Obama Proposes Overriding the Tenth Amendment

Obama’s speech at Cedar Falls, Iowa was like most of his speeches; much to do about nothing. He is proposing nothing short of allowing municipal governments to use taxpayer funds to compete against private enterprise, and he is encouraging the FCC to override 20 state laws in contradiction to the Tenth Amendment. I make no bones that I am a free market capitalist and I am strongly against the government taking over or competing against private enterprise. What Obama is proposing is not only anti-capitalism but also illegal.

I have written here that our current duopolies are not optimal for consumers, but replacing them with a subsidized government bureaucracy is a move in the wrong direction. I support municipal governments determining their own broadband destiny as much as I support removing restrictions allowing new entrants into the market by removing obstacles that municipalities and states have created. Twenty states have created laws to protect taxpayers from having to pay for cities failed attempts into the broadband services markets. These states realized that the communications market is competitive and fast moving. They have seen how over 50% of all municipal broadband efforts have failed leaving taxpayers to pay off creditors and bondholders (link, link). Proponents of government broadband, including the press, are quick to point out the few successes like EBP in Chattanooga and Cedar Falls, but they don’t bring up UTOPIA or Longmont, Colorado that is going for its forth attempt to provide residential broadband services. There are a variety of reasons that municipal broadband efforts fail which is why it is better to leave the risk to private enterprise.

Obama cannot instruct the FCC to just override the 20 state laws enacted to protect taxpayers. The Tenth Amendment gives states the ability to make its own laws without the federal government overriding them except for powers expressly granted by the Constitution and states. The Supreme Court has already upheld the authority of the states to prevent municipalities from providing telecommunications services in Nixon v. Missouri Municipal League by a 8 to 1 decision. He can say what he wants but case law is already pretty clear on states’ authority granted by the Telecommunications Act of 1986.

There is no question to the value of broadband services to a community, but it should be delivered in a competitive environment to enjoy all of the value that it brings. Either industry partnerships or cities should be allowed to come together to build open-access broadband fiber infrastructure as done in many cities and countries outside the United States. Sharing a common infrastructure will reduce the barrier to developing a profitable business model for a service provider; therefore, promoting competition that will benefit everyone in the community. This is the direction that Obama should be encouraging states to go.

Technorati Tags: broadband,municipal broadband,open access,telecom,FTTH,broadband penetration,FCC,Obama

There May Be Hope Yet

Over the past couple of weeks, I have been encouraged that there are more people discussing open-access infrastructure than before. Maybe it is because they have started to read Title II and realize that it is not the panacea once thought. By definition more government intervention/regulation means less freedom, and the hundreds of pages contained in the Telecommunications Act of 1934 is no exception. Title II is jam packed with regulations designed around telephone service in the 1930’s when we were under the control of the Bell System. Needless to say that it will control every aspect of our Internet services. The Internet was founded based on a loose federation of networks survivable if any one link disappears. It was meant so any node could reach and freely exchange information with another node. Even the technical aspects that the Internet was designed were not called standards or regulations, they are called Request for Comment that implies they are fluid and optional. Imposing laws and regulations on the Internet is contrary to its founding principles.

The FCC has indicated that if they impose Title II regulation, it will chose which parts to enforce. If you expect the FCC to exercise any forbearance of any section, you have not been living in America long. Bureaucracies live to grow and expand their power. Eventually piece-by-piece the FCC will implement parts of Title II over the years. Also included in Title II is the allowance of paid prioritization which is a no no for many net neutrality wonks. People that support this heavy handed move either are ignorant of what it will really means or have ulterior motives such as lobbying to influence control of the Internet for their business advantage (i.e. crony capitalism).

Thankfully some people are waking up and realizing what regulation will really mean to the Internet, and they realize that competition is the real solution to the yet to be encountered net neutrality issue. Karl Bode wrote an article yesterday on Techdirt that concluded that open-access broadband is a superior choice to regulation. Leo Laporte had a well-balanced panel discussion about net neutrality on TWiT that touched on the fact that competition would be superior to regulation. My neighbor to the north, Brett Glass, delivered intelligent arguments against regulation and for open-access on TWiT. These intelligent and technical discussions are ones that we should have had two years ago when net neutrality reared its ugly head. Broadband competition can be achieved if we remove the barriers that are preventing it from happening.

