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Broadband Reports: Interview
Jim Baller, municipal broadband attorney
by Karl Bode 06:45PM Wednesday May 21 2003
We recently had a chance to sit down with Jim Baller, one of the nation's leading experts on municipal broadband projects, and pick his brain for details on the growing number of communities looking toward municipal broadband for technical (and sometimes economic) salvation. We asked the members of our broadband politics forum to contribute some questions, as well as blending in some questions of our own.

BBR: Please explain who you are and what it is exactly that you do.

Jim Baller: I am the founder and senior principal of the Baller Herbst Law Group, P.C., a national law practice based in Washington, DC, and Minneapolis, MN. The Firm represents the American Public Power Association, the National Association of Telecommunications Officers and Advisors, regional and state municipal electric associations, state municipal leagues, local governments, and public power systems across the United States on a broad range of regulatory, administrative, legislative and judicial matters involving telecommunications, cable services, Internet access, and other communications and information services. In short, we represent public entities in just about everything that affects them in the communications area, including municipal broadband matters, franchising, right-of-way management, pole and conduit attachments, tower siting, strategic planning, etc...

Before answering your questions, I'd like to give you some personal background information that may help put my answers into perspective. For the first two decades of my legal career, my practice consisted almost entirely of representing major corporations in matters in which a federal agency was involved. I was an ardent supporter of private enterprise (and still am), and this experience gave me a strong and enduring negative opinion of the federal government. I had an even lower opinion of local governments as a result of living in DC during the Marion Barry years.

In 1992, I began to work with the American Public Power Association and its members on cable and telecommunications matters. Early on, I had the opportunity to research and write an extensive historical paper that compared the early days of the electric power industry with the current period in the communications industry (link). What an eye-opener that was! Not only were the parallels remarkable, but I was surprised to learn that my views of government in general simply did not apply to municipalities that operate their own electric utilities.

Specifically, I learned that, at the turn of the last century, when electricity was the great new technology of the age, the private sector focused first on electrifying the major population centers and literally left most of America in the dark. Recognizing that electrification was critical to their economic development and survival, thousands of communities that were not large enough or profitable enough to attract private power companies created their own electric utilities. Municipal electric utilities also emerged in several large cities, in which residents believed that competition was necessary to lower prices, raise the quality of service, or both. Most of these communities found that they could provide for their own needs better and at far lower cost than the private sector could or was willing to do. Eventually, hundreds of these communities sold their systems to private power companies, having fulfilled their purpose of avoiding being left behind in obtaining the benefits of electrification. Most communities, however, retained their systems. Today, approximately 2000 public power systems continue to exist and thrive, providing their communities significantly better service at substantially lower prices than investor-owned utilities provide.

Now, the history of the electric power industry is repeating itself in the communications area. Indeed, for many of the communities that were left behind by the private electric companies, its "deja vu all over again." This time, however, there's an important difference -- communities with their own electric utilities are now in an excellent position to provide for their own current and future communications needs. Because municipal electric utilities, government facilities and schools are significant users of advanced telecommunications services, these communities have built-in "anchor tenants" that can ensure a sizable revenue stream and lower project risks. They have decades of experience in providing high technology products; dealing with residential, industrial and commercial customers of all kinds; and furnishing technical support and customer service. They have access to essential rights of way, poles, ducts and conduits. They also have a century old ethic of universal service.

Over the last decade, my respect for local officials in public power communities has continued to grow. These folks are smart, technically proficient, highly dedicated and scrupulously honest. Perhaps most impressive is their can-do spirit and deep sense of individual responsibility for the well-being of their communities. Like school teachers, their value to society far exceeds their compensation or recognition. I've also come to have high regard for local government officials in general; the Barry Administration in D.C. was clearly an aberration.

There's another important lesson that I learned from my research into the history of the electric power industry -- the anti-government activities of large corporations has hardly changed at all over the last century. To be sure, the terminology is different -- municipal officials aren't vilified as "Bolsheviks" or communists today -- but the sentiments and tactics are virtually identical. For example, in October and November of 1906, Moody's Magazine published a series of articles on the pros and cons of municipal ownership of electric utilities. The titles that opponents of municipal ownership gave to their articles included: "Municipal Ownership a Delusion," "Municipal Ownership a Business Problem," "Municipal Ownership Uneconomic," Municipal Ownership Always a Failure," and "Municipal Ownership Costly and Dangerous." Sound familiar?

With the benefit of hindsight, we know that the opponents of municipal ownership largely failed and that, for the last century, municipal utilities have greatly benefited their communities and the Nation as a whole. I hope that, a hundred years from now, our successors will be able to say the same thing about municipal communications utilities.

BBR: Is interest in municipal broadband growing? If so, why?

Jim Baller: Interest in municipal broadband is indeed growing, both in communities that operate their own electric utilities and in communities that do not. While communities that operate electric utilities tend to focus on FTTH networks, other communities are generally looking into wireless networks. Furthermore, communities are exploring all kinds of involvement models, running the gamut from wholesale-only to strategic public/private partnerships to full-service retail.

Some of the reasons for this growth of interest are the following: (1) the meltdown of private-sector CLECs and overbuilders; (2) the Bells' slow rollout of DSL due to the economic downturn and their own legislative strategy of "playing chicken" with Congress and the FCC on UNEs, Tauzin-Dingell, the FCC's Wireline DSL rulemaking, etc. (this factor may now decrease in some areas, but will not probably decrease substantially in the more rural areas any time soon); (3) the relentless consolidation of giant cable companies, accompanied by continuously rising rates, deteriorating customer service, and diminished responsiveness to local needs; (4) the realization that cable modem service and DSL are limited technologies that are insufficient to support economic development (more on this later); (5) the steady increase in the number of projects that communities can study as models of success; (6) the emergence of relatively simple and inexpensive new technologies, such as WiFi, that communities that do not operate electric utilities can obtain even if wireline broadband networks are beyond their means or capabilities; (7) major victories in barrier-to-entry litigation (e.g., the Missouri case before the 8th Circuit and the Lincoln Electric case before the Nebraska Supreme Court); and (8) generally sympathetic media coverage.

