Yup, Broadband Providers Still Hate Muni Competition
from the why-not-compete? dept
A bunch of readers have been sending in the story of Time Warner and Embarq working overtime to try to stop a small city in North Carolina, named Wilson, from offering its own broadband service. These types of stories aren't new at all. The incumbent telco and cablecos have spent tons of time, money and effort trying to fight muni-broadband plans. Of course, the story is almost always the same. The incumbents have done little to actually provide state of the art broadband, so the municipality comes up with a plan to compete by offering a better service. The incumbents flip out and try to get the competition legally blocked. The whole thing is silly. The incumbent providers always are operating thanks to gov't subsidies and rights of way, and have often abused those positions to offer inferior service. A municipality deciding to compete is a perfectly reasonable response when the incumbent providers have not lived up to their end of the bargain by misusing those rights of way and failing to offer a competitive service. And, of course, if the incumbents are really concerned about muni-competition, they could just take some of that money they dump into legal fights and put it towards (gasp!) improving the broadband they offer.
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Filed Under: muni broadband, north carolina
Companies: embarq, time warner cable
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"So the city launched an ambitious $28M USD program to deliver these services basically at cost, at much lower rates than local service providers Time Warner Inc. and Embarq."
That $28M came from bonds issued by the city, according to their FAQ. While no tax money was used to fund this directly, the city has effectively taken out a $28M loan backed by the taxpayers. Hope the service recoups these costs.
The municipal broadband company here is, in effect, a nationalized company. It is a "publicly-owned utility." It's unclear whether it is operated as a nonprofit, but if so, it would gain additional tax advantages over the commercial broadband providers.
The Techdirt summary complains:
The incumbent providers always are operating thanks to gov't subsidies and rights of way, and have often abused those positions to offer inferior service.
The incumbent providers indeed have enjoyed government subsidies of one form or another over the years. How is it going to promote innovation to create a new company to "compete" with them that 1) does not have to make a profit and 2) is wholly government subsidized? What motivation does Greenlight (the city-owned broadband provider) have to innovate at all?
Assuming that a commercial, for-profit provider wants to "compete" with Greenlight, how can it do this effectively in the long run? Any innovation that the for-profit provider makes can likely be copied by Greenlight, only Greenlight can charge less for it because they don't have to worry about turning a profit.
While this may seem like a great deal for consumers in the short term, it seems like a very bad deal for everyone (the broadband market and consumers in the Wilson area) in the long term. You're taking a small number of companies with little incentive to innovate, and you're adding a "comeptitor" with more subsidies and no incentive to innovate.
When the market inevitably stagnates further, maybe the federal government can stimulate the broadband market in Wilson by establishing a company that sells broadband at a loss. That'll really encourage innovation.
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In essence, what they have done is raised the bar on minimum service level and such. So this actually encourages innovation quite so. What if you came up with a service that made it worthwhile to pay more than the at-cost internet?
Oh wait, thats how business operates. Sheesh. Pointless anonymous coward.
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"incumbent providers indeed have enjoyed government subsidies of one form or another over the years."
Also, you ask;
"What motivation does Greenlight (the city-owned broadband provider) have to innovate at all? "
I ask: "What motivation does the incumbent have to innovate when "incumbent providers indeed have enjoyed government subsidies of one form or another over the years."
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The private companies have practical monopolies already so that's not good. But when the only competition is the government-owned entity, that's not good either.
Where I live, the muni broadband is cable. It's slower and has poorer service than comparably priced AT&T. AT&T has no real incentive to offer better service and has yet to roll out their best services to my area. But the muni company doesn't have to compete for my business. They won't fail without my business. They'll exist as long as city council says so. Even if there was a private company to compete with the DSL, that would be better than nothing.
And even then, only having two companies - one DSL and one cable doesn't help matters either very much.
There's still no good solution for municipal competition, but the government owned company won't help.
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and just how is a for profit competitor going to enter the market with no subsidies or rights of way?
the incumbents are monopolies that are crying about munis having advantages that are even more unfair than the ones that the incumbents are currently enjoying.
a better question in all of this would be who is going to build the network? where are the backhaul lines going to come from? my guess is that the incumbents could bid on the contracts and maybe make some money before the competition starts.
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Downeast NC is near the research triangle park, a tech heavy job center that has helped NC grow in terms of high quality jobs. The flip side of that is cities like Wilson see jobs and the educated youth moving to Raleigh to be closer to the RTP. For instance, all of my family who have graduated college in the last 15 years live in the triangle.
So Wilson is making the moves to grow as a city. This will attract citizens to the east of Raleigh. Lower taxes and a strong highway infrastructure nearby will attract jobs.
Wilson deserves a lot of credit for this sort of move. I'm not saying a non-profit is fair competition, but Wilson has a huge incentive to innovate. It's trying to avoid drying up as a city.
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Broadband lies and the Telco's
the Telecom systems in this country I learned while
working for Cisco Systems and it is summarized in this
articles with some of the juicy bits left out.
http://www.tispa.org/node/14
We paid $200 Billion of Tax payer money for broadband
from sea to shining sea and we got ripped the hell off.
The financial pirates of today are no different than
their pirate buddies in most of the other US companies.
We have a bunch of thieves in nice suits that do no
time and live in the lap of luxury.
They are the top political donors so they are not
touched by our corrupt politicians either.
It is all swirling down the toilet bowl.
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AC1 = WH?
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Hooray For Wilson, I wish My city could do this!!
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Competition is Competition
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Customers are the drivers
Second, if a rightfully elected government, as a potential customer of particular services, decides it wants to get into a business to provide those services, then they answer to the citizens for that decision. I don't remember in my civics classes where it said we as Americans have abdicated to the telecom companies our right to hold our elected officials accountable to the will of the people. *The people,* not just some incumbent's shareholders.
There are a couple of more points that complete this in my blog post - http://mediabriefing.wordpress.com/2009/04/22/free-markets-vs-the-public-interest
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Mainwhile other countries grow
Brazil for instance is offering free wi-fi for free in many areas
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