Tag Archives: chattanooga

Muni broadband endorsed by Comcast, again

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Comcast jumps on board.

Are you wondering whether or not you live in a place where Comcast will soon upgrade at least some of its broadband infrastructure and technology to the high speed, DOCSIS 3.1 standard? All you have to do is check to see whether there’s a municipal broadband project underway nearby. That’s a very reliable way to gauge the esteem that Comcast bestows upon your town.

According to a story by Daniel Frankel in FierceCable, Chattanooga, Tennessee is the next stop on Comcast’s DOCSIS 3.1 road trip, where it will begin offer much cheaper 1 gigabit service to homes and businesses…

Comcast had been delivering its pricey 10-gig fiber service to local Chattanooga businesses, and 2-gig fiber service to local residences. The DOCSIS 3.1 products are much cheaper, starting out at around $140 a month without contract.

Chattanooga’s publicly owned electric utility built a fiber to the premise system and began offering gigabit speeds in 2010, with faster service following in later years. The project, which was initially funded by a $100 million federal stimulus grant, has been credited with amping up Chattanooga’s economic mojo, with neighboring communities begging for the network to be extended.

Comcast’s Chattanooga announcement comes a week after it promised a DOCSIS 3.1 upgrade in Huntsville, Alabama, which also has a municipal electric utility in the process of building an FTTP system, which will be operated by Google Fiber. Huntsville and Chattanooga join a very short and select list of Comcast DOCSIS 3.1 upgrade targets, which includes two other Google Fiber cities, Nashville and Atlanta.

It’ll be interesting to see what Comcast does with its pricing. The Chattanooga muni system offers a gigabit to residential customers for $70 a month, half of Comcast’s standard rate. On the other hand, Comcast can spread costs and generate profits from a wide range of video and other services, over a nationwide footprint. There would seem to be little point for it to go head to head with a muni system if it wasn’t planning to use that market power to the max.

FCC decision says state laws must treat muni and private ISPs the same

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Only Washington can level the playing field.

Municipal broadband initiatives either have to be banned altogether by state law or allowed the same latitude to conduct business that the FCC gives private Internet service providers. That’s the core of the FCC’s decision, released last Thursday, to preempt state-imposed restrictions on publicly-owned broadband systems in Tennessee and North Carolina…

A different question would be presented if we were asked to preempt…a law that goes to a state’s power to withhold altogether the authority to provide broadband. But where a state has authorized municipalities to provide broadband, and then chooses to impose regulations on that municipal provider in order to effectuate the state’s preferred communications policy objectives, we find that such laws fall within our authority to preempt.

Which means, the FCC argues, it has the authority to decide what, if any, special restrictions are allowable. It’s okay with administrative regulations, for example. But it doesn’t like state laws that tie the hands of muni broadband providers…

The requirements in the provisions of the [North Carolina] statute, especially when taken together and viewed in context, serve to regulate the operation and competitive offerings of municipally-owned broadband providers as a means to protect incumbent private-sector ISPs. Their effect is to impose asymmetric burdens on one category of providers—municipal providers—but not on others, and to place municipal providers at a competitive disadvantage.

The language in the muni broadband decision parallels the text of the new common carrier rules for ISPs, at least to the extent that it asserts the FCC’s authority to regulate Internet service and infrastructure nationally, and to put sharp limits on what state governments can and can’t do. Even if – as I believe likely – the federal courts throw out this particular preemption, expect muni broadband rules to, more and more, be written – and rewritten – in Washington and out of the public’s view.

FCC muni broadband decision relies on a wobbly position

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This isn’t the first time the feds have fought in Chattanooga.

There was no doubt that the FCC would vote two weeks ago to pre-empt state laws in Tennessee and North Carolina that restrict the ability of local governments – the cities of Chattanooga and Wilson respectively – to get into the broadband business. Both U.S. president Barack Obama and FCC chairman Tom Wheeler promised it was coming. And there’s no shortage of reasons to do it (or not).

The only real question that was left to be answered when the actual text of the decision was released yesterday was the FCC’s legal basis for doing so. It might have tried to slip through a possible loophole in the U.S. supreme court’s previous muni broadband ruling – Nixon v. Missouri Municipal League – and claimed the two specific utilities involved were independent corporations. That would have been a long shot though, and the FCC wisely didn’t take it.

Instead, it determined that federal telecoms law – particularly the very broad and equally vague language in section 706 – gives it preeminent authority over states in deciding broadband policy. Enough authority, it thinks, to get around the supreme court’s requirement that the FCC needs a “plain statement” by congress in “unmistakably clear” terms that it has the power to tell states how to manage the relationship with subordinate agencies, such as cities and counties…

A different question would be presented were we asked to preempt state laws that withhold authority to provide broadband altogether. But where a state has authorized municipalities to provide broadband, and then chooses to impose regulations on that municipal provider in order to effectuate the state’s preferred communications policy objectives, such as the protection of incumbent ISPs, such laws fall within our authority to preempt.

