Hill Bill to Curb Muni Nets Drawing Fire

Publish date:
Updated on

Consumer and municipal advocates and even key lawmakers have come out swinging against legislation that would restrict cities and states from entering the cable or telecommunications business.

HR 2726, sponsored by Rep. Pete Sessions (R-Texas), would ban states and municipalities (or any affiliated entities) from offering any telecommunications, information or cable service in areas where a private entity offers a “substantially similar service” within the government’s jurisdiction.

Several consumer and public-interest groups argue the legislation would protect telcos and cable operators from new competition at the expense of consumers.

“Communities deserve the right to serve their citizens,” said Consumers Union policy analyst Kenneth DeGraff. “Broadband is clearly as central as electricity and water to these communities.”

More than a dozen state legislatures have considered similar legislation and, in most cases, have failed to enact such bans.

Meanwhile, Sens. John McCain (R-Ariz.) and Frank Lautenberg (D-N.J.) on June 23 introduced the “Community Broadband Act of 2005,” which would ensure that states can’t stop municipalities from offering broadband services. The bill would also seem to be a counterweight to HR 2726.


The two bills could eventually merge into some kind of compromise legislation, although that would appear to require significant sacrifices from both sides.

“When private industry does not answer the call because of market failures or other obstacles, it is appropriate and even commendable, for the people acting through their local governments to improve their lives by investing in their own future,” McCain said.

Supporters of Sessions’s bill argue that cities would already have that right under his legislation.

“In the event of market failure, local governments would be free to fill the void,” Sessions spokeswoman Gina Vaughn said.

For example, Vaughn said that under the bill, a city that received broadband Internet access from a private entity over 80% of its territory — but not the other 20% — would be allowed to offer its own service in that unserved area. And existing municipal networks are grandfathered.

At its core, the bill raises the philosophical issue of whether municipalities should spend taxpayer dollars on ventures that compete with private interests.

“Municipal governments have a lot of public-works demands,” said Vaughn. “They should not be pouring taxpayer money into continual telecom infrastructure upgrades, nor should companies have to compete with government — which can tax, spend, and regulate at will — for business. Having to compete with government discourages deployment of services and in turn negatively impacts investment and innovation.”

United States Telecommunications Association spokeswoman Allison Remsen agreed that governments shouldn’t “be wasting taxpayer dollars” by competing with private carriers. “With telecom networks, government intervention could chill private investment and further delay new services for consumers,” she said.


The National Cable & Telecommunications Association declined to comment specifically on the bill last week, but NCTA spokesman Brian Dietz noted that “in the past, we’ve expressed concerns about municipal broadband projects, including whether local governments should be investing increasingly scarce taxpayer dollars for telecom services already being provided by the private sector with state-of-the-art technology.” 

But for many cities, incumbent telcos and cable operators aren’t moving fast enough to deploy advanced services.

“They’re losing money hand over fist on economic development,” said municipal consultant Bunnie Riedel, president of Riedel Communications and former executive director of the Alliance for Community Media. “What business is going to want to move into a community that doesn’t have the fattest pipe?”

McCain said his bill would further incent private businesses to accelerate deployment by getting local governments more involved.

“The bill would do nothing to limit their ability to compete,” McCain said. “In fact, the bill would provide them an incentive to enter more rural areas and deploy services in partnership with local governments.”

For the Sessions bill, consumer groups worry that disagreements over what constitutes “substantially similar service” could spur legal battles that would indefinitely postpone municipal entry — even in unserved areas. “Do we really want to leave this to judges?” asked DeGraff. “Is that the road we want to go down?”

Lobbying against the Sessions bill, which is expected to intensify in the coming months, has already become personal.

For example, media-reform group Free Press has charged that Sessions, a former executive at SBC Communications, has a conflict of interest because he owned more than $500,000 worth of stock options in SBC, according to his 2004 disclosure reports.

“Few legislators would introduce a bill this ridiculous,” said Josh Silver, executive director of Free Press. “This is a joke.”

The lawmaker actually has rights to no SBC options himself, but his wife, who works at SBC Internet Services, has rights to some options as part of her employment package with the company. However, the options are now valueless based on SBC’s current stock price and, as such, weren’t included in Sessions’ most recent 2005 disclosure report released in June.

“His introduction of this legislation is consistent with his position on similar legislative issues, which is that the government should not be competing with the private marketplace,” said Vaughn. “SBC or any other company has nothing to do with it.”

SBC Spokesman Kevin Belgrade declined to specifically address the stock-option issue but noted that Sessions “represents a broad range of constituents,” including taxpayers who are concerned about municipal-owned networks. “We’re sensitive to those concerns,” he said.

Free Press has started its own grassroots efforts, so far collecting 30,000 signatures on a citizen petition and calling on lawmakers on Capitol Hill to oppose the bill.

“I really believe that this issue of community Internet — this is the future of communications in the U.S.,” said Silver. “This is a profoundly important issue, and I think it’s going to keep cropping up.”


Consumer groups also worry that language from Sessions’ bill could work its way into other larger bills, such the new digital-TV bill sponsored by Rep. Joe Barton (R-Texas) or even the rewrite of the 1996 Telecommunications Act now in the works.

In the Senate, John Ensign (R-Nev.) is reportedly working on a 1996 Act rewrite bill that’s expected to be introduced as early as mid-July.

“We’re concerned about [the municipal ban] getting thrown in with something else,” said DeGraff. “Bills like this tend not to pass on their own. It’s more likely to be snuck in [something else] in the middle of the night.”

Opponents vow to leverage grassroots efforts to make sure that doesn’t happen. “Everywhere they turn, they’re going to have millions of people in their face,” said Silver.