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BBR Interview
Jim Baller, Municipal Broadband attorney

More than a year ago we sat down with Jim Baller, perhaps the nation's foremost expert on municipal broadband projects and a man that is at the center of nearly every major legal fight in the industry. Since our first interview, a lot has happened in the fight to allow communities to provide their own broadband services without being banned by incumbent backed laws, so we've sat down with Jim for a second round of questions, some of which were provided by our forum regulars.

BBR: Since our last interview, the Supreme Court ruled that the federal Telecommunications Act of 1996 does not preempt states from enacting barriers to municipal entry into telecommunications.  First of all, did you find the majority's reasoning persuasive?

JB:  No, I didn't, but the bottom line is that we had our day in court and lost, and now we have to move on.

BBR: I’d still like to hear why you didn’t find the decision persuasive.

JB: OK. Section 253(a) of the Telecommunications Act of 1996 states that "No state or local statute or regulation or other state or local legal requirement may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service." In the Missouri case, we argued that “any entity” means just what it says and applies to entities of all kinds, including public entities. In support of this interpretation, we relied heavily on a case called Salinas v. United States, 522 US 52 (1997).

In that case, the same nine justices who decided the Missouri case had unanimously ruled that when Congress uses “any” expansively in a federal statute, the term or phrase that “any” modifies must be given its broadest possible scope, unless other language in the statute or legislative history compels a narrower construction. Furthermore, the Salinas court had said that this rule of interpretation applies even in cases involving federal preemption of traditional state powers.

That statement, in particular, figured prominently in the decisions of the U.S. Court of Appeals for the Eighth Circuit, the Nebraska Supreme Court, and the federal district court in the Bristol (Virginia) case, holding that “any entity” must be read to encompass public entities. Yet, in the Missouri case, the Supreme Court did not even mention Salinas, let alone attempt to reconcile its constricted interpretation of “any entity” with its reasoning in Salinas.

I can accept the Court’s conclusion that Congress did not speak clearly enough in Section 253(a) to remove all doubts about its intent, but the Court’s failure to deal with Salinas left me with a hollow feeling about the decision.

BBR:  Was the opinion all bad?

JB:  No. The Court said a number of positive things from our perspective. First, the Court expressly stated that it was not ruling against us on the merits of municipal entry, and it underscored that the municipalities had "at the least a respectable position, that fencing governmental entities out of the telecommunications business flouts the public interest."

Second, the Court stressed that the Federal Communications Commission, while ruling against us as a matter of statutory construction, had "denounced" the policy behind the Missouri law and that two commissioners had "minced no words" in saying that the Missouri law was contrary to the purposes of the Telecom Act.

Third, the Court also referred to the many amicus curiae briefs that interested parties had filed in support of our position.  

BBR:  What impact do you think that the Missouri decision will have?

JB:   A victory would have enabled us to challenge existing barriers and fend off potential new ones in a relatively simple and straightforward way, as a matter of law. Instead, we’ll have to continue to fight time‑consuming and expensive battles over the merits of public involvement in the communications industry, on a state-by-state basis.

Fortunately, only a handful of states currently have barriers to public entry, and the great majority of states have never expressed any serious interest in enacting such laws.  We will undoubtedly see increased industry efforts to obtain new state barriers, and the industry’s lobbyists will surely misrepresent what the Supreme Court said and did. Even so, I doubt that these efforts will succeed in most states.

In fact, I would not be surprised if at least some states that currently have barriers removed or cut them back, as Virginia and Tennessee did when they learned that their initial barriers to public entry were counterproductive, especially to rural communities.

BBR:  How have recent battles in the states been going?

JB:  Pretty well from our standpoint.  In the legislative season that recently ended, we faced potential new barriers in nine states.  In the end, only Wisconsin passed significant new restrictions, and even there, there’s room for interpretation.  Things turned out particularly well in Louisiana.

BBR:  What happened in Louisiana? 

