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Municipal Report
Legislative hammer comes down

Wisconsin continues to push legislation that would make life difficult for local government run broadband and cable operations; in fact it's the eleventh such push in four years. -

Sun Prairie, Wisconsin recently authorized a study on wiring the city with fiber-optic cable and delivering local residents cable television, telephone, and broadband internet service. According to this Madison.com report, neighboring Reedsburg has completed roughly 40 percent of their residential fiber-optic network. The community intends to offer basic cable for about $2 less and enhanced cable about $8 less per month than Charter. Since the push began, Charter has been going door to door in the community trying to get customers to sign one year contracts. They're considering rate changes; they've been forced, in essence, to compete for the first time.

The towns of Oconto Falls and Reedsburg offer muni-cable, while Reedsburg, Sun Prairie and Waupaca offer muni-broadband. A municipal push usually results in those without service finally getting some, and those with service from a major provider seeing more competitive rates. That's good news for local residents, but the party could be short lived if proposed legislation to limit muni operations in the state gains acceptance.

Lawmakers in the state are pushing legislation that would restrict local governments who offer cable, phone, or broadband services. Representative Phil Montgomery and Senator Ted Kanavas are trying to push through the 11th bill in four years that would in one way or another restrict muni-operations in the state. The primary goal continues to be restricting munis before they can become a significant thorn in the side of the incumbents.

The bill, (SB 272 pdf link) like its predecessors, intends to "level the competitive playing field" between muni operations and their corporate brethren, primarily by preventing them from using taxpayer funds to deploy networks. While on the surface it sounds reasonable, critics (take this Op-Ed piece in the Wisconsin State Journal, for example) charge the bill is tackling a problem that doesn't yet exist, since the competitive edge remains with the incumbents. It's also not clear that the same guidelines can be applied to an incumbent operator and a new industry entry with balanced results.

"We want to prohibit a city or village or town that is running a cable TV system or wants to provide some sort of broadband service from using their local property tax base as a tool for creating an uncompetitive situation," Kanavas noted in a recent interview. Ironically, these lawmakers generally aren't bothered by the lack of competition found in regions dominated by a single provider; providers who rarely feel many of these smaller areas are worth their investment dollars. It's often only once a muni operation emerges to fill in a broadband black hole that these companies suddenly become interested in an area's welfare.

While the push to restrict munis from using taxpayer dollars seems logical, the truth is many of these operations find their funding elsewhere, and are often running in the black without the help of taxpayer funds. If they do use taxpayer funds, it's usually with a community consensus; there's no need to outlaw such financing if a community approves such improvements. Hiding behind this scare-mongering "tax increases will get you" premise, the bill adds a significantly long list of restrictions that makes launching a muni operation fairly unattractive.

Among these restrictions (some of which are discussed in this Madison.com report), the bill would force any muni considering launching a service to conduct a public hearing before authorizing construction. Again, this sounds reasonable, but incumbents know it's not terribly difficult to sway public opinion against muni operations.

Take the efforts by three cities in Illinois to provide broadband services as an example. The region had a solid financial plan in place that had withstood significant scrutiny. Preceding a public vote, local competitors SBC and Comcast reached into their deep pockets to launch a significant misinformation campaign to crush the movement (they succeeded). As this previous BBR report points out, the campaign included tactics like misleading surveys (viewable here), ads containing misleading and false claims (See tri-city broadband website), and e-mails (see pdf copy) urging incumbent employees to vote against the measure if they valued their jobs.

Who was it that was at a competitive disadvantage?

It's not terribly difficult to scare consumers into thinking their tax dollars are being thrown away on foolish agendas, when many don't understand what broadband is, much less how their communities could benefit. The reality is that many muni operations have resulted in lower prices for consumers, many of the regions doing so without tugging on taxpayer wallets.

We spoke to Jim Baller of the Baller Herbst Law Group in Washington D.C. about the state legislative push to leash municipal operations. Baller, who focuses on municipal law and has seen no shortage of similar bills in recent years, suggests the laws usually ignore both logic and comprehensive financial analysis.

According to Baller, such "Fair Competition" laws "are heavily biased in favor of the incumbents, which did not face similar barriers to entry when they got started and also had little or no competition." He points to analysis by Tom Hazlett, former chief economist of the FCC, which argues that such attempts at a level playing field usually result in greater benefit to the entrenched monopolies; attempts often resulting in "surprisingly asymmetric consequences".

Baller also points out that court rulings in relevant cases have recognized that such "apple to apple comparisons" between incumbents and new entrants are fundamentally impossible (see Insight Communications V. City of Louisville .pdf ruling).

