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Preemption, Local Authority, & Municipal Broadband – Episode 10 of the Building Local Power Podcast

| Written by Nick Stumo-Langer | No Comments | Updated on Jan 26, 2017 The content that follows was originally published on the Institute for Local Self-Reliance website at https://ilsr.org/preemption-episode-10-of-the-building-local-power-podcast/

Welcome to episode ten of the Building Local Power podcast. For full transcript of the podcast, click here.

In this episode, John Farrell, the director of ILSR’s Energy Democracy initiative, interviews Christopher Mitchell (our usual podcast host) and Lisa Gonzalez of our Community Broadband Networks initiative. The three discuss the power of municipal broadband networks, how the power held in cities is integral to these projects, and the barriers put in place by cable monopolies to prevent these networks.

Gonzalez and Mitchell dive deep into a few models that have benefitted their communities across the nation.

“These big cable and telephone companies are against competition,” says Chris Mitchell. “For them, they’ve grown up in monopoly environments. They are opposed to private-sector competition and public-sector competition.”

Play

Here are Christopher and Lisa’s reading/watching recommendations:

From Lisa: Genius on Hold is available on Netflix, currently:

From Chris:

The Deal of the Century: The Breakup of AT&T by Steve Coll, Atheneum

Be sure to read up on some of our Community Broadband Network initiative’s other work, as well as a previous Building Local Power episode Christopher and Lisa spoke on:

If you missed our podcast make sure to bookmark our Building Local Power Podcast Homepage. Please give us a review and rating on iTunes or wherever you subscribe to podcasts.

View the full transcript of the podcast, below.

Full Transcript of Podcast:

John Farrell Chris, tell me how Comcast is ruining your Sunday nights.
Chris Mitchell: Even before I came to the Institute for Local Self-Reliance, I was a photographer. When I’m done at the end of a weekend – I do a lot of sports photography – I have to upload those files to clients. If I was in Chattanooga or a place where I get a very high-quality internet connection, that would take me on the order of 10, 15, 16 seconds, depending on how large of a shoot I had done, basically. Instead, it takes me over a half hour. Which means on a Sunday night, when I’m done and I want to go to bed, I have to stay up to make sure the transfer clears and everything goes there.

This is better than it was five years ago when it would take more than an hour. Comcast has modestly increased my speed, but it’s pretty significant, frankly. I find it a little bit frustrating, especially because I’m actually paying more for my crap connection than people are paying in Chattanooga for a much better connection.

John Farrell: Welcome to another edition of the Institute for Local Self-Reliance’s Building Local Power podcast. I’m guest host, John Farrell, Director of the Energy Initiative here at the Institute for Local Self-Reliance. I want to remind you that wherever you have found us, if you like what you’re hearing, please take a minute to rate this podcast to help others find it. Remember, it’s the Building Local Power podcast. If you don’t like it, it’s the Community Broadband Bits podcast. This episode, I’m joined by Director of our Community Broadband Networks Initiative, Christopher Mitchell-
Chris Mitchell: Hello.
John Farrell: And Lisa Gonzalez, also a Senior Researcher on the same initiative.
Lisa Gonzalez: Hey, John.
John Farrell: In this episode, we’re going to be talking about situations where states have been stepping in to stop cities from making investments in local networks for faster and more affordable broadband. I just have to say I’m puzzled by this notion. It seems like broadband is an essential piece of infrastructure in the 21st Century economy. If cities want to step in and do something to make it better, why are states passing laws to preempt local authority over broadband? Can you give a couple of examples of where that’s happening?
Chris Mitchell: Yes, we can. I don’t want to burst your bubble, John, but in the United States, sometimes things are done to protect certain industries that have very good lobbyists or have a lot of money that they can donate to campaigns. Let’s just come right out and say that I don’t think there is a good policy reason to restrict local authority in these matters. The reason it’s usually done is the cable and telephone companies, they do not want to deal with restrictions, so they go to the state legislature and they say, “It is unfair for us to have to compete with cities because us at Comcast, we only have billions of dollars in profit, to say nothing of the tens of billions of dollars in revenue, hundreds of billions of dollar in revenue.”
John Farrell: I’m picking up the sarcasm here, Chris.
Chris Mitchell: I’ve been told sarcasm is a very bad tool to use. Let’s just say that they will cast themselves – this big, multinational, incredibly-profitable company – as being the underdog versus a city that is taking action because its local businesses are literally saying, “If you don’t do something as the city to get better internet access, we are going to have to move our jobs to another city that has good internet access.” That’s the dynamic that’s playing out. I think Lisa’s seen this in many cases as well.
Lisa Gonzalez: That’s right. Let’s also talk a little bit about their code words, because how do they describe themselves to the public? They say, “We’re protecting the taxpayer.”
Chris Mitchell: Right.
Lisa Gonzalez: They say, “We do this because we want to make sure that local communities don’t spend taxes on failures.” What do we know about municipal networks? There’s only a few that the anti-municipal network lobbyists use because there are only a few that haven’t done very well. We have a map that has over 400 examples of municipal networks, publicly-owned networks, that have done very well. We hear the same four or five examples used over and over again because they can’t think of any more.
John Farrell: This is a great opportunity. Let’s name a couple of these places that have taken these efforts to see what it is that these telecom companies are trying to protect us from.
Chris Mitchell: Sure. Well, Chattanooga is one that everyone knows about. They have done a wonderful job, but you can find tons about them anywhere you look. I would say Lafayette, Louisiana is a great example. Lafayette, Louisiana is a place that has an incredible culture, but did not have any tech infrastructure. They didn’t have a lot of high-tech jobs.

