Disturbing Representative Remarks

Last nights League of Women Voters Forum for the Lafayette Representative races yielded some disturbing remarks according to an article in the Advertiser. In toto:

Asked if they would support or oppose legislation that would repeal or dilute a 2004 law allowing the Lafayette Utilities System fiber-to-the-home project, all three candidates said they would not support changing the legislation.

Cox Communications, BellSouth and others worked with LUS and legislators to draft the legislation so that it would be fair, Williams said.

All three said the competition will be good for consumers, lowering rates.

Well, the last remark is true and encouraging competition is a good reason to support Lafayette’s network after they leave for Baton Rouge. Competition will be good for consumers. But that wasn’t the question. The question asked was:

“Lafayette’s Fiber To The Home project–approved by the voters in July of 20O6—was delayed by a series lawsuits based on an 2004 Louisiana law, the “Local Government Fair Competition Act.” Some Lafayette Parish Representatives introduced or supported bills to modify or repeal it in the spring of 2006.

Would you favor or oppose repeal of this law? Why or why not?”

If the concern is to promote competition in order to save their constituents some cash then the right answer would be: “Yes, I’d consider changing the law in ways that make it easier for LUS to give our citizens a break.” I’m disappointed that our representative hopefuls seemed unfamiliar with the fact that the law actually operates to restrain competition. (As discussed at length on this site (e.g. 1, 2), the law does nothing to control prices—as far as consumer prices are concerned the “fair” competition act ONLY puts a floor under what LUS (and only LUS) can charge. It limits the price breaks the utility we own can give us.) Certainly the delaying lawsuits that were enabled by the law were big news–everyone should know that this incumbent-sponsored bill cost the taxpayers a bundle of money but some may be less familiar with the way that it works to force LUS to charge us more. Badon and Hardy could take the position that they really weren’t too familiar with the story and that “of course they’d love to save the public some money if getting that law out of the way would help” but Williams was at the heart of the fight the whole time as a city councilman and can’t credibly plead ignorance. His naive take is very disappointing. He should understand this stuff by now.

LUS Franchise Agreement

Kevin Blanchard over at the Advocate reports that a franchise agreement between LUS and the Lafayette Consolidated Government (LCG) will be introduced at this Tuesday’s City-Parish Council meeting.

While it is 1) technical, 2) presented as an uninteresting “me too” copy of Cox’s, and 3) no doubt a terminally boring read this will be extremely important to Lafayette consumers and citizens—try not to let this slide by you. To understand why the franchise agreement is big deal and what shapes it I’ll have to provide some background from both the state and federal levels. Stick with it: It will have a lot to do with how much you pay for cable and internet—and it will have a huge effect on City-Parish revenues with an indirect effect on how much tax you have to pay for basic local government services. (This document should every bit as important to you as a sales or property tax ordinance–and will probably have a bigger effect on Lafayette’s future than any single tax ordinance ever has.)

As Blanchard points out, the oddity in this agreement is that it will require LUS to pay itself (for attaching to its own poles) and to pay its parent organization (LCG) a fee to access its own customers over the rights of way LCG owns.

That does sound a bit strange doesn’t it? Why bother? Doesn’t this just introduce odd inefficiencies and distort costs?

Yes, it does — and it is intended to. On to the story behind the story.

Some State of Louisiana Background:
Loyal readers will recall (1,2,3) that BellSouth (now AT&T) and Cox pushed a law through the Louisiana legislature back in ’04 shortly after LUS announced its intentions to build a fiber-optic network. That law was intended to stop Lafayette from building a network at all. That story is a long and ugly tale of corporate lobbying and legislative foolishness that LPF covered extensively. Luckily Governor Blanco forced a compromise on the legislature that let Lafayette go forward — but the rewritten-by-committee bill left Lafayette open to legal challenges and imposed a minefield of restrictions and regulations that apply only to municipal telecom utilities. Regulations, that is, that apply only to Lafayette.

Flying the flag of “free enterprise” the two enormously powerful wireline cable and phone monopoly enterprises played the poor-me role of disadvantaged competitors who needed protection from the competition threatened by the city of Lafayette’s local electrical, water, and sewer utility. Lousisiana’s legislature rushed to protect them from this threat. Prior to this law LUS and Lafayette could have simply started up a utility in this area–as it can in electricity or sewerage or natural gas–without any heavy-handed restriction by the state. There would have been no legal basis for a lawsuit to try and prevent it and no way to impose special costs or regulation only on a utility owned by the people of Lafayette. The Louisiana “Fair” Competition Act changed that.