Tschmidt asks: As momentum builds, and more and more municipalities build FTTH networks I expect incumbents to mount a rear guard action to get the FCC and State PUCs to prohibit them, as they already are in several states. How likely is this threat and what can municipalities do to protect themselves?

Jim Baller: It is a very real threat. To protect themselves, municipalities can support and work with APPA, NATOA, state and regional municipal and utility associations, grass roots organizations and other individuals and entities that are fighting these battles. We are also working to build bridges to organizations, such as the FTTH Council, that are seeking to develop truly robust broadband capabilities nationwide.

On an individual basis, if a municipality is considering establishing an FTTH network, it should take advantage of the wealth of knowledge that municipalities across the US have obtained, and are obtaining, about the technical, economic, financial, legal, political and other implications of such networks. Most important, a municipality should be clear about its needs and objectives, and it should assume that its every assumption, fact and figure, and vision of the future will be scrutinized carefully in an open process in which the incumbents are active participants.

BBR: Can you explain what exactly is so attractive about FTTH (fiber to the home)?

Jim Baller: As the U.S. Department of Commerce said in its report entitled "Understanding Broadband Demand: A Review of Critical Issues (September 23, 2002), "the current generation of broadband technologies (cable and DSL) may prove woefully insufficient to carry many of the advanced applications driving future demand. Today’s broadband will be tomorrow’s traffic jam, and the need for speed will persist as new applications and services gobble up existing bandwidth." The report went on to list the many ways in which the country would benefit greatly if we had affordable access to vastly more bandwidth capacity than the cable and telephone companies are generally making available today. The report should be required reading for anyone who cares deeply about FTTH. (This report is available on-line here)

In addition, the growing size and closed-access philosophies of the giant cable and telephone companies pose significant threats to our core freedoms. Communities see FTTH networks as a way of keeping access open to a diversity of providers of information, programming and other content.

BBR: Can't we rely on the private sector to get us to FTTH in the foreseeable future?

Jim Baller: I don't believe so. The main reason is simple economics. Firms in the private sector must cover costs and produce an acceptable level of profits over a relatively short period of time. There is absolutely nothing wrong with this. That's how the private enterprise system works. That's how we want it to work. For some services, however, the private enterprise system does not work particularly well, at least in the short term.

FTTH networks are a good case in point. At present, cable companies can make more money selling relatively modest cable modem services over their Hybrid Fiber Coaxial (HFC) networks, and telephone companies can make more money selling DSL over their copper-based networks, than they can make by investing huge sums in FTTH networks that would allow them to offer substantially more robust broadband services. To wring every last dollar out of their existing systems, the cable and telephone companies are also working hard to persuade Congress, state legislatures and the FCC to allow them to close their systems to Internet Service Providers, CLECs and other potential competitors. Until these conditions change, the cable and telephone companies will simply not invest in FTTH networks. Instead, they will continue to try to convince us that we really don't need more bandwidth than they're offering. At the same time, they will try to block municipalities from building FTTH systems that could disprove these claims.

Let me give you an example. In December of 2001, the cable industry's trade association, the National Cable & Telecommunications Association, told the National Information and Technology Administration that “Cable systems have determined, based upon their analysis of usage requirements and bandwidth availability, that 128 kbps upstream is the optimum speed to meet the needs of subscribers. Upstream capacity of 128 kbps is fully adequate to accommodate current and foreseeable needs of broadband users under most circumstances.” Comments of the National Cable Telecommunications Association, In the Matter of: Deployment of Broadband Networks and Advanced Telecommunications, Docket No. 011109273‑1273‑01 (Dec. 2001).

How can anyone seriously believe that upstream capacity of 128 kbps is adequate even to meet the current needs of residential consumers, let alone to support economic development? Of course it isn't. In fact, in ultra-rural Grant County, WA, where users of the County's FTTH system have affordable access to speeds of 100 Mbps in both directions, bandwidth usage has jumped more than 600 percent and upstream usage actually exceeds downstream usage. Why? The County believes that small businesses are sending substantially more information to the Internet than they are downloading, and gamers are vastly increasing their real-time usage. That's good news for rural communities that are looking for ways to keep their kids from leaving.

BBR: If the private sector can't afford to build FTTH networks, why do municipalities believe that they can do so?

Jim Baller: Local governments have different goals and are not tied to the same performance criteria as firms in the private sector. Local governments that are building or exploring FTTH networks are not doing so to make profits. Nor do they simply want to provide competition to the private sector -- although that would be a perfectly legitimate goal. Rather, they see FTTH networks as engines of economic development (i.e., attracting and holding on to businesses of all kinds and sizes) and as critical platforms that will support rich educational and occupational opportunities, affordable modern health care, regional competitiveness, urban revitalization, and the host of other benefits that contribute to a high qualify of life. In short, they view FTTH networks as critical infrastructure for the 21st Century, as essential as road, power, water and sewer systems. As a result, they can justify FTTH projects under traditional infrastructure development criteria: they need only contribute significantly to the community's well-being and pay for themselves over a reasonable period of time. That time will undoubtedly be longer than stockholders in private corporations would like.

This is not to say, of course, that a FTTH system is right for every community. For some communities, however, FTTH systems already make sense today, and as costs decrease over time, the number of such communities will increase.

Tschmidt asks: One of the arguments incumbents used to attack the TriCities plan was taxpayer risk. It was funded with General Obligation rather then Revenue Bonds. This was not an unreasonable attack - any words of wisdom in dealing with this issue? Revenue Bonds are safer politically but increase cost. Risk is small but that doesn’t count for much getting it approved by voters.