One of the things that the mayor there, who I’ve gotten to know quite well, Joey Durel, had said was they were very frustrated that their kids would grow up in Lafayette, in the heart of Cajun country, and they’d have to move to Dallas or Houston to get high-paying jobs, to get good jobs. He wanted to fix that. I think, Lisa, you’ve been tracking this closer than I have.

Lisa Gonzalez: Right. Lafayette is now being called, “The Silicon Bayou.” One of the reasons is because they’ve been attracting companies that are coming there because they had this great network and are bringing high-tech jobs, well-paying jobs. In 2014, there were three companies that came there bringing about 1,400 jobs to the community, all because of the network, all because they were high-tech jobs that needed high-speed connectivity.
John Farrell: What’s better about their network than what they had before?
Chris Mitchell: Actually, I just want to make a point. Because some people will think, “Oh, well, they didn’t have internet access before,” but they did. They had Cox Cable, a cable company that is one of the larger ones in the nation. They had service that was not quite as good as the top cable services, but it was pretty similar cable service you can get in any major metro.

That is not good enough if you’re a major tech company. You need very high-quality access. In particular, you need high-quality upload speeds. A lot of us at home, we have higher download speeds than upload speeds. It might be okay because we’re not going to upload as much, although that’s really been changing in recent years. If you’re a business, you need to make sure you can get files out to clients. You need to make sure you can do offsite data backup immediately. You don’t want to be waiting all night to make sure that something is backed up offsite to be secured. There’s all kinds of reasons in which you need a high-quality connectivity, which actually even goes – and we’re not going to get very technical – but you get into all sort of issues with latency and other kinds of technical measures of quality for an internet connection that you do not get on DSL and cable.

John Farrell: The network in Lafayette then is that it’s not only faster than what was offered before, but it also was, I know the term that you use sometimes is symmetrical, which is to say the upload speed is as fast as the download speed.
Chris Mitchell: Right. Right. You have all of these technical issues that are better. It’s basically a modern network or a next-generation network, we sometimes call it, rather than a last-generation network, an older network like cable and DSL. It’s last-generation’s technologies.

Now, here’s a couple of other things, too. They don’t raise their prices every year. They don’t engage in this misleading promotional pricing, where you pay one price for a little while and sometimes the cable company won’t even tell you what you’ll be paying in six months. They have transparent pricing that stays pretty stable over time. They don’t try to rip you off. They have good customer service when you have a problem, if you do have a problem.

