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South Carolina's "Exceptions" To Anti-Community Broadband Law are Worthless

South Carolina's H3508 has passed the legislature, been signed by Governor Nikki R. Haley, and has revoked local authority to build the broadband networks they need to create new jobs. Last week, we noted some of the coverage about the bill.

After reviewing the language of the bill, we are astonished at how far the Governor and the South Carolina Legislature have gone to protect AT&T's monopoly, to the detriment of the many businesses and citizens who desperately need better access to the Internet -- whether to be more productive, competitive, or just take advantage of educational opportunities.

South Carolina is near the bottom of adoption rate in the U.S. and has a higher than average number of residents living below the poverty line. Communities with fast, affordable, and reliable access to the Internet are seeing new jobs. Those stuck on slow DSL are watching jobs wither away.

We continue to be amazed at state legislatures that are prioritizing laws to make it harder to expand broadband rather than easier. The only explanation is the vast amounts of money big companies like AT&T and Time Warner Cable spend in campaign contributions.

This bill is designed to prevent local governments from building next-generation networks, even when the private sector has refused to invest. It may also put an end to projects already in the works (even those that have received BTOP or BIP funding).

H3508 is not an outright ban against municipal networks, but it might as well be. South Carolina had already discouraged community broadband networks in Article 23, Chapter 9, Title 58 of its 1976 Code. This bill ramps up the unfavorable conditions to make such investments all but impossible.

Much of telecommunications is regulated by states and the federal government, which means that local governments already have to follow the same rules as companies like AT&T and Time Warner Cable. To the extent that local governments have authority, they are required by law not to favor their own network. But South Carolina has decided to impose still more regulations only on local governments if the community decides to build its own network.

It would be impolitic to advance a bill that simply says local governments cannot invest in the essential infrastructure needed for the modern economy. So these bills are instead crafted to appear reasonable while effectively demanding that communities capture a leprechaun riding a unicorn before they can build a network. 

In the coverage of this bill, few have examined the "exemptions" in depth, so that is where our coverage will focus. The "exceptions" contained to the onerous provisions of this bill are nearly impossible to qualify for and provide insufficient certainty as to how long they would apply.

South Carolina Seal

You've Been 'Served'

South Carolina continues to use a 1990's definition "broadband service" of 190kbps in at least one direction. Possibly the worst broadband definition we have seen. But for the purposes of this bill and defining who is "served," they have adopted the FCC's "Basic Broadband Tier 1" as a benchmark. Currently, that is at least 768kbps in at least one direction. 

Some of the regulations uniquely imposed on publicly owned networks will be relaxed if the community network can obtain "unserved" designation for a specific geographic area it wishes to serve. Designation must come from the South Carolina Public Service Commission and can only be achieved in one of two ways:

1. If the county is a "persistent poverty county" (a USDA definition) AND at least 75% of the households in a 2010 census tract have either no broadband service or only access to service from a satellite provider - In rural areas, census tracts usually include large geographic areas of many census blocks, often cross county lines, and can be arbitrarily drawn, so meeting this requirement appears quite difficult. Another difficulty is that maps depicting broadband access systematically overstate coverage, often claiming some households have access when they actually cannot connect.

As 3G wireless connections (from AT&T, Verizon, or others) exceed 768kbps in one direction, we would be surprised to find multiple connecting census tracts with 90% of households lacking "broadband." Of course, a dramatically overpriced wireless service with small monthly bandwidth caps is useless for doing homework, remote education, economic development, and pretty much anything beyond email and very basic web surfing.

2. If at least 90% of the households in the county have no broadband service or only access to service from a satellite provider - Here, the requirement shifts to census blocks, which greatly tightens the requirements. Blocks are the smallest unit of census measurement, more akin to city blocks in town, but can be much larger in rural areas. Even the 2011 North Carolina bill didn't go this far, defining "unserved" as census blocks where "at least 50% of households have no broadband service or only access to satellite service."

Catharine Rice, President of SEATOA, applied some pragmatic perspective in an email to us:

Unserved areas are defined by census blocks. So you'd have to cull together tens of thousands to make a network viable, and all of them would have to qualify as unserved... So if 11% of the homes have [basic tier 1 broadband service as defined by the FCC] (not enough speed to even download a Netflix video), that Census block is 'served.' 

Also the real show stopper here is that the NTIA federal broadband maps do not measure areas by households. More specifically, the NTIA rules allow this: if one home in a census block could have broadband in 7-10 business days (as determined by the carrier reporting the data), the entire Census block is considered to have broadband. So a SC community would have to do its own broadband census survey, and that aint' cheap.

