While we’re on the subject of internet and phone providers, this article from dailytech.com is a great example of government lobbying at its best. Basically, the city of Wilson, North Carolina is offering extremely fast high speed internet to residents at a fraction of the cost of its competitors Time Warner and Embarq. Instead of embracing the competition, Time Warner and Embarq are lobbying the state government to make it illegal for the city to offer such a service.
The city’s residents, like many, long complained over high internet, cable, and telephone prices. So the city launched an ambitious $28M USD program to deliver these services basically at cost, at much lower rates than local service providers Time Warner Inc. and Embarq.
For example, the city offers an expanded basic cable (81 channels), 10 Mbps (download and upload), and a digital phone plan with unlimited long distance to the U.S. and Canada, all for $99.95. A comparable plan from Time Warner Inc., with six fewer channels (no Cartoon Network, Disney, The Science Channel, ESPNU, ESPN News, or ESPN Classic) and lower upload speeds costs $137.95, for an introductory rate, which lasts a few months and then will likely be ratcheted up.
Rather than admit defeat to the pesky local service and go quietly, Time Warner Inc. and Embarq decided to take the fight to the state government, lobbying for several years to get the state government to pass laws to try to destroy the local effort. And sure enough, thanks to a lot of hard work (and money), the cable companies are close to getting their wish — North Carolina’s State Senate have proposed bills to not only effectively crippling or banning the local service, but also to prevent such services from getting funds under the broadband portion of the national Stimulus law.
The city broadband program is not funded by tax dollars, so I would argue that they should be allowed to continue to operate. There are a few interesting comments on Wilson’s Public Affairs Manager’s Blog about what the state Senate and House bills actually say. It appears that they are just asking for the state to require municipalities costs to reflect the same taxes that a commercial operator would have to pay, and not to charge less than cost. That doesn’t really seem unfair to me. The main issues at play here are around how this type of service is funded by a municipality (bonds, taxes, public-private partnership), whether or not a local government can compete in a market where significant service gaps are identified (e.g. broadband access in rural areas, and speed limitations), and whether or not a state government can regulate municipalities competing in the private sector.
I’m sure there is more to be considered in this type of private sector / government battle, so feel free to add your thoughts in the comments. Is this issue similar to the City of Houston getting into the Hotel business?
Either way, I can see stories like this popping up more and more around the country in the near future, especially as broadband over power line technology is perfected, and deregulated energy retailers begin to offer internet access in addition to gas and electricity. This would hopefully create more competition in Houston for Comcast and AT&T and ultimately lower prices, but the same thing was said about electricity back when Texas and other markets deregulated, and I’m not sure it ever really happened.
If the REPs do offer internet access someday, do you think they’ll be able to get away with charging a few cents per gigabyte of data transfer, similar to Amazon’s Elastic Cloud Computing Platform, or would they have to stick to tiered monthly rates based on download/upload speed? Here is an overview of Amazon’s EC2 pricing scheme for data transfer:
These prices probably wouldn’t work at a consumer level (maybe if we divide them all by 10…), but I just wanted to throw the idea out there and see if anyone had any comments. Thanks to Danny DiPaolo for finding the original article.