Telecoms Suing Municipalities That Plan Broadband Access

Law.com has up a review of ongoing and historical cases of telecoms suing municipalities that plan broadband networks. In many cases those same telecoms have spent years ignoring as potential customers the cities and towns now undertaking Net infrastructure projects, only to turn around and sue them. One lawyer who has defended many municipalities in this position says, "This is similar to electrification a century ago when small towns and rural areas were left behind, so they formed their own authorities." Bob Frankston has been writing for years about the financial model of artificial scarcity that underlies the telecoms businss plans. This post gives some of the background to the telecoms' fear of abundance.

Comments

open access

[QuantumG]

Municipalities want to pay for fiber to connect them to the metropolis? Fine. But that fiber has to be open for everyone. They don't get to play favorites with the telcos.

Re:open access

[TubeSteak]

Municipalities want to pay for fiber to connect them to the metropolis? Fine. But that fiber has to be open for everyone. They don't get to play favorites with the telcos.

Maybe you're confused.

Municipalities want to build out broadband networks and make them the 5th utility, alongside natural gas, heating oil, water, and electricity. The Telcos are suing to prevent Municipalities from doing this.

Re:open access

[QuantumG]

Yes, and the bits will get from their fiber to the Internet via MAGIC.

You obviously have gotten everything you know about this issue from the article, which is poor on details.

The Municipalities are cutting deals with Telcos. They are playing favorites.

Re:open access

[negRo_slim]

Don't forget the sewers!

I'm sure we all remember the Google TiSP Project. A shame that never took off, I had it for a while and was very impressed.

Re:open access

[keithjr]

Last time I checked, lawsuits are not typically the way one cuts deals.

Re:open access

[TubeSteak]

The Municipalities are cutting deals with Telcos. They are playing favorites.

Okay, maybe I'm confused... Are you talking about the status quo, which is Munis playing favorites with the Telcos?

Or are you saying that the Munis are cutting deals with Telcos w/regards to Municipal broadband? Because if that's what you're saying, you should do a little more explaining, rather than decry the lack of information in TFA.

Yes, and the bits will get from their fiber to the Internet via MAGIC.

Building out a Municipal broadband network and purchasing bandwidth directly from a Tier 1/2 ISP is not the same thing as giving [Telco] a monopoly to build out their own network.

Or am I missing something?

Re:open access

[Yvan256]

I was in the trial program for Google TiSP.

Long story short: the speed was crap.

Re:open access

[bberens]

You obviously have never worked for a large IT firm.

Re:open access

[afidel]

Actually if it wasn't for competitive water and sewer districts in London we probably wouldn't have come about with germ theory nearly as early as we did. You see on of the best pieces of evidence for germ theory came from a actuary working for a London insurance company, he mapped the outbreaks of various fatal diseases and eventually realized that while the deaths often seemed random that given enough outbreaks patterns emerged. When he investigated further the reason that one side of the street had an outbreak and the other not was what water district they were serviced by. This in turn led him to discover that water districts that obtained their water further downstream (and hence downstream from other districts sewer discharge) were more likely to have outbreaks.

Re:open access

[RulerOf]

Yes, and the bits will get from their fiber to the Internet via MAGIC.

No, no, they don't. Those bits would travel to the internet via Peering Agreements with Tier 1 ISP's. Bandwidth that is effectively paid for by the bit. Tier 1 ISP's don't pay eachother to swap data, because each considers traffic from the other to be just as important as its own.

Interestingly enough, if municipalities were to bond together to form a network large and important enough (maybe they could buy a couple /8's from Ford or whoever) to contain enough traffic to meet the absurd "settlement free" peering agreement requirements put forth by the cartel we know as Tier 1 ISP's... now that would be interesting.

Re:open access

[Z34107]

Reading the article, it sounds like the telcos are suing over anti-competitive tactics used by the cities. (Telcos suing the government for monopolistic practices? Reads like a certain slashdot meme...)

