Obama Wants You to Have Cheap, Fast Internet, But Many Cities Aren’t Allowed to Provide It

January 25th, 2015
in econ_news

Special Report from ProPublica

by Leticia Miranda , ProPublica

Last week during the State of the Union address, President Obama pledged :

"To protect a free and open Internet, extend its reach to every classroom, and every community, and help folks build the fastest networks."

Obama is calling on the Federal Communications Commission to challenge a wave of state laws blocking the construction of municipal broadband networks, which are high-speed Internet services run by local communities.

Follow up:

Here's what you need to know about the president's proposal and what it might mean for consumers.

Why can't cities just build their own broadband networks?

Although there are about 300 municipal broadband networks across the country, laws in about 20 states create multiple administrative and financial hurdles for new networks to get off the ground. Such legislation makes it difficult, for example, for communities to issue bonds to cover the upfront costs of building a network or to lease out unused fiber as a way to offset their costs. In Florida, residential broadband networks must demonstrate how they plan to turn a profit within four years, a tall order. According to The Baller Herbst Law Group, so-called fiber-to-the-home networks often take much longer to become profitable. In Nevada, there are population restrictions. Municipalities are prohibited from providing broadband if the population exceeds 25,000; for counties, it is 55,000 or more.

Why have some states put these restrictions on municipal broadband networks?

The cable lobby and some conservatives believe that the business of Internet service should stay in the private sector. Last week, Nebraska Sen. Deb Fischer called Obama's plan "a new federal takeover of state laws governing broadband and the Internet." Telecom industry groups such as the National Cable & Telecommunications Association have argued that these networks are risky investments that could drive cities into debt. Telecom companies have donated millions of dollars to state and federal politicians on both sides of the aisle. Besides contributions, the cable lobby has directly submitted legislation to restrict municipal broadband networks and taken fledgling networks to court. Last year, according to a report by Ars Technica, the Kansas Legislature squashed a bill to limit municipal broadband networks that was drafted and submitted by the Kansas Cable Telecommunications Association. When Lafayette Utilities System in Louisiana announced its intention to build a municipal broadband network, they faced three years of court battles with two incumbent Internet providers, costing them $4 million, according to a report from the Center for Public Integrity.

How is Obama going to get around these restrictions to expand municipal broadband?

The Obama administration is urging the FCC "to ensure that communities have the tools necessary to satisfy their citizens' demand for broadband." Section 706 of the 1996 Telecommunications Act charges the commission with encouraging "the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans." In its letter to the FCC, the administration argues that:

"Where private investment has not resulted in adequate broadband infrastructure, communities can and should play a leading role in expanding broadband access."

In addition, the U.S. Department of Agriculture will revamp its broadband loan program to offer financing to eligible high-speed broadband carriers in unserved and underserved rural areas. The Department of Commerce will launch a new initiative to provide online and in-person technical assistance to communities that will help them address challenges in planning and implementing broadband networks.

What obstacles does Obama face?

With a Republican Congress, it's likely Obama will face opposition. Sen. John Thune, R-S.D., drafted a net neutrality bill that would strip the FCC of Section 706 authority. He argues that this change is:

"Necessary to update FCC authority for the Internet Age."

Moreover, FCC Commissioner Ajit Pai has said the Commission does not have the authority to preempt state bans on municipal broadband. In a statement last week, Pai recommended that the commission:

"Focus on removing regulatory barriers to broadband deployment by the private sector."

But it's still possible for Obama's proposal to have an effect. New Jersey Sen. Cory Booker introduced a bill on Thursday that would amend the Telecommunications Act to make it illegal for states to restrict or prohibit municipal broadband networks. And FCC Chairman Tom Wheeler has already seemed to express his support for using the FCC's authority to remove barriers for municipal broadband networks in Tennessee and in North Carolina, which have submitted petitions to lift restrictions on their networks.

He wrote in a blog post in June:

"I believe that it is in the best interests of consumers and competition that the FCC exercises its power to preempt state laws that ban or restrict competition from community broadband."

The commission is expected to vote on these petitions on Feb. 26.

ProPublica is a Pulitzer Prize-winning investigative newsroom. Sign up for their newsletter.

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.

 navigate econintersect.com


Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved