Policy and regulation

Six reasons communities should control their own destiny

Submitted by acohill on Fri, 03/18/2005 - 11:58

Here is a must-read article [link no longer available] that does a better job at articulating the battle between communities and anti-muni legislators and telcos than anything else I have seen. If you are trying to convice legislators to support community projects, take them out to lunch and review the six points in this article with them.

Chicago fights Illinois

Submitted by acohill on Fri, 03/11/2005 - 09:24

Worried that state legislators are going to write the best laws that money can buy and pass an anti-muni telecom bill purportedly authored by the phone company, officials in the City of Chicago are trying to speed approval of a citywide plan to offer public WiFi throughout the city. The Register has a story on it, and here's another. [link no longer available]

Chicago is considering what I recommend, which is a public/private partnership. Chicago will provide access to light poles and other public property for antennas, but a private company will manage the network and sell services. The City will get a franchise fee based on revenue. It's a win/win/win. Consumers get an alternative to DSL (and in many parts of the city, neither DSL nor cable modem service is available), poor neighborhoods get broadband access for the first time, jobs are created in the private sector, and the City gets some income.

The only possible glitch: local governments can't get greedy and turn franchise fees into "revenue enhancement" opportunities. The franchise fee should be based on the real cost to the government of providing right of way, plus a small amount for network expansion. If local government tries to use it instead as a hidden tax (no taxation without representation, right?), it will only hurt the effort.

Build your own TV

Submitted by acohill on Fri, 03/11/2005 - 07:26

Certain parts of the 'net have begun talking about building your own TV. Back when I was a kid, one of my favorite pastimes on rainy days was poring over the Heathkit catalogue. Heath of Benton Harbor, Michigan had a whole catalogue full of electronic kits, ranging from simple transistor radios to things like electronic keyboards and color televisions. I eventually built a shortware receiver, among other home-designed projects.

But with the advent of the microchip, Heath went out of business. Electronic stuff got so cheap no one was interested in putting things together themselves. So why the sudden interest?

We're beginning to see "perfect storms" in several areas. The phone business is becoming a perfect storm. Skype's CEO announced the other day that the company has 29 million users and is adding 155,000 PER DAY. Skype is free for Skype to Skype calls, and they charge a small fee for completing calls to non-Skype users. Skype is using the Google model--mostly free service and offering an optional fee-based service. And we all know what happened to Google.

But Google was not disruptive in the same way that Voice over IP is destroying the phone business because there was no global search business before Google. But the steady increase in broadband users, excellent voice telephony software from companies like Skype, and monopoly pricing from the telecoms has created a perfect storm in telephony that will shortly also swallow the entire cellphone industry, since WiFi carries Skype and other VoIP calls just as easily.

Similarly, the television business is also on very rough seas that will build quickly to a perfect storm. Again, broadband winds have increased the wave height. We're very close to a time when some innovative and brash content developer says, "Heck with the TV industry. We're going to produce a "tv" show and broadcast it over the Internet." The show will be so compelling (I'm guessing a comedy will be first) that millions will download and watch it, even if the picture quality is a little fuzzy. Once we have a single breakout show, the wave height will only get higher and eventually the existing model for television will be swallowed by the monster wave of Internet TV. This storm could start anytime in the next year or so, and TV as we know it will hang for a few years, but with fewer and fewer viewers day by day.

The emerging duopoly

Submitted by acohill on Thu, 03/03/2005 - 16:27

Congresswoman Heather Wilson of New Mexico calls it the "emerging duopoly. This Washington Post article discusses the impact the telephone mergers may have on communities and telephone users. The duopoly refers to a community that has just two telecom companies--one large phone company and one large cable company. These big firms can engage in cartel-like behavior, and the pattern so far has been not to compete on a level playing field but rather to simply buy competitors.

New Hampshire does it right

Submitted by acohill on Tue, 03/01/2005 - 10:15

A bill under consideration by the New Hampshire legislature would give municipalities and regions the statutory authority to use bonds to build out telecom infrastructure. This is exactly the right approach. For one, it's a familiar and successful model that has been used for decades to finance other kinds of public facilities (e.g. roads, water, sewer, industrial parks, etc.). More importantly, it recognizes that there is an issue of the common good here, and that community investments are important to the future of communities.

Let's hope this gets passed. We need some good models for the rest of the country.

