June 27, 2014 Bloomberg View - A group of Democratic lawmakers sent a letter to the Federal Communications Commission today, demanding it do everything in its power to let cities build competitive fiber networks. It's the next big fight in telecom policy -- and the FCC is going to need all the help it can get.
Laws have been passed in 20 states that make it difficult or impossible for cities to make this decision. For example, after Wilson, North Carolina, (population 49,000) decided to build its own fiber network, Time Warner Cable and AT&T lobbied to get a law passed in 2011 that amounts to a de facto ban on any future such networks in the state.
Right now, the country's major network providers can charge whatever they want to anyone who will pay -- whether consumers, businesses or online applications. We have, in effect, a private utility that is unlikely to be disrupted by either technology or regulation.
Changing that will be extremely hard. Comcast, AT&T and Verizon, which make up most of the trillion-dollar enterprise value of telecom in the U.S., have almost unconstrained political power as well as giant advantages of scale and scope. AT&T is the nation's 10th-largest political donor; Verizon is 15th. Almost all of Comcast's 130 registered lobbyists in 2013 previously held government jobs. The companies have no interest in supporting the idea that cities should be able to make the decision about competitive fiber themselves.
FCC Chairman Tom Wheeler has signaled interest in the issue, tellingthe cable industry in April:
If municipal governments -- the same ones that granted cable franchises -- want to pursue it, they shouldn’t be inhibited by state laws. I have said before, that I believe the FCC has the power -- and I intend to exercise that power -- to preempt state laws that ban competition from community broadband.
AT&T Chief Executive Officer Randall Stephenson fired back Tuesday during a Senate hearing about the giant company's proposed merger with DirecTV, saying AT&T "shouldn't be required to compete with government taxpayer money" funding city networks.
Stephenson's argument is misleading. According to the Institute for Local Self-Reliance, most municipal networks use no taxpayer dollars, relying instead on revenue bonds and costs saved by avoiding the expense of existing providers' services.
And AT&T has unquestionably benefited from government largesse: Much of the spectrum used by the company to sell $70 billion each year in wireless services to Americans was given to the company's predecessors for free decades ago by the federal government.
AT&T's position is rational: It is coining money and doesn't want competition. The company, like Comcast and Time Warner Cable, is focusing on lowering costs through mergers, and makes no promisesthose savings will be passed on to consumers. Meanwhile, Americans are short on choices for world-class, low-priced, high-speed Internet access, and the country has no plan to make a national upgrade to 21st century fiber networks.
The idea that local government can and should play a role in local infrastructure isn't new. Indeed, local communities have long and deep experience in making significant capital expenditures in infrastructure projects.
The authors of today's letter, including Senator Ed Markey of Massachusetts and Representative Mike Doyle of Pennsylvania, note that the Telecommunications Act of 1996 was intended to eliminate barriers to infrastructure investment and to promote competition "to stimulate more innovation and consumer choice."
Judge Laurence Silberman of the U.S. Court of Appeals for the District of Columbia Circuit wrote this year that state laws prohibiting municipalities from creating their own high-speed Internet access infrastructure to compete against private companies are a quintessential example of such a barrier.
Today's cities need to be able to decide for themselves how best to deploy fiber networks -- whether through public-private partnerships, or by leasing city-owned fiber to competitive private service providers. That fits the responsibility of cities: To foster local innovation, spur economic development, and narrow the digital divide. AT&T and Comcast won't like it, but now is the time for the FCC to act.
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