Municipal Broadband Restrictions Interfere with State BEAD Plans

Date: 14 Sep 2023 | posted in: MuniNetworks | 0 Facebooktwitterredditmail

As the National Telecommunications and Information Administration (NTIA) continues to move forward in administering the single biggest federal investment to expand high-speed Internet access in U.S. history, each state and U.S. territory is wrestling with how to best spend the windfall as they lay out their Five Year Action Plans and Initial Proposals necessary to claim their portion of the $42.5 billion BEAD program.

One major barrier to providing universal access to fast, reliable and affordable Internet service–long recognized by ILSR, telecom experts, and a growing number of ordinary citizens–are the monopoly-friendly preemption laws that either outright ban or erect insurmountable barriers to building publicly-owned, locally-controlled broadband networks, aka municipal broadband.

Preemption in the BEAD Era

Currently, 17 states have such preemption laws, most of which have filed their Five Year Action Plans and/or their Initial Proposals. In each of those states, at the behest of Big Cable and Telecom incumbents, state lawmakers have erected legislative barriers to municipal broadband to protect the monopoly players from competition, which is at the very heart of why the digital divide exists in the first place and why tens of millions of Americans suffer from the slower speeds and higher costs that go hand in hand with monopoly service.

These legislative barriers also happen to technically run afoul of the Infrastructure Investment and Jobs Act (IIJA), which enabled the BEAD program. To conform to the letter and spirit of the infrastructure law, state legislatures would have to reverse these preemption laws as the IIJA specifically says that state BEAD plans must “ensure the participation of non-traditional broadband providers (such as municipalities or political subdivisions, cooperatives, non-profits, Tribal Governments, and utilities).” In other words, municipal broadband and other non-profit public sector entities should, by law, have access to BEAD funds.

The subsequent BEAD Notice of Funding Opportunity (NOFO) goes on to say that “NTIA strongly encourages (states) to waive all such (preemption) laws for purposes of the Program.” Still, NTIA officials, likely out of fear of the political firestorm it would cause in an election year, have already said the agency will not withhold BEAD funds from states that do not remove those barriers. However, the BEAD NOFO does require those states to “identify all such laws in its Initial Proposal and describe how the laws will be applied in connection with the competition for subgrants (and), in its Final Proposal, disclose each unsuccessful application affected by such laws and describe how those laws impacted the decision to deny the application.”

Here’s a look at what three of those states are saying about preemption in their Five Year Action Plans (with links to the Five Year Action Plans/Initial Proposals of the rest):

Pennsylvania Breezes Over State Preemption

Poised to receive $1.2 billion in BEAD funds, Pennsylvania–which filed its Five Year Action Plan in August–articulates what has become a truism across the nation:

”The varied impacts to populations who lack Internet access are considerable and costly. Not having access to education, employment, health care, entrepreneurship, and more limits some Pennsylvanians in their overall quality of life,” adding that “the digital divide is increasingly worsening for Pennsylvanians from communities of color, vulnerable populations, and lower-income demographics.”

For the 333,133 “unserved and underserved locations” the state will target (based on the FCC’s faulty maps), “Internet for All” advocates will have to contend with an antiquated state preemption law–one that outright bans local governments from providing broadband service–unless broadband services are not provided by the local telephone company and the local telephone company refuses to provide high-speed Internet service within 14 months of a request for service from a local government.

As detailed by the Coalition for Local Internet Choice (CLIC), the law further says that “in determining whether the local telephone company is providing, or will provide, broadband service in the community, the only relevant consideration is data speed. That is, if the company is willing to provide the data speed that the community seeks, no other factor can be considered, including price, quality of service, coverage, mobility, enhanced efficiency of other utilities, etc.”

Glaring “Obstacles and Barriers” Omission

So what does Pennsylvania’s Five Year Action Plan say about such a strict preemption law? Very little, even though it’s loaded with indications that laws protecting monopoly incumbents from municipal broadband competition are inextricably linked to the state’s stubborn digital divide.

On page 32 of the 85-page Plan, the state notes: “limited competition among broadband providers…can increase prices for consumers.” But, even when you get to the “Obstacles and Barriers” section of the Plan, which begins on page 46, there’s no mention of the severe legislative limits placed on municipal broadband, despite mounting evidence that municipal broadband, wherever it’s been successfully established, almost always offers community-wide connectivity that is more reliable and affordable than what the monopoly incumbents offer.

It’s not until you reach page 62, under the “Key Execution Strategies” portion of the Plan that the state first makes clear it “strongly encourages the establishment of public-private partnerships (P3),” arguing that “combining efforts and resources from both the public and private sectors will expedite infrastructure improvement.”

Immediately following that, there’s a single paragraph acknowledging that “a law from 2004 allows telephone companies to block municipalities and counties from becoming an ISP, described as a ‘virtual veto.’ Attempts to remove the restriction in 2019 and 2021 stalled in committee without coming up for a vote.”