There’s all kinds of other differences, too, that we tend to gloss over. They’ve done an incredible job, but there are places that didn’t have as good of internet access and really decided that they had to do more. I think maybe it would be just helpful if, Lisa – you’ve been running the website for a long time now – what are some of the big savings that we’ve seen from communities building these networks?

Lisa Gonzalez: I think probably the most striking example I’ve seen of savings is Martin County, Florida. We did a case study on this a couple years ago.
Chris Mitchell: We did? You did it!
Lisa Gonzalez: Yeah, well, I did most of it. Martin County, Florida had a franchise agreement with Comcast. It was at the end of the contract and the franchise agreement had a provision wherein Comcast would provide a network for the municipal facilities to be connected.
Chris Mitchell: Cities wanted networks. Cable companies wanted to build in the right of way because they didn’t want to have to negotiate with every property owner. A cable company comes to a city-
John Farrell: When you’re saying, “the right of way,” you’re saying they want to put the wires under the street. They don’t want to have to run them from house to house over lots of private property.
Chris Mitchell: Right. You don’t want to have to negotiate with every property owner, right, to put a pole in there. They want access to the existing utility poles or to conduit under the ground. That’s city property. The city manages it on behalf of the public.

The goal is is that the cable company gets what it wants, but it has to pay for that. One of the ways it paid for that was to give franchise fees to pay the city some percentage of the cable proceeds of their revenues, but also to do some other things including wiring broadband to key anchor institutions like schools and libraries, police stations, and that sort of thing. This all changed in the ’90’s is what Lisa’s saying.

Lisa Gonzalez: Right. When they were at the end of the contract, Comcast said, “We don’t really want to do this anymore. Not for free.” Although, it wasn’t really free, as Chris just explained. “We want to start charging you for services.” The figure that they gave Martin County was something like 300 times on what they had been paying in the past.

Martin County, when they ran the numbers, they realized it was just more cost-effective for them to deploy their own network and run it themselves. The county and the school district partnered together to pay for this and they did use E-Rate, also, to help pay for some of the infrastructure costs.