SEATOA Logo

Hard to Get, Easy to Lose

Even if a county is able to qualify as "unserved" and could legally pursue a municipal network for their community, the designation is easily challenged by a resident or a competitor ISP. All it takes is an objection, the opportunity for a hearing, and testimony to stop the petition for "unserved" designation. This part of the process can halt development by at least 90 days. Time can be a killer for network planning and the big telcos know that. Theoretically, AT&T can hire a "Petition Buster" to routinely file objections and use time to destroy plans for networks. This is a common tactic used by big corporations that maintain big teams of lawyers -- they prefer to spend a little to block new competition rather than a lot to compete in a competitive market.

Exception Today, Gone Tomorrow

One of the most troubling components of the new law is the time restrictions that apply to the "exceptions." New broadband networks, both publicly and privately owned, require years to build and leave the "startup" phase. 

If a county is designated as "unserved," a government entity offering service is only exempt from the crippling additional regulations for one year if that area loses its "unserved" designation. Bear in mind that these unserved areas are where the business case for broadband does not exist. So if a community can somehow build a network in this area, it will quickly lose its exemption if AT&T decides to put a 3G tower up in the area.

This is not an exemption. It was an opportunity for elected officials to pretend they didn't just give AT&T an unofficial monopoly in return for generous campaign contributions. We will be very surprised to see any community proceed with a network given the uncertainty and increased advantages this legislation gives the biggest carriers (who have refused to invest in South Carolina).  

Honesty From Heartland: Munis Outgunned in Competition with Private Sector

The Heartland Institute is one of those organizations that will say anything its massive corporate funders want it to. It is embroiled in a scandal from the release of internal documents due to its work challenging the science behind climate change.

In the telecom space, Heartland's employees have encouraged laws to take decision-making authority away from communities in order to benefit the massive cable and DSL companies (like Heartland-funder AT&T).

They advocate for efforts like Georgia's SB 313 and South Carolina's H3508, saying:

  1. Muni networks are doomed to failure because of the general incompetence of government
  2. Muni networks will drive private sector providers out of the market because governments are too all powerful and have too many advantages in competition

This is why we see bills that are supposed to "level the playing field" pushed by big companies like Time Warner Cable in North Carolina last year.

If you take a gander at Heartland's telecom work, you have to wonder why the playing field needs to be leveled if they believe what they have written:

A municipal government cannot possibly hope to compete with well-capitalized broadband providers in a highly competitive market.

For those unfamiliar with Heartland, they don't use the same definitions for common words like "competitive" as the rest of us do. In Heartland's world, "competitive" means a market in which one of our funders operates regardless of how much competition exists in it.

So why do we need new legislation to make it even harder for communities to build the networks that the cable and DSL companies won't build?

AT&T Trying to Redefine Broadband in Georgia, South Carolina

The absurdity of AT&T's push to define broadband as 200kbps is so great, it boggles the imagination. We developed the graphic below to highlight just how slow 200kbps connections are.

200kbps is not good enough for communities

Feel free to spread it around. Higher quality pdf below.

South Carolina Cable Association Also Wants to Limit Competition

Many complain about gridlock in Washington, DC, but I sometimes subscribe to the cynical counter-reaction that gridlock is great. It is when the Democrats and Republicans agree that Americans should beware.

Though this may or may not be true about politics, it is certainly true when applied to two of the most hated industries in America: cable television companies and DSL companies like AT&T. When they come to agreement, you can bet that prices are going up for the rest of us.

In our coverage of AT&T's bid to limit broadband competition in South Carolina by revoking local authority to build networks for economic development, we have thus far ignored the position of the cable companies.

We took a tour through the newsletters of the South Carolina Cable Television Association over the course of 2011, which is when AT&T introduced its H.3508 bill.

Unsurprisingly, the cable companies are thrilled at the prospect of limiting competition in communities by cutting off the ability of a community to build a network when the private sector is failing to meet their needs. From the 1st Quarter newsletter [pdf]:

The SCCTA has been actively following the AT&T-backed legislation that would amend the Government-Owned Telecommunications Service Providers Act. House Bill 3508 would impose the same requirements on government-owned broadband operations that are currently imposed on telecommunications operations.

Of course, H.3508 goes far beyond applying the "same requirements." It enacts a host of requirements that only apply to public providers, which are already disadvantaged by being much smaller than companies like Time Warner Cable and AT&T. We have long ago debunked the myth of public sector advantages over the private sector.

The second quarter newsletter [pdf] identifies this bill as the highest priority of the cable association:

H3508, the AT&T backed legislation, has been our dominate piece of legislation in 2011.

Even after the bill was shelved for the year, it remained a high priority for the cable lobbyists (who, of course, need something to do while shmoozing at the capitol day in and day out) according to the 3rd quarter newsletter [pdf]:

The SC Cable Television Association will continue to work to move H3508...