The law provides for a way to drive up the “paper” costs and a regulatory mechanism for ensuring that those higher costs are actually paid by the customers of LUS’ Fiber division. LUS is required to, for instance, pay itself a fee for the use of its own poles and the rights of way that the community owns that is the same as it or the city would charge private companies. (Note that LUS already bears the real cost of building, maintaining, and replacing that property and that those costs are not subtracted from these state-imposed fees. We, and only we, pay twice.) These pay-it-to-yourself “costs” would merely be the silly imposition of a paper shuffle if the state had not required that those costs be passed on to the customer. But that is what the law does.

What is interesting is that the state constitution specifically outlaws using the Public Service Commission (PSC) to regulate publicly owned utilities. (Based on the presumption, I assume, that we as both owners and voters can do that for ourselves.) Since using the PSC to regulate public bodies is illegal, the tortured solution was to place the supposed responsibility in the hands of the state legislative auditor, who has neither the expertise nor the staff to do the job. Recognizing that “problem,” the (un)Fair Competition law directs the PSC to both suggest rules to the auditor and to then enforce those rules. This is pretty transparently an evasion of the state’s basic law but, hey, they write the laws, right?

Even more interesting, the regulations that the PSC are required to enforce are designed to raise the costs to the consumer. If that seems to you like a funny role to ask a PUBLIC Service Commission to play, I’d have to say it seems odd to me too. I had thought the role of the PSC was to protect the public from being overcharged or taken advantage of in other ways. I was not under the impression that it existed to protect large corporations from competition. Silly me. My guess is that the folks over at the PSC aren’t all that happy about it either. It is not the job they signed up for.

The central mechanism that these PSC/Legislative Auditor regulations use to raise your rates is to tote up all the costs to LUS from equipment costs, to billing costs, to interconnection fees, to salaries, to taxes, to pole attachment fees, to franchise fees (the latter two are the elements being considered by the Council Tuesday). The will use a baseline industry cost based in part on what the incumbents say their costs are to establish a “fair price” that must, by law, include the costs to “rent” property they own and fees to use poles that they have already paid to install and maintain. They will then set a minimum price that LUS must charge. Slow down and read that again: they set a minimum price. They will NOT allow LUS to charge you the least that it could…they will force Lafayette’s utility to charge more than it would have to without a set of regulations that force false costs on it.

This is all transparently designed, not to force “a level playing field” or “protect the public” as the incumbent providers claimed in the legislature; it is designed to limit the price competition that LUS will provide AT&T and Cox in Lafayette. Cox and AT&T don’t want to be forced to lower their prices to compete in Lafayette. They most especially don’t want to be forced to lower their prices to compete ONLY in Lafayette. That would make it all too obvious that public utilities like LUS could be a success and provide real value to its citizen-owners. LUS would be a “bad” example for other communities; one that might encourage them to do for themselves what Lafayette has done.

And that would never do.

The Federal Regulatory Issue at hand:
Now all this messy state law and regulation might be preempted by Federal regulation — without the benefit of an enabling law. (I know this is getting convoluted. Stay with me for a while longer; it’s important. 🙂 )

The FCC just this past Wednesday gave “relief” to cable companies on the issue of franchising in a partisan 3-2 vote. This ruling is yet another extension of the FCC’s decision to insert itself into the national franchising issue. The ultimate outcome is pretty disturbing in that the ruling will pretty much will allow a cable company to quit honoring any part of its franchise contract it doesn’t like beyond the monetary fee. Look for support for AOC and governmental networks to vanish. Whether it allows any cable company to immediately quit honoring its contract is in dispute. (Didn’t know the FCC could abrogate contracts? Me neither.) Earlier remarks by the FCC chair had indicated that it wouldn’t void current contracts.