Chris Mitchell: A federal program we’re not going to get into.
Lisa Gonzalez: Right. Over the course of the next 30-year period, when they realized how much they’ve saved, it comes to $30 million. We’re talking savings. When you break that down to what the school … Let’s just talk about what the school was paying for connectivity per megabit. By Comcast’s proposal, they would have been paying $526 per megabit. With what they’re paying to the county for connectivity, it’s 51 cents.
John Farrell: Orders of magnitude more expensive to stay with the incumbent cable company.
Lisa Gonzalez:  Right, right.
Chris Mitchell:  Right, not only that, they actually ended up with a network that was far superior.
Lisa Gonzalez:  Yes.
Chris Mitchell: We’re talking about Florida here. They had a network that was not redundant and was on poles. They have a network now which is redundant, which means if something goes wrong, the network will stay up, and it’s underground, which makes me feel safer if my public safety facilities are connected underground in hurricane country. The benefits to the public are remarkable.
John Farrell: How many communities are doing this? I think you alluded to this before. We keep a map, actually. ILSR has a map of all the communities that have done this. How many communities are there that are doing things like Martin County or Lafayette?
Chris Mitchell: We’re getting near 500 that we’re tracking. I should say very carefully the number of communities that are doing something like Martin County, where they’re focused on the local anchor institutions, it must be over 1,000. It’s very hard to track them down because there’s not a lot of press releases saying, “Hey, we’re just going to build a wire to connect our police stations and things like that.” The number of communities that is actually providing a service that is available to the public, whether it’s a local business district or the entire community, is approaching 500. The number of places where it’s available citywide is closer to 150. What one of the important things is is that it’s growing very rapidly.
John Farrell: What I’m hearing is that there’s different ways communities can do this. Sometimes you can just do it for public institutions, public buildings. Obviously, there are huge cost savings in Martin County and no doubt in other places. Or you can actually deploy this to the entire community. That, as I understand it, is where you get into these preemption fights at the state level where the enormous multinational cable company says, “We can’t afford to compete with Lafayette, Louisiana, or Chattanooga,” or some other place that wants to deploy a public network available to everybody.
Chris Mitchell: Right. I think it’s worth just reiterating one more time that these big cable and telephone companies, they’re against competition. Right? That is, for them, they’ve grown up largely in monopoly environments, which is the case prior to 1996. They are opposed to private-sector competition and public-sector competition. Their talking points trying to stop local governments from doing this are very much focused on public versus private, but it’s not because they would actually welcome private competition. It’s just convenient for them to argue in that way.One of the ways it breaks down is that a lot of local governments, I mean more than half of the ones that we’re tracking, are making investments and trying to make that available to the private sector. Chattanooga, Lafayette, Wilson, North Carolina, a lot of these communities – they provide service themselves. A lot more communities want to figure out how they can just enable others to provide services. Mount Vernon in Washington or Westminster in Maryland, they want to make sure that they’re creating a market. They want to invest in infrastructure, fiber-optic cables, or conduit, or things that you just think of it as making it easier for a private-sector ISP to offer services. They want to basically make it so it’s very easy to have competition for services in their community.
John Farrell: Maybe another way to think of this is rather than having competing road networks, building up duplicative infrastructure for different cable companies or internet providers to compete, the city builds one set of roads, and then the package delivery companies – Amazon, DHL, FedEx, whatever – all get to compete to offer services using that public infrastructure.
Chris Mitchell: Yeah, it’s almost like you’ve been reading our work, John. That is absolutely the analogy that I would use.
John Farrell: Do you think that there’s one kind of model that’s better for communities than others? It sounds like the Martin County example is small-scale, but has huge savings. On the other hand, you have Chattanooga or Lafayette that are attracting tons of new businesses because of the fact that their internet services are so competitive. Would you push a community in any particular direction?
Lisa Gonzalez: Absolutely not. I think it depends on what the community wants, their vision, what they need, what they already have. Each community is unique and we found this out. There are certain characteristics that each community has that they might find similar in other communities that have followed particular models that they may want to investigate further and maybe mirror, but every community is different. Every community needs to approach their answer uniquely.
Chris Mitchell: Yeah, I would just pile onto that and say that it’s kind of an interesting puzzle in that most of the communities that have built networks have not used taxpayer dollars. They’ve borrowed and then they’ve repaid the investors with revenues from the network without using any taxpayer dollars. Now, that’s starting to change a little bit. Some communities are looking at this and they’re thinking, “You know what, we should use some taxpayer dollars. We should build the network and, sure, the revenues from the network will help, but we’re going to build it and we’re going to make sure that our focus is on indirect benefits, is on education, is on drawing attention, drawing businesses into the community. For us, we’re looking at this as an infrastructure.”

Now, there’s some communities that would say, “We would never put taxpayer dollars into this.” There’s already been several – some of them are very conservative, some of them are very liberal – that have said, “This is a basic infrastructure, so we’re going to use our taxpayer dollars.” When Lisa and I are advising a community, we would never come in and just say, “This is the way you should do it.”

John Farrell: Let’s go back to the preemption question one more time here. You have these states, a number of different states – I think a policy was just introduced in Virginia to more severely constrict what kind of municipalities can do networks – they’re not putting taxpayer dollars at risk. The vast majority are successful. What’s the point of a preemption policy? Who is it serving?
Chris Mitchell: It’s absolutely serving the cable and telephone companies. The point is when we have an open discussion about this sort of thing, it’s a different result than the normal process. The cable and telephone companies, they own state legislatures in the sense that they put a lot of money into lobbying. They have great relationships. There’s no natural opposition to them.

You work in energy, John, where there tends to be more local groups. Not a lot, but there are some local groups that have some expertise and might be trying to lobby one way or another. Certainly now, there’s actually groups that are favoring renewable energy that are actually pretty good at lobbying.