And finally, in the 4th quarter [pdf], we get a sense that all that lobbying has been successful:

When session ended last year, the bill was in Senate Judiciary subcommittee (Sen. Luke Rankin – Chair, Sen. Brad Hutto & Sen. Paul Campbell). Our team of lobbyists have been working very hard meeting with members of the full Senate Judiciary Committee to move this important industry bill forward. As of writing this column, we expect new amendments dealing with Clemson’s Light Rail initiative and Orangeburg County. Our team has been assured the two counties who received the broadband stimulus funds, administered through the U.S. Department of Agriculture’s Rural Utilities Service, will NOT provide service in areas that is capable of receiving other broadband services. This bill is to be heard before full Senate Judiciary and will then head to the Senate floor.

Democracy in action! We know that the private sector will not create competition by itself. In fact, the future will be less competitive as cable systems generally provide faster connections than DSL and wireless, which will compete for those who don't mind slowly surfing.

South Carolina's businesses that want to thrive in the digital economy might consider looking at the nearby job-creator-friendly broadband networks in Brisol, Virginia; Danville, Virginia; Chattanooga, Tennessee; Salisbury, North Carolina; and Wilson, North Carolina. Those communities have the fastest connections in the US at the most affordable prices.

Pay Attention to the Man Behind the Curtain: Listen to AT&T's CEO, not Lobbyists

AT&T lobbyists in Georgia and South Carolina are arguing that local governments should not be allowed to build the networks that communities need, suggesting that the private sector is primed to make the necessary connections. But AT&T's CEO had a different message for investors a few weeks ago, in an earnings call on January 26:

The other is rural access lines; we have been apprehensive on moving, doing anything on rural access lines because the issue here is, do you have a broadband product for rural America?

We’ve all been trying to find a broadband solution that was economically viable to get out to rural America, and we’re not finding one to be quite candid. The best opportunity we have is LTE.

Whoa! LTE is what you more commonly hear called 4G in mobile phone commercials. The best they can do is eventually build a wireless network that allows a user to transfer just 2GB/month. That is fine for hand-held devices but it does nothing to encourage economic development or allow residents to take advantage of remote education opportunities.

But even the CEO admits they are not bullish on LTE as the solution:

[W]e’re looking at rural America and asking, what’s the broadband solution? We don’t have one right now.

Some may be wondering about "U-Verse" -- AT&T's super DSL that competes with cable in the wealthy neighborhoods of bigger cities. U-Verse cannot match the capacity or quality of modern cable networks but is better than older DSL technologies. But U-Verse is not coming to a rural community near you.

For those who missed the fanfare last year, AT&T's U-Verse build is done. AT&T's lobbyists have probably forgotten to tell Georgia and South Carolina Legislators that the over 20 million AT&T customers without access to U-Verse are not going to get it. But CEO Stephenson made sure investors weren't worried about AT&T continuing to invest in its wireline infrastructure:

In wireline, our U-verse build is now largely complete, so we have in place an IP video and broadband platform that reaches 30 million customer locations, which gives us significant headroom now to drive penetration.

Translation: AT&T will now focus on upselling customers in markets with U-Verse. If it doesn't run through your neighborhood already, you aren't getting it.

The rest are stuck on dial-up or DSL that AT&T's CEO has previously called obsolete (correctly). While AT&T's CEO has been honest about its inability to solve real broadband deployment gaps, AT&T's lobbyists have tried to advance a bill with the ludicrously low broadband definition of 200kbps and even more absurdly, the even slower definition of 190kbps.

The business model of AT&T and other big cable and DSL companies simply does not work in much of rural America. The question is why any state would foreclose the possibility of communities being self-reliant when major companies like AT&T candidly admit they have no solution and the best they can do is deliver an obsolete product.

State legislators need to pay more attention to what AT&T's CEO says and less what AT&T's lobbyists say.

Fast, affordable, and reliable access to the Internet is essential for communities to thrive in the digital age. Not every community wants to build a community networks and most undoubtdly won't. But that is decision they should make locally. Pending legislation in Georgia and South Carolina would take this decision out of the hands of these communities by enacting a host of new regulations on public networks that do not apply to the private sector. As in North Carolina, these bills effectively revoke local decision-making authority by creating impossible hurdles for communities that are already disadvantaged in the modern economy.

Corporations Oppose Limits to Local Authority in South Carolina

With AT&T continuing to push H.3508, a bill to further erode local authority over broadband and ensure AT&T faces no competition in areas of the state, a number of corporations have signed a letter asking the South Carolina Legislature not to chase jobs out of the state. Though the bill has not yet had a hearing this year, we have seen hearings scheduled and know that the bill is being actively considered behind the scenes.

Dear Senator McConnell and Members of the Senate Judiciary Committee:

We, the private-sector companies and trade associations listed below, urge you to oppose H.3508 because these bills, on top of South Carolina’s existing barrier to public communications initiatives, codified in SC Code §§ 58-9-2600 et seq., will harm both the public and private sectors, stifle economic growth, prevent the creation or retention of thousands of jobs, hamper work force development and diminish the quality of life in South Carolina. In particular, these bills will hurt the private sector in several ways: by curtailing public-private partnerships, stifling private companies that sell equipment and services to public broadband providers, and impairing educational and occupational opportunities that contribute to a skilled workforce from which businesses across the state will benefit.

