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Internet providers team up to block America's best Internet service

It is widely held that one of the fastest Internet services in America, if not the fastest, can be found in Chattanooga, Tennessee.  They’ve got speeds that can reach 1 gigabit per second, which is around fifty times faster than the average in the U.S.  The high quality of this network has been bringing tech jobs to the area.  And yet, a partnership between Big Cable companies Comcast and Time Warner is trying to block expansion of the Chattanooga high-speed Internet service, along with a similar service in Wilson, North Carolina.

It’s a good old-fashioned example of anti-competition, in which big players use political influence or legal challenges to keep a market closed up.  The twist is that in this case, the new players entering the market with superior service are municipal governments.  The broadband services in question are owned by the local governments.  The UK Guardian explains that the operation in North Carolina was launched expressly as a result of customer complaints about poor Time Warner service:

Chattanooga has the largest high-speed internet service in the US, offering customers access to speeds of 1 gigabit per second – about 50 times faster than the US average. The service, provided by municipally owned EPB, has sparked a tech boom in the city and attracted international attention. EPB is now petitioning the FCC to expand its territory. Comcast and others have previously sued unsuccessfully to stop EPB’s fibre optic roll out.

Wilson, a town of a little more than 49,000 people, launched Greenlight, its own service offering high speed internet, after complaints about the cost and quality of Time Warner cable’s service. Time Warner lobbied the North Carolina senate to outlaw the service and similar municipal efforts.

The FCC has been actively encouraging the creation of high-speed networks, although not specifically from municipal utilities.  The service in Chattanooga criticized Big Cable for failing to rise to the challenge:

In January this year, the FCC issued the “Gigabit City Challenge” calling on providers to offer gigabit service in at least one community in each state by 2015. The challenge has come amid intense lobbying from cable firms to stop municipal rivals and new competitors including Google from building and expanding high speed networks.

In a statement EPB said: “Communities should have the right – at the local level – to determine their broadband futures.

“The private sector didn’t want to serve everyone, but public power companies like EPB were established to make sure that everyone had access to this critical infrastructure. “

USTelecom, which represents Comcast and Time Warner, has a lengthy blog post in which it defends its actions partially on the basis of municipal broadband failures, which it warns can leave “state taxpayers on the financial hook when a municipal broadband network goes under.”  That doesn’t seem to be a problem in the Tennessee and North Carolina cases, although USTelecom cites other experiments that haven’t fared as well.  (Which probably isn’t going to prevent eager consumers of the municipal services in Tennessee and North Carolina from suspecting that big companies who offered them poor service are just trying to use legal shenanigans to prevent the expansion of a successful competitor.)

The USTelecom post also suggests sweeter incentives to private companies can expand broadband service more efficiently than letting the government do it, specifically citing “the expense of obtaining permits and leasing pole attachments” as start-up costs that create barriers to entry in the market.

Whatever one might think of the broadband providers’ motivations, they do have a significant legal case.  The UK Guardian article is somewhat confused about the legal situation, but in essence, there are state laws that would block expansion of the municipal broadband services.  The FCC is trying to overrule them, in response to requests from the cities of Chattanooga and Wilson.  USTelecom argues that the FCC doesn’t have the authority to grant such waivers to state law, and for what it’s worth, The Hill reports that the National Governors Association agrees:

The governors group on Friday claimed that stepping in would violate the 1996 Telecommunications Act as well as President Obama’s 2009 executive order telling agencies not to preempt state laws unless there is a firm legal footing.

“The public elects representatives to govern them,” the governors’ group wrote in their warning to the FCC.

“There is a legal distinction between laws that are unconstitutional from those that some factions do not support,” they added. “The tool to address the latter is the ballot box.”

It’s a bit of a legal mess, and public perception of the conflict is likely to be driven by a certain degree of satisfaction with the service provided by private broadband interests in many areas.  Perhaps they’ll step up their game in order to head off further municipal challenges, although they’re not whistling Dixie when they talk about the regulatory barriers and start-up costs that make expansion into some areas difficult.  Since the whole business of broadband is a tight pseudo-monopoly anyway, the public isn’t likely to have a strong inherent aversion to seeing municipalities enter the market; they’re almost the only new competitors that can.  Results are going to matter as much as legal arguments to the voters, who can always change those state laws, if the FCC doesn’t have the power to over-rule them.

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