May 1 2010

Big Media and State Lawmakers, Unite!

ALEC fights to keep broadband in private hands

Photo Credit: American Legislative Exchange Council

Photo Credit: American Legislative Exchange Council

As the functions of media, commerce and communication rapidly shift into the digital world, more and more cities are viewing broadband Internet access as a necessary resource to stay economically viable in the 21st century. While these communities have been working to expand access, another group, the American Legislative Exchange Council (ALEC), has been working to ensure that control of the information superhighway remains in the hands of a few very powerful corporations.

ALEC is a group that unites state lawmakers—it claims 2,000, or a full third of the nation’s state legislators, as members—with an impressive roster of the nation’s largest corporations. Member lawmakers get together with representatives of these corporations to draft “model legislation,” which they then dutifully carry back to their state legislatures and introduce as their own (Mother Jones, 9-10/02; Washington Post, 2/10/10). Critics of the group say that the legislation forged in these meetings is intended to serve the interests of its member corporations, not the public (In These Times, 3/06; Progressive, 3/08).

The council is a 501(c)(3) tax-exempt nonprofit—which, under the tax code, are allowed to devote only an “insubstantial part” of their activities to influencing legislation. In 2008, the group reported revenues of nearly $7 million. Its legislator members—who pay dues amounting to $50 a year—provided $93,000 of this, while 250 corporate and interest group members put up $5.6 million.

While ALEC refuses to make public full lists of either its corporate or government members, the group’s magazine Inside ALEC has mentioned members in the field of media and information technology that include the News Corporation, Comcast, Time Warner Cable , Cox, AT&T and Verizon, as well as the National Cable and Telecommunications Association (of which Disney Media Networks is a member). As such, ALEC represents the interests of most major media conglomerates and telecommunication providers in the country.

So it should be no surprise that when cities started announcing plans to establish municipal broadband services in direct competition with ALEC’s corporate telecommunications members, ALEC led the resistance. The group drafted a resolution in opposition to the 2009 stimulus program which included $2 billion (later increased to $7 billion) in “build-out” grants for municipal broadband infrastructure; any attendant network neutrality guidelines and legislation, ALEC said, would only serve to stifle competition (Business Wire, 1/29/09, 1/27/09). Connecticut state Rep. Bill Hamzy (R.), the public-sector chair of ALEC’s Telecommunications and Information Technology Task Force, was the chief signatory on an ALEC letter sent to the FCC in protest of such guidelines (Journal of Technology & Science , 1/31/10).

“ALEC opposes any grant program that discriminates against competing providers of the same service,” said Seth Cooper, director of the task force, in a January 29, 2009, press release. “When government becomes a direct competitor in the marketplace, there is a danger that it will use its official tax and regulatory powers to unfairly gain an upper hand in the market. This undermines consumer choice.”

“Consumer choice,” however, was not a top priority for these telecommunications giants when they spent millions of dollars lobbying for the Telecommunications Act of 1996 (In These Times, 3/4/96), which lifted limits on media ownership, leading to far-reaching media consolidation. The Act also established the FCC’s Universal Service Fund, from which corporations such as AT&T—the ALEC Telecommunications and Information Technology Task Force private-sector chair—have drawn billions of dollars in federal subsidies to serve rural populations.

True to form, ALEC’s proposed alternative to the broadband subsidies provided by the stimulus program was a program of increased tax breaks for telecommunications providers.

In response to local proposals to treat broadband Internet service as a public utility, a spate of bills—sponsored by ALEC member legislators and heavily lobbied for by ALEC member corporations—have appeared across the country that would make it nearly impossible for such plans to reach fruition (Business Wire, 3/31/09).

The chief piece of ALEC legislation intended to stop any municipal competition with private telecommunications corporations is the Municipal Telecommunications Private Industry Safeguards Act (Business Wire, 1/29/09), which has appeared in numerous states, often introduced as the Fair Competition Act or Local Government Fair Competition Act (Wilson Daily Times, 4/9/09). Despite the various names, the text of the bill has been introduced in state legislatures in cookie-cutter form.

In 2007, several cities and small towns in North Carolina began investigating the possibility of establishing municipal broadband service—due in large part to the number of rural communities who have no access to the service and who, according to local officials, are being deprived of economic opportunities as a result. Not long after these cities made their intentions known, the Fair Competition Act appeared in the state General Assembly (Independent Weekly, 6/13/07). One of the bill’s primary sponsors, Rep. Harold Brubaker (R.), is an active ALEC legislative member and served as the group’s national chair in 1994 (Washington Times, 8/4/94).