JB:  Upon hearing that Lafayette Utilities System was exploring the possibility of establishing a fiber-to-the-home system, BellSouth introduced a bill based on the so‑called “ALEC Model.” The acronym “ALEC” stands for the American Legislative Exchange Council, a highly conservative group that promotes what they consider to be the best interests of large corporations.

The ALEC Model is virtually identical to the law that Utah passed in 2001 to discourage municipalities from providing retail communications services. Although BellSouth touted the ALEC model as a paragon of balance and fairness, ALEC itself espouses the notion that municipalities should never be allowed to compete with the private sector.

Following BellSouth’s action, Louisiana Governor Kathleen Babineaux Blanco literally locked representatives of municipalities and industry in her conference room and essentially told us not to come out until we had negotiated a compromise bill that she could sign. It took a month, but much to everyone’s surprise, we did it.

With BellSouth, Cox Communications, the Louisiana Cable Telecommunications Association, Lafayette Utilities System, the Louisiana Municipal Association, and various other groups supporting the compromise bill, the Louisiana legislature passed it nearly unanimously, and Governor Blanco signed it into law on July 6, 2004. (link, navigate to SB 877)

BBR:   How is SB 877 different from other state laws on municipal entry?

JB: At the outset, let me make clear that I do not believe that SB 877, or any other law that restricts public entry in any way, shape or form, is a good law. To the contrary, I believe that we should be going in the opposite direction and enacting laws that make it more attractive, rather than less attractive, for public entities to provide or facilitate the provision of advanced communications services in their communities. That said, I believe that the compromise reflected in SB 877 was as good an outcome as all concerned could have achieved under the circumstances.

To help you to understand SB 877, let me give you some background. Over the years since the enactment of the Telecom Act of 1996, state barriers have evolved from flat-out, in-your-face bans on public entry, such as the laws of Texas and Missouri, to more subtle barriers that are disguised as “level playing field” laws. Such laws authorize public entry – and give incumbents and their supporters the opportunity to proclaim their unwavering support for “fair competition” – but the laws make entry subject to the fulfillment of conditions that are very difficult or impossible for new entrants to meet. For example, under the ALEC model, a municipality that wants to provide retail communications services must first obtain an independent feasibility study – for which it cannot use public funds – showing that, for both the first year and for the first five years of operation, for each service on a stand-alone basis, revenues will exceed costs by amounts sufficient to cover debt service.

As ALEC knows perfectly well, that requirement alone is a show-stopper. No provider – public or private – has ever met such a requirement, and no one will ever do so. As a colleague of mine once observed, the public may love competition, but no one is going to pay for services before the system is even built.

In a typical state legislative session, representatives must vote on 2000-3000 bills in a few short months, and they don’t have time to get into the details of a proposed barrier to municipal entry. In contrast, in the negotiations that led to SB 877, we examined every line of the ALEC model under a microscope and compared what it would require municipalities to do with what private providers actually do in similar circumstances. We put rhetoric aside and drilled deeply into the details, with the Secretary of the Louisiana Public Service Commission at the table to keep the negotiations moving forward and the parties grounded in reality.

In the end, the negotiators developed mutually acceptable alternatives for every provision in the ALEC model that would have been prohibitory in practice or would have given either municipal or private providers any significant advantages over each other.

SB 877 is a lengthy and complex law. Rather than go through it in detail here, let me steer you to a presentation (link) that includes a side-by-side comparison of the main features of the ALEC model and SB 877. Suffice it to say here that SB 877 will enable Louisiana’s municipalities to make well-considered judgments on whether to proceed with communications projects – or not – based on the merits of the projects, and not on the basis of artificial legal barriers to entry. At the same time, incumbents will continue to have a fair and reasonable opportunity to participate in this decision-making process.

BBR: How important was Governor Blanco’s involvement?