Jim Baller: The public's perception of risk is, and rightly should be, a critical factor in any FTTH project. Thus, it is essential, but not in itself sufficient, for proponents of these projects to begin with a conservative business plan that leaves significant room for revenues and cost savings to fall short of reasonable projections and for costs and other downside factors to exceed reasonable projections. The TriCities had a very solid business plan that withstood several waves of microscopic analysis. A substantial segment of the voters understood this and were willing to accept the risks involved. But, as we saw, SBC and Comcast mounted a massive and disgraceful campaign of disinformation that brushed the facts aside and appealed to the public's gut fears. With more time and money, the proponents of the project might well have been able to obtain a winning margin. They still might in the future. For now, however, a majority said "No."

I sympathize with those who believe that SBC and Comcast distorted the democratic process to such an extent that the TriCities vote was not a true reflection of what a majority of voters would want if they really understood the issues and facts. As the fabulous TriCities citizens support group showed on their website, www.tricitybroadband.com, and as the local politicians and the media came to realize, the arguments that SBC and Comcast were making were fundamentally flawed and contrary to the facts. Even so, the public spoke at the ballot box, and that's what democracy is all about. In the future, proponents of FTTH projects will have to communicate the facts to the public more effectively -- from the very outset, and over and over again. The TriCities experience was one from which all concerned learned a great deal.

BBR: How do you answer the charge that municipalities should not compete with the private entities that they regulate?

Jim Baller: The premise underlying this question is incorrect. Local governments do not regulate telecommunications providers -- that is done by the federal government and the states. Internet access providers are generally not regulated by any level of government. Local governments do manage public rights of way, but this is subject to federal and state non-discrimination and competitive neutrality requirements. Besides, incumbent cable and telephone companies are already in the public rights of way, so they can hardly claim to be adversely affected by local right of way management practices. Local governments do typically regulate cable service providers, but this is done through cable franchises that implement well-defined federal policies and standards. Local governments rarely, if ever, impose more onerous conditions on a private cable provider than they impose on their own cable utility. For one thing, local governments typically have master cable ordinances that apply equally to all cable operators in the community. For another, to head off potential claims of bias, local governments today typically subject themselves to substantially the same terms and conditions as the incumbent cable company.

BBR: What about the charge that municipalities do not pay taxes and have access to tax-advantaged financing?

Jim Baller: Municipal utilities typically make payments to the local government that are equal to or higher than the local taxes that private communications providers pay. Municipal utilities do not pay income taxes because they do not make profits. On the other hand, they also do not have access to the billions of dollars of tax credits, accelerated depreciation and other tax benefits that are available to private sector providers.

The supposed benefits of tax-advantaged financing are often illusory, especially in today's fianancial markets. It often turns out that the very significant restrictions and burdens associated with tax-advantaged financing are simply not worth the potential savings of a few basis points in costs. As a result, local governments are increasingly financing broadband projects through taxable instruments. For example, the FTTH system in Kutztown, PA, was financed through taxable bonds. By contrast, the major cable and telephone companies have access to the best commercial rates.

BBR: How about the assertion that municipalities can cross subsidize communications services with revenues from other sources.

Jim Baller: Municipalities today are careful to avoid cross-subsidization. The private sector, by contrast, engages in cross subsidization on a massive scale. At a recent conference, I asked a fellow speaker who was representing the industry's point of view whether private sector providers would be willing to comply with the "level playing field" requirements that he was espousing for municipal broadband providers. His answer was, "Why should we? We are and should be free to do anything to maximize revenues for our shareholders." Fine. But then let's get off our high horses about the need to impose level the playing field requirements on municipal broadband providers. More on this later.

BBR: Comcast and SBC claimed in the TriCities, and they continue to claim elsewhere, that many municipal communications systems have failed. What's your answer?

Jim Baller: This is absolutely false. For starters, I urge readers to visit www.tricitybroadband.com, where the flaws of Comcast's and SBC's claims are laid bare point by point, system by system. Special thanks to Annie Collins for pulling this information together.

Let me also add a few other points. In 1998, Professors Ronald Rizzuto and Michael Wirth of the University of Denver studied the case histories of four municipal cable systems and concluded that such systems are generally unsuccessful and unsustainable. The professors qualified their conclusions in three important respects: (1) they were examining only revenues from cable services, and not other potentially significant revenue sources such as telephone and broadband services; (2) the study used performance criteria applicable to private sector projects, even though municipal objectives are fundamentally different; and (3) some of the municipal systems studied were at an early stage, before they were fully operational. The cable industry loves to quote the conclusions of the Denver study but somehow always forgets to mention these qualifications.

Let's take a closer look. One of the systems studied was the municipal cable system of Glasgow, KY. The residents of Glasgow love their system because it has given them low-cost, high-quality cable service, and, since the mid-1990s, bargain-basement access to the Internet at 4 Mbps. Yet, according to cable industry, the Glasgow system should be considered a failure because it has never made a profit. It is quite true that Glasgow has never shown a profit, but that is because it sets its rates at the lowest possible level that will enable it to recover its costs. This policy has saved the citizens of Glasgow more than $30 million over the relevant period. For a town of 14,000 in rural Kentucky, that's not a failure -- its a grand success.

Another system included in the Denver study was the municipal communications utility of Cedar Falls, IA. To their credit, the professors acknowledged in their report that the system had not been operating long enough to generate any meaningful data. Since then, the Cedar Falls system has been a rousing success, particularly when compared to its next-door neighbor, Waterloo, IA, which shied away from establishing a communications utility of its own. The two cities are comparable in every way except that Cedar Falls has a municipal communications system and Waterloo does not. The result -- economic development in Cedar Falls has surged since the system was completed, even in the face of the economic downturn, while Waterloo's economy has languished. Hardly the profile of a failed system.

I could respond system by system, but the result would be the same. In short, SBC and Comcast have not supported, and cannot support, their claim that municipal communications systems have often failed.

lml2000 asks: How much of the municipal infrastructure buildout and/or operation is a local agency willing to subcontract out to a private party? i.e. network design, construction, operation, customer service, home installs)...and How does this impact the opportunity to receive either tax-exempt or taxable financing, and the ability to establish public/private joint venture partnerships?

