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Industry group part of effort to halt cities' fiber-optic plans

By Mark Wineka
mwineka@salisburypost.com
In recent days, Rowan County residents have been receiving recorded telephone messages in support of legislation aimed at limiting N.C. cities that seek to offer broadband services to their citizens.
Salisbury city officials, who have embarked on establishing a $30 million fiber-to-the-home cable utility, say House Bill 1252 is an industry-written effort to maintain monopolies and keep consumers from receiving better options in telephone, cable and Internet service.
The N.C. Chapter of Americans for Prosperity, which describes itself as a grass-roots group committed to limited government and free market principles, is behind the telephone calls.
In the recorded message, State Director Dallas Woodhouse asks Rowan Countians to call Rep. Lorene Coates and tell her of their support for House Bill 1252.
Coates, a Rowan Democrat, is chairman of the Public Utilities Committee in the N.C. House.
The bill recently moved out of the Science and Technology Committee to Coates’ committee, where it could be discussed next week.
In recent weeks, Salisbury Mayor Susan Kluttz spoke against the bill twice before the Science and Technology Committee. She said Thursday she was “floored” that legislators would even consider the legislation without study.
If it passed, the General Assembly would be allowing North Carolina to fall further behind in providing the kind of broadband services its citizens need, Kluttz said.
“This is the new infrastructure,” she said of fiber-optic cable, “and I’m proud of the staff for bringing the idea to us and our council for supporting it.”
The city of Wilson already has launched its fiber-optic cable utility. Meanwhile, a contractor for Salisbury has begun installing underground cable in the Crescent and Country Club Hills subdivisions.
A rollout of the Salisbury system is expected to start sometime in 2010.
House Bill 1252, with companion legislation in the Senate as Bill 1004, is partially titled the “Leveled Playing Field” bill for cities and service providers, but Salisbury officials and the N.C. League of Municipalities say there is nothing level about it.
“This is a bill written by Time Warner Cable and the Cable Association through their attorneys,” Salisbury City Manager David Treme said. He described it as a double-standard, anti-consumer and incumbent-protection bill.
The competition municipalities can provide through fiber-optic cable will lower prices for consumers, improve customer service, broaden choices, offer the service to everyone and spur economic development, Treme said Thursday.
“Plus, it will have instant accountability,” Kluttz added. Customers of a city cable utility would own the enterprise and have local people heading the operations and providing the service, the city officials said.
“This is a hometown business,” Treme said.
Kluttz added that Wilson and Salisbury have studied the broadband issue “for so long we know how dangerous this (the bill) is.”
For legislators to consider changing the rules now after Salisbury has studied the issue for several years and taken significant steps in establishing its utility is unfair, the mayor added.
In general, House Bill 1252 would require cities in the communications business to comply with laws applicable to private providers.
It would require cities to establish separate enterprise funds for the utilities. It would not allow cities to subsidize communications service from other government funds.
The city would have to remit to its general fund an amount equivalent to all the taxes and fees a private provider would pay, plus an amount equivalent to the property tax that would be due from a private provider.
Also, the city utility would have to calculate into its rate structure federal, state and local taxes that a provider of its size would normally pay; rights of way, franchise, consent and administrative fees; and pole attachment fees.
Doug Paris, assistant to the city manager in Salisbury, said the legislation would be asking cities to take imaginary costs and pass them onto consumers by raising rates.
“That’s not good public policy,” Paris said, describing the legislation as simply about protecting the monopoly cable companies now enjoy.
In addition, cities would have to prepare and publish an independent audit.
Woodhouse, the state director of Americans for Prosperity, acknowledged that cable and telephone companies support the bill, “but our actions are on our own.”
“This is a baby step compared to what may need to happen,” Woodhouse said, adding a city’s offering Internet, cable television and telephone service is not a core function of government.
In this instance, government is trying to get involved in something the private market already provides and can do better on its own, Woodhouse argued.
Government has distinct advantages when it competes against private companies, he said. It doesn’t have to pay for things such as vehicle tags on trucks. It receives rebates on taxes it pays for gas and gets a break on insurance, he gave as examples.
Cities also could use tax revenues to subsidize their businesses, giving them another unfair advantage over a private enterprise that pays taxes and employs people, according to Woodhouse.
Woodhouse said every bad idea in government is couched in terms of its being important to economic development. “The Randy Parton Arena was sold the same way,” he said. “You can use the argument of economic development to do anything.”
Nationally, Americans for Prosperity has written a position paper on municipal broadband, concluding that “an active government role in the broadband marketplace has produced nothing but wasted tax dollars and a record of failure.”
As written now, the legislation would exempt Wilson and Salisbury from what cities find so objectionable. The bill says key provisions would not apply “to communications service duly authorized by a city on or before March 1, 2009.
But Mike Crowell, head of information technology for the city, warned Thursday that nothing prevents the legislators from changing the language. He also fears that the way the bill is written will prevent Salisbury from adding services down the line.
Even if Salisbury and Wilson are exempt, the bill will prevent other cities from offering an alternative to the incumbent providers and stunt the growth of the state, the city officials argued.
Paris said the bill is simply bad for the state, cities such as Salisbury and consumers in general.
“Ask yourself, who is it good for?” Treme added. “Apparently, they (incumbent providers) are worried about us. They have a team of lobbyists, and we have us.”
The legislation also has repercussions for public safety radio networks, such as the one Salisbury operates in Rowan County.
Some 2,800 radios are in the system, and because the network is fee-based, only revenues generated directly from the system could be used to operate them, according to the bill’s provisions. Treme said that would force the city to raise rates for the county, hospital, law enforcement and volunteer fire department users of the radios.

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