JB: Governor Blanco was not involved in the day-to-day negotiations, but she played a critical role in bringing the parties to the table and keeping the negotiations on track. In the end, her clarity of purpose forced the parties to reach a compromise that should work for all concerned. I hope that governors in other states learn a valuable lesson from this.

BBR: Do you think that SB 877 will become a model for other states?

JB: I hope not. I would much prefer to see other states reject new barriers outright and remove all existing ones. By no means should any state enact a measure that is more restrictive than SB 877.

BBR: Back to the bill’s origins briefly….We consistently see groups like ALEC, who claim to be “non-partisan” organizations, acting as mouthpieces for the interests of large corporations. Many of them, like the Citizens for a Sound Economy release home brewed research generated to promote deregulation as a cure-all. These studies then get picked up by the Associated Press, and are often read by regular users around the country who believe they’re reading information from an uninvolved third party or consumer group. How do you combat efforts like this, and do you believe laws will eventually need to be passed in this country to make company efforts (and wishlist bill origins) more transparent?

JB: I agree with what you have said about these groups. They’re particularly troublesome because they often have vastly more money to spend on their campaigns of disinformation than public entities have, or are allowed to spend, to counteract them. The First Amendment gives these organizations the right to say whatever they want, so we just do our best to answer their propaganda with the truth. Once they get the relevant information, most fair-minded members of the public see through what these groups are doing, so it always helps when we are able to root out and publicize the affiliations and biases of these groups.

BBR: You recently participated in a public hearing in Illinois regarding the muni operations there and their efforts to compete with SBC and Comcast.  What did you think of SBC's promise to wire Batavia fully with DSL by the fall?

JB: The Japanese are flocking from DSL at 45 megabits per second (Mbps) to fiber to the home (FTTH) at 100+ Mbps, and SBC wants the TriCities to believe that they should be satisfied with DSL at 1.5 Mbps! Gimme a break. SBC knows that 1.5 Mbps is barely adequate now and will be totally inadequate to support the TriCities’ future bandwidth needs. In fact, just two weeks before SBC’s local representatives made this promise to the Batavia City Council, SBC’s national organization issued a press release stating that SBC was going to invest $4 to $6 billion over the next five years to extend “fiber to the premises” in various unspecified locations. Here are SBC’s own words:

"Fiber technologies and IP-based services will enable a communications revolution, allowing consumers and businesses to experience integrated video, data and voice services beyond what can be provided over any network today. This next generation of services will require us to revolutionize our local networks as well, which we will do as economic and regulatory conditions make practical."

...

"SBC companies also are pursuing development of new services that can take advantage of the network's bandwidth. For example, SBC companies and Microsoft have begun testing an IP-based switched television service based on the Microsoft TV IPTV platform. This infrastructure would enable a new type of next-generation digital video entertainment experience, offering features like standard and high-definition programming, customizable channel lineups, video-on-demand, digital video recording, multimedia interactive program guides, event notifications and more. IP-based television services also will enable household TV devices to participate in connected home experiences with other devices in the home."

If SBC really believes what it is saying in its press release, it should forthrightly admit that the TriCities are right to want fiber rather than DSL. Then, SBC should either provide the FTTH that the TriCities want or get out of the way.

BBR: What do you think of the promises that SBC made in the press release that you just mentioned?

JB: Unlike Verizon, SBC is not promising FTTH. Rather, it is proposing to extend fiber to neighborhood nodes of 300-500 homes, with copper running between the nodes and the homes. This technology is commonly referred to as ADSL2+. SBC claims that it will offer bandwidth capacity of 15-25 Mbps downstream and 1-3 Mbps upstream. That's a big improvement over 1.5 Mbps, but whether it will be sufficient to meet future bandwidth needs is another question.

Let’s do some math. High definition television (HDTV) is growing at a rapid rate. I've seen estimates that, within 5 years, it will be in 40-60 million American homes. These homes will not just be running a single HDTV stream. Rather, they will need the capacity to run 2, 3 or even more HDTV streams simultaneously with other known and yet-to-be conceived bandwidth-rich consumer and home-business applications.

