run campaign.

That’s a fight with ground rules only Don King could love.

In the end, that leaves ordinary citizens of North Carolina facing down a multi-billion dollar statewide consortium of telecommunications interests hellbent on preserving and protecting the status qu0.

The earlier-discussed moratorium was a brick wall against municipal broadband.  Hoyle’s bill is the Great Wall of China with the logos of AT&T, Time Warner Cable, and CenturyLink plastered all over it.

But wait, there’s more.  To deal with municipal broadband projects that got an initial green light to dare to interfere with the phone and cable industries’ grand business plans, another provision provides a near endless supply additional referendums to get rid of the projects.  Hoyle’s bill actually demands more votes should existing systems need:

• refinancing to reduce the interest rate or restructure existing debt;
• to make repairs to the system’s “fixtures;” and/or
• to upgrade the system to meet subscribers’ needs.

Ponder the insanity:

• The legislation could be interpreted to demand a public referendum if your service goes out.  Can you wait until the next election to get back your cable service?
• If a municipal broadband fiber cable falls in your backyard, does it make a sound?  It won’t, but you will when you learn that cable might not be reattached to the pole until the whole town holds a referendum about it;
• Would you be upset if your local municipal provider could refinance its debt at a much lower interest rate, letting them cut their prices, but they can’t before the next election?
• While cable and phone companies refuse to upgrade their service to levels that would have made such municipal alternatives unnecessary, they also want to make certain the one provider that did meet your needs can’t upgrade… without a public vote.

These systems are not constructed with public tax dollars, but Senator Hoyle wants every citizen in a community, subscriber or not, to ponder the future of a local municipal broadband provider.  It’s like giving AT&T veto power over Time Warner Cable’s channel lineup.  Guess who has to pay for these constant referendums?  Taxpayers.  So while Senator Hoyle complains municipal broadband costs the state tax revenue, his legislation guarantees increased government spending on pointless referendums.  That’s logic only a politician working for the interests of big cable can appreciate.

For the cable and phone companies, and their good friends in the North Carolina legislature, this is their idea of a level playing field.  In reality it’s about as level as a downhill ski run.

Let’s extend that “fairness” out to incumbent cable and phone companies and consider whether you got a vote on:

• Whether or not the cable and phone companies got to put their wires on phone poles plunked down in front of your house;
• Whether or not you wanted either company to dig up your yard to bury their wiring;
• Whether you wanted that giant metal refrigerator-sized metal box installed on your street, in your yard, or on the phone pole you see from your window every day;
• Whether or not you want the cable company to repair Mrs. Jenkins’ problems with HBO up the street whenever it rains or replace the cable the squirrels chewed up;
• What channels and services you want to pay for, which ones you do not, and at what price you need to pay your local phone or cable company.
• What cable or phone company gets to provide service in your community.

Apparently the fairness concept only applies to potential new competitors, not the existing providers.

Let’s also consider the cable television industry didn’t just magically bloom into a multi-billion dollar business without government help.  In the early days of cable television, investors were assured that they were financing a monopoly provider, guaranteed through a franchise agreement process that gave newly built cable companies exclusivity to help repay construction costs.  Franchise wars broke out between 1978 and 1984 as competing companies promised the moon with state-of-the-art two-way cable systems with the capacity to offer 70 or more channels.  The players then included Time’s American Television and Communications Corporation, Warner’s Amex, and Telecommunications, Inc. (TCI).  ATC and Amex would later evolve into Time Warner Cable and TCI became AT&T Cable before being sold to Comcast.  Communities seeking cable television for their residents would later learn a lot of these promises made were promises broken – reneged on by large cable companies with few, if any consequences.

During the Reagan Administration, then-FCC Chairman Mark Fowler bestowed additional deregulation benefits on the cable industry.  The Museum of Broadcast Communications explains:

The Cable Communications Policy Act of 1984 addressed the two issues that still hindered cable television’s growth and profitability: rate regulation and the relative uncertainty surrounding franchise renewals. Largely the result of extensive negotiation and compromise between the cable industry’s national organization, the National Cable Television Association, and the League of Cities representing municipalities franchising cable systems, the act provided substantial comfort to the cable industry’s future.

Its major provisions created a standard procedure for renewing franchises that gave operators relatively certain renewal, and it deregulated rates so that operators could charge what they wanted for different service tiers as long as there was “effective competition” to the service. This was defined as the presence of three or more over-the-air signals, a very easy standard that over 90% of all cable markets could meet. The act also allowed cities to receive up to 5% of the operator’s revenues in an annual franchise fee and made some minor concessions in mandating “leased access” channels to be available to groups desiring to “speak” via cable television.