Jim Baller: There is no single answer to your question because circumstances differ widely from community to community. For any particular community, a fact-specific analysis would be necessary. Among the many case-specific issues that would have to addressed are: What are the community's goals, needs, facilities, experience, expertise, risk philosophy, legal infrastructure, demographics, etc.? What kinds of businesses, educational institutions, health care facilities, etc., does the community have? What are the strengths, weaknesses and interests of potential partners? What technologies are going to be used and why? What opportunities exist for regional operations? How would a public/private partnership work? How would the project be financed? What are the tax consequences of the different methods of structuring the project?

lml2000 asks: What type of bond financing structures have you come across? (i.e. user fees, taxes, G.O.) What is the typical size of such financing? $5MM? $10MM? $20MM? Has there been any interest by the bond insurers, rating agencies in studying these deals and adopting some format for establishing underwriting risk?

Jim Baller: I've run across all of the methods of financing mentioned as well as numerous others. My expertise does not lie in project finance -- we bring in specialists for that -- so I would prefer not to offer any rules of thumb. I can say, however, that the financial community seems eager to finance municipal deals that are solidly put together.

ronpin asks: Maryland's challenge to the FCC franchise exemption for "Information Services" seem destined to be upheld this month. What exactly should a FTTH data-only (information svc. only) expect from a municipality when overbuilding? A franchise with no fees? no franchise? -- just a ROW permit?

Jim Baller: I'm not sure that I fully understand the question, but let me take a stab at it. In March 2002, the FCC issued a declaratory ruling in which it classified Internet access service over cable modems as an "information service" rather than a "cable service" or a "telecommunications service." The FCC did not exempt Internet access service from all franchise fees, as the cable industry would have you believe. The FCC said only that a local franchising authority that bases cable franchise fees solely on gross revenues defined in terms of the Cable Act's definition the "cable service" cannot logically charge franchise fees on Internet access service. The declaratory ruling is now on appeal before the federal court of appeals in California, and at oral argument a week ago, it appeared to many observers that the court might overturn the ruling. In any event, the FCC went on to say in the declaratory ruling that some state laws may allow local franchising authorities to charge fees on Internet access service based on the provider's use of the public rights of way rather than to the Cable Act's definition of "cable service." The FCC is now considering whether to preempt such state laws, and it has not yet made a decision on that issue. Also, the FCC has not yet determined how to classify Internet access service over wireline facilities -- e.g., DSL.

To make matters more complicated, there are two proceedings now before the FCC in which providers of Voice over Internet Protocol (VoIP) are arguing that, to encourage growth of the Internet, the FCC should classify VoIP as an "information service," even though, to users, the service looks just like telephone service over the Public Switched Telephone Network. The Bells have vigorously fought treating VoIP as an "information service," arguing that a phone call is a phone call, no matter what facilities are used to provide it. Stay tuned.

What should an overbuilder that uses the public rights of way expect from a municipality? That will depend, in part, on the state involved and on the outcome of various FCC and court cases. As counsel to municipalities, I will certainly try to help them ensure that overbuilders pay fair, reasonable and non-discriminatory compensation for use of the rights of way.

dyoo78 asks: Some argue that telecommunications service, in particular, broadband service, is a natural monopoly. If that is the case, why then should municipalities duplicate telecommunications service providers' efforts? Should municipalities deliver local telecommunications service too?

Jim Baller: I don't agree with the argument that telecommunications service is a natural monopoly. Broadband is certainly not. I also believe that municipalities should be able to provide any service that the community wants them to provide.

JakCrow asks: Why aren't the phone and cable companies addressing the reasons for the municipal push? Municipal broadband is developing because people are tired of the bad service, high prices, and lousy coverage, yet the phone and cablecos would rather spend money using propaganda to fight municipal projects than fix their own problems.

Jim Baller: I believe that there are many good people working for cable and telephone companies who would like to deliver good products at reasonable prices and also offer good service. Consider, for example, an article in the Tacoma News Tribune on May 19, 2003, in which Comcast spokesman Steve Kipp said that competition with Tacoma's Click! Network was a good thing for all concerned, including Comcast. Specifically, Mr. Kipp was quoted as saying that: "It's that competition that has really spurred the additional investment in cable and customer service." (link). Think of where we would be if Comcast, as a whole company, acted as though it really believes this. Unfortunately, as a company, it does not.

As I noted earlier, cable and telephone companies have invested vast sums in their HFC and copper infrastructures, and they have powerful incentives to maximize returns on these investments. Municipal broadband projects are very scary to them, even in small markets that they would otherwise ignore, because once the public sees what's really possible, the cable and telephone companies will find it difficult to defend their inferior products and services. In my opinion, that's good for the U.S.

Tschmidt asks: Wholesale vs retail biz model. Internet connectivity can be deployed as either wholesale service where various ISPs compete to deliver services over the Municipal network, or the municipality provides retail service directly. CATV service does not lend itself to multiple service providers. The same wholesale vs retail biz model applies but there can only be one retail provider. Opinions as to the best way to deploy service?

Jim Baller: I've just participated in a month-long debate on this very issue with some of the leading experts in the field. The whole debate will be published in the current issue of The Cook Report. There were lots of interesting ideas, but no firm consensus was reached .

In my opinion, wholesale and retail are not necessarily inconsistent models, particularly for FTTH systems that can accommodate multiple providers. For example, the City of Bristol, VA, expected that several private-sector providers would come forward to offer a range communications services on the City's open-access FTTH system, with the City just operating the system and filling service gaps. As it turned out, the CLEC that was going to offer telephone service went bankrupt, and no cable provider was willing to compete with the incumbent cable operator. Thus, the City had a choice -- either abandon its system and forgo the economic development and other benefits that the system was intended to provide, or expand its own retail offerings. Although the City chose the latter course, the system is still open to any private provider that wants to ride on it.

Also, we know that municipal retail can work -- it has for a century in the electric power area. We don't yet have proof that a wholesale model works in practice. The UTOPIA wholesale-only project has just gotten a "thumb's up" on its feasibility study. But even if UTOPIA succeeds, that does not guarantee that wholesale-only projects elsewhere, operating under different conditions, will also succeed. In my opinion, municipalities should have the right to choose for themselves whatever model they believe to be in the community's best interest.