Fortunately there are solutions that can be adopted that eliminate the need for heavy-handed FCC regulation: open-access fiber infrastructure. I am not discounting other means of access such as wireless, but there are impediments to wireless access as well such as spectrum allocation which is also under FCC control. I have already extolled the virtues of open-access in other posts so I will refrain from being repetitive. Suffice it to say that there are a few different models for open-access. Network unbundling is the least favorite of mine but in a pinch that will work. Most of the incumbents don’t have fiber that deep into the network to make unbundling an option. We need to build fiber to every home and well as provide spectrum to do it as well. The FCC should be working to support those efforts and eliminate barriers for new and existing entrants that want to provide infrastructure. Working on some convoluted semi-regulation scheme is a fools-errand that will only lead to lawsuits and more complaining. Let’s work on providing a competitive broadband environment instead.

Technorati Tags: broadband,municipal broadband,open access,FCC,net neutrality

Avoiding the Pitfalls of Municipal Broadband Networks

I just posted an article on municipal broadband from Forbes that is one of many that points out the pitfalls of municipal broadband. Lest we forget all of the muni-WiFi follies of the last decade. It is not the purpose of government to compete with free enterprise in a capitalist economy. Government should only step in when private enterprise will not or cannot financially serve a market.

This article touches on the fact that fiber-based broadband networks are extremely costly to build. That last-mile access is the most expensive because it is the portion of the network least shared. Add to it the fact that we have a much lower housing density in the United States than in most countries, and you have added even more to the cost of providing service to a single home. Now consider the fact that the electronics that power the network will be replaced typically every 5 years to keep up with the demand for more services and bandwidth and you have offset most of the benefits of the 40-50 year life-cycle of the fiber. Do not forget the pressure to lower cost due to competition and the increasing costs for content. Now maybe you can see why there are only two providers at best in each market.

The business case for broadband services (i.e. voice, video, and data) works for at most two providers if they build and operate their own networks. Most areas of the United States are currently in this situation. A duopoly does not promote competition; hence, the desire for a third player. Google has chosen to stir up the pot in several markets by competing with the incumbents but their business objective is to use these captive eye-balls to push more Google advertising. I personally applaud Google for taking a long-term and different approach to provide true competition in some markets. The down side to what they are doing could be the "walled gardens" that so many net-neutrality wonks are afraid with managed services on the Internet. What's to prevent Facebook from doing the same as Google? Why not? The problem is if Facebook and Google start limiting content to competing services. It could happen. Remember AOL and CompuServe?

These fears and the fact that Google has only announced a limited number of markets it is entering. In Google's defense what is limiting the speed of their penetration is the byzantine regulatory environment that they have to navigate. Many cities and towns do not want to wait for Google or someone else to come so they have turned to government to fill in where private enterprise will not. A persuasive argument could be made for wanting municipal broadband which citizens of Chatanooga and around Salt Lake City have bought.

Cities have not considered out-of-the-box solutions such as they lay and manage the fiber infrastructure and allow service providers to lease the fiber access from a centralized location to the subscribers' home. Locales in Europe and Asia have successfully implemented this model. Where they have open-access broadband infrastructure, competition has flourished. I have challenged several municipalities to try open-access but they had employees more interested in building and running their own little networks. Civic leaders need to reach beyond their own bureaucrats or desire for bigger government and look for solutions that will work for the economic growth of their cities.

North Carolina Legislate to Limit Muni Broadband is Neither Fair Nor Level

Last week House Bill 129 was passed by the North Carolina House of Representatives, and it is now making its way through the Senate.  This piece of legislation’s sole purpose is to protect the incumbent service providers in the state in areas where they cannot afford to make investments for advanced broadband services.  It unfairly limits municipalities ability to drive economic growth and stimulate competition in the communications marketplace.  States that enact this type of legislation are limiting their long-term growth capabilities.  Competitive content and service providers need to band together to support municipal broadband as an alternative method to deliver their services and content.  The best way to ensure net neutrality is through greater competition. 

I have written a longer editorial on the topic in the news section at Inphotonics Research.  Please read it and provide any feedback you feel fitting.

Technorati Tags: North Carolina,broadband penetration,net neutrality,telecom,municipal broadband,rural broadband,NC politics