Broadband Cable Association of Pennsylvania

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February 3, 2014

A bill to outlaw community broadband service across the state will come before a Kansas Senate committee Tuesday.

Senate Bill 304, introduced by a lobbyist for the cable TV industry, would prohibit cities and counties from building public broadband networks and providing Internet service to their businesses and citizens. Officials in the southeast Kansas city of Chanute, population 9,100, say they're the primary target of the proposed legislation. As part of its public utility system, the city runs an ultra-high-speed broadband network that now serves schools, city buildings, the town hospital, banks and other key businesses.

On Nov. 23, the City Commission voted to work toward "fiber to home," which would extend access to all residents and businesses within about a three-mile radius around the city, said Larry Gates, Chanute utilities director. "This bill (SB 304) is an attack on competition, an attack on municipal government," Gates said. "It takes away our local control and local decision making. It will hurt our efforts in economic development."

John Federico, a cable industry lobbyist who introduced the bill, was out of the office and could not be reached for comment Friday. Sen. Julia Lynn, R-Olathe and chairwoman of the Commerce Committee where the bill will be heard, said the main argument in favor of it is philosophical - the concern of government competing with private enterprise for broadband customers. Lynn said she doesn't think that's a fair competition because "They (municipalities) don't have to pay property taxes, and they don't have to pay franchise taxes."

Lynn said she doesn't oppose government stepping in when private-sector broadband service is nonexistent or substandard. "It ought to be up to the town to decide if they want the local city hall to take care of it," she said. However, she added, "I think that would only happen in very rare instances where there's no service."

As written, the bill contains an exemption for "unserved" communities. However, there's nowhere in Kansas that would actually be unserved under the bill's definition. According to the bill, an area is deemed served if nine out of 10 residents can get satellite Internet. Beamed from space, satellite service is available anywhere in the 48 contiguous United States that has a view of the southern sky. Satellite is generally slower and considerably more expensive than cable or telephone broadband. "I think it (SB 304) is bad for our local rural communities," said Sen. Tom Holland, D-Baldwin City, the ranking minority member of the Commerce Committee. He said several small towns in his district are considering setting up their own networks or partnering with smaller providers because "they've had a heck of a time trying to provide high-speed Internet to their constituents. This (bill) would just about shut that down."

Lynn said she was taken aback by the furor over the bill, which has reached national technology-trade publications. "It's more of a complicated issue than I anticipated," she said. Lynn said she has been criticized for even allowing the bill to be introduced, but she said that it's a routine part of the process. In committee meetings, "I say 'Are there any objections?' " she said. "If nobody objects, it's introduced."

Mike Taylor, the lobbyist for Kansas City, Kan., said his city could also be adversely affected by provisions of the bill. Kansas City has partnered with Google Fiber to install an ultra-high-speed network in the city. Google's paying the bill, but the city gave the company expedited permit consideration and a discount on rent for space on utility poles, Taylor said. "In exchange, they run Google high-speed fiber for free to about 135 school buildings, City Hall and community buildings, that sort of thing," he said. "We didn't spend any tax money doing it," Taylor added. But SB 304 "would probably prohibit future arrangements like that" and could possibly affect renewals of existing contracts when they expire.

But while Kansas City is big enough to have alternative sources for broadband, Chanute's too small to attract that kind of investment from the private sector, Gates said. As a result, he said, the local cable service is so balky that nearly half the town's residents subscribe to satellite TV instead. In addition, he said, people go to the library if they have to download large files because it's much faster than what they can do at home with cable or phone broadband service.

The city has been a state leader in broadband development since the 1980s, Gates said. In addition to its fixed broadband network, the city has free wi-fi in all its parks and public green spaces and a 4g mobile data network. Gates said that advanced data infrastructure has paced economic and social development in Chanute, one of the few rural Kansas cities that's growing while most are bleeding population. The local hospital can provide advanced telemedicine services and the local college, Neosho County Community College, is the fastest-growing in the state and among the fastest-growing in the country, he said.

Chanute hasn't spent any tax money on the system, Gates said, using proceeds from the electric company to pay for building it. If access is expanded to all residents, those who use it will be billed for the service at rates projected to be comparable to what the cable and phone companies charge, he said. Gates said he expects SB 304 to clear the committee. But he will be at the Capitol on Tuesday to testify against it anyway. "I will do everything in my power to squash it," he said. Wichita (KS) Eagle

For a subject that sounds mind-numbingly dull, "network neutrality" is the most important issue facing the Internet since, well, the Internet.

The idea behind net neutrality is that the web material we see on our laptops and smartphones, whether from Google or a tiny little blog, should flow freely through the pipes of the Internet, regardless of origin, destination or content. No one gets special treatment. But what if someone is willing to pay for her data to go faster? This is capitalism. Can't the people who own the pipes charge more?

The issue has come to the fore now that a federal appeals court has ruled that the Federal Communications Commission can no longer stand in the way of AT&T, Verizon and other Internet service providers that might want to create Internet express lanes. Count on it: This battle isn't over yet. On Friday, President Obama said the F.C.C. was considering an appeal with the goal of maintaining "a free and open Internet."

The premise behind net neutrality goes back to the days of the telegraph. Even then, everything moved at pretty much the same speed. Since the 1970s, the F.C.C. has prevented telecommunications companies from playing favorites on long-distance telephone lines. And it's not as if your electric company charges you one rate for the electricity to power your refrigerator and another for the electricity to use a washing machine - or offer special, high-price options to those who want power during shutdowns. The question is, Has the Internet become so fundamental to our lives that it is, in essence, a utility that should be subject to regulation?