Dyoo78 asks: Robert Crandall and crew keep insisting that asymmetric regulation has alot to do with U.S. broadband woes? How credible are those arguments and where do you stand on regulating cable companies and ILECs differently?

Jim Baller: With all respect to Robert Crandall, et al., I doubt that asymmetric regulation has had much, if anything, to do with our Nation's "bandwidth woes." Furthermore, I think that putting everyone on the same regulatory track without accounting for the historical and other differences between providers is a formula for trouble.

As Robert Pepper, Chief of the Office of Planning and Policy of the FCC, has succinctly observed, "[W]e hear all the time, the argument by incumbents, that ... ‘Well, we are regulated, but these new entrants, providing new services, are not regulated, and we need to have a level playing field. We need to make sure that everybody is treated the same.’ There are two kinds of asymmetric regulation. One is where you have firms that are similarly situated and treated differently. That is a bad thing; it leads to all kinds of distortions. Likewise, if you have two firms that are not similarly situated and are radically different in their circumstances, but you treat them the same, that also leads to all kinds of distortions." R. Pepper, Policy Changes Necessary to Meet Internet Development, 2001 L. Rev. M.S.U.-D.C.L. 255, 257 (2001) (emphasis added).

While we're on the topic of asymmetric regulation, I have great concerns about the laws that a number of states have enacted, or are considering enacting, to create a "level playing field" between public and private communications providers. Tom Hazlett, a former chief economist of the FCC, has shown that such laws weigh heavily in favor of incumbent and make meaningful competition very difficult, if not impossible, to achieve. T. W. Hazlett and G.S. Ford, The Fallacy of Regulatory Symmetry: An Economic Analysis of ‘the Level Playing Field’ in Cable TV Franchising Statutes, 3 Business and Politics 21, 43 (2001), pdf link. In my opinion, laws such as these are unnecessary and counterproductive.

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AR
Premium,ExMod 2001-04
join:2000-09-21
Toronto, ON

2 recommendations

Great interview!

In keeping with what this site is really about...this is a great interview.

I see some member names in there, members who have in-depth knowledge of the politics behind broadband deployment.
--
What? Me worry?

koitsu
Premium,MVM
join:2002-07-16
Mountain View, CA
kudos:23

Re: Great interview!

Agreed. The latest few interviews provided here have been absolutely fantastic -- keep up the good work.
--
Making life hard for others since 1977.

RayW
Premium
join:2001-09-01
Layton, UT
kudos:1

An anti-government shyster

And he supports munis having their own systems AKA the electric era. And he talks about some history.

Too bad the rest of this country can not see this piece and understand the history. Of course, today the money is a bit different, I think that the industry in question can pay off politicians and the media to do what they want. And face it, when it comes to thinking, most of the US has become 'Joe Six-Pack' in one respect or another (myself, sadly, not exempted ).
--
I am not lost, I find myself every time.

lml2000
Whazzup

join:2000-08-17
Los Angeles, CA

Thanks to Karl & Jim for an informative interview

Maybe BBR can convince Jim to be a regular contributor here?

tschmidt
Premium,MVM
join:2000-11-12
Milford, NH
kudos:9
Reviews:
·FirstLight Fiber
·Hollis Hosting
·G4 Communications

Wild wild west of broadband

Thanks Lev,

A number of NH towns are in early stage investigation of municipal FTTH network nice to get as many perspectives as possible.

Is BBR going to give equal time to the incumbent Cablecos and Telcos to explain why Municipal Broadband is not a good idea?

Jaime
Premium
join:2001-06-03
Huntington Beach, CA

Re: Wild wild west of broadband

said by tschmidt:
Is BBR going to give equal time to the incumbent Cablecos and Telcos to explain why Municipal Broadband is not a good idea?
I would hope so. Although I really do favor municipal broadband and believe anything that the private sector spits out must be taken with a spoon of salt, yes that much salt.
--
"The human mind treats a new idea the way the body treats a strange protein; it rejects it." - P.B Medawar

zabes63

join:2003-04-05
Batavia, IL

1 recommendation

Re: Wild wild west of broadband

When it comes to a Muni run broadband operation, the only thing that the incumbents know how to do is constantly repeat;

"Your taxes will go up!"
"Your taxes will go up!!"
"Your taxes will go up!!!"

Other than that they have nothing to say.

They could at least be honest with everyone and say, "this will result in competitive pricing which will not allow us to continue to gouge our customers in the manner inwhich we have become accustomed.
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Click here to visit Tri-City Broadband

Rob Froelich

join:2000-03-26
Saint Charles, IL

Re: Wild wild west of broadband

here here..

three cheers for zabes, spot on man!
--
Help! Help! I'm being oppressed!!

Octopussy2
Premium
join:2003-03-30
Batavia, IL

That would be awesome!!! I'd like to see that!

I heard all of Comcast's and SBC's reasons why Muni broadband was a bad idea for the Tri-Cities...upclose and personal.

SBC and Comcast both came in here saying our business plan was flawed, we would lose money and the utility would fail. Shortly thereafter, SBC issued this email to their Tri-City employees.

»www.tricitybroadband.com/misc/sb ··· yees.pdf

Notice in the email they call out that SBC employees will lose their jobs if the referendum was to pass.

You can't have it both ways. It's either going to succeed and put SBC employees out of work, or it's going to fail because the financial plan is wrong. This is just one example of the "spin" the incumbents used on the Tri-Cities and their own employees as well.

