The bill is to prevent a town or municipality from getting into a utility business without a referendum of the citizens to be burdened. Utilities are very expensive to run and more expensive to maintain. With TV cable systems on the decline, and the need for more bells and whistles to compete with satellite systems, internet TV providers as well as Time Warner and ATT U-Verse, there is no way this system will be profitable. Folks, we purchased this system from a company that was bankrupt and had neglected the system for many years.

Not only are we in the hole for the debt maintenance payments but also for the depreciation in value of the system itself. Neither the debt or the upkeep are going to go away and maintenance will only cost more in the future.

I hope that our officials will provide answers to the hard questions already asked and work hard to implement a way out of the utility business. If you wanted to do a service for the citizens, it would have been much more cost effective to allow them to hook onto a system owned and run by a cable system and then we could provide more practical services to our citizens. I would like everyone to think of what we would be talking about if we had our $2 million back: maybe parks, greenways, activities for our children and grandchildren, sidewalks and, oh yes, a Public Works Department with curbside leaf collection.

Just out of curiosity, why if we need money, do we take the Downtown Development director position and move it under the Town payroll and then do away with the MSD tax that was used to pay for that position?

I think people are incorrectly jumping to the conclusion that this legislation is designed to hurt MI-Connection. At the one MI-Connection board of directors meeting that I attended, this legislation was discussed, and the discussion was largely negative.

First, let me state that I am not anti-government. I don’t think government is bad, and I don’t think private enterprise is the solution for everything. Frequently the lines between what services should be provided by government or by private enterprise are blurry.

I do think in most instances private enterprise is better equipped to provide services than government. I believe that the profit motive should be held in check by proper regulation, but I believe that the goal of achieving a profit in a competitive marketplace results in innovation and the cream rising to the top.

The services that are provided by MI-Connection can clearly be provided by a multitude of private enterprise companies. AT&T, Time-Warner, and the satellite providers are the primary examples.

I agree with MI-Connection board member John Venzon that there should exist a ‘level playing field’ for the government entity and the private businesses. But, I disagree that that field would be tilted in the favor of private enterprise were this legislation to pass. I also believe this legislation is in the long-term best interests of our community.

As was mentioned in the recent article about the public hearing for the town’s proposed budget, there appears to be sincere sentiment amongst the Davidson board to find a way to reward citizens who subscribe to MI-Connection, and that reward would take the form of a reduction in the new solid waste fee or something similar. This sentiment is wrong for two reasons: First, we should want people to subscribe to MI-Connection because it provides a good service at a competitive price. We don’t want to further subsidize MI-Connection by dropping tax rates for subscribers. Second, if the government offers this incentive than the playing field is totally out of level. A private enterprise cannot entice customers by offering a reduction in taxes if they sign up. This is simply not fair.

MI-Connection and our elected officials should not fear putting any future borrowing to the people. Many times they have referred to us as shareholders. In the world of private enterprises, shareholders do get votes. It should not be any different for MI-Connection.

The primary problem with giving a government entity an advantage over private enterprise is that it discourages investment by private enterprise. Ultimately, it is private enterprises that are the innovators in our economy. The list of consumer technologies that have been invented by government (particularly underfunded local governments) is a short one. Conversely, there is a very long list of innovative technologies that have been developed by private enterprise. Apple, Google, facebook and others are all private enterprise companies.

By giving the government a leg up on private enterprise companies, we risk private enterprise abandoning our area, and we risk being left behind as new technologies are introduced by private enterprise companies in other areas. My biggest fear with our ownership of MI-Connection is that technologies will come along to replace it, and then Davidson will be at a complete disadvantage to other communities. Right now MI-Connection has a good system that allows Davidson to compete on the basis of technology with our surrounding communities that are served by Time-Warner, AT&T and others. But, as those multi-billion dollar companies continually invest in newer and better technology, will we be able to keep up? Will we lose the battle for businesses and people because we can no longer offer the latest and greatest in connectivity? The question that needs to be asked of MI-Connection is ‘what are you doing to ensure you remain state-of-the-art in connectivity?’

In the short term, it may be true that this legislation could hurt our community. But in the long term it is essential that we allow private enterprise to compete for our business. A truly level playing field is in the best interests of Davidson.