Attorneys for telecommunications companies say the litigation is needed because municipalities with the ability to borrow money cheaply -- and not hobbled by the need to return a profit -- have unfair competitive advantages

...which is an interesting point. I'm inclined to give some sympathy to the telcos because of another bit in the article:

Goodnight cited an association of Utah cities formed to promote the construction of a broadband networks in smaller cities and rural areas. "What we found during discovery was that the cities were providing facilities and personnel at no cost, interest-free loans and, in some instances, outright cash infusions," he said.

So, the Telcos make it sound like municipalities are arbitrarily picking "winners" in the broadband market. Kind of a no-no. But, I wonder if that's really the case, especially given the cities complaint of lack of service. Can you sue the city for anti-competitive practices (or whatever the actual suits are about, the article doesn't say) if you weren't competing there? If no one was offering broadband services prior to the cities mucking about?

I like the typo at the end, too:

A motion for dismal is scheduled to be argued on July 18.

(Sounds like it's already pretty dismal.)

Re:open access

[Daengbo]

What I find amusing is that, in most cases, the telcos have been given monopolies by the municipalities, so what grounds would the telcos have to sue the munis on? It's all very screwed up.

Ultimately, though, the U.S. consumer gets little choice in most cases.

Somehow, here in Korea, I have a choice of several broadband providers, including one that offers unmetered 100Mb/s downstream. There are also multiple Wifi systems for larger towns, though none in my little tucked-away village.

Re:open access

[SpaceLifeForm]

Last time I checked, it was always the way Microsoft cut deals.

Re:open access

[armareum]

Further to the AC's comment: http://en.wikipedia.org/wiki/John_Snow_(physician)#Cholera

Re:open access

[jc42]

They don't get to play favorites with the telcos.

And from TFA: ... you can't use your powers as a city to create an uneven playing field,"

This is a nonsensical argument. Nearly everywhere, the municipalities, states, and all other levels of government always "play favorites" and create an "uneven playing field". They do this by creating and enforcing local telecom monopolies.

Where I live, the phone line leading to my house is owned by Verizon, and it's illegal for any competitor to install a competing line. This is about as much an uneven playing field as you can imagine. The town has exactly one favorite phone company, and the others aren't allowed to install their wires in this neighborhood.

Cable is similar, though our neighborhood is a bit unusual in that there are two companies that are legally permitted to install their cables. But a "duopoly" isn't all that much better than a monopoly. (And the "competition" between phone and cable companies does little to alleviate these mon/duopolies.)

Also, here in the US, and in most other companies, the phone companies have received all sorts of subsidies from the national government. If I'd tried to start my own phone company, I'd have had no access to those subsidies. And even with regulations allowing my startup to use the phone company's (copper) wires, they can charge me so much that I can't price my services competitively with theirs.

How do people get off arguing that municipalities shouldn't play favorites to create an uneven playing field, when for over a century, all levels of government have been doing exactly that to create and enforce the telecom monopolies that we see everywhere?

The government?

[symbolset]

The government? Providing necessary infrastructure companies can't or won't? How dare they!

Re:The government?

[QuantumG]

Yeah, cause its not like these municipalities are trying to say who can use the fiber that they want to build to connect their citizens to the Internet. Oh wait, yes they are. This would be like building a nice new highway, and getting Ford to pay part of the cost, and only allowing people with Fords to drive on it. [Slashdot car analogy at its finest].

Re:The government?

[Anonymous Coward]

At one point in our history, electricity wasn't necessary infrastructure either.

Hence the TVA.

I argue that high-speed telecommunications infrastructure is necessary for a 21st-century economy. I'd like to hear your thoughts as to why you believe differently.

Re:The government?

[Anonymous Coward]

OH SHUT UP.

Sanitation is not "necessary infrastructure". Electricity is not "necessary infrastructure". Telephone lines are not "necessary infrastructure". The Amish show all this quite well.

But any modern city requires these things and also requires data transfer. Now, if no company will spend the money, clearly the citizens have the option of doing so themselves. I'd rather see them form a co-op, but whatever, it's their city.