And Jim...You do indeed ROCK!
[text was edited by author 2003-05-21 19:26:14]

Maxo
Your tax dollars at work.
Premium,VIP
join:2002-11-04
Tallahassee, FL

Re: Wild wild west of broadband

quote:
Notice in the email they call out that SBC employees will lose their jobs if the referendum was to pass.
Actually it says:
quote:
A government-funded network relies on taxpayers' hard-earned money, threatens SBC jobs and puts the municpal broadband at an advantage not afforded to their competitors.
It says it threatens their jobs, it doesn't say they will lose their jobs.
--
Today I didn't even have to use my AK, I gotta say it was a good day. - Ice Cube www.maxolasersquad.com

batageek
Slave To The Duopoly
Premium
join:2003-01-25

Re: Wild wild west of broadband

it can't threaten their jobs if it's going to fail

zabes63

join:2003-04-05
Batavia, IL

Re: Wild wild west of broadband

said by batageek:
it can't threaten their jobs if it's going to fail
Yeah! which is it!? One or the other, but not both.
--
Click here to visit Tri-City Broadband

JakCrow

join:2001-12-06
Palo Alto, CA
Reviews:
·SONIC.NET
said by Maxo:
quote:
Notice in the email they call out that SBC employees will lose their jobs if the referendum was to pass.
Actually it says:
quote:
A government-funded network relies on taxpayers' hard-earned money, threatens SBC jobs and puts the municpal broadband at an advantage not afforded to their competitors.
It says it threatens their jobs, it doesn't say they will lose their jobs.

Actually, it's good 'ole Eddie threatening their jobs, but whatEVer....

photomankc
Puffy And Prickly
Premium
join:2001-06-13
Liberty, MO

1 recommendation

Re: Wild wild west of broadband

Exactly,

What muni broadband plan was it that caused the massive round of layoffs at SBC not so long ago? Also, if a car manufacturer is going to put skilled carriage crafters out of a job, how is that an argument to forgo cars and stick with buggies? We should just stick with the status quoe forever because somebody might lose their job... that's life folks.

rtcy
FACTS only please
Premium
join:1999-10-16
Norwalk, CA

error
[text was edited by author 2003-06-01 14:10:34]

rtcy
FACTS only please
Premium
join:1999-10-16
Norwalk, CA

ISN'T SAD how SBC went and laid off 100,000 of it's work force on the same year they had their highest earnings

oops double post sorry
[text was edited by author 2003-06-01 14:09:39]

Rob Froelich

join:2000-03-26
Saint Charles, IL
I don't think the cable cos and telcos would want to take advantage of that equal time here
1) they have enough money to fund elaborate local ad campaigns to spread lies rumors and innuendos targeted directly at local voters
2)they'd be wasting there time here since the vast majority of readers of this site are intimately aware of what a poor job the incumbents of done deploying broadband, and how much better off those who have municipal service are today.

I'd love to see someone do a detailed study of private sector incumbent provided broadband vs municipal/local public sector provided broadband comparing them in terms of cost, performance, reliability, time to install, etc. I think it would be very enlightening to see how far ahead the municipalities are from a very quantitative perspective.

Don't all go flaming me all at once, I know municipal broadband, and public sector services are not the answer everywhere, but I do believe that somehow someone needs to throw some ants in the pants of the incumbents or eventually we are all going to end up paying $100/month for a 128k connection that we are only allowed to connect one computer to, that goes down twice a week for 12 hours at a time.
--
Help! Help! I'm being oppressed!!

Maxo
Your tax dollars at work.
Premium,VIP
join:2002-11-04
Tallahassee, FL

Re: Wild wild west of broadband

They wouldn't want to mix us in their little debate for the same reasons the republicrats didn't want Nader in the debates.
--
Today I didn't even have to use my AK, I gotta say it was a good day. - Ice Cube www.maxolasersquad.com

batageek
Slave To The Duopoly
Premium
join:2003-01-25

BALLER IS THE MAN

Jim & Karl

YOU ROCK!

Excellent Article.
Tom Zachman

join:2002-12-01
Dodge City, KS

$3,000 Billion Dollars disappeared

That's only 3 Trillion Dollars in Government speak, and some say that's what disappeared from the worldwide economy with the .com bubble burst and (more importantly) the telecommunications downturn.

A massive United States initiative towards deploying FTTx will help us find this misplaced wealth. It will reappear with future developments, applications, software and hardware that can only be imagined today. Ignoring this opportunity simply delays the inevitable; we will get connected.

Pushing Ourselves into the future will be quicker than waiting for the existing copper to corrode.

zabes63

join:2003-04-05
Batavia, IL

Re: $3,000 Billion Dollars disappeared

said by Tom Zachman:
Ignoring this opportunity simply delays the inevitable; we will get connected.

Pushing Ourselves into the future will be quicker than waiting for the existing copper to corrode.
I agree!

Broadband is so much more than downloading Porno and MP3's. It is also one of the components of the engine that will help drive economic growth for any given area. Waiting for the telco or cableco to hold up their end of the bargain is nothing short of gambling with a community's economic future.

Once again, if the incumbents were to take care of business the way that they are expected to, there would be no municipal operated broadband.
--
Click here to visit Tri-City Broadband
Tom Zachman

join:2002-12-01
Dodge City, KS

Re: $3,000 Billion Dollars disappeared

Before I die, I want to watch a 3-dimensional broadcast of the SuperBowl that is (dis)played on my living room floor and also 3-dimensional telephony wherein our virtual conversations are very nearly lifelike.

Electrons can manipulate the data that the photons delivered.

rshoch

@o1.com

Hats off to all involved.

Solid & informative piece. Reduces many of my concerns surrounding public sector broadband utilityzation.

This good pro piece should be balanced by a future con piece from the other side.

no1ukn0w
Whats This?

join:2002-01-24
Boerne, TX

There is only one problem

My ISP is a municipality, while you do get that down home feeling of calling and not having to talk to 3453 people to get to the person you are looking for there are also major problems that come along with it.

I've had major problems with my cable for 9 months, they knew there were problems, they would never admit to it, they just didn't have the money to upgrade the equipment for the demand (IMO).

Most people that live in a big city don't realize what a big problem this is. What am I going to do? Change providers, not gonna happen they are the only "broadband" gig in town, DSL and CABLE, they are the cable company AND the telco. Change to dial-up, well I'm looking to upgrade not downgrade.