Why your broadband stinks

Submitted by acohill on Mon, 02/28/2005 - 16:07

Broadband legal policy expert Lawrence Lessig has a nice summary of the issues swirling around community investments in broadband.

He makes an interesting point regarding industry criticism that community projects are "unfair." With reference to public WiFi projects in community spaces (e.g. streets, parks, public buildings, etc.), Lessig points out that public street lights did not put electric companies out of business. He also provides other examples of public/private competition: public buses compete with private taxis; police departments "compete" with private security forces (like Pinkerton).

It's a short article with a tall dose of common sense, and it would be good to print a copy and mail it to your favorites local and state legislators.

1996 Telecom law may be revised

Submitted by acohill on Fri, 02/25/2005 - 08:31

Here is an excellent article on the growing movement in Washington to take another look at the 1996 Telecom Deregulation Act. There is growing agreement that a) the law worked poorly, if at all, and b) it's now beginning to make things much worse.

Unlikely advocates are emerging to support new legislation. The phone companies want to get into the TV business, which was formerly the exclusive playground of the cable companies. The phone companies are going to go straight to Internet TV. They can do this because more people are tossing dial up over the side of the boat every day and signing up for broadband. And the protocols for delivering video have improved immensely over the past several years. Broadband can deliver TV, at least in a limited way, but the phone companies have realized it is their only way out of the mess they are in--free or very low cost phone service via VoIP is killing them.

The cable companies always tend to be a bit behind, which is pretty damning when you think about it. Would you want to claim you are almost as forward thinking as the phone company? The cable companies want to get into the telephony business, and already claim to have millions of customers. This is a bad direction to head because as I just said, the phone business is dead on the vine. The cable companies have decided to pick some very rotten fruit.

The '96 Telecom Act complicates all this tremendously because the government, in '96, treated TV and telephony differently. Today, both those services are just a stream of electrons shooting down the broadband pipe. It's absurd to view telephony as something deserving of special regulation and a pile of really dumb taxes.

Communities lack a strong, clear voice in Washington, although a few legislators realize this is important stuff. The really smart thing to get rid of the FCC entirely, but there are too many sacred cows who depend on complex rules and complicated taxes. It's hard to know what the current administration will do; when free markets and special interest business monopolies collide, the results are not often pretty.

Florida bill would stop muni telecom systems

Submitted by acohill on Wed, 02/23/2005 - 07:20

Add Florida to the list of states with bills pending to stop municipal and local government investments in telecom.

Across the country, legislators, prodded by the phone and cable companies, are trying to outlaw community investments in telecom. One of the problems is that the discussion is one-sided. There are few consumer and local government advocates getting involved in educating legislators about the benefits of local telecom investments.

Barry Moline, head of the Florida Municipal Electric Association, summed up the debate from the community perspective.

"Why should our communities' needs be based" on whether private companies will provide services?"

One of the red herring arguments being tossed around by the incumbents is the notion that tax money is being used to support these projects. I've been invovled in designing business models for community telecom projects for years, and I've yet to see one that counted on one cent of tax dollars. I've never even heard anyone suggest, even casually, that tax dollars ought to be used. And finally, these simply can't be financed with tax dollars. It doesn't work, and elected leaders know that.

Community telecom projects have to be designed from the ground up to be self-supporting, or they will fail. Services fees have to balance out with the cost of managing and maintaining the network. It's a complete fiction that tax dollars are being used to support these projects, and the incumbents know it. What's really sad is that these companies, instead of choosing to compete honestly and offer their customers the services they want, are instead refusing to provide those services and simultaneously trying to cut off the options of communities to get needed services.

Anti-community legislative roundup

Submitted by acohill on Sun, 02/20/2005 - 10:00

WiFi Net News has a long but informative roundup of all the anti-community legislation in process around the country. While it appears some legislators are resisting teh lobbyist-led push to keep communities at the mercy of the incumbents, it appears that the Philadelphia project (where the City wanted to do a citywide WiFi effort) has motivated the telcos and cable companies to get busy to protect their marketplace monopolies.

While most of the news sites are calling this "anti-muni" legislation, I'm deliberately calling it something else--"antic-community" legislation, because I think that's a better term.

This is an out and out assault on the rights of communities to control their economic future. If the incumbents were open and honest about their plans and were offering good and affordable services, none of these community projects would be underway. But this is an issue of community survival. When Hong Kong is running fiber past a million homes, are communities in the U.S. supposed to sit back and be content with either twenty year old copper technology (DSL, cable modems) or nothing at all?