For the likes of AT&T, Comcast and Verizon, the answer is no. They contend that if a Google or a Netflix wants to pay more to travel in the fast lane, let it. Customers, they say, will be better off. The F.C.C. and others worry that such an arrangement would let Internet service providers play favorites and give preferential treatment to those who can pay for it. How could a nascent start-up compete with a Google or a Netflix if its content wasn't delivered as quickly or at the same quality? And what is to stop someone from outright blocking content?

Frankly, many people simply do not trust the AT&Ts and Verizons of the world. "There's a long history of the telcos saying, 'We'll be good people, we'll act like the rules are in place,' and then six to nine months later they are breaking those rules," said Christopher Libertelli, a former senior legal adviser to the F.C.C. and now the head of global government relations at Netflix. In 2007, for example, Comcast slowed traffic involving the BitTorrent file-sharing format, and the F.C.C. had to step in. Then, in 2010, Verizon blocked people from using Skype on its network, citing congestion. And in 2012, AT&T blocked people with unlimited data plans from using Apple's FaceTime video chat features unless they subscribed to a more expensive plan. Mr. Libertelli said Netflix was already seeing instances of its service slowing in certain areas and the company could not do much about it. In these cases and many more, the cable and telecommunication companies are blocking products that directly compete with the services they offer.

The Internet providers say customers should be allowed to decide with their wallets, switching to a competing provider if they do not agree with another's business practices. But most Americans do not have options to switch. A 2013 F.C.C. report about competition among wired Internet service providers found that almost one-third of Americans have only one possible provider in their home with high-speed Internet that travels at six megabits a second or more. Another 37 percent of Americans have only two choices.

Susan Crawford, a visiting professor at Harvard Law School, notes in her book "Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age" that telecoms are already making astounding profits while continuing to invest in new infrastructure. Profit at Verizon Communications has risen by double-digit percentages in recent years, pulling in more than $2.2 billion in profit during the third quarter of last year. AT&T, the second-largest American carrier after Verizon Wireless, reported profit of $3.8 billion during the same quarter.

Tim Wu, who coined the term "net neutrality," said he worried that the telecommunications companies were too big and too powerful to lose this battle. "The F.C.C. is afraid of the companies they regulate. They are capable of being intimidated by them," said Mr. Wu, a professor at Columbia Law School. But Mr. Wu, who has written extensively about similar regulatory issues, predicts that this could backfire on the Internet service providers, leading to stricter regulation or to companies like Google calling their bluff.

"Phone and cable companies should be careful what they wish for because this could all blow up in their face," he said. "Verizon and Comcast could end up facing serious demands for money. It could be that Google will say to the telcos, 'Actually, if you want your customers to be able to reach Google, I'm afraid you're going to pay us.' " For now, though, the wagons are circling the wagons. That is, until a line in one direction or another is breached - at which point, the future of the Internet may be changed forever. New York Times

Charter Communications Inc. is discussing raising its bid for Time Warner Cable Inc as soon as in the next two weeks, according to people familiar with the matter, a move that could pressure its reluctant rival ahead of a proxy deadline. Charter is considering a higher bid in the low $140s per share range, the people said on Friday, up from its current $132.50 per share offer that values the second-largest U.S. cable operator at $37.3 billion based on shares outstanding. A new price at around $142.50 per share has been discussed, but no decision has been made, one of the people added. The likely bump reflects feedback from Time Warner Cable investors Charter has received in its two-week roadshow, that person added.

Time Warner shares were up 2 percent in after-hours trading at $136 following Reuters' report on the higher bid possibility. Time Warner shares have surged 49 percent over the past year, compared with a 19 percent gain in the S&P 500. While timing of any new bid has yet to be decided and may change, Charter could sweeten its offer before, or at the same time it nominates a slate of directors for Time Warner Cable's board, people familiar with the matter said. The one-month window to nominate a new slate expires in mid-February for the annual shareholder meeting expected in May. All the people asked not to be named because the matter is not public. Representatives for Charter, Comcast and Time Warner Cable declined to comment.

With no rival bidder for Time Warner Cable in sight, Charter may also hold out on a sweetener until after it nominates a slate, one of the people said. It could also wait until it reaches an agreement with Comcast Corp about carving up Time Warner Cable, the person added. Charter and Comcast are in discussions about how to carve up Time Warner Cable's markets, the people familiar with the matter said on Friday.

Comcast is interested in owning Time Warner Cable's systems in New York City and in parts of New England such as Maine, but has little interest in Los Angeles, another of Time Warner Cable's largest markets, Reuters previously reported.

The deal could also involve some Charter-owned systems going to Comcast, such as Worcester, Massachusetts, the people said. Under the proposed deal, Comcast would buy the cable systems from Charter if Charter succeeds in acquiring Time Warner Cable. The details and timing of a potential agreement remain unclear. UBS analyst John Hodulik said in a research note on Friday that a bid of $140 to $145 would be necessary to get support from Time Warner Cable investors. "We would expect Charter to move forward with plans for a proxy fight but believe a new, higher bid may come given the support it would have from Time Warner Cable shareholders and our modeling that suggests ample value for both sides," Hodulik said. Reuters

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