Now, the private sector may not be able to compete with tax subsidized services, but the fact that the private sector does not want to get involved is a pretty clear indication that they can't compete, period. If they're not going to compete, then they need to stay the hell out of the way.

Re:The government?

[clang_jangle]

Internet access is not "necessary infrastructure"

Then get the fuck off it and stop clogging our tubes, Ebeneezer!

Re:The government?

[whoever57]

Internet access is not "necessary infrastructure".

Isn't it? I think that, with services such as local phone running over the Internet (eg. Vonage), there is a very strong argument that it is a necessary infrastructure. We think of electricity as a necessary infrastructure, yet in the early days many people were without it.

Re:The government?

[Xzzy]

That may have been true 10 years ago, but now? It's the 21st century equivalent of the printing press or TV.

Obviously it's not a required service to survive, but the generation of kids in school right now are building their lives around the existence of the internet, and if those of us in power now don't think it's "necessary", I guarantee you their generation will.

May as well get a jump start on it and make my life easier as well. ;)

Re:The government?

[Anonymous Coward]

I'm not the other anonymous coward, but you never proved your point that "Internet access is not 'necessary infrastructure'."

Instead, you said "The private sector cannot compete with tax subsidized services." Your second sentence just shows that you don't want it because it's bad for business. However, this sentence does not offer any proof of why internet access isn't necessary infrastructure.

Re:The government?

[whoever57]

Internet access is not "necessary infrastructure". Isn't it? I think that, with services such as local phone running over the Internet (eg. Vonage), there is a very strong argument that it is a necessary infrastructure. We think of electricity as a necessary infrastructure, yet in the early days many people were without it.

Vonage? Are you serious? Yeah, let's consider Vonage, one of the most unreliable VoIP providers on the planet, to be a necessary service.

No thanks. I'd rather stick with my switched circuits for reliable service.

Your opinion on the reliability of Vonage has nothing to do with the discussion. Vonage (and other VOIP providers -- I cited Vonage only as an example) provide a local phone service. It is not possible for them to provide this essential service without Internet access.

I notice that elsewhere you responded to another poster with a clear ad-hominem.

And if you think that you get a switched circuit from your local phone provider for anything except perhaps a call to your neighbor, you are just showing your ignorance.

Re:The government?

[Vancorps]

The only thing you stated was circular logic. You did not state why you think it's not a necessity. You only made a generic statement about private industry competing with government.

I think it's pretty easy to make a case that the 21st century economy should include Internet access as a necessity.

In this day and age all my bills are paid online, the yellow pages on paper is a thing of the past and calling internationally is no longer prohibitively expensive. Looking for a new job is next to impossible without being online even.

Yes people can live without the Internet, people can live without phone service and electricity too. How exactly is it not a necessity?

Re:The government?

[nine-times]

We think of electricity as a necessary infrastructure, yet in the early days many people were without it.

Right. For every kind of infrastructure we have, there has been a time when we lived without it. Telephones, electricity, indoor plumbing, roads. In the hunter/gatherer sense of the word "necessary", none of these things are necessary.

However, they're all vital to our economy, and an important factor in the development of our civilization. Having a couple big companies exercise complete control over all allowed infrastructure, and that infrastructure's use, is unacceptable.

Would we hand over construction of our roads to a single private company, allow them to build roads where they want and not build roads elsewhere, and then allow them to arbitrarily decide what kind of traffic is allowed, based solely on what they believe would be most profitable?

Re:The government?

[mabhatter654]

you mean the PUBLIC utilities that ALREADY accepted millions of dollars in tax credits (that's a subsidy!!!!) but didn't deliver the product? Telcos already had their chance, got it paid for with tax money and took the cash.. but didn't deliver when and where they promised Congress.

Why do they hate America so?

[WillAffleckUW]

And is there any way we can post the plans for the wiring of their top execs offices and homes online so all the world can assist them in not having broadband?

After all, it's for the public good - the USA is near the bottom for high speed Net access among first world nations ...