John Farrell: Let me just jump in and just make that analogy, because I was going to ask that question. Specifically in the electricity business, we have a lot of disruption happening because of solar power. I mean, there are lots of other technologies, too, whether it’s electric vehicles or what have you, but solar power has fundamentally changed the system in that an individual person can now be a power generator. Are there disruptive technologies like that or is it like you said, there really is no natural opposition, so these cable and telephone monopolies don’t have any kind of countervailing power facing them down at the legislature?
Chris Mitchell: I think that’s a hard question to answer, but there’s a little more history here because we went through this all in the late ’90’s when Congress and the federal government changed the policy and opened it up so there could be lots of competition. We had 10,000 – a little less than that, like 7,500, 8,000 – ISPs and they were called CLECs at the time.

The point was was that when you and I, John, when we were in high school, we were getting on the internet, we could go to any company in town. Right? We’re using dial-up modems and we would go to these companies. Those were all these companies that came about from a result of Congress changing policy and allowing them to enter that market. They almost all got crushed and destroyed because of changes in federal policy, because the incumbents were so good at lobbying in the late ’90’s and early 2000’s. Over time, they really learned a lesson.

You come back to now. There’s not a vibrant movement of independent service providers that are lobbying against anti-competitive bills in the statehouse. Which is to say that when a cable company goes to the statehouse and says, “We need to outlaw this competition,” a legislator might turn around and say, “Well, who can I talk to to get the opposite opinion?” There’s no one. Right? There might be a municipal league of cities, which is then consulting with someone like us to try and figure out what they can say, but that’s only one of many issues for them. There is almost nobody in every state whose primary issue is to look after the telecommunications interests of small businesses and residents. There’s just a vacuum.

Honestly, our number one defense when Virginia or Missouri, which are two states which are right now considering these bills to really restrict local authority, our number one goal is to make sure the press is reporting about it. Because when the press reports about these bills, people write in. They get very frustrated. They call. They overload the switchboards in some cases. Then the bill disappears.

John Farrell: That’s because unlike when they call their cable companies, somebody actually answers the phone.
Chris Mitchell: Right, right. Well, or there’s an answering machine, but a legislator that’s thinking, “I can just do this and nobody’s going to notice or care,” when people start noticing or caring, they think, “I have other priorities. I’m going to worry about something else rather than this cable and telephone company who I know will be around next year to give me more money to try and push this bill through again and hopefully no one will notice then.”
John Farrell: Well, I think we’ve covered it pretty well about why preemption is a bad idea and how municipal networks can be very good for communities.
Chris Mitchell: Let me just say that you mentioned our Community Broadband Bits podcast, which Lisa does an incredible job editing, we have 240 episodes almost now cataloging these local stories. There’s a wonderful back catalog that, if people are interested in the actual local stories, that they can check out.
John Farrell: Just out of curiosity, if I’m looking at the map, for example, on our website, can I tell if you’ve told a story about that community from there?
Chris Mitchell: Each city that we’ve written about has a link to all of our coverage of that community, so you can click on that community and then you can see what we’ve written about it and if we had a podcast, it would be included in that.
John Farrell: Excellent. Well, that’s a perfect reminder for folks who are listening. Please take a moment, whether it’s on iTunes or Stitcher or wherever you found this podcast, to review this podcast. Let us know how we’re doing. Other people can’t learn about it if you don’t tell them whether or not this was good or not. I just was on iTunes the other day. They won’t even show the reviews until we get to a certain threshold. Help us out there. Remember, the Building Local Power podcast, if you like it and I’ll leave it there. Our final question for you, both for Lisa and for Chris, what’s something you’ve read recently that we should read, too?
Chris Mitchell: There’s so many different things, but I thought I would come down with a book that I just read, which is quite old, which is The Deal of the Century, by Steve Coll, which details the breakup of AT&T in the ’80’s. I had no idea the deep history, but it really touches on anti-monopoly and anti-trust policy, which is something that we care so much about here at ILSR. I think it’s an incredible read to just look back at that era.

I think it’s important to note that if you look at the result of that breakup now, I think it’s been good in the sense that I don’t think the internet would have developed if AT&T continued to have a monopoly. We also went from an era in which Americans all had good access to telecommunications of the day, telephones that worked at reasonable prices. We have moved into an era in which telephones do not work very well and we pay an incredible amount for our telecommunications bills. I am a very big fan of competition, but I think it’s also important to recognize that there are trade-offs and it is not by any means a clear win to have competition.