Failure to Connect the Dots

And yet, as the Plan documents, resident surveys found that nearly 46 percent of respondents said they “strongly agreed” with the statement “I would choose a different type of Internet subscription if more choices were available”–with another 33 percent saying they “somewhat agreed.” Additionally, 45 percent reported difficulty affording their Internet bill.

To further make the case that Pennsylvanians are screaming for competition (and more affordable prices), when residents who do not have home Internet service were asked why they don’t, the top three answers were: “The cost is too expensive” (56.05%); “Service is unreliable or has frequent outages.” (43.14%); and “I don’t like the available service providers.” (31.30%).

On the flip side: Among those with home Internet subscriptions, “56% have cable Internet and 17% percent use DSL. More than 55% reported they have no choice of provider, with only one provider available. Over 50% of survey respondents indicated that the cost of their Internet subscription is over $100/month.”

The long and short of it is: besides banking on the big incumbent providers and promises of encouraging public-private partnerships to build out infrastructure, Pennsylvania’s only answer to the affordability crisis is the Affordable Connectivity Program (ACP), even as the state’s ACP participation rates are below the national average with only 31.5% of eligible households enrolled in the program.

The Plan acknowledges as much, while making a concise point on the nexus between affordability and competition.

“Ultimately, the ACP is only one way to promote affordability and, as a federal program, it has limited funds available. Currently, the ACP is projected to run out of funds in 2024 without further Congressional action. Addressing the needs and gaps impacting broadband affordability requires a combination of long-term policy solutions, including increasing competition, subsidizing broadband costs for low-income households, and supporting small broadband providers. By addressing these gaps, more households can access affordable high-speed Internet services.”

Sounds good. But details are scant on how the state intends to “support small broadband providers” in markets dominated by regional monopoly incumbents and with a rising chorus of small providers who say the BEAD program’s “letter of credit” requirement will make it extremely difficult, if not impossible, for small providers to secure grants and compete.

A Way Around Preemption Law?

At least in rural parts of the state, the Plan points to a way around its preemption law. “In efforts to bring broadband to rural communities, one region of the state created a nonprofit to become the owner of the broadband network.” But, that is quickly followed up with a caveat: “This route may not be feasible for smaller communities. It may prove easier and more effective for counties and municipalities to partner with ISPs directly in order to bring broadband to the community.“

The Plan also gives a nod to electric cooperatives, which in other states are bringing fiber networks to large swaths of rural areas.

“The Commonwealth of Pennsylvania has 13 electric cooperatives across the state with large amounts of assets that could be used for placing fiber. Some of these cooperatives are currently providing high-speed Internet access through a subsidiary; others are looking into options that are best for their memberships.”

While the state’s inaction on removing municipal broadband barriers is breezed over in its Five Year Action Plan, the issue hasn’t gone unnoticed by residents–as is evident by one Allentown resident who wrote a letter-to-the-editor in The Morning Call:

“Expanding Internet access to all Pennsylvanians could best be demonstrated by collaborating … to eliminate the public utility code provisions that prevent localities from setting up their own municipal broadband systems. Instead, we have a system where after over two decades of private companies being in charge, there are still … almost 280,000 unserved locations here in Pennsylvania alone.”

“Fortunately, the federal government is finally stepping in with Broadband Equity, Access and Deployment funds to provide the necessary infrastructure that the cable and wireless companies have failed to provide during their period of monopoly control.”

North Carolina Statute Creates ‘Chilling Effect’

In contrast to Pennsylvania, North Carolina’s Five Year Action Plan confronts a similar preemption law more candidly. It notes that since the enactment of its 2011 “Level Playing Field Act,” which “places limits on and establishes requirements for local governments seeking to provide broadband service,” it has meant that “no local government has met the requirements of the statute to provide broadband service to its residents.”

And the result, the Plan says, has been “a limit on the number of options available for broadband service, particularly in areas where the private sector is not providing adequate, affordable service.”

The Plan goes on to note how the statute has also curtailed the construction of open access networks, which have become an increasingly attractive way for states and local communities to create the conditions for competition.

“This statute created a chilling effect for local governments interested in exploring alternative networks like open access networks. Municipalities that own conduit and dark fiber have been reluctant to lease their infrastructure to private internet service providers or create open access networks operated by a private entity for fear of violating the statute.”

“This provision limits the options available to residents, particularly in areas where incumbent internet service providers may not want to provide service. It also unnecessarily restricts existing public service providers from leveraging grants to expand within their jurisdictions.”

While the Plan doesn’t specifically mention the municipal network in Wilson, NC, the city’s Greenlight network is a prime example of what municipal broadband could bring North Carolinians in other parts of the state.

In 2016, Greenlight initiated a partnership with the Wilson Housing Authority (WHA) to connect hundreds of public housing residents to $10/month low-cost fast Internet access. And since the city-owned fiber network was built, it has been credited with helping local businesses thrive while attracting new companies to relocate to the area, which led to Wilson in 2019 being ranked as the 10th best small city in the country to start a business.

