The Recent ALEC Letter to the FCC

Every once in a while I see an idea in this industry that makes me shake my head. Recently ALEC (the American Legislative Exchange Council) wrote a letter to the FCC asking them to override all state and local laws pertaining to making broadband connections. They specifically cite the issues associated with the placement of small cell sites. They urge the FCC to declare broadband to be an ‘interstate’ service and use that as the basis for setting nationwide rules.

It’s easy to understand where ALEC is coming from. It’s an organization that is funded by the largest corporations in the county and the biggest telcos and cable companies help to fund ALEC. Over the years the organization has drafted proposed legislation that benefits the large ISPs, and in recent years ALEC was behind many of the state legislative initiatives to block municipalities from building broadband networks. ALEC has also commissioned various white papers that espouse the positions of the big ISPs. The white papers are generally intended to be used to lobby with state and federal legislators.

I don’t think anybody in the industry is unsympathetic to some of the worst stories being told about locating small cell sites. There certainly are cases where local rules are definitely a barrier to deployment. But this is an area where states and cities are allowed to create local rules.

And it’s not hard to understand why ALEC would petition the FCC. This has to be the most big-carrier friendly FCC in the last century. It’s clear that this FCC would grant the ISPs many of the things on their wish list. If the FCC adopted what ALEC is asking for then the big ISPs could solve their problems in this area in one fell swoop – and they could stop the expensive lobbying effort at the state and local level.

But there are a few flaws in ALEC’s arguments. First, many of the FCC’s rules are the result of legislation passed by Congress. For instance, the FCC has no authority to override anything that was required by the Telecommunications Act of 1996 or many other congressional laws, and that law provided states and localities the right to make local rules concerning rights-of-ways and connections on poles or in conduits. I find it doubtful that the FCC can arbitrarily preempt those specific parts of that Act.

But the most important reason this makes no sense is that it comes just a few weeks before the FCC is likely to reverse Title II regulation of broadband. Once the FCC does that they will have effectively taken themselves out of the broadband regulation business. They will be handing off things like broadband privacy to the Federal Trade Commission, but many areas of broadband will become purely unregulated. The FCC can’t declare broadband to be an interstate service if they don’t regulate broadband.

It’s kind of ironic that the only way the FCC could try to do what ALEC is asking would be by maintaining Title II regulation – the only tool they have for regulating broadband. But once they renounce Title II authority the FCC is greatly weakened in making any regulations concerning broadband. I’ve always asserted that the big ISPs need to be regulated in some manner and this is a perfect example why. A friendly FCC with the authority to regulate broadband could give the big ISPs the things they most want – but the trade-off of being regulated is that it also means accepting things the ISPs don’t want . This request by ALEC is the perfect example of the ISPs wanting things both ways – they want to be regulated where they need it and unregulated where they don’t – but there is no logical ways to have it both ways.

The ISPs biggest fear with having Title II regulation is that some future FCC could use the authority to impose rules they don’t like. They particularly fear a future FCC that tries to regulate broadband prices. The ISPs don’t really have a lot of concerns about this FCC, but these companies have seen the FCC change over time with changes in administrations and they know that the pendulum always eventually swings the other way.

So I sit here and just scratch my head over this. ALEC is asking this FCC, which wants to reduce regulations, to create new regulations. And they want the FCC to use their authority to regulate this issue while at the same time they don’t want the FCC to use that same authority to regulate any other broadband issues. I don’t know if I’ve ever seen a better example of somebody that ‘wants their cake and eats it too’!

Municipal Broadband

One of the fights that I expect to see resurface this year is on the topic of whether local governments should be allowed to build fiber networks and become ISPs. The last FCC tackled this issue in a small way when they granted petitions by Chattanooga, TN and Wilson, NC to expand their broadband networks beyond their electric service territories and municipal boundaries. That ruling got reversed by a US district court and was not appealed by the FCC. But the ruling was of limited scope anyway and only addressed those two cities and didn’t set any precedent for other communities.

There are a lot of moving parts on this topic and it’s hard to know where this might go with the current FCC. This FCC is obviously pro-big ISP and companies like Comcast and AT&T have been staunch opponents of municipal broadband. But by the same token, this administration seems to lean towards states’ rights – and up until now municipal broadband has been regulated on a state-by-state basis.

Interestingly, at the local level municipal broadband has broad bipartisan support. In most communities almost all local politicians of both major parties support local broadband efforts. In my experience in working around the country, the only local political opponents of municipal broadband I have seen are those who are strong opponents of government spending money for anything but essential services. Generally local, state and even federal politicians support local broadband efforts in the communities they serve. I think the broad bipartisan appeal is due to politicians recognizing the strong public support for broadband and that almost every household wants broadband these days.

But there are 22 states with some restrictions on municipal broadband. These range from hurdles that can be overcome, like a referendum, up through states that have a total prohibition on municipal broadband. There has been a continual effort by ALEC (American Legislative Exchange Council) – funded by large corporations – to pass new state restrictions on broadband. But most recent efforts to increase prohibition of local broadband have been rebuffed, because few politicians want to go on the record against broadband. But I would not be surprised to see the big ISPs try to press their current advantage at the FCC and try to pass new national restrictions.

Today I see the municipal world dividing into two separate constituencies – urban and rural. Very few big cities have any desire to become an ISP. But they have legitimate concerns that urban broadband isn’t benefiting everybody. For example, San Francisco and some other cities are unhappy that apartment residents don’t have the same broadband opportunities and options as single family homes. And a lot of cities are still unhappy that after all of these years there is no solution for the digital divide. The FCC said last year that there are still around six million people in pockets of urban areas that don’t have access to broadband that meets the 25 Mbps download standard. But while these issues are viewed as a major problem in urban areas, I don’t see much appetite for big city governments tackling the cost of building broadband networks, which is particularly expensive in cities.