In the case of the Wisconsin legislation, Baller questions why a municipal operation should be prevented from using taxpayer funds if the community determines such a project is in their best interest. "If a project pays for itself over a period of time, it by definition is not a burden on taxpayers," he argues. "In any event, why shouldn't a community fund a project with tax dollars if it wants to? After all, communities build advanced telecom systems primarily for economic development, which benefits the whole community, not just users of the system. In that way, advanced telecom projects are just like any other public works project."

Oddly it's the Corporate competitors, who face very little competition and have monopoly strangle-holds over large swaths of the United States, who are beginning to see less regulation. Small municipal operations, still a significant minority in the broadband universe, are already facing greater regulation and in some cases being outlawed entirely. Critics charge that this fundamentally flawed logic is simply a result of well funded lobbyists hoping to avert a future where competition thrives and profits suffer in these smaller markets.

Futher municipal issues are discussed in our recent interview with Jim Baller.
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Seandhi
Seeing From a New Level
Premium Member
join:2003-04-19
Humble, TX

Seandhi

Premium Member

If voters vote yes...

Municipal Utility Districts (MUDs) should be allowed to do whatever they want... as long as the voting public allows them to do so. These major media outlets need to have competition, and that's what the MUDs are providing.

However, if they are only charging 2 dollars less per month than the incumbents, where is the extra money going? Cable operators charge an amount amount to make substantial profits, and even at $2 less per person, there is a substantial profit being made. They should use that profit for further improvements and tax relief... but we're talking government here.

Kaltes
Premium Member
join:2002-12-04
Los Angeles, CA

Kaltes

Premium Member

Re: If voters vote yes...

BASIC cable (the $10/month version) isnt really all that profitable, and it wouldnt be offered at all unless there were laws forcing the cable companies to offer it.

Remember that any municipal venture will have a substantial bond that it must pay back. Once the bond is paid off expect municipal prices to drop EVEN LOWER than the already-low initial prices.

Incumbents are afraid because they know once word gets out about how great municipal broadband is and how effective it is at ensuring lower prices for a better product, these municipal ventures will spring up all over the place, and heck even prime time news stories might be run showing the disparity between cities with muni and without.

Karl Bode
News Guy
join:2000-03-02

Karl Bode

News Guy

Re: If voters vote yes...

And stop covering the Kobe Bryant trial?

Seandhi
Seeing From a New Level
Premium Member
join:2003-04-19
Humble, TX

Seandhi to Kaltes

Premium Member

to Kaltes
If the government starts pushing prices too low, and if what you say is true about 10/month not being profitable, how will cable companies compete? Once they are pushed out of the market, then we just have another (worse?) monopoly.

On the other hand, I fail to see how the MUD can drop rates too low if tax payers will not be splitting the bill (as is stated in the article). This would just cause the cable company to be a little more fair to their customers.

Karl Bode
News Guy
join:2000-03-02

Karl Bode

News Guy

Re: If voters vote yes...

Well for one thing, cable providers profit margins are INSANE. They could afford some pretty hefty price cuts before getting shoved out of any market....they could also spin off sports programming a-la-carte and save a bundle.....

Governments can't afford to push their prices too low, they aren't Walmarts..they're serving small communities at the moment. I think I've seen one instance so far where a muni engaged in questionable behavior, in Grant County, Washington:

»Competitive Conundrum

If the time comes when they are abusing their position and posing serious life or death threats to the incumbents on a broader scale, then perhaps examine leashing them somewhat. What's occuring on the state level here is a bunch of well lobbied politicians falsely assuming you can put equal regulatory restrictions on both incumbents and muni-upstarts and receive competitive parity; which simply isn't accurate.

Something these politicians forget is the fundamental fact that these muni's are being formed because communites are NOT being served and are being over-charged, plain and simple....I think that gets forgotten in the legalese.....the customer is always right, or so someone once said.
TheGhost
Premium Member
join:2003-01-03
Lake Forest, IL

TheGhost to Seandhi

Premium Member

to Seandhi

$2 less on basic...

The $2 difference is for "basic" cable. I wonder if this is more like the "lifeline" cable which just includes most of the locals, a few shopping channels, and a few extras. The difference is $8 on advanced services.

The real benefit is that it might actually get some of the incumbents to upgrade their systems. I know that my community cable company (TCI/ATT/Comcast) has not done much. I moved in over 4 years ago and was told that digital cable and cable modems were "months" away. I signed up for cable TV and ISDN access, planning to upgrade when they came available. TV service was very poor (picture quality, outages) - worse than the cable adds against satellite, and ISDN was getting expensive. I ended up switching to DirecTV and DSL service.

I recently received a call from Comcast asking if I would like to "switch" to digital cable. They were very "hazy" on the details and it seems like they were trying to hide the true costs. It ended up that they would basically match the cost of the my DTV for the first year, but then prices would go up. They still did not offer cable modem service.

I doubt I will ever go to Comcast if I have a choice, even if I would eventually have to pay a bit more. They ignore communities like mine, yet have the major dollars to go after smaller communities that try and help themselves.