The United States continues to suffer through difficult economic times. The private sector alone cannot lift the United States out of this crisis. As a result, federal and state efforts are taking place across the Nation to deploy both private and public broadband infrastructure to stimulate and support economic development and jobs, especially in economically distressed areas. For example, in South Carolina, Orangeburg and Oconee Countieshave received broadband stimulus awards to bring much-needed broadband services and capabilities to communities that the private sector has chosen not to serve adequately. H.3508, together with SC Code §§ 58-9-2600 et seq., would impose burdensome financial and regulatory requirements that will prevent public broadband providers from building the sorely needed advanced broadband infrastructure that will stimulate local businesses development, foster work force retraining, and boost employment in these economically depressed areas.

Consistent with these expressions of national unity, public entities across America, including South Carolina, are ready, willing, and able to do their share to bring affordable high-capacity broadband connectivity to all Americans. Enactment or retention of direct or effective barriers to community broadband, such as H.3508 and SC Code §§ 58-9-2600 et seq., would be counterproductive to the achievement of these goals. These measures are also inconsistent with our country's National Broadband Plan, which recommends that no new barriers be enacted and that existing barriers be removed.

We support strong, fair and open competition to ensure that users can enjoy the widest range of choices and opportunities. H.3508 is a step in the wrong direction. South Carolina should be removing barriers to public broadband initiatives rather than establishing new ones, so that high technology companies can spread and prosper into all the communities in this beautiful state. Please oppose H.3508, repeal SC Code § 58-9-2600 et seq., and reject any future measures that could significantly impair municipal broadband deployments or public-private partnerships in South Carolina.

Sincerely,

Alcatel-Lucent
American Public Power Association
Atlantic Engineering
Fiber to the Home Council
Google
OnTrac
Southeast Association of Telecommunications Officers and Advisors
Telecommunications Industry Association
Utilities Telecom Counci

NATOA Encourages South Carolina Senate to Preserve Local Authority

With AT&T again pushing a bill in South Carolina to revoke local authority to build community broadband networks, the National Association of Telecommunications Officers and Advisers has sent a letter to the Chair of the Senate Judiciary Committee [pdf] opposing H3508. The bill will be considered by that committee on Thursday, January 26. South Carolina already restricts local authority to build networks but this bill would essentially close off any possibility of doing so.

Dear Senator Rankin:

The National Association of Telecommunications Officers and Advisors (NATOA) joins the growing chorus of business, consumer, and government groups and associations in opposing H. 3508 (Government Owned Communications Service Providers). This bill will harm your state’s economic growth and do little if anything to promote competition or to bring advanced communications services to the citizens of South Carolina. Hamstringing local government efforts to provide fiber networks will simply result in the further flow of millions of investment dollars to neighboring states such as Tennessee.

NATOA has long supported community broadband networks because they offer the promise of increased economic development and jobs, enhanced market competition, improved delivery of e-government services, and accelerated and affordable Internet access for all. Communities across America are ready and eager to bring the economic and social benefits of broadband access to their citizens. But private providers alone will not bring these advanced services to all parts of our country, especially to those communities that do not fit into the companies’ business plans.

As a result, hundreds of cities have launched community broadband initiatives, either with private partners or on their own, and many more are now in the planning stages. Communities should be encouraged to step forward to do their part to ensure the rapid deployment of broadband to all Americans, and they should have the freedom to choose what makes the most sense for their citizens. H. 3508 will simply make it more difficult for public broadband providers from building the advanced broadband infrastructure necessary to stimulate local business development, work force retraining, and employment in economically depressed areas.

Among other things, the bill’s definition of “broadband service” – 190 kilobits per second (“kbps”) at least one direction – is extremely low. In its 2010 Sixth Broadband Progress Report, the Federal Communications Commission raised its decade-old minimum broadband speed threshold from services in excess of 200 kbps in both directions to services enabling actual download speeds of at least 4 Mbps and upload speeds of at least 1 Mbps. But even this threshold is viewed by many as too slow to support the applications available in the marketplace today, as well as rapidly emerging technologies and applications for teleworking, distance learning, and telemedicine. Unfortunately, even with this minimum threshold speed, South Carolina, according to a recent FCC Internet Access Services report, has the fifth worst level of broadband in the United States (out of 44 states with data reporting) with only 17% of households having that level of access available.

Rather than erecting further barriers to entry, South Carolina should be encouraging community leaders to develop networks that make sense for their communities, including public-private partnerships and systems wholly owned by municipalities.

Thank you for your consideration.