TotSF: Industry Mobilizes to Stop Philly WiFi

Surprise! Surprise! Surprise! As recorded in this article about last night’s community meeting in Philly, Verizon has mobilized to squash municipal wifi in Pennsylvania. This little gem, called House Bill 30, is a classic: it provides huge new public subsidies for Verizon while squeezing out competitors. My analysis below.

Pennsylvania House Bill 30, as this delightful little piece of industry drafted legislation is called, is such a masterful piece of work I can almost cry. I am so not worthy! The Verizon lobbyists are veritable Gods! The Force does give power over weak minds, and the minds in Harrisburg appear about as weak as they come. Verizon has not only screwed the good people of Pennsylvania, it has made them pay for the privilege AND prompted the gullible among them to say “thank you sir, may I have another.”

A bit of background, Pennsylvania is home to a number of municipal broadband systems, including some using unlicensed spectrum (which, as you all know, is one of my favorite things). Until recently, these systems have been primarily deployed in rural areas where Verizon and Comcast find it non-cost effective to deploy.

But the announcement by the City of Philadelphia that it would commit to a municipal wifi system of some kind has brought home the fact that municipal wifi is now a major competitor. So, although House Bill 30 has been languishing for over a year, it has suddenly gained new life.

And how _convenient_ that they trotted this out after the elections! What an amazing coincidence.

“But Harold,” you will no doubt say, “there have already been a handful of states that have prohibitted their municipalities from serving their citizens. What is it about this bill that puts it in the Corporate Legislation Hall of Shame?”

In terms of drafting, this is art. Just as Frodo could not help but admire the beauty and perfect craftmanship of the One Ring, I stand in awe of House Bill 30 (which, hopefully, someone will cast into the depths of Mt Doom ASAP).

1) The bill prohibits the state or any municipality (or any municipaly owned or operated entity) from providing any sort of telecom or broadband service for any kind of remuneration. The bill grandfathers any existing systems, tho, so no one will get cut off.

GOTCHA! The grandfathered municipality may only off service “of the same type and scope as were being provided on the day the act becomes effective.”

So municipal systems can operate, but not upgrade services. No increasing speed of delivery by a significant factor. No offering to provide voice or video services as the technology becomes available. Like a fly in amber, the municpal network is destined to become a fossil.

2) The bill purports to protect rural communities by requiring the local exchange telecommunications company (LETC) (read, Verizon) to respond to a written request to provide broadband service by making an offer to provide “the speeds requested” within two months, and must actually provide the service within fourteen months.

GOTCHA! The statute does not require the LETC to offer at a particular price. So what happens if the LETC says “sure we’ll do it, for $10K a month.” Heck, that might even be based on the actual cost of pulling fiber to a rural county. And if the county declines the offer, they are SOL, because Verizon has complied with the terms of the statute and extended an offer in the relevant time frame. So the “protection” is meaningless. Brilliant!

3) But wait, lest you think the state of Pennsylvania is abandoning it’s rural communities and abdicating its oversight of Verizon (oops, I mean LETCs), rest easy. Pennsylvania is setting aside more than $100 million in subsidies for broadband deployment (with $40 million dedicated to wire schools). And, just to keep Verizon in line, the Statute mandates complete coverage of the state with broadband by 2013 and requires TELC to file actual documents with the state making sure they stick to their deployment plans. Pennsylvania is watching out for YOU!

GOTCHA! This is what makes House Bill 30 real genius. It looks like a public subsidy to build infrastructure, but, thanks to the statute, THE ONLY PLACE YOU CAN BUY IT FROM IS VERIZON! (Well, I suppose some might dribble out to other companies like Comcast, but that is a risk of doing business). So, in exchange for eliminating cost saving competition, Verizon will receive a $140 million subsidy. Way to go Harrisburg! You rock!

And, once the subsidy runs out, the communities must continue to pay the subscription costs for Verizn service rather than operating their own. Just to give you an estimate of how high that is, York PA estimated it would save $200,000 a MONTH by switching from Verizon T-1 line service for all its schools to setting up its own municipal wifi network. So not only does Verizon get $140 million, it sets up a permanent dependency/revenue stream. This is like trying to solve pollution and traffic congestion problems by outlawing buses and subways while subsidizing SUV purchases.

And as for those filing requirements to keep Verizon honest, bah (as Dogbert would say). Check out Verion’s long history of broken promises in Pennsylvania on this issue. Verizon (then Bell Atlantic) has made a tidy sum bilking the people of Pennsylvania with promises of broadband and magic beans since 1994, when it promised to rewire the state with a fiber optic network. To quote The Hon. Eric Cartman “You guys in Harrisburg are HELLASTUPID.”

Fortunately, however, the people of Pennsylvania do not have to quitely sit back and respect their authoritah. Now is the time to write your state rep and your state govenor (cause frankly, I’m not I’d trust the phones on this one).

Stay tuned . . . .

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6 Comments

  1. John says:

    Harold,

    Thanks for this excellent analysis.

    I don’t live in Pennsylvania so I’m not directly affected, but I do realize that this kind of thing goes on all the time.

    By the way, a few weblogs have linked to this article and wetmachine traffic has gone up somewhat over the last few days.

  2. Ross says:

    I’m not sure if this definitively points to a veto by Gov Rendell, but House Bill 30 is NOT on the weekly “bills signed” press release, as I note here:

    http://karchner.com/blog/68

  3. William Middlemas says:

    I don’t get it ! I don’t think that I am particurely dense but I don’t understand. In paragraph 1, he states that the municipality will become a fossil. Is this true ? Maybe they will only have to rebid ?

    Paragraph 2: His example doesn’t make sense or am I missing something? If LETC in his example makes a super low offer why wouldn’t the county accept? And if the offer is too high, what stops the county from going to another company for a best bid?

    Paragraph 3: Again I don’t get the point. The state is budgeting 100 million for broadband service. Whoever wins a bid in a particular county would logically qualify for it, am I right? So what is the problem. If the winner in a particular county starts charging high fees, then other providers will presumably be around to take provide services.

    Am I missing something here ? I really don’t see the terrible implications that is implied here. By the way I live in Maryland and I use Verizon DSL and find the service excellent.

  4. Michael McNeil says:

    How do I get permission to post this article on?

  5. John says:

    Michael,

    You can of course link to the article.

    As for outright copying, well, copyright belongs to Harold Feld; I’m sure he’ll reply here soon. If he doesn’t reply in a day or two I’ll send him a note on your behalf.

  6. Eugene Esterly III says:

    I live in Breinigsville, Pennsylvania & the people who run Verizon are fucking idiots. For example, Breinigsville is in Upper Macungie Township which is located in Lehigh County & we can’t even get broadband even though we are the largest township in Lehigh County.

    Verizon wants to kill the competition & when they do, they sit on their asses & don’t even try to upgrade the infrastructer. They said years ago that they would upgrade Upper Macungie for DSL but years later, the assholes who run Verizon still haven’t done it.

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