Yet, when Greenlight extended the network to its broadband-starved neighbors in the Pinetops, the cable lobby pounced and forced Wilson to sell its assets and stop offering service in that community, which eventually became the subject of the short documentary “Do Not Pass Go: The Battle for Broadband.”

South Carolina Residents Tired of Monopoly Rule

Of all the state’s with preemption laws that block municipal broadband, South Carolina’s Five Year Action Plan goes the furthest in shining a light on how it will hamstring BEAD funded projects–unless state lawmakers remove the barriers.

The Plan highlights the bevy of complaints state officials got when they hosted “roadshow events” to get public input.

“Throughout these roadshow events, the general public expressed a lack of trust in ISPs (Internet service providers). This was a running theme throughout roadshow events and was the most commonly raised issue by participants after expressing that they had a poor connection or no connection to high-speed broadband.”

And in surveys the state conducted to inform its Five Year Action Plan, it became clear that “many South Carolinians do not feel that ISPs are taking their concerns seriously.” The survey found three common complaints:

“1) ISPs are not interested in expanding Internet service if it is not profitable, which can result in lack of access or spotty service in an area; 2) that ISPs are creating monopolies and customers are beholden to the prices and services they offer, regardless of the quality of services; and 3) that ISPs are difficult to contact, are not helpful with repairs and provide confusing information about service offerings and costs.”

State broadband officials even included several direct quotes from the state’s listening sessions that indicate how clearly residents understand the dynamics involved:

“What is being done to stop companies from becoming a monopoly due to the contracts that they make you sign to be able to use their services?”

“[Our] current service does not match the amount of money [we] are spending.”

“There is a monopoly — why don’t we have an array of ISPs to choose from?”

Broadband Office May Raise Preemption Alarm With State Lawmakers

Elsewhere in the state’s Five Year Action Plan, it says the South Carolina Broadband Office “may raise any concerns for the consideration of the State General Assembly.”

The Plan first notes that the infrastructure law stipulates municipalities are eligible to apply for state administered BEAD funds. However, a state law prevents municipal broadband in South Carolina on the grounds that it “ensures that government resources are not used in an unfair, anticompetitive manner and requires various procedural requirements, limitations and additional tax considerations that some may consider to be barriers to the provision of municipal retail broadband service.”

The only exceptions to that law so far have been in Orangeburg and Oconee Counties where municipal broadband service currently exists. However, the Plan says, “municipal broadband networks have to first show that there is no ISP or Internet service available in an area prior to offering retail broadband services.”

Reiterating how “state law intends to ensure that government resources are not duplicative of the market, are efficiently utilized and are not used in an anticompetitive manner,” it may be a bridge too far for state broadband officials to spell out what is obvious to many residents: the broadband market is broken and the idea that local governments competing with deep-pocketed national companies is somehow “unfair” is laughable, at best–to say nothing of the fact that these laws effectively protect monopoly incumbents from competition.

South Carolina Areas of Need

Regardless of intent, the Plan acknowledges that South Carolina’s municipal broadband barrier has meant “no government entity has chosen to make a filing at the Public Service Commission of South Carolina to declare an area is unserved and that the government entity seeks to provide retail Internet service in that unserved area.”

Barriers to municipal broadband aside, the Plan does make the point that local governments can build and own open access networks or “operate broadband networks as wholesale suppliers, leasing its infrastructure to private ISPs that can then offer broadband service to residents,” citing examples in Orangeburg County and Newberry.

Also, the Plan makes it clear that electric cooperatives “can provide retail broadband service in their electric service areas to their members and within two miles of its authorized electric service area,” further adding that “electric cooperatives may go anywhere in the State if provided a state or federal grant.”

Finally, the Plan says, given that the BEAD program “encourages states to address laws that may restrict BEAD participation from nontraditional applicants, such as municipal broadband providers,” in its annual report, “SCBBO may raise any concerns for the consideration of the State General Assembly.”

What About Other States?

A handful of other states with municipal broadband blocking preemption laws have also submitted their Five Year Action Plans or Initial Proposals. They include: Georgia, Montana, Utah, Virginia, Tennessee, and Wisconsin.

You can find links to those plans and proposals at the NTIA website here.

Here you can read a 2020 study presented at the 48th Research Conference on Communication, Information, and Internet Policy that details how “the existence of municipal broadband restrictions tends to lower availability and broadband competition.”

Also below, you can listen to ILSR Community Broadband Networks Initiative Director Christopher Mitchell and CBN’s Associate Director for Communications Sean Gonsalves discuss how various states’ BEAD plans are shaping up.

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Sean Gonsalves

Sean Gonsalves is a a senior reporter, editor and researcher for ILSR’s Community Broadband Networks Initiative. Sean was a longtime former reporter, columnist, and news editor with the Cape Cod Times. He is also a former nationally syndicated columnist in 22 newspapers, including the Oakland Tribune, Kansas City Star and Seattle Post-Intelligencer. His work has also appeared in the Boston Globe, USA Today, the Washington Post and the International Herald-Tribune.