Rural America is a totally different story. We have come to the point where communities without good broadband really suffer. Broadband is not just about Netflix but is necessary to take part in the modern world. Local governments are finding that nobody wants to buy homes without broadband if there is a nearby community with broadband. Worse, communities are seeing businesses move away or bypass them when considering new locations. Lack of broadband puts school kids at a definite disadvantage and there are still a lot of households that drive kids daily to public hotspots just to do homework. And lack of broadband takes away all the opportunities for working at home – probably the biggest area of job growth in rural America.

I see small communities – even down to really small sizes like townships with 700 residents – trying to find ways to build a broadband network. I’ve read a few hundred RFPs from rural communities over the last few years, and probably not more than 5% want to become an ISP. But they will do so if they can’t find a commercial company willing to do it. Rural communities largely favor of public-private partnerships. More and more of them are willing to kick money into a building a network if an ISP will invest in their community and operate a broadband network.

I believe that within a decade we are going to start seeing broadband ‘deserts’ where communities without broadband start withering – just as happened in the past to communities that didn’t get electricity, or that were bypassed by railroads or interstate highways. It’s hard to think that a community today can keep their kids at home without broadband – and this is starting to scare local governments.

I just hope that the FCC doesn’t wade into this battle on the side of the big ISPs. Those big companies are not spending money in rural America – or if they are, it’s only when handed to them by the federal government. And even then they are just putting band-aids on rural broadband rather than building fast new networks. I have a feeling that many of the states that have restrictions on rural broadband are going to start having second thoughts about those restrictions when they realize that broadband is at or near the top of concerns of most of rural America.

There are companies building great rural broadband networks. The small telcos are almost all expanding their service areas to build broadband networks. And many of them are working with or partnering with local governments. But all of these small companies collectively can only solve a relatively small percentage of the rural broadband gap – together they do not have the capacity to borrow anything close to the billions needed to build broadband everywhere. Many rural electric cooperatives are now looking hard at the issue, and they could satisfy another slice of the rural market. But that’s still going to leave millions of rural residents with no broadband on their horizon. And I predict these folks are going to become a vocal constituency that politicians will be unable to ignore.

Squelching Competition

Bell_logo_1969I doubt that many people outside of the broadband industry understand how good the large incumbent cable companies and telcos are at squelching competition. They have a whole arsenal of strategies to make it hard for somebody small to compete against them.

There is no better example of this than the very successful war that these big companies have waged against municipal broadband. I’m not entirely sure why they have singled out municipalities other than they are somewhat of an easy target. Certainly the actions of the incumbents against cities is far out of proportion to the actual threat. On a nationwide basis the amount of competition from municipalities is miniscule. Following are just a few of the strategies they have used against municipalities:

Creating Laws to Prohibit or Curtail Muni Competition. There are now 23 states that have some kind of prohibition or major restriction against broadband competition. Many of these laws have been written by the incumbents and have been passed due to heavy lobbying and political contributions given by the incumbent providers.

Every year there are attempts to pass new restrictions, often using template language developed by ALEC (American Legislative Exchange Council). This group’s authors suggested statutes that benefit their corporate sponsors and in the broadband area they seem to focus on municipal competition. The FCC recently overturned some restrictive anti-muni state laws in Tennessee and North Carolina. The incumbents urged those states to appeal the FCC order, and even before the appeals have been decided in court those states are trying to pass new laws to replace the ones that were overturned.

Lawsuits or Threats of Lawsuits. I can’t recall a lawsuit where the incumbents have been successful in keeping a city out of the broadband business. But lawsuits are great delaying tactics and can cost a lot of money to defend. Lafayette, Louisiana for example was sued several times before it was able to float bonds to build its broadband network. Lexington, Kentucky was recently sued and they hadn’t even yet found a broadband partner. But lawsuits are a very effective threat and I know cities that have decided not to tackle broadband due to the fear of facing costly suits.

Constant Bad Press. The incumbents sponsor a never-ending barrage of whitepapers and policy research papers that demonstrate that municipal broadband does not work and is a failure. I can think of half a dozen such papers that have attacked Lafayette since they have been in business.

The problem with these papers is that they are full of lies and inaccuracies. While there have been a few municipal failures with broadband networks, most of the operating muni networks are happy with their results and are covering their costs of operations while bringing true competition to their community. The main purpose of these papers is to persuade politicians that muni broadband is a failure – even when it is not.

The anti-competitive tactics aren’t just used against municipalities. Any CLEC that has to interface with a large telco network can recite a long string of stories of how difficult the big companies make it for them to operate. Something as simple as ordering a new circuit or connecting with incumbents can take forever and can cost far more than its worth. The big telcos began almost immediately after the Telecommunications Act of 1996 to make the prescribed processes as non-functional as possible. The intransigence of the large telcos contributed to driving some CLECs out of business.

Even very large competitors are not immune to the delays that the big monopolies can throw at them. The issues that Google is having in California in getting access to poles shows that even big commercial companies are not immune from the tactics of the telcos and the cable companies to keep them out of their markets for as long as possible.

It’s hard and expensive to fight the incumbents. This short blog barely touches the many tactics they use to thwart competition. They have flocks of lobbyists in DC and at the state level. They make big political contributions and have many allies from statehouses down to city councils. And they don’t seem boldly lie if that might convince a politician to vote their way. There is no question that they are a formidable foe and have proven very good at protecting their monopoly and duopoly markets.