According to Paul Meyer, chief legislative council for the North Carolina League of Municipalities, the Fair Competition Act was part of a plan to hamstring municipalities in the broadband market, unleashed on the state by Time Warner Cable , AT&T, Verizon and Embarq Communications (now CenturyLink).

“We’ve had three legislative sessions in a row where the incumbent TV companies or telecommunications companies were filing pieces of legislation that would have essentially prohibited, or made it virtually impossible for these municipal systems to succeed,” Meyer told Extra!.

Ironically, the Fair Competition Act seeks to eliminate municipal competition through the same yoke of regulation that these corporations have been so opposed to. Under the bill, a municipal entity seeking to provide any communications system would have to come up with a plan detailing a system that would generate revenue and pay off all principal and interest associated with its development. The bill also calls for a special election to be held on the development of the system (Independent Weekly, 6/13/07; Business Journal, 6/25/07).

The bill goes on to stipulate that funds to initiate the project must be paid off solely through project revenue; there can be no start-up money provided by the local government. The bill would also require municipal service providers to pay local, state and federal taxes, as well as municipal right-of-way fees, as though they were private entities.

Mayor Tony Chavonne of Fayetteville, North Carolina, one of the municipalities seeking broadband service, drafted a resolution introduced to the state legislature in opposition to the act. The resolution (No. R2007-024) noted that the act contradicted state laws that allow local governments to support economic development, and that providing municipal broadband service to areas unserved by private telecoms is essential to replace jobs lost in the tobacco, textile and manufacturing industries.

In North Carolina, the Fair Competition Act died in 2008 (Independent Weekly, 6/18/08). Meyer says the telecommunications corporations repackaged and reintroduced several of the more stringent stipulations as the Level the Playing Field Act. Although that bill stalled out in 2009, Meyer says the corporate pressure is not off, adding that telecommunications companies have been pushing similar legislation across the country.

“I can tell you that there is an active, ongoing dialogue being conducted by the incumbent providers to have this issue brought up again,” said Meyer.

North Carolina Rep. Lorene Coates (D.), who serves as vice chair of the House Ways and Means Broadband Connectivity Committee, told Extra! that currently there is talk of reintroducing the Fair Competition Act and that the new version of the bill would still render the municipal broadband plans of the state’s communities unattainable.

Joey Durel, city-parish president of Lafayette, Louisiana, is all too familiar with the difficulties posed by incumbent service providers and ALEC’s protective legislation to cities seeking to establish a broadband system.

Durel says that in 2004, discussion began in Lafayette about using a 65-mile loop of existing municipal fiber-optic cable to provide broadband as a potential economic development driver. When the city made their intentions known by issuing a feasibility study, Durel says, Bellsouth (since merged with AT&T) and Cox Communications began calling his office and inviting him out for coffee.

Durel says that he repeatedly asked the companies to provide broadband during these meetings, as he was not enamored with the idea of public/private competition, but they declined, saying that Lafayette did not need the service.

As the city proceeded with its plan, the Local Government Fair Competition Act was introduced into the Louisiana legislature. One of the bill’s primary sponsors, Rep. Noble Ellington (D.), is ALEC’s Louisiana state chair.

“They called it the ‘Fair Competition Act’; we called it the ‘Unfair Competition Act,’” says Durel. “Everything they were trying to do to make it a ‘level playing field’ was actually designed to make it an unlevel playing field.”

Eventually a version of the bill passed in Louisiana, but only after legislators had eliminated provisions that would have effectively stopped Lafayette’s broadband plans in their tracks (Daily Advertiser, 7/7/05).

But as Lafayette moved forward, even holding a public vote in accordance with the ALEC-drafted law’s stipulations, Bellsouth and Cox filed suit against the city, saying that they were not issuing the bonds to fund the project properly (Governing Magazine, 8/09).

A lengthy legal battle ensued and in 2007, after two years and $1.2 million in legal fees, the state Supreme Court sided with the city. Durel estimates that the system will be completed by July.

Now that the battle in Lafayette is over, Durel says cities looking to compete with big telecommunications corporations had better brace themselves for the long hard road ahead.

“They used every tactic you could imagine, from misrepresentation of the facts, smoke and mirrors…. They used a lot of the philosophical, emotional stuff, such as the government competing with the private sector,” said Durel. “I drive down Main Street in my town and I see the private sector, and I always saw [public broadband] as a huge free enterprise initiative that would be really good for small businesses.”