A few comments:

Cable TV systems are not on the decline. They remain immensely profitable. The services that make the most money are changing however. It used to be cable TV made up the bulk of revenue. That is now shifting to broadband. Eventually, cable systems will use a broadband platform to deliver all of their services.
Adelphia had neglected its system for a LONG time. That is why buying a legacy system can be an administrative and upgrade nightmare. Everyone underestimates the costs to get things modernized. But once that upgrade process is complete, assuming you have a platform for easy expansion, the big costs are behind you. I think MI-Connection’s upgrades have gotten them in a good position for operating a workhorse system for at least the next 20 years. For new builds, there is only one smart option – fiber to the home or a fiber to the neighborhood system that is easily upgradeable.
Maintenance costs on modern facilities are actually lower than legacy systems. The reliability of parts and the upgrade path for headend equipment is far better than the 80s and 90s – much cheaper, too.
About public vs. private systems: I think your community needs to consider the track record of the last 25 years and decide:

a) Have we gotten the services we really wanted to have or have we been forced to settle for what services a company was willing to provide?

b) North Carolina’s broadband ranking is near the bottom among all 50 states. Can MI-Connection provide superior broadband that can serve as an economic driver for the community’s private sector? Can it be leveraged for education, health care, and attracting new residents to the area?

I’ve watched the cable, satellite, telephone and broadband industry since the 1980s. I’ve heard the deregulatory rhetoric promoting private innovation and competition and that is accurate only when there is actual robust competition. I recall similar arguments during debate over the 1996 Communications Act, which allowed today’s telecom platform to exist.

What Congress expected was a deregulatory approach that would facilitate telecom companies and utilities to all compete with one another, providing robust innovation, price competition, and improved service.

At the outset, we did have some excellent examples of innovation, primarily to allow different companies to compete with each other. Phone companies developed IPTV which allowed television pictures over legacy copper wire phone lines, cable systems developed cable modem broadband and Voice Over IP implementations for Internet and “digital phone” service, and some electric utilities began to leverage their fiber networks for telecom services.

But then the innovation stopped and Wall Street-fueled industry consolidation began. In just a decade, AT&T has largely restored its national reach (excepting Qwest and Verizon), cable industry consolidation has allowed Comcast and Time Warner Cable to control the majority of today’s cable households, and the much ballyhooed “competition” today only provides lower prices for new customers for a limited time. After that, the industry brings rate increase after rate increase. The investment that is there fuels additional consolidation, not innovation.

Today’s Wall Street-model allows for one phone and one cable company to compete, but forbids price wars. Third entrants are discouraged, and no phone or cable company will build a competing system in another phone or cable company’s service area.

The biggest discouragement for massive investment in broadband and advanced fiber networks doesn’t come from municipal systems – it comes from Wall Street bankers.

When Verizon began its FiOS fiber to the home system, the most difficult obstacle to overcome was Wall Street. Analysts downgraded the stock and were outraged Verizon was going to spend a ton of money to build a fiber network they felt was not competitively necessary.

For them, providing second-class service in smaller cities and rural areas where competition is negligible and customers are captive was more than enough. In fact, even with AT&T providing its U-verse service in some communities, the cable industry does not feel particularly threatened. Much like in the wireless world, both players establish near-equivalent pricing and strenuously avoids price wars.

The game-changer comes when a municipal player shows up to break the comfortable duopoly. For the first time, private incumbent players are forced to upgrade and do better.

In Minnesota, for example, TDS Telecom (an independent phone company) refused to provide communities with anything beyond the lowest class DSL service – a decade-old technology that kept communities in the slow lane. One local community demanded more and TDS said no. So they built their own municipal broadband system. The moment that system went live, TDS committed to wiring fiber optic service throughout that community to compete.

The existence of the municipal competitor shook up the duopoly’s standard operating procedure that hadn’t spent on upgrading service or facilities in years. Municipal broadband was the factor that drove investment. It didn’t discourage it.

The most important thing Davidson needs to do is hire experienced advisers to help them properly market and manage their municipal system. Most local governments are not inherently equipped to understand how to effectively compete in this marketplace. Broadband speeds must be higher and more affordable than the competition. As much a-la-carte choice as cable TV contracts allow should be a part of the cable package. Telephone service should be simple for all to understand.

Compelling someone to switch from one provider to another only comes by offering an outstanding package of services (and quality of service) that will drive consumers to make the municipal choice. This must not be left up to guesswork. It can make all the difference between a profitable and stable municipal provider vs. a failed system.

As far as North Carolina’s muni-killer bill goes, all you have to do is follow the money. This isn’t about protecting taxpayers – it’s about protecting the incumbent phone and cable companies which give generously to the bill’s supporters. There is no level playing field in a bill that compels referendums on EVERYTHING down to system repairs.

We’ve watched these bills over more than a dozen states. They are always driven by local cable and phone companies, are designed to kill competition, and when they are successful, consumers continue to get substandard service at ever-increasing prices. The “level playing field” is only for the incumbent providers. Consumers increasingly can’t afford the admission price to even see the game.

Phillip Dampier
Editor, Stop the Cap!