Saturday, August 13, 2016

Another Study in Inconsistency: North Carolina Politics

            North Carolina has a lot to offer including world class beaches, technology parks and barbeque.  Sadly it also leads the nation in partisan and checkbook politics.  This state’s majority party appears obsessed with remedying non-existent election fraud, bathroom gender ambiguity and the scourge of municipal broadband service.  Let’s consider the latter topic.



            From my perspective, municipal Wi-Fi and wired broadband offer a community service in the same vein as libraries, parking decks, parks, zoos, water authorities, etc.  For many types of services, it makes no sense to wait for, and rely on, the marketplace to recognize and serve consumers’ wants, needs, or desires.  The concept of market failure also applies when private industry refrains from providing a service based on forecasts showing insufficient returns on investment.


            Municipalities provide Wi-Fi and fiber optic broadband largely based on the view that the service enhances the welfare of residents while also accruing intangible, or at least hard to quantify benefits.  The Wilson, N.C. local government invested in broadband early, opting not to wait for the possible market expansion by incumbents, or newcomers.  The city mothers and fathers properly concluded that no venture would consider it worthwhile to invest in infrastructure for such a small and relatively isolated place.  Bear in mind that fiber optic ventures, such as Verizon’s FiOS, simply do not extend far from the most densely populated portions of the United States.


            Even though incumbent carriers have little likelihood of actually providing Wi-Fi or any alternative to metered service, they want the “right” to foreclose even cities from resorting to self-help.  In Pennsylvania, Bell of Pennsylvania secured a legislatively conferred right of first refusal for the entire state, except for Philadelphia.  Predictably, the company never acted on this option, but simply having it has achieved the goal of blocking home grown initiatives.


            In North Carolina, incumbent carriers simply convinced legislators that municipal broadband networks would unfairly compete with private ventures who have to enter the private debt and equity market instead of having captive taxpayers bear the financial burden.  In reality, incumbents simply bought a way to preempt town wide, unmetered Wi-Fi, or wired broadband.  Residents, not within the original  broadband service footprint, and in countless other localities have to pay on a metered basis for wireless broadband, or be grateful that they live in a location where cable modem or DSL service is available.


            Elsewhere in North Carolina, Google has installed a major server farm in Lenoir and recently announced that it will include Raleigh in future extremely high speed wireless projects.  In one state, we can see how cutting edge technologies contribute to the tax base, employ people and enhance community welfare.  Elsewhere, checkbook politics blocks community initiatives that would enhance the livability and commercial appeal of a rural locale.  

Friday, August 12, 2016

Consistently Inconsistent: How Very Large ICT Ventures Cannot Maintain a Consistent Legal/Regulatory Posture




            Technological and marketplace convergence makes it increasingly difficult for large, integrated firms, like AT&T, to maintain a single, consistent position on legal and regulatory issues.  This results in rich, irony. 
            Consider AT&T’s recent Kentucky law suit to prevent Google Fiber from using federal pole attachment law to secure access to AT&T-owned telephone poles, at relatively attractive rates, using a congressionally created formula.  See, e.g., http://www.bizjournals.com/louisville/news/2016/05/25/where-at-ts-lawsuit-against-the-citystands.html. 

            This litigation reeks of irony, because AT&T, in its capacity as an Internet Service Provider, would qualify under federal law to attach lines to poles owned by electric, telephone and cable television companies.  Federal pole attachment law prevents companies from refusing to provide pole access, or to allow access, but only at extortionate rates.  AT&T surely would benefit in cities where it does not own telephone poles and needs to install lines using the poles of another, potentially competing company.  But of course AT&T does not make it a practice of trying to compete in localities where it does not also happen to owe telephone poles.
            Adding to the irony—make that disingenuousness and other D words—is AT&T’s consistent legal and regulatory position on state and municipal laws and ordinances affecting access to cellphone towers.  When it comes to that technology, which AT&T considers a functional equivalent and competing option, the company vigorously asserts that federal law preempts state and municipal laws.

            Clearly both wireline and wireless access to the Internet qualifies as interstate telecommunications.  A long body of case precedent supports a “contamination” standard that favors federal preemption, and in turn FCC jurisdiction, whenever a line carriers both interstate and intrastate traffic that cannot be separated.  AT&T regularly seeks federal preemption of state and municipal laws that impose any sort of cost, delay, environmental impact assessment, etc. Federal preemption renders the state and municipal law invalid and inapplicable. 
             The FCC recently failed to convince an appellate federal court that the Commission should be able to preempt any and all state laws that limit or prohibit municipalities from offering Wi-Fi service. See http://docs.techfreedom.org/Tennessee_v_FCC.pdf.

This means there are some instances where federalism prevails, i.e., the national legislature did not clearly and unconditionally prevent states from enacting laws and some argument can be made that the law does not affect interstate commerce.  But when it comes to still lawful state and municipal laws affecting tower locations, etc. AT&T speaks clearly and unconditionally: that federal law severely restricts what states and municipalities can do, despite the intense local nature of tower siting issues.

            Ironically, AT&T’s absolute certainty that federal law trumps states and cities in terms of wireless Internet access, does not extend to functionally equivalent wireline Internet access.  This has nothing to do with respecting the “Rule of Law” and everything to do with stifling Goggle and the innovation and price competition it would offer. 

             The same conclusion applies to those incumbent carriers opposing municipal Wi-Fi networks and coverage expansion.  These carriers invoke law to short-circuit competition, but in other forums invoke the same laws, policies and precedent to justify their lawful right to ignore state and municipal law.  Consider this strategy rent seeking and not some lofty respect for the Constitution.