Affordable broadband is the economic lifeblood of communities. Without affordable broadband, the small businesses of America (remember that small businesses create 75-90% of new jobs) cannot compete in the global economy. While the incumbents are protecting marketshare, communities are becoming increasingly less competitive from and economic development perspective.

Finally, I think communities ought to be regarding their investments like they manage roads, and not like water and sewer. My first choice for communities is to build digital roads and let the private sector create jobs, deliver services, and use those roads to create prosperity in the community.

Creating a new municipal monopoly (i.e. the way water, sewer, and electric is handled) is my second choice. In either case, communities should have the right to make those choices.

Indiana update

Submitted by acohill on Thu, 02/17/2005 - 08:37

The Indiana bill that would have restricted the rights of communities to invest in telecom has died in committee.

The Internet is providing an alternate channel for citizens and community leaders to deal with these issues. In the past, bills like this often got passed into law quietly before anyone even knew about them. Today, most legislatures post proposed legislation on the Internet, open to all to see, and lots of people have the opportunity to review this stuff before it is too late. It's a useful counterbalance to lobbyists.

VoIP being blocked

Submitted by acohill on Tue, 02/15/2005 - 18:52

Om Malik reports on news from law professor Larry Lessig that some VoIP services may be blocked or degraded on some of the incumbent networks. I predicted this many months ago--that the monopoly infrastructure carriers would eventually block VoIP because it competes with their own "antique" phone systems.

Congress and the FCC have generally been friendly toward to VoIP phone service, so expect this to become a huge political issue. The phone companies have the most to lose--namely their entire business, but the cable companies also want to sell telephone service. These dinosaurs will pour billions, if they have to, into the pockets of legislators to get laws that let them keep their monopoly control of their infrastructure, and by extension, monopoly control of the communities that they serve.

This is going to get very ugly. Communities can begin to innoculate themselves from this infection by making prudent investments in telecom. It's the only way to break the monopolies.

Colorado steps on community rights

Submitted by acohill on Mon, 02/14/2005 - 15:42

Add Colorado to a growing list of states that have bills pending in the legislature that would take the right to determine their own future away from communities.

Like other states (are you starting to see a pattern here?), the Colorado bill would require communities that want to invest in broadband to ask the private sector first. That permission is not likely to be forthcoming, and according to the report, even if the private sector declines to offer broadband service, the community is still stuck.

There are some issues here that are worth reviewing.

First, the article talks about (some) broadband initiatives as a way to raise revenue. Some communities are seeing it this way, but they are crazy. It makes no sense at all to invest in public infrastructure as a hidden tax scheme. Why on earth would you spend money that way when using it as a tax collection mechanism makes the community less competitive from an economic development perspective? This is an education problem--community leaders need help understanding telecom is not a way to balance the local budget, but a way to create jobs and create an economic development engine.

Second, it is important to keep our eye on the ball. Hong Kong just announced it is rolling out Gigabit Ethernet to more than a million homes, beginning later this year. Meanwhile, I just got a flyer from Verizon touting DSL. The flyer explains how fast their 1.5 megabit service is because it actually permits 384 kilobit upload speeds. That's right...here is Verizon's math:

384,000 bits/second = 1.5 million bits/second

Huh? Meanwhile, in places like South Korea and Hong Kong, they are getting broadband service hundreds of times faster than we are getting here while our own legislators are trying as hard as they can to hold their own citizens and businesses back.

Verizon buys MCI

Submitted by acohill on Mon, 02/14/2005 - 09:26

It is being widely reported that Verizon has purchased MCI. This was widely predicted once the news came out that SBC was purchasing AT&T.

MCI, as you may recall, was the company that took on AT&T in the early eighties and caused the giant to be split up into seven regional phone companies, with long distance wide open. The result was that long distance rates began dropping, and local service prices went up.

But twenty years later, here we are again with essentially monopoly phone service, although it is now Balkanized. Although there are multiple phone companies, each enjoys marketplace monopoly in its own area.

There is good and bad news in all this. The bad news is that legal deregulation, as practiced by the FCC in 1984 (AT&T breakup) and 1996 (Telecom Dereg Act) does not work BY ITSELF. It is necessary but not sufficient. In both cases, it did not work as expected because the infrastructure to deliver services in communities remained in monopoly control of a single company.