Additional reforms guaranteed pole attachment rights to the cable industry so they could wire and service their network unencumbered by utility company interference or high pole attachment fees.  Cable consolidation allowed formerly mom and pop cable systems to become part of a cable industry where just a handful of cable companies provide service to the majority of cable households.  Countless millions are spent each year by the industry to lobby state and federal governments to keep the party going without regulatory interference, suggesting competiti0n alone is the only regulation required.

Except when a new competitor enters the market, of course.  Fearing competition from municipal providers who will force cable and phone companies to charge reasonable rates and upgrade service, the best possible solution is to find a way to ban such projects.

Forcing regular referendums and the complexities and expenses associated with them guarantees no community in North Carolina would ever bother with the onerous requirements to launch municipal broadband projects.

That’s not just Jay and I saying that.  What Hoyle has proposed hardly breaks new ground.  It’s the same dog and pony show the industry has brought to other states to stop competition and keep prices high and service slow.

So let’s learn from the painful experiences of others:

First lobbying for legislation requiring referendums and then winning it, SBC (later AT&T) and Comcast used the opportunity to spend more than $300,000 of their subscribers’ money to launch a major misinformation campaign with misleading and inaccurate mailers that successfully fought off a proposition to deliver better and cheaper service through a municipal broadband project in Batavia, Geneva, and St. Charles, Illinois.  Fiber for Our Future documented the whole sordid affair from start to finish as a lesson to others confronting industry-backed referendum requirements.

[flv]http://www.phillipdampier.com/video/unproven.flv[/flv]

Want a preview of the distortion and misinformation-campaign cable and phone providers will bring to stop municipal broadband?  Watch this SBC (today AT&T) executive tell city officials in Illinois that fiber is “unproven,” that the phone company’s DSL speeds are comparable to Comcast Cable, and that consumers don’t need the 3Mbps speed the company was delivering back in 2004 when this video was taken.  “What are you going to do with 20 megabits.  I mean, it’s like having an Indy race car and you don’t have the race track to drive it on.”  (3 minutes)

Longmont, Colorado spent years suffering with bad broadband service from Comcast and Qwest and sought a better alternative with a municipally-run provider.  But then the cable and phone giants spent $200,000 to put a stop to that.  While local subscribers may have preferred that $200,000 be used to reduce their rates, for Comcast and Qwest it was an investment in maintaining future pricing only duopolies can achieve, all while delivering “good enough for you” broadband service to Longmont residents.  In 2006, the Baller Herbst Law Firm collected information on industry-backed barriers to municipal broadband, and the list went on for nine pages.  Many of them sound eerily familiar to what Hoyle proposes (after cable and phone companies whispered time tested, industry proven ideas into his ear).

The city of North St. Paul, Minnesota has advice for states like North Carolina after their own experience with a coordinated industry-backed smear campaign against municipal broadband enabled by legislation similar to what Hoyle proposes:

What should be of interest to all communities was the organized opposition.  It appears that the incumbent providers, industry associations and politically conservative think tanks teamed up to promote negative news stories, do polling and opposition phone calls, provide transportation for identified “no” voters and create web sites.

While we heard some advocates lamenting this high priced anti-municipal fiber effort, this response is something that community leaders must expect and be prepared for.  A strong community education and mobilization effort must be a part of any municipal telecommunications initiative.  A coalition of business owners and residents must be created and maintained that can counter the expected efforts of the incumbent providers.  The benefits of the community-owned network should be documented and promoted so that an overwhelming majority of voters will choose to vote yes.  We hope that, one way or the other, North St. Paul gets the “More, Better Broadband” that the MN Broadband Coalition supports.

Of course, when local communities are banned from spending a nickel on advocacy for their projects, it effectively hands a restraining order to broadband advocates who can’t even get on the playing field, level or otherwise.

Outraged yet?

It will only get worse if Hoyle’s bill ever becomes law.  Residents in communities like Salisbury endured a sampling of the kind of negative campaign this industry will launch wherever municipal broadband competition threatens to appear.  In 2009, residents were hassled with push-polling phone calls from industry-backed astroturf groups claiming to represent ordinary citizens, but were actually little more than sock puppets for big telecom.  Your mailbox will be filled with blizzards of misleading mailers that current cable and phone customers pay for.  If they need more money, they can always raise your rates to cover the difference.  In the end, with the help of elected officials who don’t care about North Carolina consumers, existing municipal projects can bleed themselves dry (later to be used by the industry as “failed examples” to claim such projects are too risky to try) and proposed ones will never see a spade plunged into the soil to bury the first strand of fiber optic cable.