We're screwed

[clang_jangle]

The people didn't worry when the same thing happened with electricity, they didn't worry when it happened with telephone service. They didn't even worry when a "radio set" came to mean just a receiver. The wild and wooly "early days of the internet" will be over in just a few years, and few will really care. Relish these times we live in, pity those who come later...

Re:We're screwed

[clang_jangle]

Thanks, you have illustrated my point well. The day may well come when someone with no understanding of today's internet potential will say, "People have download only accounts (or accounts with tiny upload caps) because they have little desire to upload. Oddly enough, most people who want an uploading account can just go buy one (they may have to fiddle about a little to legally use it)."

fsck the telcos

[blind biker]

I was on a course in Oulu, a smallish city slightly up north here in Finland, and was delighted that across the whole city there is unrestricted free WLAN access to their PanOulu network. It was a grand week - I was cycling around a lot (excellent city for cyclists, BTW) and once a bit tired, sit down and whip out my Eee PC and check my e-mails. When I returned to Helsinki, I felt like I was in a stupid backwater, and can't wait for the day Helsinki, too, introduces such a wonderful, free service. As for the telcos, well, they "don't have a God-given right" to profits. If I were one of the telcos, I'd try to actually be the one supporting such an initiative, and try to get what I can from the municipality, in terms of revenue.

By the way, before the Helsinkiläinen lynch me: I love the city, but dudes, Oulu beats Helsinki in this particular instance, sorry.

That's the point

[symbolset]

These areas have no current broadband business serving them and they aren't going to because the margins are higher providing 5mbps to city folk than dragging fiber out to farmer John. That's why rural areas to get broadband at all have to do it themselves.

The thing is in places like sleepy Ephrata, WA they can sell 100mbps broadband for $50/mo through the power district and still make a profit - just not as big of a margin as the telcos are getting.

There is no business there to destroy and there never will be. Comcast and Ma Bell have no intention of serving these folks ever. They just sue to keep other people from doing it to prop up the myth that bandwidth is evpensive. Yeah sure it's expensive if the guy dragging the fiber has to take every corner, valley and river by force from a defending battalion of lawyers.

Re:That's the point

[QuantumG]

Stupidity runs in your family doesn't it?

I'll spell it out for you:

1. Municipality pays half the cost to get fiber run to them.
2. A selected telco pays the other half.
3. In exchange, they get exclusive access to the cable to provide Internet to customers in that town.
4. All the other telcos are suing the municipality for not allowing them access.

What is so fucking hard to understand about that?

The internet is the modern post road

[symbolset]

Many government services are provided by Internet. The internet is for many people the only access to modern markets. Internet is essential infrastructure.

These companies have no desire to compete for these markets. Their objective is the prevention of information services to these people. The people are right to be angry. They're also more used to fixing these things themselves.

New business model

[SilverBlade2k]

Just like the RIAA and MPAA, the Telcos would rather sue, then to actually WORK for their money.

Not all of them

[symbolset]

The power districts I know of that are doing this don't sell retail. They'll open their network to any shmuck with a decent router. I could be an ISP. If comcast and AOL want to play on a level field, they're welcome to. They don't. The thought terrifies them. Hence the lawyers.

In Tacoma WA they have muni broadband, and they're more particular. OTOH their quality of service is stunning. You call, and get actual local people who know the area and the network and get someone out to you right away if you need it. Click Network is great stuff, even if it's only 10mbps over cable instead of 100mbps over fiber.

Problem with the telcos

[DigitAl56K]

Here is the problem I see with ISPs in general.

You tend to get internet, phone, and TV services from a single provider. Unfortunately, phone services will go away as a revenue stream as people move to VOIP. I know plenty of people who have also canceled their tv service because they only watch a few shows and they prefer to get them online at their convenience. This means that providers loose the revenue attached to phone and tv services right off the bat. Then you have to consider how many big ISPs are also media industry giants and have a vested interest in ensuring you continue to consume media through premium channels and channels laden with advertising. They don't necessarily want you watching things over the net at your convenience. So we have ISPs fighting against P2P claiming "conjestion", while refusing to upgrade their backbone, killing their newsgroup services, and imposing bandwidth caps with costly per gigabyte charges for subscribers who exceed them.

