The Playing Field
May 6, 2009
Is it the plucky little town going up against the evil corporate behemoth? Or is the government unfairly undercutting private enterprise using taxpayer money and tax-free borrowing? Where should someone who is interested in freedom and small government fall on the question of a private company putting forward a bill that tries to force the government to act as a private entity?
The market is the provision of broadband internet to North Carolina residents. The government-backed Greenlight system in Wilson, NC, provides much faster broadband access (up to 100Mbps up/down for home use) at rates far cheaper than the existing private provider, Time Warner Cable, whose best available service 10Mbps/1Mbps up/down. TWC and Embarq were both approached by the city to improve broadband service, and both declined to participate, leaving the city in a “do it ourselves or not at all” situation. So they did. And now Time Warner Cable is proposing a bill in the North Carolina General Assembly which establishes a set of restrictions on how governments can go about providing broadband internet service.
The first thought I had when I read about this story was, “Pack up the kids, we’re moving to Wilson.” The second thought I had was, “How did it come to this?”
While in theory the state-granted franchises required to establish cable television systems are not exclusive, it has not worked that way in practice. Time Warner Cable is the sole provider of cable television and internet services to the vast majority of North Carolina residents. The state franchising system replaced the city-level franchising system in 2007. In Wilson, at least, the city franchise was also not exclusive, yet the notes in the municipal code indicate that there was only one franchisee. The barriers of entry in the market are clearly very high, and TWC has a de-facto monopoly over the delivery of cable TV and broadband services in North Carolina. There’s some competition from providers with DSL services, but DSL has turned out to be a service that has substantial limitations, and in most cases is unable to compete with cable in availability, cost, or speed.
Clearly, Wilson’s Greenlight service does not fall under the reporting requirements of the existing cable-provider laws. They are operating in more-or-less unrestricted territory. TWC’s proposed bill tries to put them back under the existing rules, with some additions that are government-specific, such as restrictions on the use of other government funds to support the broadband initiative (cross-subsidization). This doesn’t create a level playing field but rather puts government providers under more restrictions that private providers.
And I can’t help but think, along with many people in Wilson, that “more restrictions on competitors” is what TWC really wants. If this was really about a level playing field, why isn’t TWC lobbying to remove their own reporting rules and restrictions, instead of extending them to other providers? The obvious answer is that the current rules suit TWC just fine, because they support and extend the de-facto monopoly that TWC has over North Carolina cable broadband.
However, municipal broadband is not without its own pitfalls. The Greenlight Acceptable Use Policy reads like it was intentionally designed to bypass the Fourth Amendment:
Upon becoming aware of an alleged violation, Greenlight may take such action as Greenlight in its sole discretion may determine, including without limitation:
investigating suspected violations of this policy, including the gathering of information from the user or users involved and the complaining party, if any, and examination of material on Greenlight’s servers and network. You expressly authorize Greenlight and its suppliers to cooperate with (i) law enforcement authorities in the investigation of suspected violations, and (ii) system administrators at other Internet service providers or other network or computing facilities in order to enforce this Acceptable Use Policy.
Who decides what a violation of policy is? Greenlight does, at their sole discretion, meaning that, by agreeing to the AUP, you are essentially authorizing continuous law enforcement monitoring of your internet traffic without notification and without recourse. TWC policies do not go nearly as far.
Taxpayers are also on the hook for Greenlight, whether the service succeeds or fails. The network was built using city bonds to borrow the money, which must be paid back regardless of whether the service is profitable or not. That puts all Wilson taxpayers, not just the users of the service, in the situation where we have a semi-public company that isn’t able to fail, which is a situation that we’ve recently seen can go bad in spectacular and catastrophically expensive ways.
Still, that is a decision for the citizens of Wilson and Salisbury and a thousand other cities to make for themselves. TWC’s “level playing field” bill goes in the wrong direction; if we truly want to preserve competition, we need to remove the franchising laws and other restrictions that reduce competition in the current broadband market, so that citizens can get the services they want in a marketplace that isn’t choked off by regulation. As a Libertarian, I oppose HB1252 and encourage others to do so – adding more government to regulate existing government is not the small government we desire.