But it’s not all bad news.  It doesn’t have to happen this way.  You can tell your state representative you are watching them like a hawk on this issue.  Any “yes” vote for legislation like that proposed by Senator Hoyle is a no vote for them at the next election.  Let them know you are well aware of the game plan here — it has been tried in other states with similar legislation that is little more than protectionism for big telecom. Tell your elected officials you already have the power to choose whether or not you want these projects simply by voting for or against the elected officials that propose them.  While the concept of a referendum sounds fair on the surface, it’s not when you consider the past experiences of other communities who faced well-funded opposition campaigns, helpless to correct the record or fairly argue their position on the matter.  Providers know that, which is why they advocate this type of legislation in the first place.  It effectively stops competition, stops better service, and stops North Carolina residents from enjoying lower priced cable, phone, and broadband service.

There are a few stand-up representatives of the people of North Carolina who do deserve our gratitude and thanks today.

Rep. Paul Luebke, (D-Durham County) (who co-chairs the Revenue Law Study Committee) [email protected] 919-733-7663 College Teacher

Rep. Jennifer Weiss, (D-Wake County) [email protected] 919-715-3010 Lawyer-Mom

They both will likely face fierce opposition from the incumbent providers and their fellow legislators. Please take the time to thank them for standing with consumers today and for trying to protect the future of North Carolina and its economy.

Stop the Cap! will have video of today’s remarks by both legislators soon.  We hope to follow with a complete video record of today’s events surrounding the anti-competition legislation proposed by Senator Hoyle.  It will serve as a testament to just how much work we have to do to remove legislators who have stopped representing the public interest, and renew our support for those who stand with consumers.

Meanwhile, check out these two delightful pieces paid for by the cable and phone industry, sent to homes where municipal broadband projects faced a referendum in 2003 and 2004.  More than a dozen different mailers were sent to every home in the communities of Batavia, Geneva, and St. Charles, Illinois from phone and cable companies.  Now imagine the repercussions when not one of those communities could respond with their own mailers correcting the record and giving their side of the argument.  There is a reason why special interests spend enormous sums of money to protect their turf, and the battle is over before it even begins when those interests demand the other side not have the opportunity to respond in kind.

What smears do providers in North Carolina have in store for you?

… Continue Reading

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

One in eight Americans are poised to drop or curtail their cable, satellite, or telco-TV packages in the coming year because the bill has gotten too expensive, according to a new study.

With an average cable bill now $71 a month and rising an average five percent a year, middle class consumers are being priced out of pay television according to the Yankee Group.  The Boston research firm conducted the study of cable, satellite and telephone-company IPTV services and surveyed 6,000 consumers from across the country.

“At the most basic level, the decision to cut off pay TV services is an economic one,” says Vince Vittore, principal analyst and co-author of the report. “As programmers continue to demand ever higher fees, which inevitably get passed on to consumers, we believe more consumers will be forced to consider coax-cutting.”

Coming on the heels of a steady erosion away from traditional telephone landline service which has threatened the fortunes of major phone companies, the implications of millions of consumers coax-cutting are not lost on cable operators or phone companies getting into the IPTV business.

Back to the Future: Older Americans Going Back to Rabbit Ears When Confronted With Today’s Cable Prices

Retro TV is a network that piggybacks on digital television sub-channels in many cities across the country. The network airs classic television shows popular with older audiences.

Those dropping service often take diverging paths for their future entertainment in a cable-free household.  Among older consumers, especially those on fixed incomes, it is back to the future with over the air television and a pair of rabbit ears or rooftop antenna designed to receive digital television broadcasts.

Among these consumers, the most common reason for canceling service is cost.  Many signed up for cable in the 1970s and 1980s for better picture quality, and with the right rooftop antenna, last year’s conversion to digital television solved that problem for over the air viewers.  Post-cable, many are pleasantly surprised to discover new channels piggybacking on traditional stations, several offering classic TV shows from decades past that are familiar and welcome in older Americans’ homes.  Even better — no confusing equipment to deal with.

Jesus Chea, 59, of Queens, told the NY Post he ditched his Time Warner subscription “because I’m on a fixed income and I believe it’s not worth the money.”

To get around the $136 monthly bill, the retiree, who lives with his wife and two grown sons, had antennas installed on both of his TVs — at a cost of $298 — taking advantage of last summer’s national conversion from analog to digital broadcasts.

“Antenna is great,” he says, “because they don’t charge you for rent on digital boxes and they don’t charge you for the remote control. When you add up all those extra fees and so many extra [cable] charges, even if it’s three or four extra dollars, they all add up.”

For many others, the arrival of Redbox video rental kiosks in area grocers has replaced the HBO subscription, and has proven to be a worthwhile supplement to the coax-cutter who drops cable service altogether.