The History:
State and federal franchise issues are also topics that have been covered on these pages, but in synopsis: The incumbent phone companies, lead by AT&T, are determined to get into the cable business. It is easy to see why since estimates I’ve seen show the profit margin at somewhere between 40 and 60% and their own year-to-year reports show that their core business, landline phone service, is declining every year even with margins cut to the bone. But the old Bell phone companies don’t want to have to follow the same rules that cable did in developing this lucrative market: they don’t want to have to go to the public bodies who own the land and negotiate a franchise contract to use the public rights of way. Their first tactic was to go to state governments and get them to take over the localities property rights and establish a state-wide franchise that allowed the state to control the money and disburse it to the localities. Not surprisingly state legislators found shifting this power into their hands an attractive “pro-business,” “pro-competition” policy. This state-level tactic worked in the early rounds but then the municipalities began to unite in opposition and the laws were more and more often either vetoed (as Blanco did here in Louisiana) or defeated in the legislature.

With the preferred state-level alternative failing the phone companies turned to the federal government. They first asked the FCC to establish a federal-level franchising regime. (This is essentially what they have for phone service–the feds reached down and simply “took” state and local rights of way and allowed the phone monopoly to use them for free. This was in an earlier, less ideological, time and for the “good” cause of universal phone service and no one much objected.) The FCC demurred as the Congress was in the midst of gearing up for a major rewrite of telecommunications law. At that point in time no one had any trouble believing that the incumbent providers would mostly get what they wanted. But then AT&T’s CEO went and started the big war over Net Neutrality and the whole bill went down in flames. (Comcast has recently restarted the controversy.) Congress considered but was unable to pass a law that would have redefined franchising.

The FCC then stepped in, and in the face of a obvious lack of Congressional support for the idea, decided to do for the phone companies what they had previously directed the Bells to ask Congress for: they instituted a regime that removed much of the control of rights of way from their local, municipal owners. As you might imagine, lawsuits are underway that argue that the FCC has overstepped its boundaries and is attempting to legislate by regulation. The FCC ruling forbade local governments from requiring cable franchisees to serve the whole community (“buildout” requirements); and basically it forbade municipalities from asking for asking for much of anything beyond money—which was already strictly limited by federal law. As a consequence all sorts of contracts between local governments that cut deals for schools or police or government office, and deals that supported local media like AOC with funds and channel space to provide coverage of city-council events and locally produced programming are all now on the chopping block. Those contracts, by federal fiat, don’t have to be honored. And the city cannot try very hard to negotiate a better deal (not that much is left to “negogitate”) since the FCC imposed a “shot clock:” if the city and the corporation cannot reach an agreement within 90 days the corporation can simply go ahead and provide services without finalizing a contract. (The room for abuse ought to be obvious–localities will have no leverage whatsoever and could easily be reduced to agreeing to whatever the company decided to hand out. Remember, generosity is not a trait of these fellas.) It goes without saying that without any real leverage the local clauses that insure that providers meet service requirements to customers goes out the door.

So does that mean that LUS could decide not to honor its contract too? No, there is no practical way that LUS is not going to meet the obligations it makes with the people of Lafayette…it is a public body and it will not desire to and will not be allowed to simply stiff the city-parish. But Cox, who you will recall, suggested the legislature fine the citizens of Lafayette $900,000 if they had the nerve to vote for fiber, is surely resentful enough to pull back from any contribution to our city that does not look good on a sponsorship form.

So that, as Paul Harvey might say, is “the rest of the story.”

LUS is going into the Council on Tuesday to discuss a franchise agreement for its fiber-optic based cable system that will be shaped by the requirements of a state law that was initially designed to kill the project. Instead of being a document that we could proudly point to as a one which sets out the unique and forward-looking obligations of LUS to the community and its customer-owners we will likely get a defensive document that promises no more than what the city fathers could extract from Cox in the last contract round. The strange franchise and pole attachment agreements that LUS will sign with itself are by-products of the (un)Fair Competition Act and its resulting, anti-consumer regulations that are designed to drive up the price of LUS’s services and so minimize the competition it can offer its citizens. To add insult to injury, federal intervention may well result in Cox deciding to abandon most of the very franchise agreement that LUS will be imitating while LUS will, regardless of federal “relief,” will be obliged by its ownership and the aforementioned law to fulfill its contractual obligations regardless of the competitive disadvantage at which it is put.

I think that’s all pretty sad and more than a little sick. I hope you do too. We’ve earned better than a me-too franchise with our local communications utility.

Welcome to topsy-turvy world of American Broadband Policy as it plays out in real local communities.