On a side note on lost jobs threat. I would imagine that they would still need people to service the area, especially if they were going to compete, and the new entrant (be it MUNI, whatever) would also need new employees. It seems like the MUNI would even have more LOCAL employees than a major player like Comcast, which centralizes facilities.

Seandhi
Seeing From a New Level
Premium Member
join:2003-04-19
Humble, TX

Seandhi

Premium Member

Re: $2 less on basic...

I guess I have really been lucky. I have lived in two different cities, and both of them had pretty good cable service. I lived in Lubbock for 2 years, and the cable internet and tv was great. I now live in Houston, and IMHO Time Warner rocks. We have digital cable, and all of the digital channels are dvd quality. (The channels that appear on analog cable are not quite as clear) We also have Video on Demand, which is extra cool. My Road Runner service is also outstanding. I would really be reluctant for the government to come in and try to compete. Less government is good government.

The prices probably need to come down, but I think that Time Warner is offering top notch service.
dufrense
join:2002-03-09
Neenah, WI

dufrense

Member

Why not cry about it

Its about time that some competition comes into those markets - I grew up in Waupaca and remember how excited I was when the fiber was put in my neighborhood to finally get a cable modem (however my folks didn't appreciate the hole i drilled in the floor of the office to bring myself a line to my bedroom). ..

I think its riduculous to NOT allow the munis to offer something... Apparently, since i just read that waupaca was muni-broadband, without that we'd still be stuck without the cable modem there... Businesses need competetion, otherwise we'll wind up with more microsofts on our hands. Typical that the republicans are whining about this idea since it would actually make things easier for people to afford broadband... I'd love to see all broadband more affordable.

Kaltes
Premium Member
join:2002-12-04
Los Angeles, CA

Kaltes

Premium Member

Re: Why not cry about it

said by dufrense:
Typical that the republicans are whining about this idea
Actually if you followed the municipal broadband battles, you'd see that plenty of democrats who have been bought and paid for by the major Cable/DSL companies have been busy trying to kill municipal startups.

The real issue here is corrupt representatives being paid off by large companies to kill off competition before it gets off the ground. Since municipal broadband is such an obscure issue that most people don't know much (if anything) about, it is also possible that lobbyists can genuinely convince some representatives who might believe in small government to resist publicly-owned utilities providing services that the private sector already offers.

I would say the republican support is more uninformed than corrupt while the democratic support is simply corrupt. The democrats have no policy excuse here: municipal broadband is right up their big-government alley.

jhboricua

join:2000-06-06
Minneapolis, MN

jhboricua

Wisconsin is weird, lol

I'd love to see what all those who complain about telco/cable incumbents having to share their cable plants and "competitors should run their own cable" have to say about this.

It is pretty obvious that, no matter if you want to use existing plant or deploy your own, the telco/cable incumbents will make every effort to make it an unprofitable endeavor for the competitor.

ravital
Just Another Pesky Independent Nh Voter
Premium Member
join:2001-07-19
Merrimack, NH

ravital

Premium Member

The trend

The trend is definitely alarming. State after state is falling for the same "even playing field" rhetoric, not to mention lobbying efforts with the usual - or greater than usual - monetary contributions to legislators' campaign coffers. This will not change until the towns involved begin some sort of "education" effort or whatever else they care to call it. The towns are the ones interested in their own networks, after all. More power to them, but they do have to do some heavy lifting and knock on the doors of their own residents and give them what for.

One interesting possible outcome of a law that forbids the use of tax funds - it works both ways. With such a law in effect in a state, any town that finances such an initiative with anything but tax money - such as revenue bonds - can tell opponents what to go do with themselves.

Here in NH I'm hearing about legislative initiatives that actually push in the opposite direction - proactively encouraging municipalities to get involved in such efforts. Must be something in the water in NH, either that or a state with a mere 1.2 Million residents is not interesting enough for the incumbents to fight so hard over.

And please, there is absolutely no value added in telling readers that "republican legislators" are behind this, as opposed to just "state legislators." I've read the bill from the linked PDF, and it lists all the sponsors, and anyone can find the Wisconsin Legislature on line and learn that there are quite a few democrats listed at the top of the bill. Media and telecommunications are an area where legislators - Demublicans or Repocrats, each as useless as the other - have always relied on general public apathy or ignorance of complex issues, and often respond all too enthusiastically to lobbying. Unless of course there's a different agenda here.

