November 23, 2004

Why Compete When You Can Lobby?

Telecoms giants oppose cities on web access. Once again, the SBC's of the world would rather play politics than provide true high speed connectivity. 100mbps (100x faster than my home dsl line) is available in Japan and Korea for 35/month..... I wonder what the implications are for Madison and Dane County's wireless plans?

November 23, 2004
TELECOMMUNICATIONS

Telecom Giants Oppose Cities On Web Access
http://online.wsj.com/article/0,,SB110116864041881375,00.html
By JESSE DRUCKER
Staff Reporter of THE WALL STREET JOURNAL
November 23, 2004; Page B1

Dozens of cities and towns across the country are rushing to provide
low- or no-cost wireless Internet access to their residents, but the
large phone and cable companies, fearful of losing a lucrative market,
are fighting back by pushing states to pass legislation that could make
it illegal for municipalities to offer the service.

Over the past few months, several big cities -- including Philadelphia
and San Francisco -- have announced plans to cover every square block
with wireless Internet access via the popular technology known as
Wi-Fi, short for wireless fidelity. Cities say these plans will spur
economic development and help bridge the digital divide, making Web
access nearly ubiquitous.

But that's bad news for the large Bell telephone companies and cable
operators, who are looking to their digital-subscriber-line (DSL) and
cable-modem businesses for growth. Wi-Fi, technically known as 802.11,
takes existing high-speed Internet connections and wirelessly extends
them by several hundred feet, allowing dozens or even hundreds of
people to share one subscription.

Philadelphia announced during the summer that it would hook up the
entire city with Wi-Fi. Its current Wi-Fi service is free, but it
hasn't decided whether that would continue with wider deployment; it
may charge a small fee. "There are some very specific goals that the
city has that are not met by the private sector: affordable, universal
access and the digital divide," says Dianah Neff, the city's chief
information officer. She says that less than 60% of the city's
neighborhoods have broadband access.

However, last week, after intensive lobbying by Verizon Communications
Inc., the Pennsylvania General Assembly passed a bill with a deeply
buried provision that would make it illegal for any "political
subdivision" to provide to the public "for any compensation any
telecommunications services, including advanced and broadband services
within the service territory of a local exchange telecommunications
company operating under a network-modernization plan." Verizon is the
local exchange telecommunications company for most of Pennsylvania, and
it is planning to modernize the region using high-speed fiber-optic
cable. The bill has 10 days for the governor to sign it or veto it.

The Pennsylvania bill follows similar legislative efforts earlier this
year by telephone companies in Utah, Louisiana and Florida to prevent
municipalities from offering telecommunications services, which could
include fiber and Wi-Fi.

Critics denounce this legislative tactic, arguing that the U.S. lags
behind other countries in broadband Internet access because the phone
and cable companies have been slow to roll out the service in some
areas.

"We should be encouraging our municipalities to take a major role in
broadband, the way other countries are doing," says James Baller, an
attorney in Washington, D.C., who represents local governments on
telecommunications issues.

The telecom companies argue that it is unfair for them to have to
compete against the government. They say that the legislation enables
them to improve service to their customers by investing in their
networks. "If we put that money at risk, and here comes government to
compete against us, with advantages that government has -- not paying
taxes, access to capital at good rates ... that severely limits the
opportunity and limits our interest in taking the risk," says Eric
Rabe, a spokesman for Verizon. Pennsylvania Gov. Edward G. Rendell has
until November 30 to act on the bill, and hasn't said yet which route
he will choose.

Telephone companies have long used local legislative muscle to stave
off competition. After Congress passed the landmark Telecom Act in
1996, which required local telephone providers to open their networks
to allow competition, several municipalities, including some municipal
power companies, sought to offer telephone service. After extensive
lobbying by the Bell telephone companies, roughly a dozen states passed
laws prohibiting municipalities from offering telecommunications
services. Currently, 621 municipal power utilities around the country
provide some kind of advanced communication service, including
telephone, high-speed Internet access and cable television, according
to the American Public Power Association; a minority of these utilities
sell those services to the general public.

The U.S. Supreme Court earlier this year found that such legislation
was legal, so cities and towns are particularly anxious to quash such
legislation before it gets passed.

The tactic is being revived by the increasing interest in using Wi-Fi
to spread broadband access, as well as interest in fiber. Wi-Fi
equipment maker Tropos Networks Inc. says it has supplied gear for
public networks in roughly 50 towns and cities, including Philadelphia,
Los Angeles, and Corpus Christi, Texas. Scottsburg, Ind., last year
built a network using a different type of wireless technology that
covers nearly all of the surrounding county's residents, using
equipment from Alvarion Ltd.

Earlier this year, the attempts by local telephone companies BellSouth
Corp. and Qwest Communications International Inc. to push for severe
restrictions on municipal broadband service in Louisiana and Utah ended
in compromise, in some cases with existing plans being allowed to
continue but new plans limited.

The legislative provision in Pennsylvania -- a small portion of a much
larger telecommunications bill that gives telephone companies
incentives to modernize their networks -- was originally prompted by
the fiber deployment of a small town called Kutztown. But people
involved in the legislative process say the provision took on added
importance for legislators and the state's big phone companies after
Philadelphia announced its Wi-Fi plans.

Cities have been able to deploy Wi-Fi relatively cheaply: Philadelphia
says it set up its initial wireless zone for $85,000, paid out of the
city's budget. The city-wide offering is expected to cost $10 million,
and could be paid for by a combination of borrowing, private donations
or selling rights to the poles on which the Wi-Fi equipment will be
deployed.

The annual cost of operating the system is expected to be roughly $1.5
million. Since the city has said the plan would be "cost neutral," a
prohibition on levying any fee for the service could make it tough to
deploy. "That's been made more difficult by current legislation," says
Ms. Neff. However, she adds: "It's not stopping us. It may have
eliminated some options."

The city deploys its current system much like a larger version of a
wireless setup in a Starbucks coffee shop: A high-speed line connects
to a wireless antenna mounted on a light pole that essentially sprays
out the connection for several hundred feet.

Unlike high-speed connections into people's homes -- a service
dominated in Philadelphia by Verizon -- the city could choose a variety
of high-speed access providers for its Wi-Fi offerings, including MCI
,Sprint Corp. and Level 3 Communications Inc.

The Pennsylvania bill, first introduced in 2003, was passed by the
state Senate late Thursday night and then passed for a second time by
the state House of Representatives late Friday night by wide margins.
Senate supporters agreed with Verizon's view of the legislation. Don
Houser, a spokesman for Senator Jake Corman, the Senate sponsor of the
bill, said "the thinking was the telephone companies didn't want to
have local municipalities using tax dollars to compete with private
dollars."

Verizon spokesman Mr. Rabe says the legislation is not a giveaway -- it
also contains incentives for the phone company to deploy broadband
service throughout the state, which he says will cost hundreds of
millions of dollars. The bill also has a grandfather clause, giving an
opening to providers who have some types of service in place before
Jan. 1, 2006, but it is unclear how that would affect Philadelphia's
plans.

Write to Jesse Drucker at jesse.drucker@wsj.com 4

Posted by James Zellmer at November 23, 2004 10:11 AM | Subscribe to this site via RSS:
Posted to Broadband