As Alan McAdam, a Cornell economist, has shown in extensive study and research, the only way to counter these marketplace monopolies is to have shared ownership of the infrastructure, with property owners, the community, and the private sector all owning parts of the network.

What is the good news? The good news, of a sort, is that telephone companies are going the way of the dinosaurs. Anyone connected to the Internet has an IP address which uniquely identifies you...kind of like a phone number. The emerging ENUM system maps IP addresses to a personal identifier so that you can take your phone number with you wherever you go, and anyone, using any software that is ENUM-aware, can call you no matter where you are in the world--no phone company required.

It is going to take another five to ten years, but phone companies (including the cellular companies) will be reme

Hands off WiFi

Submitted by acohill on Fri, 02/11/2005 - 15:39

Dianah Neff, the CIO of the City of Philadelphia, has written an interesting article on municipalities and WiFi for CNet.

Philadelphia had ambitious plans to provide WiFi citywide until Verizon jumped into the discussion and got the Pennsylvania legislature to pass a law requiring municipalities to ask Verizon's permission before going into the service business (Philadelphia was exempted, but the whole debacle put the brakes on Philadelphia's effort).

Neff puts her finger on what I think is an essential truth in this whole dust up:

For all the money they've spent lobbying against municipal participation, they could have built the network themselves. The truth, of course, is that the incumbent local exchange carriers want unregulated monopolies over all telecommunications.

Bingo! The article is worth a careful read.

Muni wireless: friends and foes

Submitted by acohill on Tue, 02/01/2005 - 14:21

eWeek has a good article that provides a useful snapshot of anti-muni telecom investment legislation that is that is making the rounds of legislatures (Pennsylvania, Ohio, Indiana).

Some of these laws are so bad it makes your head hurt. Why on earth are state legislatures wading into what is clearly a local issue? It is exactly the same as if these legislators had decided to make public water projects illegal because "it keeps out private companies." Would our communities be better places to live if all water distribution was handled by private companies?

Actually, we know exactly how that turns out, since that is the way things were done in the late 19th and early 20th century. Prior to the 1906 San Francisco earthquake, as one tawdry example, water to the city was provided by several private firms. To save money, they build the main water lines to the city directly over known earthquake faults, and provided no backup means of delivering water.

The earthquake is not what leveled San Francisco. It was the fires that occurred after the earthquake. With all the water lines broken, there was no water to put out fires, and so, over a period of a few days, the entire city burned completely to the ground.

I'm not trying to be hysterical here; my point is that a knee jerk "leave it to the private sector" is not always an appropriate response. Some things really should be done by government, and there is ample precedent to take services that were once offered solely by the private sector and move at least part of them into the public sector--like the transport layer of telecom (NOT the service layer).

Telecom is best done, in my opinion, as public/private partnerships. Are there other ways to do it? Of course there are. But an overreaching principle should be that state and Federal lawmakers should not be usurping the right of communities to decide their own future.

Indiana turning its back on communities

Submitted by acohill on Mon, 01/31/2005 - 08:42

Add Indiana to a growing list of states that have legislatures turning their backs on communities. Legislations is being considered there that would prohibit communities from providing telecom services.

Even though I think that communities ought to stay out of the service business and limit their investments to telecom infrastructure, I think that decision ought to be left to the community, and not be pre-empted by the state legislature.

This is a serious issue that is being co-opted by the incumbents, who are lobbying legislators vigorously. It's not that the legislators are necessarily bad people, it's just that they are only getting one side of the story, and are being unduly influenced.

The answer is education. Local communities and regions need to spend more time with their legislators explaining the issues, and in particular, explaining that there is more than one way for communities to invest. Taking the infrastructure only route is pro-competition, not anti-competition. Unfortunately, few lawmakers understand that. Only by preparing talking points and having local leaders take them out to lunch, or meeting them in their offices at the state capitol, is that situation likely to change.

Just one phone company in the U.S.?

Submitted by acohill on Fri, 01/28/2005 - 11:50

If your heartburn is not acting up now, it probably will be after you read this analysis by Om Malik. Malik, like me, see the phone companies as running scared, and part of the emerging phone landscape will be the re-monopolization of the existing "old" telephone network.