HDTV programming alone consumes about 19 Mbps today, and while advances in compression will bring that number down, it will probably not bring bandwidth requirements for real-time programming down below 10 Mbps anytime soon, if ever. Viewed in this light, 25 Mbps downstream, and certainly 1‑3 Mbps upstream, are not very impressive. According to Mark Wegleitner (Verizon’s chief technology officer), ADSL2+ "just doesn't have enough margin."

BBR: OK, now that you’ve mentioned Verizon, let’s turn to it. Since we last spoke, Verizon has gotten plenty of press concerning its fiber deployments - particularly their trial in Keller, Texas.  The general consensus seems to be they're serious this time. Knowing their history of promises well, and their Pennsylvania history in particular, what are your thoughts?

JB: One surely has to be cautious about Verizon’s promises, but I genuinely hope that Verizon is serious this time. Verizon’s support for FTTH validates what we have been saying for a long time, and the more successful Verizon is in practice, the more powerful that validation will be. Furthermore, with Japan, Korea, Canada and several other advanced nations rushing past us toward “big” broadband, our nation needs Verizon to be serious. It is important to recognize, however, that Verizon is only talking about a small number of localities. Even if Verizon did everything that it promised, and even if other private providers followed Verizon’s lead, that would still leave tens of thousands of cities and towns in America behind for years or even decades.

A century ago, when the private sector couldn’t meet demand for electrification fast enough, thousands of communities took their futures into their own hands and formed electric utilities of their own. Those that did generally thrived in the 20th Century, while many that did not became “ghost towns.” We need to encourage our municipalities to do this again, and the sooner that we come to accept this, the better off we will be as a nation.

BBR:  Each time we mention municipal operations in the news, there is inevitably several users who ask: "Why does the government need to be involved?  Why can't those who want the system go after private funding and create their own broadband alternative"?  Your response?

JB: At the core of this question is a premise with which I disagree – that any product or service worth having will attract sufficient private financing to render government involvement unnecessary. That premise does not necessarily apply to infrastructure, which has always been the province of the public sector. Water, sewers, roads, and electricity benefit everyone, but they generally do not attract private providers and investment – unless they are operated as sanctioned monopolies. Advanced telecommunications infrastructure is similar to these other utilities, even though some of the services provided over such networks may themselves be competitive.

BBR: Does it follow that municipalities should be limited to providing infrastructure or wholesale services and prohibited from providing retail services in competition with the private sector?

JB: Absolutely not. A municipality should be able to provide any service that the community wants, wholesale or retail. There’s nothing inherently wrong with municipal retail service – to the contrary, municipal electric utilities have been providing retail services for more than a century, to the great benefit of the communities they serve and the country as a whole.

Our main goal should be to get advanced communications networks up and running as quickly as possible, whatever it takes. We have plenty of evidence from the field that municipal retail projects work well – in fact, sensationally well when it comes to FTTH. We also know from numerous feasibility studies that wholesale-only models are not feasible in small, isolated communities. The UTOPIA and Provo wholesale-only projects in Utah appear feasible, and we hope that they will succeed in the field, but this remains to be seen. In the meanwhile, it is disingenuous and irresponsible for groups such as ALEC to promote laws that effectively prohibit municipalities from providing retail services.

BBR:  In your opinion, what is the most viable and risk-free way to fund a municipal operation?

JB: I’ve seen so many different funding mechanisms, that I can’t say that any one is the best for all situations. There are just too many different state-specific and project-specific factors involved.

BBR: We recently linked to an opinion piece claiming this country’s global broadband gap was overstated and that letting the telcos “play” – basically deregulation - was the best approach for the future. Thoughts?

JB: The author, Mike Langberg of Mercury News, makes a number of points with which I disagree.