The savings from cord cutting can be dramatic.  Some have saved upwards of $60 a month — $720 a year just by dropping the cable-TV part of their package.  Those kinds of savings have become important when wages are frozen or in decline, jobs are hard to find, and everything else is still going up in cost.

The cable industry has never imagined a country where consumers have quit cable (or satellite) and gone “cold turkey,” especially when upwards of 90 percent of Americans pay for some type of entertainment — pay television, movie rentals, or broadband video.

But as the Yankee Group discovered, Americans are simply tapped out.

Your Father’s Cable TV: Why Would Anyone Under 30 Subscribe?

For younger Americans, the addiction to cable or pay television was something that afflicted their parents.  They never had a problem dropping service from a cable company with whom they never did business.  The teens and twenty-somethings have spent most of their video dollar on broadband and DVD’s for much of their viewing, not cable.

Younger cable subscribers are most at risk for coax cutting, rationalizing they can watch most of their favorite shows online through services like Netflix, Hulu, or websites run by the major American networks.  Others download content (legally or otherwise), rent or buy DVD’s, or subscribe to services like Netflix which combine video streaming with DVD rentals-by-mail.

Many of these viewers also own devices that can bring web-based viewing right to their 50-inch television sets, using set top boxes or video game consoles with web connections.

“Admittedly, this is a small phenomenon now, but a number or recent transactions and new items point to a shift in consumer thinking,” said Vittore.

With the increasing ubiquity of Internet-capable devices, the challenge to traditional coax-based cable TV has never been greater.

“Just like with telephone land lines, it’s going to become hard to sell pay TV to anyone under 30,” Vittore said.

Provider Revenge: You Won’t Get Away That Easy!

With billions of dollars at stake, providers and content producers are intent on not allowing a repeat of what happened to the newspaper industry to afflict their business plans.  Giving it all away for free is not their idea of a sustainable business model.  Keeping tight control over content and its distribution is their ticket to maintaining profits.

Many Olympic events were not aired on NBC television, instead moved to NBC Universal-owned cable networks.

Older Americans who’ve gone back to over the air television are least susceptible to provider revenge, but content is still king and the cable industry will own an increasing percentage of it if the NBC-Comcast merger is approved.  While the two companies are currently promising not to dispense with free over the air broadcasting, an increasing amount of content could be diverted to pay television channels like cable sports networks, movie networks, and general interest basic cable channels.  Broadcasters themselves are now hungry for the same dual-revenue stream their cable competitors already enjoy – advertising income and subscription fees.

Most of the coming wars over pay entertainment are expected to be fought on the broadband battlefield.  For younger Americans relying on Hulu and other video streaming services, subscription fees are coming.  Hulu promises to keep some free viewing options open, but additional access to back episodes or certain series are likely to be restricted only to those who agree to pay an anticipated $9.95 per month.  The cable industry’s own TV Everywhere streaming services offers a clearer dividing line — its available only for those who maintain their pay television package.

Broadband providers, often the same companies that stand to lose from the retreat from television subscriptions, are considering making up the difference with limits on broadband service to make sure consumers can’t watch too much online, or charging consumption fees for heavy online viewers to make up their losses on the TV side.

The long-standing business relationship between content producers and distributors, such as those between Hollywood studios and cable companies, have led to a united front against would-be competitors.  For consumers seeking access to the latest Hollywood movies through low cost rental services or online video, expect to wait longer.  The window of time between a movie release in the theaters and when it becomes available for rental through Redbox or Netflix is growing longer to protect video-on-demand revenues for the cable industry and DVD sales for Hollywood.

Some consumers don’t mind the wait, but are still regularly reminded what they can miss when they don’t agree to a monthly pay television bill.

Jeremy Levinn, a 27-year-old personal trainer from Manhattan, told the Post he jumped the cable ship last year, but Time Warner Cable reminded him whose still boss during the Olympics, when numerous events were available only on Universal-owned cable channels including USA, CNBC and MSNBC and not broadcast over the air.

[flv width=”384″ height=”236″]http://www.phillipdampier.com/video/CNN Converging Broadband and Television April 2010.flv[/flv]

CNN aired this review of the next generation of television sets capable of connecting with your broadband service to receive television shows and movies over the Internet.  (4 minutes)

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.

Report on Today’s Legislative Meeting

Sen. David Hoyle (D-NC)

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)
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Meeting Highlights:

Senator Daniel Clodfelter (D-NC)

• 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.

Kelli Kukura, NC League of Municipalities

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.

EPB provides broadband service for residents in Chattanooga, Tenn.

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)
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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 (D-NC)

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.