Updated Thursday, 6/3/10, 2:30 p.m.
The North Carolina Senate on Thursday adopted a minor amendment and sent on to a final reading a bill that would suspend for a year any new financing for city or town owned high-speed data services.
The senate is expected to schedule a third reading of the bill on Monday, June 7. If it passes then, it would be sent to the House for consideration.
The bill (S1209) is a revised version of the one originally introduced last month by Sen. David Hoyle (D-Gaston County). It is moving quickly through the legislature. Thursday’s action came after the Senate Finance Committee on Wednesday approved the bill and sent it to the full Senate.
The legislation is backed by the state’s large telecommunications and cable providers and is part of an ongoing effort to keep local governments from competing in the network business. Opposing the bill are municipally owned cable and internet systems and local officials in areas that aren’t currently served by the private sector.
If approved, the ban on new financing is unlikely to have any immediate effect on MI-Connection Communications System, the system’s general manager said Thursday morning.
The towns of Davidson and Mooresville have borrowed $92.5 million in recent years to buy and upgrade the former Adelphia Cable system. The company has not met original growth projections, and has had to turn to Mooresville and Davidson for subsidies to cover a shortfall.
In theory, a ban on financing could limit MI-Connection’s ability to pay for new equipment or upgrades. But MI-Connection has already spent millions on a badly needed upgrade, and much of its network is new. “We don’t really anticipate any new borrowing,” General Manager Alan Hall said Thursday morning.
The bill now before the Senate is a substitute for one the Finance Committee originally reviewed. That bill would have forced cities and towns to seek voter approval before borrowing money to build or repair high-speed communications networks.
Lobbyists for the state’s cities and towns are opposing the legislation. They’re concerned that the bill could leave rural residents without access to high-speed data services. If private companies decide it’s not worth the investment to offer broadband in rural areas, local officials would be prohibited from filling the gap, they say.
RELATED COVERAGE
See DavidsonNews.net‘s previous coverage of MI-Connection. CLICK HERE>
David — nice work on this issue. You may not be aware that the bill passed by the Senate Finance Committee and working its way through the Senate is actually a compromise bill which is supported by the League of Municipalities, which represents the cities. Also the issue is not one of getting broadband into rural areas — it’s one of what the rules of the game are / should be when cities compete with private business.
Marcus Trathen
Brooks Pierce
Raleigh
Stop the Cap: “Special Report: One-year moratorium on muni broadband in North Carolina: ‘Crazies aren’t going to like this’”
June 3, 2010, StoptheCap.com, “Special Report: One Year Moratorium on Muni-Broadband in North Carolina: “The Crazies Aren’t Gonna Like This””
I am anxiously awaiting a typically well-researched, objective story about this legislation from DavidsonNews.net. The Huntersville Herald ran a story this week, but it presented mostly the viewpoint of the sponsors of this legislation. I’d like to see both sides of this legislation on record.
I do feel that to the extent municipalities participate in private enterprise, the playing field needs to be level. We cannot discourage private enterprise from participating in what is effectively a private enterprise. That may be beneficial in the short-term, but will harm us in the long run.
The gentleman from upstate New York who is now weighing in our cable issue needs to drop the notion that government is this altruistic enterprise that provides basic services to everyone regardless of the cost. I am sure there are instances where private enterprise elects not to provide broadband access to certain areas. But, I would bet that in many of those cases their local governments have also chosen not to provide water or sewer service. The truth is that in many cases people choose to live in areas where it is not cost-effective – for both private companies and governments – to provide certain services. This is not a phenomenon of private enterprise. If elected officials feel that they have to get into the cable business in order to provide broadband to the back forty, then they also need to run a water and sewer line out there as well.
Senate Bill S1209 is necessary to reign in the spending of the public’s money by politicians who seldom understand the consequences of their largess until its way too late.
Had this bill been in place three years ago, it would have simply required a vote of the public in order to proceed with the government purchase of MI-Connection.
Davidson’s board voted unanimously on the purchase. Commissioners in Mooresville voted this purchase on a split decision. The votes were against the will of the people. Had the public been afforded a vote on the expenditure of $92.5 million dollars for a cable business back then, the sensible decision not to proceed would have been firmly endorsed. … and perhaps the town’s employees would not have needed to be “thrown to the wolves” nor a “garbage fee” be trumped up as a discriminatory property tax increase (it hits the least expensive homes the same as the most expensive).
Andy Stevens
Troutman
To Rodney:
Nothing in S1209 mandates that a government entity build its own municipal broadband system. Local governments answer to their citizens to a better degree than most any level of government. If a rural entity sought to build a broadband system that was opposed by its residents, those politicians would be out of office in the next election. They know this and are not going to support unpopular projects.