Mirroring FCC Chairman Michael Powell’s views, Mr. Langberg suggests that the United States is not really in bad shape, even though we’ve fallen to 10th place worldwide in broadband deployment. According to Mr. Landberg, the real problem is one of demand rather than supply, as just about all residents in urban and suburban America now have access to DSL and cable modem service, but only 50 % of Internet users have switched to broadband. That demand problem would solve itself, he suggests, if suppliers simply offered products and services that were attractive enough for large numbers of consumers to switch to broadband.

Unlike Mr. Langberg, I do view the supply-demand issue from the standpoint of only a single corner of the market – residential consumers – but from the standpoint of the community as a whole. From that perspective, I see no lack of demand. To the contrary, demand is growing explosively across America as communities are coming to realize that advanced communications networks can be critical to achieving core community goals – robust economic development, lifetime educational and occupational opportunity, affordable access to modern health care, reduced congestion and environmental burdens through telework, urban revitalization, reduced dependence on increasingly unresponsive communications providers, and the whole gamut of factors that contribute to a high quality of life.

When one considers the multiple benefits of an advanced communications network, building such a network can make a great deal of economic sense for a community as a long-term infrastructure project, even if Mr. Langberg is right about the need for more “killer apps” to increase demand among residential consumers.

Furthermore, as the number of advanced communications networks grows, so will the number of bandwidth-rich applications that can take advantage of the new networks. That, in turn, will attract an increasing number of consumers to broadband.

Verizon has now come around to this way of thinking. According to Bob Ingalls (Verizon’s head of retail markets): "We're building a superhighway, and enabling that is going to draw application providers who'll make applications we haven't thought of today. We believe that some of these interactive applications that haven't yet been developed will arrive because the bandwidth is there." (Boston.com)

This is another reason why I sincerely hope that Verizon will follow through on its promises.

What’s more, I do not think it’s a good idea to define success in terms of availability of DSL and cable modem service. As the U.S. Department of Commerce said in its report Understanding Broadband Demand, “It is important to note here that 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.” If we want to make more rapid progress toward deploying truly high bandwidth broadband nationwide as rapidly as possible, we’ve got to stop kidding ourselves about the paltry level of progress that we’ve made so far with DSL and cable modem service.

Turning to our plunge to 10th place worldwide in bandwidth deployment, Mr. Landberg denigrates President Bush’s concern about this as just being “macho,” and he offers a number of lame – and inaccurate – excuses to account for this decline. Among other things, he says that some of the countries ahead of us are smaller, some have bad narrowband, some have a single monopoly provider, etc., etc., etc. He then contends that “the United States, with extensive and even chaotic competition in telecommunications, implements new technology more slowly than nations with a single government-controlled provider. But we often do better in the end.” That’s a nice image, but it has little to do with reality.

The reality is that the giant telephone and cable companies that dominate the broadband market in the United States today are not pushing each other to the cutting edge of technology through “extensive” or “chaotic” competition. Far from it. Rather, they have settled into a mutually acceptable level of low-grade “coopetition” at bandwidth levels that are far below what the nation needs to stay competitive globally. Instead, they’re spending enormous amounts of time, effort and money on persuading federal and state legislators, agencies and courts to allow them to squelch competition from new entrants, particularly public entities.

Dave Burstein, the well-informed and astute publisher of DSL Prime, recently characterized SBC’s fiber-to-the-premises initiative as follows: "Essentially, SBC is betting that Comcast will not deliver for a decade a fraction of the capabilities Brian Roberts is promising, or that consumers won't care about higher speeds." If he’s right, and he could well be, that’s a sorry state of affairs for our country.

I’m tired of hearing about the advantages that other countries have, especially coming from companies and individuals who want to prevent us from taking advantage of a uniquely American strategic asset – a well-developed nationwide network of 2000 public power utilities, many of which are ready and able to step forward to help our nation climb rapidly back up the world rankings in broadband deployment. We owe it to ourselves to take maximum advantage of this asset.

