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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  1.  
    identicon
    Anonymous Coward, Apr 23rd, 2009 @ 4:07am

    From the article:

    "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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  2.  
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    Matt, Apr 23rd, 2009 @ 4:13am

    Re:

    uh? Utilities are utilities. This means that providing them at cost is competitive. If non-muni competition (note:incumbents) cannot figure out how to compete by offering other relevant services along with their internet, then that is not the fault of Greenlight.

    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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  3.  
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    Anonymous Coward, Apr 23rd, 2009 @ 4:31am

    I live about an hour from Wilson, and I'm considering moving there in the near future. Wilson's tech forward stance has helped me consider enduring a longer commute (As well as being closer to family).

    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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  4.  
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    oxymoron, Apr 23rd, 2009 @ 4:34am

    Re:

    If the demand is there from the consumer, why haven't the incumbents then met that demand? They've been supplied the means to do so -

    "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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  5.  
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    Anonymous Coward, Apr 23rd, 2009 @ 4:40am

    Re:

    What encourages innovation at Greenlight? Hmmm, lets see, who owns it, that would be taxpayers. Who would be the ones to complain about poor performance and the need to improve? Hmm, that would be the customers(also known as the tax payers). Are we beginning to see some connection. If the incumbents want to compete, they better innovate, because if Greenlight doesn't offer better service it won't be around long. As for not be a profit generating company, keep something in mind, the fact that you don't produce a profit doesn't mean you don't make money. Any funds the company makes that exceeds operating cost will be put back into the company to, what's the word, oh yeah upgrade and innovate. In other words, provide better service. If the incumbents had done this to begin with.....

     

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  6.  
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    Duane M. Navarre, Apr 23rd, 2009 @ 4:55am

    Broadband lies and the Telco's

    All I need to know about the corporate whores running
    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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  7.  
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    Mechwarrior, Apr 23rd, 2009 @ 5:57am

    Its simple, if one town does it, then more will. And when towns that TWC or Comcast dont service end up providing the service through bond sales, they'll lose "prospective" income. Basically, its what a racket would do if someone else moved on to their , which is to beat the other gang bloody. Its the same with incumbent monopolies. Its all about legalized extortion.

     

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  8.  
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    SunKing, Apr 23rd, 2009 @ 6:02am

    AC1 = WH?

    Is the first AC Weird Harold? He rationalizes like him, has similar (BS) logic, obfuscates, twists and side-tracks like him, ignores the main points like he does etc. etc.

     

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  9.  
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    jonnyq, Apr 23rd, 2009 @ 6:10am

    Re:

    Both you and Mike are right.

    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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  10.  
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    Steven Leach, Apr 23rd, 2009 @ 8:49am

    Hooray For Wilson, I wish My city could do this!!

    I live in the foothills of California, a 1 hour drive from Sacramento, California. WE have a choice of AT&T DSL in some areas, while many many areas have no broadband at all. The only reason we have DSL in some areas, was because I circulated a petition and had many of the residents sign up, when AT&T HAD to put in a new junction box. That was nearly 7 years ago, and to this day despite promises and more promises 1/2 the subdivision where I live still have no DSL or Cable !!! I wish my town, had this kind of moxy !!!

     

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  11.  
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    chris (profile), Apr 23rd, 2009 @ 10:12am

    Re:

    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?

    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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  12.  
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    Steve R. (profile), Apr 23rd, 2009 @ 12:12pm

    Competition is Competition

    The government is simply another player in the competitive market landscape. Like community developed products such as LINUX or Wikipedia, if government can do better than for-profit private industry, why not. These efforts help to keep the for-profit companies competitive and fighting for survival. Isn't that what competition is supposed to do? If for-profit private industry can't compete too bad, you don't deserve to be in business.

     

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  13.  
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    Craig Settles, Apr 23rd, 2009 @ 12:50pm

    Customers are the drivers

    First, the municipal broadband movement started because the free market time and again failed to deliver vital services to potential customers. Make no mistake, the local governments are just as much customers as are local citizens and businesses. And as customers, if they cannot get what they want from what vendors or service providers want to sell them, they have every right to look elsewhere or make it themselves. Many small governments and then larger ones decided that they wanted to do it themselves, or build networks with business partners other than incumbent telcos.

    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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  14.  
    identicon
    Koki Mourao, Apr 23rd, 2009 @ 3:11pm

    Mainwhile other countries grow

    While our corporations are doing their best in not allowing a quality service at a fair price, other countries are investing huge sums of money in improving their online presence... http://www.euronews.net/2009/03/26/free-wi-fi-comes-online-in-rio-favela/

    Brazil for instance is offering free wi-fi for free in many areas

     

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