# Presentation: 514713

## Fermilab ColloquiumJuly 21, 2004

- Jim Baller
- The Baller Herbst Law Group, PCWashington, DC
- (202) 833-1144
- Jim@Baller.com

**Bringing “True” Broadband to America**

## Baller Herbst - Fiber Projects

- Bristol, VA
- Chelan County, WA
- Crawfordsville, IN
- Dalton, GA
- Danville, VA
- Jacksonville, FL
- Kutztown, PA
- North Kansas City, MO

- Provo, UT
- Rockford, IL
- Rock Springs -   Green River, WY
- Lafayette, LA
- Tri-Cities, IL
- UTOPIA, UT
- XXX

## Overview

- The Stakes
- Progress So Far
- Barriers to Entry
- Anticompetitive Incumbent Practices
- Common Objections and Answers
- Open Discussion

## The Stakes

- Economic development
- Educational and occupational opportunity
- Regional and global competitiveness
- Urban core revitalization
- Affordable modern health care
- Reduced congestion via telecommuting
- Fewer adverse environmental impacts
- High quality of life

## The Stakes (continued)

- Demise of private-sector CLECs and overbuilders
- Economic constraints on many incumbents
- Continuing consolidation of giant incumbents
- diminished responsiveness to local needs
- constantly rising rates, no end in sight
- customer service at bottom of barrel
- Incumbents’ inadequate broadband offerings

## Cable Modems and DSL – No Big Deal!

-        “It is important to note here that the current generation of broadband technologies (cable and DSL) may prove woefully insufficient to carry many of the advanced applications driving future demand.  Today’s broadband will be tomorrow’s traffic jam, and the need for speed will persist as new applications and services gobble up existing bandwidth.”
-      Office of Technology Policy, U.S. Department of Commerce,                       *Understanding Broadband Demand: A Review of Critical Issues,* at 6 (Sept. 2002)** **

## Bandwidth Comparisons

- Gig-E

- Gig-E

- Gig-E

- Gig-E

- Work at home
- Educational & Medical Applications

- Prepared by Jon Moore
- Zipp System (Grant County, WA)

## Slide 8

## Our Goal – “True” Broadband

**Notes:**
This is a diagram of the city fiber optic system

## Progress Made

- 	 Surge of interest in municipal broadband
- APPA statistics on municipal utility broadband (www.appanet.org)
- High percentage of FTTH deployments
- Dozens of municipal wireless networks emerging (www.muniwireless.com)
- Progress & Freedom Foundation (Oct. 2003): “Disturbing Growth Trend Continues Unabated”

## Progress Made (continued)

-      Growing list of success stories
- Cedar Falls, IA
- Bristol, VA
- Kutztown, PA
- Dalton, GA
- Tacoma, WA
- Glasgow, KY, and Muscatine, IA
- Manassas, VA (powerline)
- Many, many others ...

## Progress Made (continued)

- 	New non-traditional alliances
- FTTH Council, BSPA, CFA, Educause, etc.
- 	Generally positive trade press and national media
- NYTimes, WSJ, Broadband Reports, etc.
- 	Support from well-informed experts
- Cook Group, Canarie, etc.
- 	Generally successful in Congress and the States

## Barriers to Public Entry

- 	Section 253(a) of Telecommunications Act of 1996:
- 	“No state measure may prohibit or have effect of prohibiting any entity from providing any telecommunications service”
- 	*Nixon v. Missouri Municipal League*
- 	Several states currently have barriers to entry
- AR, FL, MO, MN, NE, NV, SC, TN, TX, UT, VA, WA, WI
- 	Costly battles before agencies, courts
- 	Vicious local campaigns – e.g., TriCities

## Anticompetitive Incumbent Practices

- Predatory pricing
- Discriminatory “winback” programs
- Denial of access to critical content
- Refusal to deal with suppliers, contractors
- Tying up multiple tenant environments
- Refusal to carry advertising
- Numerous other “dirty tricks”

## Ten Common Objections and Answers

- 	Localities shouldn’t compete with the private sector
- Localities only compete if public demands it
- Fill service gaps or offer better services/rates
- Advance economic/community development goals
- Currently, public power communities are focusing on FTTH/B, which the private sector will not make available in most locations for years, if ever

## Objections and Answers (2)

- 	Regulators shouldn’t compete with the regulated
- Localities don’t regulate telecom providers – FCC and states do; ISPs not regulated at all
- Cable regulation subject to federal standards and nondiscriminatory master cable ordinances; cable franchises administered by City Hall, not utility
- Limited local discretion in ROW management – must be non-discriminatory/competitively neutral

## Objections and Answers (3)

-       Localities don’t pay taxes
- Community utilities make payments in lieu of taxes that are often higher than private taxes
- No income taxes because no profits
- Private sector gets billions annually in tax breaks(see APPA study)

## Objections and Answers (4)

-      Localities can use tax-advantaged financing
- This is a perfectly legitimate practice for public improvement projects
- BUT tax-advantaged financing is often unavailable or overrated and comes with numerous onerous burdens
- Projects today often use taxable financing
- Large cable and telcos have access to the best available rates

## Objections and Answers (5)

-     Localities cross-subsidize communications services at the expense of electric rate payers
- This should be OK (e.g., schools, fire departments, sidewalks all subsidized by municipal utilities)
- BUT, for political reasons, localities are careful to avoid cross subsidization
- Arm’s length loans are not cross subsidies
- Private entities routinely subsidize across products, geographic markets

## Objections and Answers (6)

-      Public entry raises First Amendment concerns
- Public involvement _adds_ speakers
- Shrinking number of private-sector speakers a serious concern (media ownership controversy)
- Cable Act requires separation of regulators and entity that chooses programming
- No evidence of public interference with any cable operator’s speech

## Objections and Answers (7)

-      Public communications projects often fail
- Not true – see _[www.tricitybroadband.com](http://www.tricitybroadband.com/)_
- Industry “studies” are seriously flawed
- Success means different things to public and private sectors -- i.e., public projects do not need to earn profits over relatively short period
- Economic development, educational opportunity, etc. have great monetary value for community

## Objections and Answers (8)

-      Local officials are lazy, incompetent, clueless
- Community utilities have a century-old record of stellar performance
- Much experience with complex technology
- Municipal electric utilities are already operate sophisticated communications systems
- Technical assistance available where needed

## Objections and Answers (9)

-     Local governments have free access to poles, ducts, conduits and rights of way
- These are FAIR advantages, as long as the locality allocates costs appropriately
- Major communications providers have similar or even greater advantages
- Incumbents already occupy poles, ducts, conduits and ROW

## Objections and Answers (10)

-     Localities should not enter into risky ventures, especially since the private sector is on brink of rolling out ultra high speed services
- True, localities should not assume high risks, but public, not incumbents, should decide this
- Risks are lower for communities that operate utilities than for private sector providers
- Private sector will not roll out truly high speed broadband to most communities in the foreseeable future, if ever

## Discussion