Community Broadband Act moves to the U.S. Senate

Following up on an old story made new again…

The latest Community Broadband bill has been reported favorably out of its Senate Committee and will face a vote on the floor of the Senate. Partisans of Lafayette’s fiber optic network ought to drop a line to Mary Landrieu and David Vitter insisting that they vote to make the bill federal law.

From the MuniWireless short:

It should never have required a proverbial “act of Congress” to insure that local government could make decisions aimed at lowering access rates and promoting economic development in their local communities. And yet, it did.

Or, rather, so it will. This story began back in 05 when Senators Lautenberg (D) and McCain (R) promoted a bipartisan bill that would have guaranteed that no state could forbid local authorities to provide telecommunications services. At that time Lafayette’s high-profile fiber fight was underway and it was said that the behavior of the incumbents helped the bill gain traction. But not enough traction. It was eventually folded into the 06 effort to pass an omnibus telecommunications bill–the bill that went down in flames in the aftermath of AT&T’s net neutrality faux pas. This year it is back as an independent bill.

Over the years it has gathered an influential bevy of seven co-sponsors ranging from McCain and Kerry to Inouye and Stevens (he of “the internet is a series of tubes” fame).

So write to Landrieu and Vitter and suggest that they support the cause.

You might even want to urge them to suggest a simple ammendment prohibiting the cruel and unusal punishment of local communities: add language prohibiting the state from imposing special disabilities not applied to other public projects or private businesses only on public telecom projects. The bill as it stands only forbids a law that bans or has the effect of banning local government participation. That leaves a huge amount of room for mischief of exactly the sort that BellSouth/AT&T and Cox engaged in with the Louisiana (un)Fair Competition Act. That law in its original form would have had the effect of forbidding municipal participation. But th e law that passed “merely” imposes enormous disabilities that on our public utility that would outrage BS/AT&T should anyone even consider imposing such on them ranging from special requirements for public planning to forbidding the use of the system’s financial resources, to shutting down the business automatically if it should have a bad stretch, to a completely unique and possibly unconstitutional regulatory apparatus. I don’t think there is another city in the state that has the cojones for this fight–in effect it is and was intended to be prohibitive. Only Lafayette’s unusual courage and determination allowed it to get this far–and it will continue to be restricted in damaging ways.

But the sad truth it that by perservering against all the odds Lafayette has proven that it can be done. And so the law will not be viewed as prohibitive and will likely become a perverse template for use in other states.

The suggested new language prohibiting “cruel and unusual” punishment of local communities would help us–and would help a lot of communities that might face a law like Louisiana’s.

Go ahead, drop David and Mary a note suggesting that they help ban the cruel and unusual punishment of their local communities by supporting a strengthened Community Broadband Act.

“The FCC’s Rose-Colored Broadband Glasses”

Broadband Reports has a “worth-your-read” overview article of the sad state of the Federal Communications Commission. The FCC is that little-known but uber-important federal regulatory body that was chartered to prevent corporate abuse in the monopoly-prone national communications market. It has been so thoroughly captured by the corporations that it is supposed to regulate that it defines broadband as a mere 200 kbps, doesn’t collect anything resembling adequate data on the market it is supposed to regulate, and hides what little data it does collect from the consuming public.

Broadband reports gives a good rundown on the current state of this body’s data collection processes and the forces which might force some change.


It’s that time of year again; time for the FCC to release U.S. broadband data that’s about as reliable as a heroin addict in charge of your retirement funds. Despite years of criticism from everyone from consumer advocates to the GAO, the FCC continues to insist that if one home in a zip-code has broadband, that broadband is wired for service…

One interesting note: FCC data shows that broadband over powerline (BPL), which the agency once called the “great broadband hope,” actually had fewer total subscribers at the end of December than when the year started. The FCC has consistently lauded BPL as a third competitive pipe that would bring competition to the market, and has used its “success” as justification for deregulation…

The FCC’s rulings will have an enormous effect on LUS’ ability to compete. Ironically for us as consumers hoping for relief via LUS competion the FCC’s pro-corporate rulings might actually rebound to our benefit since federal rules meant to “deregulate” override state laws and local contracts that emphasize local sovereignty, consumer protection, and municipal property rights. LUS, as a newly minted telecom corp. benefits. Luckily it belongs to us….and presumably won’t be tempted to abuse its new freedoms. (Of course we ought to watch it…:-))

The FCC’s Rose-Colored Broadband Glasses – It’s that time of year again…. – dslreports.com