SBC, one of the Baby Bells, is reportedly trying to buy AT&T. Verizon may get into the game to keep SBC from becoming a competitor. If SBC succeeds, thinks Malik, Verizon is likely to try to buy MCI. And part of Sprint could end up in Qwest's hands.

Twenty some years after the 1984 breakup of the phone company into AT&T and seven regionals, we could back down to two giants withering on the vine before we know it.

All the more reason to get busy and build some community infrastructure not under the control of the incumbent phone company.

FCC Chairman Powell resigns

Submitted by acohill on Fri, 01/21/2005 - 11:00

The Wall Street Journal reports that FCC Chairman Michael Powell has stepped down as head of that agency.

The past four years for the FCC have been rocky ones. The FCC has lurched from one decision to another, sometimes favoring users of telecom services, but too often seeming to coddle the corporate dinosaurs of telecom. Trying to walk a line between the two is probably the worst job in Washington, and that has to be factored in when evaluating Powell's performance.

The bigger and more important issue for me has been this: What is the national policy on broadband? Powell, the FCC, and the Bush administration have never answered that beyond pablum that can be boiled down to "Broadband is good."

It's hard to imagine why we would even need an FCC ten years from now, and the new head of the FCC would do great good by announcing that his job is to shut the agency down over an appropriate period of time. Doing so would unleash a great wave of investment and entreprneurship because companies would finally know that they would not be hampered in the future by capricious regulations from Washington.

If the Federal government has a role, and I think it does, it's a simple one. Instead of the piecemeal approach to trying to help communities with broadband, the Federal government should simply fund very high bandwidth, interstate, long haul fiber routes, exactly the way it does with interstate highway projects.

And like the interstate highway system, it would have profound, and mostly positive effects on the economy, because unlike the highway system, small communities everywhere would have a chance to hook up to a world class Internet backbone. If you are interested in the how this might look at a local, state, and national level, take a look at my paper on this topic--Connecting the Dots fo

Lafayette, Louisiana beaten by BellSouth

Submitted by acohill on Tue, 01/11/2005 - 20:51

USA Today has an article about Lafayette, Louisiana, which has been trying to put together a community fiber project for the past year. The southern Louisiana community has apparently been beaten down by BellSouth, which has vigorously opposed the deal.

BellSouth has claimed it is "unfair" for communities to offer a service the company could offer, even though it provides only DSL in the community, a pale shadow of the robust fiber network the city was planning.

At the risk of boring my regular readers, there are two ways to approach community telecom projects. One is to regard telecom infrastructure just like roads. Communities build the roads, but private companies (like BellSouth) deliver services (like dialtone or TV programming) to customers. The other approach is to regard telecom infrastructure like the municipal water or electric system, in which the city itself provides the customer services.

The latter is certainly more efficient, but given that many of our elected leaders still don't take any of this very seriously and given that we have a ridiculously complex regulatory environment, I think the former approach (a public/private partnership) is the only alternative.

Rightly or wrongly, communities that are trying to create public monopolies in this area are losing. The telecoms are outspending them and are buying whatever laws are needed to prevent community investments. But communities must invest to stay viable in the global economy, and Lafayette knows that. From the article:

"The future of Lafayette shouldn't be left to the whim of the big telecommunications companies, insists City Parish President Joey Durel. Installing fiber-optic cable, he credibly argues, is no different from laying down sidewalks or sewer lines.

In fact, the "triple play" plan mirrors the action Lafayette's city fathers took a century ago when they realized the private power companies were passing them by in favor of larger, more lucrative markets in Baton Rouge and New Orleans. To survive, they built their own municipal power system.

Consumer's Union jumps into broadband, cellphone issues

Submitted by acohill on Thu, 01/06/2005 - 12:03

Consumer's Union, the publisher of Consumer Reports, has a site called Hear Us Now that has some useful information on policy and regulatory telecom issues that affect consumers. Among the topics on the home page are cell phone lockdowns, which is the scam used by cellphone companies to force you to buy new phones even if you have a perfectly good one already. CU estimates 100 million cellphones are discarded each year just in the U.S., which is an appalling waste of resources.

They also have information on what states are trying to block the ability of communities to invest in telecom infrastructure. Unfortunately, they also have form letters you can send to legislators expressing your "concerns." Good concept, bad implementation, as doing it this way is really little better than spam. Nonetheless, the site overall is quite useful.

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