John Farrell: Well, let me pushback on that concept, though, Chris, because what you’re saying is that competition may not lead to the same outcome as the monopoly did under AT&T. What I’ve also heard you say before is we don’t really have a competitive marketplace for telecommunications. Maybe we don’t know what could be delivered in a competitive market at this point because we’ve gone from one monopoly that was well-regulated to a lot of monopolies that have a lot of market power and political power to crush their competition.
Chris Mitchell: You are absolutely right. I think one of the questions we have to deal with as a country is whether or not we truly want competition, because competition may involve government policy that we’re not so comfortable with. One thing here in Minnesota right now is whether or not liquor stores should be open on Sundays. Minnesota is one of many states that has long prevented liquor stores from being open on Sundays.

Some people cite religious reasons, but it’s really about preserving small businesses because it’s harder for them to be open seven days a week. That is a policy that a lot of people look at and say, “Government shouldn’t be regulating that,” but it’s also a pro-competition policy. Pro-competition policies are hard and they may look like the government’s putting its thumb on the scales more than people are naturally used to, but that might be what it takes to truly establish a competitive market in a lot of areas.

John Farrell: That’s a really interesting insight into that law. One that I wasn’t aware of, so thanks for sharing. Lisa, did you have a book to share?
Lisa Gonzalez: Actually, I want to recommend a video, and it happens to be on Netflix right now, because I saw it last weekend. One of the reasons why I’m recommending it is because it dovetails off Chris’ book recommendation. It’s called, Genius on Hold. It’s about an inventor. His name is Walter Shaw. He worked for AT&T back when it was a monopoly. He worked there when it went through the regulatory breakup. He was a tinkerer and he was not somebody who had been to college. He was just one of those guys who just get it and can do it.
Chris Mitchell: John and I are familiar with those people. Sorry.
Lisa Gonzalez: It follows the whole legal story of AT&T breaking up, but at the same time it talks about the social implications on this gentleman’s life because AT&T really had it out for this guy because they were intimidated by him and what he could do. What they effectively did was prevent him from earning a living. He ended up working for the mob creating these little inventions that allowed them to break the law, because they could talk on the phone without having their phone calls tapped by the government.

It just follows him and his family and his life and, at the same time, what was going on with the AT&T breakup and all of the stuff that was going on with them. It’s just a really interesting story because it talks about anti-competitive implications and monopolies, but at the same time it brings it to a real-world perspective. It’s called, Genius on Hold.

John Farrell: Most of the time, we don’t go so far as to say that monopoly behavior will make us work for the mob, but I think that this could be an interesting way to learn more about that. Thanks, Lisa.
Lisa Gonzalez: Thanks, John
Chris Mitchell: Thank you, John.
John Farrell: You’re welcome.
Lisa Gonzalez: That was John Farrell hosting the Building Local Power podcast this week. John’s the Director of ILSR’s Energy Democracy Initiative and he took some time to interview Christopher and me about state preemption and local authority as it pertains to municipal broadband networks. Thanks, John.

We have a number of other resources on preemption and local authority at our website dedicated to community broadband, muninetworks.org. At that site, you can also find the interactive Community Networks Map we discussed during the interview. Take a few moments to check it out.

This was Episode #10 of the Building Local Power podcast. We encourage you to subscribe to Building Local Power and all of our other podcasts on iTunes, Stitcher, or wherever else you get your podcasts. Never miss out on our original research by also subscribing to our monthly newsletter at ILSR.org.

Thanks to Dysfunction_AL for the music, license through Creative Commons. The song is, “Funk Interlude.” I’m Lisa Gonzalez from the Institute for Local Self-Reliance. Thanks again for listening to the Building Local Power podcast. Catch you next time.


Audio Credit: Funk Interlude by Dysfunction_AL Ft: Fourstones – Scomber (Bonus Track). Copyright 2016 Licensed under a Creative Commons Attribution Noncommercial (3.0) license.