Of course, the ISPs can't afford to lose even these "undesirable" users to a municipality, because as soon as they do they can no longer impose p2p throttling and bandwidth caps as a measure to slow people moving away from their established channels and services, and their content is harder to monetize. So IMHO they're going to fight to keep people locked into a service that they're also working feverishly to lock down to their benefit and the detriment of consumers.

But that's just my $0.02 ..

Re:Problem with the telcos

[pdemon]

just removing a wrong mod

Re:Problem with the telcos

[nine-times]

You tend to get internet, phone, and TV services from a single provider. Unfortunately, phone services will go away as a revenue stream as people move to VOIP. I know plenty of people who have also canceled their tv service because they only watch a few shows and they prefer to get them online at their convenience. This means that providers loose the revenue attached to phone and tv services right off the bat. Then you have to consider how many big ISPs are also media industry giants and have a vested interest in ensuring you continue to consume media through premium channels and channels laden with advertising.

Yup. It's a problem. People often focus on the problem of limited choices in ISPs-- that your only real choice in a given area is usually "the phone company" or "the cable company"-- but they usually fail to recognize the conflict of interest involved in owning multiple points in the chain. Verizon, for example, is the owner of the infrastructure, the ISP, and the phone service provider. So right off, they aren't going to want VOIP to be successful, but also they don't have much interest in seeing successful alternative ISPs over their own infrastructure.

Cable companies can be even worse. Like with TimeWarner Cable, you have the same problems as Verizon, but substitute "cable TV" for "phone service". But in addition to that, their parent company also owns a bunch of the content being delivered on their TV service. So they own the infrastructure, they're the ISP, they provide a video service, and they provide the video content that they're providing in that service.

Now maybe there's some independence between those functions, but there's still a conflict of interest. As the company building infrastructure, it would normally be in your best interest to build infrastructure everywhere so that you could get paid. As the owner of the infrastructure (if you weren't an ISP) it would be in your interest to foster ISPs and new services who would pay for a variety of uses of that infrastructure, instead of putting all your eggs in one basket. If you were the ISP, anything which made people want access to the internet would be to your advantage. As the video/voice service provider, you'd want the best/fastest network possible. As the content owner, you'd want your content on every possible channel (that makes money for you).

But since these companies basically run the whole supply chain, their interests are different. Building the infrastructure comes out of their own pocket, they don't want to build anything without knowing it'll provide the best ROI, so they don't bother building in lots of places. As the owner of the infrastructure, they want to restrict its use to pushing their own services. As the ISP, their interests are best served by restricting usage, as much as possible, to pushing their own content and services. As video/voice service provider, your interests are served by seeing Internet service being slow outside of a QoS for your own services. As the content owner, you want to restrict your content to channels that you control, and also use those channels to push/advertise your content.

All of this is a bit of an oversimplification, but I still think we would be well-served by breaking some of these functions out into separate companies. Primarily I have in mind that whoever builds/maintains the infrastructure should be forbidden from providing any services on that infrastructure. I admit that I'm not an expert in telecommunications or economics, but it seems reasonable to me.

If it's not possible to build infrastructure by itself, without providing services, then it seems like an argument in favor of a completely public infrastructure.

Re:Bad Idea

[stinerman]

Letting a local government run your Internet is a stupid-bad idea.

I agree.

What isn't a stupid idea is letting a local government build networking infrastructure and then allowing access to anyone who wishes to provide services over the infrastructure.

World Class Land Grab, oops Fiber and Services

[postbigbang]

The telcos are running scared. They may no longer be able to bribe (oops, sorry, I meant lobby and give campaign contributions) to Congress and the White House, so it's time to grab all available opportunity to extend and destroy-- I mean deploy.

The thought of public utility as a concept is just about over in many areas, and communications is a de facto utlity concept. So, if you can't woo them, like Verizon did to Ft Wayne Indiana, then simply sue and use the legal funds to drive municipalities broke.