But the loudest voices clamoring for broadband come from rural communities that do not have it. I can point you to a number of communities that built their own systems because residents demanded someone do something. One of them is less than 10 minutes away from me and is hardly a socialist enclave. Broadband is remarkably bipartisan. The ones in office who are loudest in opposition to community broadband just also happen to be among the top recipients of telecom campaign cash. Follow the money.
You might also be interested to know many states have legislation that requires fiber conduit be installed if/when underground dig projects commence for things like roads, sewers, gas, etc. If the hole is open, drop the conduit in along the way.
I have been in areas that rely on septic systems and well water. Yet they are equipped with electricity and telephone service. Broadband is rapidly becoming just as essential, and the good news is even rural areas can be serviced by at least DSL service over existing telephone lines for relatively minimal investment.
What stops most of these projects from being built by the private sector is return-on-investment requirements. They want 3-4 years tops and that simply makes broadband untenable with those limitations in a lot of rural areas. If a municipality accepts an ROI of 10 years, for example, using future-proof fiber, there will be a whole lot of people getting service that don’t today.
Sen. Hoyle’s bill is a transparent effort to block service from anyone but a private provider, even when they won’t provide the service.
You may recall Ma Bell used to say investments would dry up if the telephone network were opened up for competition. Cable companies say exactly the same thing – allowing in other providers will hurt investment by reducing returns. AT&T got to hear that when it proposed to bring forth U-verse. Now it’s municipal broadband that will somehow kill off the incumbent commercial providers, even though that has never happened. What does happen can be found in Wilson, the only community in North Carolina that avoided a Time Warner rate hike this year. Consumers are saving real money and getting better service from BOTH Time Warner and the municipal provider.
Considering companies like Time Warner also receive tax dollars, I’m not sure why you believe these multi-billion dollar companies need protection from a municipality that builds its own system. If anything, the reverse is true.
Phillip Dampier has been following the progress of North Carolina legislation to limit municipal governments from the communications business. He is editor of Stopthecap.com, a consumer-focused website that covers the telecom and cable industries.
To Phillip:
I understand that SB1209 does not mandate that local governments get into the broadband business. Rather in its current form it mandates that municipalities seek the approval of voters prior to getting into broadband, and once in the broadband business it seeks to ensure a level playing field between public and private enterprise.
I do not disagree that broadband is becoming a necessity these days. I do disagree that cable TV is a necessity, and I disagree that digital phone service is a necessity (there are plenty of other ways to deliver phone service). I also disagree with the notion that everyone is entitled to broadband regardless of where they live. My prior comment merely pointed out that governments make the same cost/benefit decisions as private enterprise, which is why a large number of citizens do not receive essential government-provided services such as water and sewer.
Every locale is different, and there may well be cases where it makes sense that government be the provider of broadband services. But, given the large investment that broadband represents, voters should have a say. If, as you point out, local governments answer to their citizens, they should have no problem with that requirement of SB1209.
I don’t know much about the town of Wilson, NC, but I do know that they have $28 million invested in their broadband system, and right now they have 4,500 customers. That is about a $6,000 investment per customer. In our small town, we are indebted to the tune of also about $6,000 for every customer. By comparison, a cable company in Colorado (Bresnan) just announced that it was being acquired by another company for $2,000 per customer. This disparity shows that private enterprises can typically provide broadband service at much lower costs relative to government.
Many local governments (such as Wilson) that are in broadband also provide other utilities to their citizens, frequently electricity. Often the other utility is used to subsidize broadband (this is the case in Wilson, where the electric utility subsidizes the loss of the broadband utility). So while the Wilsonites may be saving in cable, they could be saving more on electricity were it not for broadband.
In our town, while we may be saving a bit on broadband relative to Time-Warner, we now have a solid waste fee because of the subsidy we must provide to our broadband utility, and the enormity of the subsidy is preventing us from responding to the basic needs that government should provide. When governments need $6,000 to provide service to a customer, and private enterprise can do it for $2,000, ultimately it is going to cost us money.
SB1209 may not be a perfect bill, but I strongly agree with the requirement that massive indebtedness be subject to a vote of the populace. Politicians are fond of saying that we can vote them out if we don’t like their decisions. The problem is that we’re stuck with the debt even if we aren’t stuck with them. I, and I think most people in Davidson, would like a little more input (i.e. a vote) before we take on such a large debt. That time has passed for Davidson, but I think SB1209 can give other citizens of North Carolina an opportunity to have a say in how their tax dollars are spent. That exercise in democracy can’t be a bad thing.