“Broadband Killer” is dead

Hoyle foiled: Senator David Hoyle’s controversial bill was finally defeated by the NC House of Representatives over the weekend. He retires this year after 9 terms in the senate.

For the last few months, some contentious legislation has been winding its way through Raleigh that would have put a hold on local governments from getting into the retail Internet and cable TV business. The fourth such attempt in recent years, the legislation was finally killed in the wee hours of Saturday morning by the North Carolina House of Representatives before it adjourned.

The latest iteration was first proposed back in May in the form of Senate Bill 1209 by Senator David Hoyle (D-Gaston) and later folded into House Bill 1840 — which reauthorizes the Rural Internet Access Authority (e-NC). The proposal would have temporarily stopped new cities from building, purchasing, or operating their own retail broadband networks until next year. Currently, five towns in North Carolina — which would have been exempted from the ban — already own and operate their own Internet services: Wilson, Salisbury, Morganton, Davidson and Mooresville. Private companies such as Charter Communications and Time Warner Cable currently provide most of the rest of the broadband access in the state.

Hoyle’s bill would have required the Assembly’s Revenue Laws Study Committee to bring together representatives of both cities and private telecommunications providers in a 12-member blue-ribbon task force to study the various complex legal and funding issues and then report back to the next session of the General Assembly. The final language permits such action but strips the requirement for the study and increases the panel to 14 members. It also essentially guts the remaining provisions of Hoyle’s original language, including its keystone, the so-called moratorium.

Critics of the Hoyle’s initiative, including the North Carolina League of Municipalities, various consumer advocacy groups, newspapers, progressive political action committees, and broadband technology proponents were particularly vocal in their opposition. They charged that the legislation was nothing more than an industry-sponsored attempt to stifle competition, deeming it a “broadband killer” for rural communities that puts the state at a competitive disadvantage.

Because it is expensive and often unprofitable for private companies to go into far-flung rural areas to lay and maintain high-speed lines, these locations often do not have access to cable TV and Internet services the same way more populated areas do. To address this inequity in service, broadband advocates believe that local governments should have the power to build their own networks to bring access to these underserved areas. They equate broadband with any other public utility that local governments regularly provide, including roads, water, sewer, electric or bus service when the services aren’t otherwise available or inadequate.

Until the very end, Hoyle contended that broadband access was never the issue. “I’ve heard that BS, and it’s just not true — period,” he told Xpress. “Anybody that needs service can get served in this state.”

Hunter Goosman, general manager of ERC Broadband here in Asheville, believes that Hoyle was mistaken. “He claims that competitive service is already available all over North Carolina,” Goosman told Xpress. “I’d love to give him a tour across our mountains.”

Funding Issues
Current municipal broadband systems in North Carolina are financed using “certificates of participation,” in which the city’s new debt is collateralized by the infrastructure itself and does not require any direct approval by voters. Traditionally, cities and counties borrow money to build roads, schools, jails, parking decks and other capital projects through general obligation bonds that are backed by the taxing power of the government and which by law require direct voter approval through a referendum. Hoyle wanted to ensure that city governments that choose to build and operate their own broadband systems do so by way of these general obligation bonds — and the voter approval that would come with them.

This upset municipal broadband advocates, who argue that subjecting such proposals to local referendums will all but guarantee that they never pass.

Hoyle was also concerned that the state’s cherished AAA credit rating would be at risk if cities continue to issue certificates of participation for these massive projects and end up defaulting on their debt. The cities of Davidson and Mooresville have been operating their jointly-owned $92.5 million cable TV and broadband system at a loss since 2007, and they recently informed residents there that they will require an additional $6.4 million subsidy from taxpayers next year to keep the operation going. Funded through an $80 million certificate of participation and a $12.5 million bank loan, voters in those cities were not afforded a chance to vote on whether or not to incur this debt and go into what some say amounts to competition with private industry.

Hoyle, a self-described free-market advocate, believes that private investors —and not taxpayers — should be taking this sort of financial risk, and if the measures had been put up for a vote in those towns, residents would have defeated it. “I want the cities to make the case that they need to be in this business,” said Hoyle. “But I can tell you that the ones who are in it are not doing it very well. Wilson has got a mess on their hands. An unadulterated mess.” Hoyle is referring to Wilson, N.C., which implemented its $28-million municipal broadband system (dubbed “Greenlight”) last year.

There are other issues as well. Some worry that government competing in the free market with private corporations is not only inherently unfair — because they don’t pay any taxes as do private corporations — but unwise due to its inherent lack of and business experience and technical expertise. Buncombe County may be a good case in point; its free WiFi service, which once covered much of downtown, was discontinued.

Another problem that Hoyle saw is the potential for taxpayers to be on the hook for what could amount to tens of millions of dollars in outdated technology. He talks about new Internet services, such as WiMax, which can offer broadband speeds comparable to today’s cable modems, and which work much like Wi-Fi but over distances of approximately 30 miles. He sees such technologies as potentially rendering “hardwired” systems obsolete — especially as more and more people opt for mobile computing. “They’re going to own an Internet cable system that may become obsolete,” Hoyle said, “and they’re going to expect the taxpayers of this state to bail them out.”

Hoyle has been accused by some opposing his efforts as being nothing more than a shill for the telecommunications industry, a charge that he naturally rejects. “The lobbyists don’t influence me,” he said. “I’m in the pocket of the people that provide jobs for this state, and Time Warner Cable employees — 8,500 in this state — and I can’t imagine any one that would want to compete with that.” Time Warner PAC contributed $6,000 to Hoyle’s re-election campaign in 2009.

Hoyle’s legislation would have made a wide range of exceptions for local governments: It wouldn’t cover those cities that already own and operate their own broadband service, cities that have begun the process of establishing their own service, cities that take formal action by December 1 of this year to establish their own service, or any city that is required to put up matching funds as a condition for receiving a federal broadband stimulus grant or any of the 36 cities in North Carolina that would require public financing to qualifiy to be chosen as the winner of the Google Fiber project. It also would have exempted any city or county enterprise that want to build their own high-speed networks connecting, for example, city police departments or hospitals.

Hoyle, now in his seventies, retires this year after serving 18 years in the state Senate.

Michael Muller can be reached at 251-1333, ext. 154, or at mmuller@mountainx.com.

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2 thoughts on ““Broadband Killer” is dead

  1. Hunter Goosmann

    This is a convoluted attempt to use financing laws to restrict the ability of rural communities to support their own broadband needs by creating their own systems. While oversight and regulation is necessary, a moratorium would do nothing to support rural communities when they don’t attract the national carrier’s requirements for ROI.
    Thanks to Michael for a balanced article.

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