This so begs for a reexamination of competition in the communications markets, but it's unlikely to happen after the last two legislative fiascos (this after Judge Greene).

To extend the parallel...

[Stanislav_J]

"This is similar to electrification a century ago when small towns and rural areas were left behind, so they formed their own authorities."

And yet (as is painfully aware to me every month when I pay my power bill), the big power companies still survived and thrived. So will the telecoms.

It amazes me how they say it isn't profitable to for them to serve a certain market, municipality, or region, then suddenly covet those same populations when someone else tries to serve them. If you want them, serve them. If you don't want to serve them, don't go crying to court when someone else does.

Just a technicality

[f2x]

I hate seeing articles like this...
Municipal corporations versus privately held corporations. It doesn't matter who wins, the taxpayer/consumer loses.

I'm curious when the internet as we know it will essentially vanish. Usenet is already on the endangered species list, P2P is still a logistics nightmare if it goes prime time. Special interest groups want to censor every website. Barratry is rampant over intellectual property claims. Spam, spyware, trojans, worms, viruses, and other malwares are constantly trying to take over or kill the net. Governments want to tap into everybody's business while they're on the net. Telecoms want to repackage it with their own brand name all over it. The list of this degenerating garbage is endless, and yet people are still so desperate to get it!

Why doesn't this stupid thing just implode already?! Once it does, Tim Berners-Lee (with nothing better to do) can come out and design a whole new concept of network computing that no single entity can possibly own or control.

Meanwhile, Priva-corp vs Muni-corp can serve as yet another distraction from creating more practical advances in technology.

I won't move to VOIP.

[plasmacutter]

When the power goes out, so does VIOP. Eventually a mobile also has to be charged, and murphy's law states the power will go out on the evening it's due to be charged.

The redundancy offered by self-powered land lines is something which cannot be so readily ignored, at least to me.

Re:I won't move to VOIP.

[AvitarX]

Mobiles can be charged in all sorts of ways:
1)car
2)USB from laptop
3)Double A's
4)For the truly hard core hand crank

Re:I won't move to VOIP.

[ScrewMaster]

Sure, POTS runs off batteries at the CO, but nothing says you can't run your cable/DSL modem and VoIP box from a battery. That's what I do. I've coasted through a number of power failures with no loss of service (I have Comcast as my ISP and AT&T's Callvantage for my VoIP service.) Plus which, the AT&T service allows you to assign a backup cellphone number, to which all incoming calls are routed in case they can't get through to your VoIP unit.

Re:open access - "unfair" competition

[davide marney]

See, here's the thing: telcos do not have a "right" to compete for these services. Rights belong to the people, not to private businesses.

The people, through their various branches of government, decide what are the rules and laws under which business can operate. The people, through taxes, fees, and bonds, provides the funding. The people, through our elected representatives, entirely owns the "public" sphere and everything that operates within it.

We are our own sovereign entity. No private enterprise can legitimately claim to "compete" with us; there is no government other than what we have established.

The whole foundation of the telco's argument is built on sand. Something to think about ...

A manifestation of Googin's Law

[grandpa-geek]

The abundance concern of the telcos is a manifestation of Googin's Law, enunciated by Roxanne Googin, editor of a telecom-related newsletter. She stated that broadband (from an investor perspective) will either be a valuable monopoly or a worthless commodity.

The marginal cost of additional bandwidth is near zero. According to basic economics, the price should equal the marginal cost. That is the "worthless commodity" part. However, if there is a single monopoly owner who can play games and charge whatever they want for whatever they decide to provide, that is the "valuable monopoly."

Right now, we are in the valuable monopoly situation. Speeds are dumbed down (real broadband starts around 500 Mbps bidirectional, chips now in systems can support 1 Gbps). Cable TV providers use the rationale of limited bandwidth to choose the channels they provide and play games with tiers.

This situation is causing the US to fall behind in worldwide competitiveness.

We need to make bandwidth a worthless commodity. That may mean end-user ownership or municipal involvement. Our innovative birthright should not belong to the telcos.