Harold Feld on Competition: why we need to keep the muni option open

I won’t say that every municipality should deploy its own system. But every municipality needs to have that option. I can sum up the reason in one word — Competition.I won’t say that every municipality should deploy its own system. But every municipality needs to have that option. I can sum up the reason in one word — Competition.

The Florida Municipal Power Association just did a study showing that having municipalities offering broadband *increased* the number of broadband providers. The same thing happened in Kutztown, PA. Before Kutztown built its network, it couldn’t interest anyone in providing services. Now they have offers from several companies to provide service in their market.

In fact, even the threat of municipal entry can spur incumbents to provide better service. Consider the example of the Tri-Cities area of Illinois. That area has twice tried to offer municipal systems, only to have it defeated by referendum. Comcast and SBC, the local cable and DSL incumbents, spent a good deal of money to fight the campaigns. But they also started offering better service, because they knew that if they didn’t, the referendum measure would eventually pass.

With merger mania going full tilt, competition is evaporating in most broadband markets. Even giants like AT&T and MCI have fled the local market and surrendered to the Baby Bell local monopolies. While consumers can hope for modest competition between the incumbent giant cable company and the incumbent giant phone company, most businesses only have one choice — if they have any choice at all. Worse, the FCC has aggressively deregulated the surviving broadband giants. The FCC has gone to the Supreme Court to defend the right to eliminate the regulations requiring incumbents to open their networks to rivals and carry internet traffic without interference. Next month, in Brand X v. FCC (to be argued, interestingly enough, on the same day as the Grokster case), the FCC will argue that it is vital to our national broadband policy to let big cable and big telco have a free hand.

But we see what happens in an unregulated, uncompetitive broadband market. Fiber goes only to the wealthy neighborhoods. Prices stay high, while quality of service remains low. Speeds remain ridiculously low (the United States has the highest price for broadband in the developed world, measured on a dollars-per-bit basis). Worse, the rates remain asymetrical, with cable and telco DSL providers convinced that “consumers” have no need for high-speed uploads (so much for my iLife uploads; it would take hours to upload videos of my six-year old for his grandparents to watch).

In addition, innovation in network services comes to a stand-still in a market with a duopoly between cable and DSL. Cable and DSL companies will block any services that challenge the cable video monopoly and the telco voice monopoly. The high-profile complaint of Vonage that telephone companies have blocked VOIP service to Vonage customers makes it clear how the incumbents will leverage their networks to block competitors. If you subscribe to cable modem and want VOIP, you’ll use the cable VOIP or none at all. If the local Baby Bell offers video and music through its fiber, you can bet that rival services won’t get through your DSL line.

Nor can states regulate the incumbents to prevent these things from happening — even if they were interested in doing so. The FCC has pre-empted the ability of states to regulate “IP enabled services” for fear that regulation might discourage cable companies and Baby Bells from deploying.

In this nightmare world of no competition municipal systems — or the threat of municipal systems — remain the last hope for keeping big cable and big telecom from exploiting their near monopoly control of customers. States foolish enough to foreclose this option take away one of the last means remaining to municipalities to protect their residents and businesses from abuses by broadband monopolists.

Opponents of municipal entry say this is about competitive markets. What it’s really about are monopolists who would rather regulate than compete. States should keep the muni option on the table if they want their residents and businesses to enjoy the benefits of a competitive market in broadband.

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Harold Feld is Senior Vice President of the Media Access Project (MAP). Harold’s blog, Tales of the Sausage Factory, is at http://www.wetmachine.com.

Harold joined MAP in August 1999 after practicing communications, Internet, and energy law at Covington & Burling. He also served as co-chair of the Federal Communications Bar Association’s Online Committee, and has written numerous articles on Internet law and communications policy for trade publications and legal journals. He graduated magna cum laude from Princeton University in 1989, and magna cum laude from Boston University Law School in 1993. Harold has clerked for the Hon. John M. Ferren of the District of Columbia Court of Appeals.

Media Access Project (MAP) is a thirty year old non-profit tax exempt public interest telecommunications law firm which promotes the public’s First Amendment right to hear and be heard on the electronic media of today and tomorrow.