Give municipalities a chance

Nov. 1, 2005

Earlier this year, I wrote an editorial in which I cautioned municipalities on the complexities inherent in getting into the telecommunications business (see “Do it yourself? Watch your step,” Lightwave, February 2005, p. 8). These difficulties are very real and often very hard to overcome. Nevertheless-or perhaps because of such complexities-scores of municipalities, their associated utilities, and various other would-be developers of optical communications infrastructure sent representatives to Las Vegas last month for the Fiber to the Home Council’s FTTH Conference. The fact that this year’s event again set records for the number of conference attendees-as well as the number of exhibitors eager to market to them and each other-points to the growing importance of broadband communications to U.S. communities, large and small.

It also illustrates the mounting impatience of many communities, particularly smaller ones, with their place on the local incumbents’ optical speed broadband “to do” list. As a result, many communities have decided that if the incumbents don’t want to provide 20 Mbits/sec or higher to homes and businesses in East Podunk anytime soon, then the government of that fair hamlet has a responsibility to its citizens to do it themselves.

Obviously, incumbent telcos and multiple systems operators don’t want more competition, particularly if it might be subsidized by tax dollars or the fruits of electrical service provision. In many cases, they have taken their grievances to local and state legislatures, and several states have passed incumbent-backed bills that bar their communities from competing with the carriers. With the current drive in Washington to reshape the Telecommunications Act of 1996, incumbents also have an opportunity to deploy this anticompetitive agenda on a national scale. Certainly one of the reasons the Ensign-McCain bill received such plaudits from incumbent service providers was that it would severely limit the ability of municipalities and their associated utilities from providing services over home-built networks.

Such restrictions are wrong and bad for the optical communications industry. One of the goals of any national telecom legislation should be to ensure fair and open competition, particularly the facilities-based competition incumbents demanded during the recent Triennial Review wrangling-even if those facilities are owned by local governments or utilities.

The situation in Lafayette, LA, illustrates why Congress should ensure that municipalities retain the option of providing high-speed broadband services themselves. As the city’s mayor, Joey Durel, described in a speech at last month’s conference, Lafayette is a small community that wanted to be sure that, as BellSouth and Comcast rolled out their competing high-speed infrastructures across the state, those cables would reach Lafayette relatively quickly. The news from the incumbents wasn’t good: New broadband infrastructure would be deployed first in communities where return on investment would be highest and quickest, and Lafayette promised neither. Therefore, the town would have to wait.

Mayor Durel pointed out that this didn’t make the two incumbents evil or uncaring. They’re businesses, and they have the right to tailor their provisioning plans in a way that makes the most sense for themselves and their shareholders. However, Lafayette town fathers had heard a similar story early in the last century from electrical service providers, Durel said. Rather than accept life without electricity, the town started its own electrical utility. It was about 30 years after the founding of Lafayette’s electrical utility that another electrical service provider found its way into the city. Unwilling to wait that long for broadband, Lafayette city government decided they would have to take matters into their own hands once again.

Whether providing electricity is different than supporting telecom isn’t the point. Neither is what happens to the town if the city falls flat on its face when it tries to offer triple play services. In fact, whether Lafayette’s efforts and those of communities in similar situations represent potentially unfair competition isn’t quite the point, either.

What is the point? It’s this: Local incumbents-in Lafayette’s case and in similar situations in communities across the United States-have decided, for perfectly sound business reasons, that they don’t want to compete right now when it comes to optical broadband in small communities where ROI isn’t reasonably assured. And if you’ve decided not to compete, you have no right to stop others from competing as long as they do it fairly. In this case, that means the new local triple play service provider operates without cross-subsidization from electrical service revenues or at taxpayers’ expense.

Congress should resist efforts to shut out municipalities from broadband service provision and instead focus on establishing rules that ensure incumbents can compete evenly with such muni networks when they do decide to offer equivalent services. Anything else harms both the citizens of these small communities as well as the optical communications industry.

Stephen M. Hardy
Editorial Director & Associate Publisher
[email protected]

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