Karl Bode
News Guy
join:2000-03-02

Karl Bode

News Guy

Re: The trend

Yes, your accurate about it not being a partisan push, I simply added 'Republican' because Representative Phil Montgomery and Senator Ted Kanavas (both repubs) were the primary pushers in this instance. I've rephrased it to read simply "Lawmakers in the state"....

ravital
Just Another Pesky Independent Nh Voter
Premium Member
join:2001-07-19
Merrimack, NH

ravital

Premium Member

Re: The trend

said by Karl Bode:
Yes, your accurate about it not being a partisan push, I simply added 'Republican' because Representative Phil Montgomery and Senator Ted Kanavas (both repubs) were the primary pushers in this instance.
I stand corrected, thank you. My point was that when it comes to telecom/media interests lobbying, both parties are equally mercenary.

Thanks again and best regards.

Varangian
join:2002-12-08
Collinsville, IL

Varangian

Member

Well ,we know who is owned then

Vote out the suits' lapdogs -the sponsors and supporters of this bill- at your first opportunity.
Theyll vote in sexual access to your wives and daughters next...

Camelot One
MVM
join:2001-11-21
Bloomington, IN

Camelot One

MVM

And this years top Telco/CableCo donations go to..

quote:
Representative Phil Montgomery and Senator Ted Kanavas are trying to push through the 11th bill in four years
Gee, is it obvious to anyone who is paying for their re-election campaigns?

godsmack
join:2003-06-08

godsmack

Member

I say...........

Power to the people.......
Give the people what they want.........

oliphant5
Got Identity?
Premium Member
join:2003-05-24
Corona, CA

oliphant5

Premium Member

Telco whores

The lot of 'em. What would fix this is simply banning campaign contributions from anyone other than REGISTERED VOTERS from the district the political hack serves. Any one who doesn't have a right to vote (like unions, corporations etc), certainly doesn't have any business buying votes.
burger2000
join:2001-06-25
Madison, WI

burger2000

Member

Overpriced services = muni push?

Granted Telelphone and Cable service are extremely overpriced for products offered....

I can think of very few areas in Sun Prairie that are not covered by Charter's plant. There are a few houses here and there in the country without, but almost all of Sun Prairie is covered. I know a few farms miles outside of the city limits that have cable. And in the Madison area, if cable passes it is Digital, Broadband and VoD/HDTV ready. I don't know about Verizon's services but do know that Sun Prairie already offers ~400kbps wireless internet service.

I fail to see the need to invest in a fiber build where the only reason is overpriced services. There is no lack of broadband deployment. Cellular and DBS do a fantastic job of undercutting incumbents.

zabes63
join:2003-04-05
Batavia, IL

zabes63

Member

Think about this...

Seeing that most, if not, gosh-darned, nearly all, of the Muni's are approved of via some kind of voter approval. I find it ironic, if not sad, that, only in America, can we have legislation pushed to benefit Corporations by short circuiting the democratic process, while our men and women are dying to bring the right to vote to other nations.

Karl Bode
News Guy
join:2000-03-02

Karl Bode

News Guy

Re: Think about this...

It bothers me when we post a thread about Spyware, "DSL vs. Cable" or other smaller issues we get hundreds of comments, but here, where as you note, big business is repeatedly crushing the democratic process and a community's right to vote for their own broadband service, we get 20 people who have something to say.

Maybe I need to use more pie charts.
BosstonesOwn
join:2002-12-15
Wakefield, MA

BosstonesOwn

Member

Re: Think about this...

said by Karl Bode:
It bothers me when we post a thread about Spyware, "DSL vs. Cable" or other smaller issues we get hundreds of comments, but here, where as you note, big business is repeatedly crushing the democratic process and a community's right to vote for their own broadband service, we get 20 people who have something to say.

Maybe I need to use more pie charts.
What really annoys me is seeing how alot of these companies "contribute" to the politicians so they can get reelected to push their political stances on us and the fact that not very many people are aware of the situations when they vote.

Case in point my current city is having a mayoral election. The city has been mismanaged to the point where for a little city our tickets for trash are more exspensive then Boston's a mush bigger community with lower taxes. The mismanagement has driven the cost of all stuff up. Parking meters went from .10 to .25 a 15 minute span.. typical street cleaning tickets from 10 to 25 with talk of going to $40. And people after seeing their property taxes increase don't even wish to understand why.. they just grumble when they write the check.

A very sad time in american history... if the founding fathers could see these times for sure they would roll over in their graves or start a revolution again.

bmbarnes
join:2003-08-10
Derwood, MD

bmbarnes

Member

What about the Brewers?

I just moved from the Town of Madison, WI and I remember having SkyCable, a wireless cable service, at the apartment. Few channels, but ESPN and ESPN2 were in the package so I ate it up. What we never got that we wanted was the Midwest Sports Network (now Fox Sports North or some such...) as Charter had exclusive rights for cable distribution throughout WI. For five years, I never saw the Brew Crew. Not a problem really, they stink. But, the idea that a muni telco solves all problems underestimates the power of Charter. They waived that $19.95/mo for a year under my nose to have me ditch SkyCable. I bit. Given then the option, I didn't watch the Brewers really, come to think of it....