It’s a decision that’s begging to be overturned by the federal courts. The problem is that section 706 puts state telecoms regulators on an equal footing with the FCC: “the [Federal Communications] Commission and each State commission with regulatory jurisdiction over telecommunications services shall…” do all this stuff.

It’s far from clear that congress intended to give FCC absolute preemption powers. And even then, the decision is (horrors!) legally disingenuous about the Nixon decision…

We therefore find that the “clear statement rule” from Gregory does not apply here. And unlike Nixon v. Missouri Municipal League, the question here is not whether the municipal systems can provide broadband at all, but rather whether the states may dictate the manner in which interstate commerce is conducted and the nature of competition that should exist for interstate communications.

Gregory was an earlier U.S. supreme court ruling that affirmed the principle that if congress wants to “upset the usual constitutional balance of federal and state powers” then it must make that intention “unmistakably clear in the language of the statute”. It was integral to the Nixon decision. So was the question of whether the FCC has the power to tell states they can’t ban muni broadband – the answer was no, the FCC doesn’t have that power – but it wasn’t the only question. The Nixon ruling used the unmistakably clear principle to parse whether or not congress wrote into the telecoms absolute authority over state policy regarding publicly-provided Internet service. The decision the FCC released yesterday slides around that question.

There’s plenty to consider in the FCC’s muni broadband decision, and even more in its decision to regulate Internet service and infrastructure using common carrier rules – also posted yesterday. More to come.

Muni broadband ruling posted by FCC

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Today is the day. The FCC just followed up its release of new common carrier rules for the Internet with the text of its decision to preempt state restrictions on municipal broadband projects in Tennessee and North Carolina…

Click here to download the muni broadband decision…

The statements issued by the five commissioners can downloaded here.

It’s 116 pages long. Added to the 400 pages of new common carrier rules all the associated commissioner statements, objections and press releases, that makes for a serious reading assignment today.

I’m going to try to work through as much as I can. I’ll probably have a blog post tomorrow morning on the muni broadband decision – not only is it shorter, but it seems more urgent for my clients. Analysis of the new common carrier rules will follow sometime after that.

In the meantime, enjoy reading it all!

Muni advocates need to be careful what they wish for at the FCC

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If you like the idea of cities and other local agencies encouraging broadband development and deciding to go into the business themselves – as I do – then FCC chair Tom Wheeler’s talk about sweeping away state-level restrictions is sweet music to the ears.

The City of Chattanooga certainly enjoys the tune. It filed a petition with the FCC on Thursday, asking it to override a Tennessee law that prevents it from expanding its fiber-to-the-home network.

Muni broadband advocates seem to assume that Wheeler will issue an order along the lines of “states shall not restrict muni broadband”. Something clean and clear, that leaves no room for legal ambiguity or weaseling by lobbyists.

That’s a bad assumption.

Wheeler has delegated Internet policymaking – in particular, regarding network neutrality – to his fellow lobbyists former colleagues. To him, leadership is a matter of bringing the best-heeled lobbyists into a room and working out a deal that everyone can live with. Any muni broadband edict from the FCC will be vetted through that process.

The likeliest result will be a high-sounding declaration that proclaims the liberation of muni broadband while hobbling it with conditions and circumlocutions that cable and telephone company lobbyists can cheerfully exploit to stall projects, perhaps forever.

And if that proves insufficient to the needs of deep-pocketed incumbents, all they need do is go back to the FCC for another friendly conversation, as the National Conference of State Legislatures has pointed out. The messy business of arguing in front of state legislators or local officials will be gone.

As hard and as frustrating as community broadband battles are in Sacramento, local agencies and advocates can get in the fight and score victories. Once it moves inside the Beltway, we’re out of it. I’d rather be in a game we can occasionally win than one we’re locked out of from the start.

Chattanooga forces Wheeler’s hand: tear down muni broadband barriers

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The City of Chattanooga formally asked the FCC yesterday to throw out a Tennessee state law that prevents it from extending its fiber-to-the-home network to surrounding areas. In doing so, the city is asking FCC chairman Tom Wheeler to make good on his high-sounding rhetoric about pre-empting state restrictions on municipal broadband.

The filing is a goldmine of information. The petition itself was written by muni broadband legal expert Jim Baller, and the attachments provide a wealth of case study material on the Chattanooga project specifically, and the history of muni broadband regulation and legislation in general.

Baller makes a plausible, if circuitous, case for allowing the FCC to tell states how to allocate power amongst subordinate agencies, such as cities. As Baller has previously said, regarding another muni broadband case, the U.S. supreme court has established and applies a “traditional rule of statutory construction that federal statutes cannot be read to preempt a fundamental state power unless Congress makes it its intent unmistakabl[y] clear”.

This time, Baller says, congress wanted the FCC to be able to do whatever it thinks necessary to open up broadband markets…

Congress’s grant of broad authority to define the relevant terms, standards, and remedial approaches — limited only by the constraint that the Commission act “in a manner consistent with the public interest, convenience, and necessity” – reaffirms that Congress did not intend to tie the Commission’s hands in removing barriers to broadband investment and competition like the territorial restriction in [the Tennesse law].