The basic plan is 384/128 for $42/month (no webspace, 3 e-mails, dynamic. Get real, no major provider offers those kinds of speeds for that price. All the while Time Warner is chopping at the bit, wanting to offer service in town.

I know this is just "one case", but its the most frustrating thing to pay for the crap service, knowing that you can't call a competitor and get a better deal.

zabes63

join:2003-04-05
Batavia, IL

Re: There is only one problem

I was under the impression that Texas Law prohibited Muni run telco/BB outfits.
2farfromCO7

join:2000-10-14
Farmington, MI
It's all about availability and deployment in my mind. The biggest proponents of muni broadband are those with no options at all. They would do backflips for 384/128 for $42. Keep in my that your deal is NO STRINGS!! DON'T FORGET THAT. You don't have to take ANY OTHER SERVICES to get that price unlike cable and DSL. That fact alone makes the cost lower than $42.

Rob Froelich

join:2000-03-26
Saint Charles, IL

Re: There is only one problem

My cable modem from comcast is pretty fast down (between 1.5M and 800k depedning on time of day)/pretty mediocre up (between 160k and 80k) - but I have to pay over $60 a month for it. I'd take your 384/128 for $42 any, thats nearly 30% less!
--
Help! Help! I'm being oppressed!!

David
I start new work on
Premium,VIP
join:2002-05-30
Granite City, IL
kudos:101

This was an

enjoyable piece to read, rather informative and on the topic.

Thanks BBR...

pnh102
Reptiles Are Cuddly And Pretty
Premium
join:2002-05-02
Mount Airy, MD

Contradiction?

Because municipal electric utilities, government facilities and schools are significant users of advanced telecommunications services, these communities have built-in "anchor tenants" that can ensure a sizable revenue stream and lower project risks.

And then later...

Municipalities today are careful to avoid cross-subsidization.

Well what is it going to be? Either other municipal utilities subsidize broadband or they don't? Maybe something just isn't clear here. Can anyone explain it?

The fact is (and this WAS posted on the Tri-Cities Broadband page) that most municipal broadband networks are in fact subsidized by other municipally owned utilities. That's one of the reasons they can offer service at a discount. Is it fair that non-subscribers to broadband have to pay increased utility bills so that other can have cheap broadband?
--
Saying that Microsoft has a monopoly in Operating Systems because one is too lazy to learn a different OS is like saying that Ford has a monopoly in cars because one is too lazy to find a Honda dealership.

[text was edited by author 2003-05-22 10:29:08]

Ericdsa

@attbi.com

Re: Contradiction?

You work for Comcast, no? Why do I have to subsidize video customers by paying more for my HSI?

Octopussy2
Premium
join:2003-03-30
Batavia, IL
Whoa. Wait a minute. The utility that was to be built in the Tri-Cities was to be a "stand alone" utility paid for by subscriber fees. It was going to be backed by GO Bonds. Where was it listed that this was going to be subsidized by another utility here, in the Tri-Cities, on our citizen support page (www.tricitybroadband.com)?
ericdsa

join:2003-05-22
Fort Lauderdale, FL
Comcast has no problem with me subsidizing it's video subs.

asdfdfdf

@xtraport.net
I think you are trying awfully hard to read something into this that isn't there.

Dealing with the statement you quoted.

1. since many, if not all, electric utilities have upgraded infrastructure (such as fiber), for reasons tied to the distribution of electricity, and since these upgrades have led to excess communication capacity, the utilities are considering utilizing that infrastructure to develop new revenue streams, such as for communications. Clearly municipal electric utilities have an opportunity here to maximize the revenue generated by their present infrastructure.
There is nothing here that says that communications services will come out of the backs of electricity ratepayers.

2. Given that schools, government and municipal utilities all have increasing bandwidth needs, it makes sense that they would utilize any municipal bb system put into place and hence these are "sure reliable customers" who will be there long term. Hence the remark about reduced risk and a more reliable revenue stream. Presumably they would expense the services rendered to them out of their budgets wouldn't they or am I being too simpleminded? Why should this be interpreted as a subsidy?

Rob Froelich

join:2000-03-26
Saint Charles, IL
Um, no other municipal entities buying service on a municipal network is not the same thing as a subsidy. It does mean that the other local government entities like the other utilities and schools are definitely going to buy service from the local broadband utility.

So, if you apply your logic here, if the schools or utilities are buying internet service from another company, for example Comcast, would you say they are subidizing Comcast? I think you should read the interview again, with the knowledge that schools and utilities are in area significant consumers of data networking services.

Finally, I don't know of anywhere that non-subscribers to broadband would be charged increased rates for other utilitities in order to finance a broadband network, I'm not a lawyer but I'm pretty certain thats highly illegal in most states.
--
Help! Help! I'm being oppressed!!

lml2000
Whazzup

join:2000-08-17
Los Angeles, CA
said by pnh102:
Because municipal electric utilities, government facilities and schools are significant users of advanced telecommunications services, these communities have built-in "anchor tenants" that can ensure a sizable revenue stream and lower project risks.

And then later...

Municipalities today are careful to avoid cross-subsidization.

Well what is it going to be? Either other municipal utilities subsidize broadband or they don't? Maybe something just isn't clear here. Can anyone explain it?

I think I can. On the first statement, the issue is assuring revenues to the BROADBAND OPERATION generated by the BROADBAND NEEDS of OTHER municipal departments (i.e. police, fire, library, admin). The second statement refers revenues generated by the services provided by OTHER MUNICIPAL DEPARTMENTS (i.e. power, water, public works) that could be used to SUBSIDIZE THE OPERATING EXPENSES of the broadband operation.

Baller is saying that the goal of the municipality should be to avoid applying REVENUES generated by services supplied by one department to help fund the OPERATING EXPENSES of another, in the instant case the municipal broadband entity. This should be distinguished from BROADBAND NEEDS of these other municipal departments who would otherwise have to contract out to a private network provider for such communication services. This is not a subsidy. Real revenues are being rec'd by the municipal broadband entity for real broadband services provided to these other departments. Bottom line, what you don't want, for example, is water revenues (generated by the supply of water service) to be applied to fund the operations of the broadband entity; what is OK is for the water utility to contract with the broadband entity for its communication services (voice, data, video).

