Congress Considers Limits on Muni Wireless
As Cities Move to Deliver Internet Access, Warning Flags Raised on Competition From Governments
By Ted Hearn -- Multichannel News, 2/19/2006 7:00:00 PM
Washington — Washington— Congress is debating whether to allow local governments to provide high-speed data access in competitive markets already served by cable and phone companies.
Dozens of communities around the country are promoting the deployment of broadband — some through partnerships with private companies and some through ownership of their own facilities with at least implicit taxpayer support.
At least one legislator argues that local government has no business competing in competitive communications markets and want to bring the trend to a halt. But just as many have no problem with government intervention.
“I don’t like to see local governments competing with the private sector,” Sen. John Ensign (R-Nev.) said at a Senate Commerce Committee hearing Feb. 14.
| Where the Wireless Is | ||||
|---|---|---|---|---|
| Municipalities that are planning or building wireless networks: | ||||
|
Source:Multichannel News research |
||||
| City | Status | Business Model | Partner | Square Miles |
| San Francisco | RFP issued December 2005 | Free basic service, higher-speed pay tiers | TBA | 46.7 square miles. |
| Minneapolis | Staging a bake-off between two providers | Provide free access to city government users, with ability to charge residents for service | TBA | 58.7 square miles. |
| Tempe and Chandler, Ariz. | Network built in Tempe, under construction in Chandler | Free access for municipal users with pay access offered to residents | NeoReach Wireless | 112 square miles |
| Philadelphia | Initial 15-square mile network to be built and running by the end of 2006 | Free access in parks and public space, low-cost consumer service | EarthLink | 135 square miles |
| Dayton, Ohio | Issued a request for proposals from service providers, with contract to be awarded in April | Free 256 Kpbs access to residents with option to offer higher pay tiers | TBA | 55 square miles |
| Houston | Draft request for proposals to be issued March 3 for comment | N/A | TBA | 630 square miles. |
| Suffolk County, N.Y. | Creating a committee to develop a plan | N/A | TBA | 900 square miles |
| Anaheim | Awarded a contract in January to build the network | Users will pay about $20 monthly | EarthLink | 50 square miles |
PART OF OVERHAUL
The fate of municipal broadband service is likely to play out in the ongoing effort to overhaul the Telecommunications Act of 1996. Senate Commerce Committee chairman Ted Stevens (R-Alaska) is hoping his panel will approve a bill next month.
Ensign has introduced a bill (S. 1504) that would give the private sector first crack at providing a communications service that a city wants to see deployed.
“If nobody else is out there, then I think that is fine for local governments to do it,” Ensign said.
Sens. John McCain (R-Ariz.) and Frank Lautenberg (D-N.J.) are supporting a bill (S. 1294) that would, in a direct slap at federalism, ban states from denying cities the authority to deploy “advanced telecommunications capability or any service that utilizes advanced telecommunications capability.” House draft legislation would largely follow the McCain-Launtenberg approach.
The McCain-Launtenberg bill and the House draft would effectively overturn the Supreme Court’s 2004 decision in Nixon v. Missouri Muncipal League that said the 1996 telecom law allowed states to bar their subdivision from providing telecommunications services.
The legislative momentum is also a response to city elders’ fears that their communities will be left behind if their residents don’t have broadband access or can’t afford to pay for it.
In Philadelphia, the city is working with EarthLink Inc., an Atlanta-based Internet-service provider with 5.3 million subscribers, to deploy the largest wireless-broadband network in the country, covering about 135 square miles. The service will cost $10 a month for the city’s poorest residents who will also be eligible for a city-provided computer. Everyone else will pay market rates.
“We simply could not afford to wait any longer. We needed to foster private sector action. Broadband is not universally available,” Dianah Neff, Philadelphia’s chief information office, told the Senate panel.
Neff and EarthLink municipal networks president Donald Berryman insisted the partnership hewed to free-market principles.
“EarthLink is not getting special breaks. EarthLink is bearing all the risk of constructing this network,” said Berryman. Although Berryman predicted citywide availability in spring 2007, a cable operator source said the city government had not given final approval to EarthLink’s contract.
Neff’s concern about broadband availability to all 660,000 Philadelphia households was at odds with data provided by the city’s largest broadband providers.
Comcast Corp., the cable-TV giant with wires passing 75% of city homes, makes high-speed data available to all of those households for $57 a month on a standalone basis and $42.95 for those who subscribe to basic video service.
Verizon Communications Inc., offering digital subscriber line service to 95% of city residents, charges $14.99 for its slowest-speed DSL service — not much more, in dollar terms, than the city plans to charge its poorest residents to connect to EarthLink’s wireless network.
In her testimony, Neff did emphasize affordability. But other witnesses pointed out that if affordability is the issue, rather than availability, local governments did not need to enter the market as competitors.
“Before pursuing a municipal-owned or sponsored network, first look to private solutions,” said Robert Sahr, a member of the South Dakota Public Utilities Commission. “Municipalities should act only where market failure exists.”
PREMIER SOLUTION
Douglas Boone, CEO of Premier Communications in Sioux City, Iowa, said the federal government could make broadband more affordable by providing subsidies to providers, mirroring the program in place for local phone service, called universal service.
Boone’s company competes for voice and data subscribers with the local government in Sanborn, Iowa, a town of 1,353 people which recently upgraded the city-owned cable system to provide phone and high-speed data service.
In his testimony, Boone complained that governmental competition was unfair and might prompt companies not to invest if they feared governmental entry at any moment.
“Local governments do not pay taxes. It is difficult to compete when the local municipality starts out with a 40% discount,” Boone said.
In a telephone interview, Sanborn city administrator Jim Zeutenhorst said that 83% of the town voted to upgrade the cable system and pay for it with new voice and data revenue.
“We needed to offer more than just cable TV,” Zeutenhorst said.
But Boone claimed that the city’s expansion had cost him 50% of his customers.
Stevens Unveils Reform Bill
05/02/2006City Officials Blast Ensign Bill
08/03/2005Stevens Bows Sweeping Telecom Bill
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