Cable and telecom companies have made billions by selling mediocre Internet service to American customers who don't have anywhere else to go.
The firms, which are monopolies or nearly so in many local communities, aren't happy about municipalities that have taken matters into their own hands by launching their own broadband services. That's especially so because the public systems typically are faster and cheaper than the crummy connections served up by the commercial providers. So they've worked hard to get laws passed interfering with this form of competition.
They just chalked up their biggest victory yet — in a courtroom, not a legislative chamber. The 6th Circuit U.S. Court of Appeals on Wednesday shut down an effort by the Federal Communications Commission to foster the spread of municipal broadband. The FCC, arguing that the public interest was served by more competition in the broadband market, had tried to overturn state laws in Tennessee and North Carolina blocking the creation or expansion of municipal systems.
A three-judge appellate panel rejected the commission's argument that federal law preempted the states' ability to place limits on public broadband. In other words, no dice.
What's intriguing about the ruling is that it accepted the FCC's reasoning that competition from municipal systems works well. The restrictions imposed by Tennessee and North Carolina were "onerous," agreed Judge John M. Rogers, writing for the court.
When Chattanooga, Tenn., launched its own fiber-based broadband service in 2009, Rogers observed, it was a near-instant success. By 2010, it was providing gigabit Internet connectivity, a speed almost unheard of in the cable and telecom broadband world, at least at an affordable price. Now the system has 63,000 customers.
The "network has received uniform praise," Rogers wrote. "It has led to job growth and attracted businesses to the area," and turned the city's Internet-ready public library system into a national model. It has been such a moneymaker for Chattanooga that the city's credit rating went up.
Most important, "its introduction led established Internet providers to lower rates while increasing the quality of their services." Comcast, the local cable and Internet provider, "stopped raising its rates — which had risen sharply for years," and along with AT&T, "vastly improved" their Internet speeds.
The gigabit service offered by the city of Wilson, N.C., is free to businesses in the downtown area and similarly successful — cheaper than competitors, faster and profitable. Time Warner Cable felt the pinch; it "held rates steady in Wilson while simultaneously raising rates in places without such competition" and improving connection speeds.
Both communities inspired envy among their neighbors. The communities around Chattanooga, Rogers noted are said to "constitute a 'digital desert' in which the Internet services are abysmal or nonexistent. In both cases, neighboring towns clamored for the expansion of the systems across the city lines.
That's where the state laws came in. Tennessee and North Carolina both forbid municipal utilities to operate outside the city limits except in limited cases. North Carolina's law, passed in 2011 plainly in response to the competition presented by Wilson, is the more stringent — it not only restricts municipal broadband services to city limits, but requires municipal providers to pay the same taxes and fees a private Internet service provider would pay and to solicit partnership proposals from commercial providers before launching a public system.
There's no mystery about who pushes for these laws and those like them, enacted in about 20 other states. It's the cable and telecom companies, abetted by the infamous right-wing, business-funded American Legislative Exchange Council.
"ISPs, especially Comcast and AT&T, have lobbied for these restrictions all over the country," says Andrew Jay Schwartzman, a veteran telecommunications consumer advocate. In 2014, for example, a lobbying group that counted Comcast and Time Warner Cable among its members got a bill introduced in Kansas outlawing municipal broadband in that state. Earlier this year, Comcast and AT&T succeeded in killing a measure that would have allowed Tennessee municipalities to expand their broadband services to other communities, despite existing state law.
ALEC has provided state legislators with model policies and a model state law favoring private broadband providers and filed a friend-of-the-court brief with the Sixth Circuit. "The rollout of broadband services in the U.S. is going phenomenally well," the group maintains, "and is largely being done with private capital and without involving taxpayer dollars." That's obviously not the case, since competition from municipal systems has goaded those private capitalists into cutting prices and improving their services.
Even when that happens, the private firms compete begrudgingly. Last year, after Longmont, Colo., rolled out a gigabit municipal system, Comcast said it would increase speeds for most subscribers in the area — to 150 megabits per second, one-sixth of the city service's speed. Gigabit service would be available to Comcast customers, but for $300 a month; Longmont charges $50.
Voters in nine Colorado communities voted in April to explore creating community systems, meeting a requirement in state law that mandates a local vote. Before then, 36 Colorado communities had already voted to explore launching a service, though only Longmont's is operational.
Those votes underscore that voter discontent with the low quality and high cost of cable and telecom broadband has helped defeat the efforts of big companies to stifle municipal competition. Since 2005, only one such law has been passed, says Chris Mitchell, a community broadband advocate at the institute for Local Self Reliance — North Carolina's restriction, in 2011.
"State legislators talk about passing new barriers to public systems until it's written about in the press," Mitchell says. "Then they get letters from voters."
Thanks to this week's appeals court ruling, supporters of community broadband will have to continue their work without the assistance of the FCC. But by providing lousy service, the cable and telecommunications industries may make their job easier.