Hope this helps.

jakennedy

@dmotorworks.com
Schools and other government facilities will have to pay for the service they utilize just like everyone else. This is natural and is not cross-subsidization. The question is will these distinct agencies have the option of choosing a commercial provider if it is more economical for them?

Anonymous Coward

@dsl.scrm01.pacbell.n

1 recommendation

About your sig...
Saying that Microsoft has a monopoly in Operating Systems because one is too lazy to learn a different OS is like saying that Ford has a monopoly in cars because one is too lazy to find a Honda dealership.

It should say something like:
Saying that Microsoft has a monopoly in Operating Systems because one is too lazy to learn a different OS is like saying that Ford has a monopoly in cars because one is too lazy to swim to Japan and swim back with it on ones back.
Microsoft puts about as many difficult obstacles in the path of changing OSes as the swim to Japan would be!

Tres,
An avid Linux user.
class5@--NO-SPAM--pacbell.net

Rob Froelich

join:2000-03-26
Saint Charles, IL

Re: Contradiction?

Hey I like that. I think Steve Ballmer would say that a swim to Japan would be awfully refreshing.
--
Help! Help! I'm being oppressed!!

SomeEric

@wanarb01.mi.comcast.

Important legal differences

One important difference with a public system vs. a private one is that the public one will have more trouble throwing abusive users off.

For example, let's say someone sets up a Pro Nazi web page. A private system can easily have a clause in the contract banning "hate speech". A public system cannot.

This is no different than public school systems vs. private ones. The private ones can simply throw out bad students while the public ones have no choice but to keep them.

Still, I'd love to see a muni system here. Comcast is better than SBC/Ameriwreck, but that's not saying much.

Drel

@alc-net.com

Re: Important legal differences

Strange to argue against a system because it enhances users freedom of speech, but hey...

Lest ye forget, freedom of speech is NOT a bad thing. Speech that a corporation may find unfavorable (for example, www.[megacorporation]sucks.com) may be instantly removed without any recourse by [Insulted/Biased/Interested ISP]. In these days of mergers and consolidations, some corporation you may have a bone to pick with might very well be the parent / sister / subsidiary company of your ISP.

Look at it like the difference between a library and a book store. Your local library may have books you don't agree with (Mein Kampf), but it will almost certainly offer titles that may not be commercially attractive to your local book store at prices that can't be beat.

Terrific article, thank you Broadband Reports!

kmild

@lanl.gov

Re: Important legal differences

Good response. I would also add that I am not sure SomeEric's legal point is sustainable in court. Private providers typical use public infrastructure (Right of ways, telephone poles, etc.). Use of public infrastructure comes with strings attached, one of which is adherence to the Bill of Rights.

We had a similar brouhaha in my community when the local cable company refused to offer the Playboy Channel. They had to cave-in. Their retribution, however, was to charge an exorbitantly high subscription fee. I think they have made a lot of money (I don't subscribe to cable service).

Rob Froelich

join:2000-03-26
Saint Charles, IL

Open Letter to Jim Baller and Karl Bode

Jim,

I stood on a chair and cheered like I did the first time I saw Rocky after reading your interview. You have encapsulated and articulated perfectly what many of us have been trying to say for several years here on DSLReports and in other places. My greatest hope is that there are enough of us that understand how important this is to the US economy that we formulate a message that is simple enough yet powerful enough for the masses to understand.

Thank you for taking the time to address the details of municipal broadband with the readers here. We need more people like you, and more people to champion the cause competition in the broadband marketplace.

Karl,

Thank for this excellent interview, with such a knowledgeable and credible source. I've been in this business quite a while, and while I heard a many things I've known for a long time, I learned many more things I didn't know, and it was all said in a much better way than I could have myself.

Rob
--
Help! Help! I'm being oppressed!!

MTalos

@bgsu.edu

I agree

I live in Massillon, Ohio which has a municipal cable TV station. It offers about 2-3 times the channels of Time-Warner at about 80% of the cost. It also offers comparable cable modem service at about the same cost. At college, I have to deal with Time-Warner bending me over for Internet/Cable.

I say more power to the local communities.

also, Municipal services also don't have to pay massive and redundant executive salaries.

macguiguru

@attbi.com

Kill the CableCos NOW!!

All I know is, the cable company has been ripping us off for years for television - now they want the internet too??
Two words: Stinger Missle.
Shoot early, shoot often.

zxcv99

@comcast.net

i didn't rtfa

anyways, i currently use comcast as my isp, and everything is great. speed (1.7mbps/210kbps on average), stable (i rarely get lags or disconnected), and affordable ($43/month)

honestly, i can't find a better deal. the only complain i have is that comcast doesn't allow me to run servers in their TOS.

kmild

@lanl.gov

Re: i didn't rtfa

What about VPN'ing to your site or to others? Does Comcast block that, too? Also, what does the $43/month cover? Just data, or does it include CATV and phone? Do they offer fully converged services?

What is your upstream bandwidth? You imply that you would like to run servers. Cable does not typically support the upstream bandwidth required for servers, unless they are providing very rudimentary, low bandwidth services.

FrenchGates

@c005.g4.mrt.starband

1 recommendation

The broadband have-nots

Face it, the big operators now own the obviously lucrative high population density markets. They are really not interested in much expansion beyond unless it is subsidized.

The same situation occurred with electricity and it took the support of the federal Rural Electrification Commission to address the problem. The same is going to be true here and the sooner we face that the better. I live in a rural area about 5 miles out of DSL range. My only reasonably priced option is 2-way Satellite internet, and it isn't going to change any time soon unless we get it done through local govt.

Also, when rural electrification happened, a lot of the financial return went to appliance companies who suddenly had a huge new market. We have to get the companies who will benefit from ubiquitous broadband (high speed modem and computer makers, internet providers, media companies, etc.) to get behind this.

•••