Do ISPs Deserve Protection Against Competition?

— -- The latest chapter in the ongoing battle over the best way to deploy broadband access across the country has landed in the North Carolina legislature. Both houses in Raleigh are considering identical legislation -- Senate Bill 1004 and House Bill 1252 -- that, if passed, would make it more difficult for North Carolina municipalities to install and run their own broadband networks as public utilities. Both bills are dubbed the "Level Playing Field/Cities/Service Providers" and, in theory, would artificially handicap public Internet service providers with the same financial constraints that private companies would incur from building and running a new high-speed network.

Those handicaps would include submitting the same taxes, fees and surcharges to the city that a private company has to pay; and the public utilities could not undercut private providers by pricing the public service below cost. To achieve this so-called equity between public and private enterprises, the public Internet provider would have to submit to auditing and accounting practices that a public company would not, such as an annual audit to prove it is handicapping itself properly in accordance with the proposed legislation. North Carolina's communities would also be prevented from reallocating any profits earned from running their own Internet service to benefit other city projects like improving schools, roads, or public parks.

As a matter of principle it makes sense to prohibit public companies from undermining private enterprise, but in terms of Internet service there are times when depending on a private company to install broadband in your city doesn't make much sense. Case in point is Greenlight in Wilson, N.C. Greenlight is a utility owned by the City of Wilson that provides Internet, cable, and digital phone services to city residents and businesses through its own fiber optic network. The city decided to install its own network at a cost of $28 million after the two private providers in Wilson, Time Warner Cable and Embarq, declined to upgrade their broadband service. Wilson wanted improved broadband because the city believed broadband to be a "critical tool" to attract new jobs to the area, Wilson spokesperson Brian Bowman told the Durham, NC-based Indy Week last year.

After Wilson built the broadband network it decided to offer broadband services as a public utility called Greenlight rather than contract a private company to run the network. Greenlight now competes with Time Warner Cable and Embarq for customers, and according to Indy Week, Wilson residents who have Greenlight service believe the public utility provides superior service and faster Internet speeds at a lower price than the two private companies. For example, Greenlight offers a basic bundle that includes 81 television channels; digital phone with unlimited calling to the U.S. and Canada; and high-speed Internet at 10Mbps (upload and download) for $99.95. Time Warner Cable by comparison has a similar package but with five fewer television channels, digital phone and 10Mbps Internet service (download only) for just under $133.00. Greenlight also offers some services the two private companies simply do not, such as a 100Mbps (upload and download) service for those requiring large amounts of bandwidth. Embarq does not provide television service and its prices for phone and Internet were unavailable at the time of this writing.

If the "Level Playing Field" bills do pass, Greenlight would be exempt from the new laws; however, under the proposed legislation, other North Carolina communities seeking to imitate Greenlight's success would be saddled with the extra burdens outlined in the bill. Although municipalities would be exempt from the proposed restrictions if a high-speed Internet provider didn't exist in their community or the local provider's service was available to fewer than 80 percent of households in that community. The two bills define high-speed Internet in accordance with the federal definition, which is 200Kbps in at least one direction (downstream or upstream), according to the Federal Communication Commission.

For several years, municipal broadband projects have been a controversial issue for communities, politicians, and large cable providers. Time Warner Cable in 2005 attempted to stop North Kansas City, Mo from implementing its own broadband network, and Philadelphia has faced similar difficulties during its ongoing saga to implement a free, citywide Wi-Fi network. Despite the fact that companies continue to rally against municipal Internet projects, the federal government recently allocated $7.2 billion in federal funds toward broadband stimulus that could resurrect municipal broadband and Wi-Fi projects across the country.

While arguments continue in the U.S. over the best way to achieve broadband service for all, other industrialized countries are already moving ahead with plans for national high-speed Internet service. Australia recently instituted a project to have broadband Internet at speeds of 100Mbps available to 90 percent of Australians by 2018 and South Korea is shooting for a national service of 1Gbps by 2013. The United States ranks 15th out of the 30 member states of the Organization for Economic Cooperation and Development (OECD) in terms of broadband access, and consistently scores poorly in other studies of broadband access among industrialized nations.