There’s a difference, though, between telling a state what to do and micromanaging the way it does it. If Wheeler cowboys up (and I’m not betting on it) and the FCC grants Chattanooga its wish, it’ll be up to federal courts to sort it out.

States rights invoked as muni broadband grandstanding continues in Washington

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Blackburn’s not shy about extending a helping hand, particularly towards money.

States would be free to ban municipal broadband projects, under under language inserted into a bill and approved by the U.S. house of representatives (h/t to the Baller-Herbst listserv for the heads up). Since bills that get passed by the republican-controlled house seem to have a rocky time in the democrat-controlled senate (and vice versa), it’s unlikely have any practical effect. But the idea is to pre-empt FCC chairman Tom Wheeler’s (likely empty) talk about stepping in between local governments that want to get into the muni broadband business and states that want to ban it.

But regardless of its eventual fate, the most interesting thing about the bill is its sponsor, Marsha Blackburn (R – Tennessee). According to an article in the International Business Times, AT&T and Comcast alone have put more than $100,000 into her pocket, and other telecoms companies and lobbying fronts have added tens of thousands of dollars more in campaign cash.

She also represents a state that puts restrictions on publicly owned broadband systems. Tennessee doesn’t allow municipal utilities to extend broadband service outside of existing boundaries, a restriction that earlier prompted EPB, the city-owned electric company in Chattanooga (which Blackburn doesn’t represent), to threaten to file a complaint with the FCC

There are vast areas of Tennessee, surrounding EPB’s electric service territory, where citizens and businesses have little or no broadband Internet connectivity…For several years EPB has received regular requests to help some of these communities obtain critical broadband internet infrastructure. However, since 1999, while state law has allowed EPB to provide phone services outside its electric service territory, it has prohibited EPB from offering Internet and video services to any areas outside its electric service area.

Blackburn is framing the issue as a question of states rights. Regardless of any financial motives she might have, it’s a legitimate issue. Local agencies are sub-units of state governments, and there are few restrictions on a state’s discretion to delegate power. A 2004 U.S. supreme court ruling affirmed that principle, particularly in regards to muni broadband. All Blackburn might accomplish is to make a warm, fuzzy gesture toward her campaign contributors. Which might be all she intended to do in the first place.

Sunk costs support sinking gigabit prices

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Nowhere to go but up.

Fiber-to-the-home system operators are falling in behind Google’s idea that market share counts more than marginal revenue gains (or cost controls). Both Chattanooga’s municipal FTTH network and the Utopia system serving several Utah communities are following Google’s lead in Kansas City and Provo, and offering residential gigabit service for monthly fees in the $65 to $70 range.

At $350 per month, Chattanooga was attracting only a few dozen gigabit-level subscribers. At $70 per month, it should shortly have tens of thousands. For now, almost all of those will be existing subscribers who will upgrade in place. Over time, though, it’s a way of leveraging the cheap and abundant bandwidth provided by an FTTH system to gain market share.

Although reliable subscriber and market share figures are hard to come by, it looks like Chattanooga’s muni fiber system might have as much as 30% of local Internet subscribers, and Utopia appears to be in the 15% to 20% range. In either case, it’s not enough to pay back the full cost of building the systems, including debt service. I’ve yet to see hard numbers that show that it’s even enough to cover the true operating costs.

But near term costs can be covered by grants, direct taxpayer subsidies and indirect support from affiliated utilities. Long term, the goal is to make FTTH systems fully self-sustaining and to do that you need market share, certainly 40%-plus and likely in the 50% or 60% range.

Which means taking subscribers away from incumbent cable and telephone companies, who have shown a willingness to upgrade infrastructure, boost speeds and shave prices when threatened by a metro-sized competitor. The incumbents’ ability to leverage continental-scale capitalizations to fight local battles is tough to beat.

But maybe not impossible. Offering a gig for $65 to $70 is something only an FTTH operator can do. At that price, it’s a no-brainer for high end users. At that speed, it’s tempting for mid-level subscribers who haven’t been persuaded to spend an extra $20 or so a month for a few megabits more.

The marginal cost for operators is probably quite low, at least for now. Home subscribers might occasionally enjoy bursting a gigabit, but average aggregate usage probably won’t rise much at first. Those that definitively cross the grey line between residential and business uses can be managed with common sense terms of service. Revenue losses, from the relatively small number of customers willing to pay steeper rates, should be easily offset by higher total subscriber counts.

The fixed costs of an FTTH system are high. The way to be self-sustaining is to spread the pain thinly over many subscribers rather than thickly over a few. Google, and now Chattanooga and Utopia, are using the capacity those fixed costs provide to buy market share. It’s a page out of the incumbents’ playbook.

There’s no guarantee they will prevail, but when the big money is already spent and results are so far insufficient, the greater risk is to do nothing.