BBR:  Do you think the municipal push will eventually become so large, that the incumbents and small cooperatives will rush to provide service in "broadband black holes" across the country, thereby removing the need for muni operations eventually?

JB: That would be great, but I don’t believe that there’s any reasonable chance of the private sector filling all the “broadband black holes” any time soon. Certainly, it’s far fetched with regard to truly high-bandwidth broadband.

BBR:  Forum user Cheeseware asks "What should be the FCC role as a Regulator pertaining to municipal broadband being an additional competitor in the "marketplace"?"

JB: I believe that the FCC should be playing four main roles with regard to municipal broadband: (1) to the maximum extent of its statutory authority, it should aggressively remove barriers to entry; (2) it should ensure that municipal providers have full and fair access to at least the same statutory and regulatory incentives that private-sector providers have; and (3) it should vigorously curb anticompetitive practices by incumbents, including predatory pricing, targeted rate discrimination, denial of access to content, and a host of other unfair business practices; and (4) it should advise Congress of measures that are needed to fix shortcomings in the current federal communications laws.

BBR:  Forum user ABCovell asks "how important do you think wireless (e.g., WiFi and WiMAX) will be in providing an open network alternative that is decidedly less capable but offers more favorable economics for municipalities that are unlikely to secure funding for an FTTH network?"

JB: I believe that wireless is very important, both as a transitional technology for communities that cannot currently afford fiber, and as an extension of fiber systems to support our need for mobility. I believe that we are heading for a world in which various technologies will be integrated seamlessly, and wireless will be a big part of that world.

BBR:  User Marigolds takes issue with your comparison in your last interview between Cedar Falls, IA (which has a muni system and has seen considerable economic improvement) and Waterloo (which has neither a muni operation or an economic surge).  "Cedar Falls holds significant advantages over Waterloo in income levels, education levels, and property values. Waterloo contains over 230 census blocks that are majority low income minority residents while Cedar Falls contains 2", he notes.  "Is there a demographic and economic profile better suited for municipal broadband or can all cities benefit equally?"

JB: If anything, User Marigold’s assumptions about the facts strengthen the conclusion that the existence of a municipal communications utility in Cedar Falls and not in Waterloo is the key factor that accounts for the much higher rate of economic development in Cedar Falls. Specifically, given the proximity of Cedar Falls and Waterloo, a new business would presumably locate its facilities in Waterloo, to take advantage of its lower property values, while its employees could live close by in Cedar Falls to get the benefit of its schools, shops, etc. But it is to Cedar Falls, not Waterloo, that most of the new businesses have gone. The only plausible explanation is that they chose Cedar Falls to get access to its advanced communications capabilities.
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TheMadSwede
Premium Member
join:2001-01-30
Holland, MI

TheMadSwede

Premium Member

He had me until...

...he threw down a "yeah, but the Japanese have..." reference.

Transmaster
Don't Blame Me I Voted For Bill and Opus
join:2001-06-20
Cheyenne, WY

Transmaster

Member

He doesn't care

Heck he makes money anyway you look at it. look at South Korea they started with nothing and built what they have they didn't have the 120 year old infrastructure to contend
with as it is in this country. That isn't making excuses it just the facts.

CheeseWare
Premium Member
join:2003-04-24
Burnaby, BC

1 edit

CheeseWare

Premium Member

The Should Do -and The Should Not Do

JB's answer to my question was politically quite correct.

Perhaps I should have asked what they should not do such as cheer leading one technology in particular as they have done with BPL. I can certainly see that the FCC will not cheer lead Fiber if the special interest groups funding the FCC still wish to sell current broadband data rates or lesser and more problematic ones from pseudo-competitors in anticipation of their own fiber "low hanging fruits" slow rollout.

At that rate the USA will soon fall from 10th in "broadband" deployment to 20th. I think the current ideology is that munies fiber rollouts are some kind of a commie threat to the existing private commercial rollout scheme.

Thanks to Karl for an other excellent interview.