Internet providers have mostly fought such locally owned systems, particularly ones that would be built in areas where local phone and cable companies offer services. Thanks in part to lobbying by Internet providers, there are laws in 19 states restricting municipalities from funding competing systems. Aside from concerns by competitors, there have been a few cases where locally owned systems have run into financial trouble, since it’s extremely expensive to build fiber networks and incumbent Internet providers in some cases have cut their prices to retain customers.
Sam Gustin takes note of the timing:
Next month, the FCC will decide whether to assist two cities—Wilson, North Carolina and Chattanooga, Tennessee —which have asked the feds to help them bypass state laws that pose barriers to super-fast community networks. Obama’s latest statement provides a powerful political boost to FCC chairman Tom Wheeler, who has made clear his intention to “preempt state laws that ban competition from community broadband.”
Timothy B. Lee looks at the politics:
Last year, the Republican-controlled House passed language banning the FCC from banning states from banning cities from building municipal networks. It never became law, thanks to opposition from Senate Democrats and President Obama. But it could become another flashpoint in the relationship between Republicans in Congress and the FCC — a relationship that’s already been strained by disagreements over network neutrality regulations.
This is one reason President Obama’s support for municipal broadband is important. Now that he’s on the record supporting the concept, he’s more likely to veto legislation that tried to overrule the FCC on the issue.
Meanwhile, the new GOP Senate may be planning to preempt the upcoming FCC ruling. Drilling down, Jason Koebler finds there are in fact 21 states that restrict municipal Internet efforts in one way or another:
There are three different “categories” of state law banning municipal broadband. There are “If-Then” laws, which have some requirements for municipal networks such as a voter referendum or a requirement to give telecom companies the option to build the network themselves, rather than restrictions (some are easier to meet than others). Then there are “Minefield” laws, which are written confusingly so as to invite lawsuits from incumbent ISPs, financial burden on a city starting a network, or other various restrictions. Finally, you’ve got the outright bans. Some of these are simple, others are worded in a way that make it seem like it’d be possible to jump through the hoops necessary to start a network, but in practice, it’s essentially impossible.
Yglesias elaborates on the funding blocks, noting that Big Internet seems much happier to spend money on lobbying than expanded infrastructure:
The 2009 stimulus bill, for example, provided a grant to the District of Columbia to build a publicly owned fiber-optic network, but the city’s not allowed to use it to deliver fiber connections to its residents. In San Antonio, the city-owned electrical utility already built a fiber network but lobbyists got the state legislature to pass a law making it illegal for households to use the fiber.
So even though we have the technical ability to deliver cheap, super-fast internet and we have the financial ability to finance the construction, we don’t actually have the network. In fact, we’re so in hock to the interests of the broadband incumbents that we don’t even use all the fiber networks we’ve already built.
Evan Swarztrauber doesn’t like the president’s plan:
The greatest regulatory barriers to deployment are local, not Federal: cities make it painfully difficult to deploy new infrastructure. Google Fiber’s great accomplishment is convincing cities to get out of the way. Yet the White House focuses entirely on cities as the solution — not by cutting red tape, but by building their own networks to compete with private providers. That means taxpayer dollars that should go to pay teachers and fix potholes, are instead squandered on inefficient and expensive networks.Governments, unlike private companies, can simply borrow and throw money at broadband projects until they “work,” leaving taxpayers on the hook.
But Tim Fernholz thinks Obama’s play might prove to be smart jujitsu:
Put simply, competition spurs faster and cheaper broadband service. The administration notes that academic studies and empirical data show that when new networks come to town, everyone gets better: When Google built a fiber-optic network in Kansas, speeds on existing networks there nearly doubled; when it announced a similar plan in Austin, Texas, AT&T hastily unveiled its own investment plan.
The White House isn’t really expecting municipal internet to make a major dent the market share of existing cable providers. As with the short-lived “public option” for health insurance before it was cut from the president’s health care proposal, the idea here—and on a much smaller scale—is to hold telecoms’ feet to the fire by providing a baseline level of service.