Incumbent SPs Win One Fight, But FTTH Competition Builds

Beverly Purdue, governor, North Carolina

Beverly Perdue, governor, North Carolina

June 8, 2011 – Incumbent service providers got a hard-wrought win in their efforts to battle municipal funding for broadband networks in North Carolina last month, but they appear to be on the wrong side of the trend line as ever more fiber-based initiatives intensify competitive pressures around the country.

The North Carolina legislature, following Republican takeover of both houses in the 2010 elections, reversed previous defeats of the legislation, which creates stiff barriers on whether and where municipalities can use public funds to build fiber networks. Notwithstanding overwhelming legislative support for the measure, Democratic Governor Beverly Perdue refused to sign it while allowing it to become law by not vetoing it.

While asserting the state needs “rules to prevent cities and towns from having an unfair advantage over providers in the private sector,” Perdue in a statement criticized the measure, saying, “My concern with House Bill 129 is that the restrictions the General Assembly has imposed on cities and towns who want to offer broadband services may have the effect of decreasing the number of choices available to their citizens. For these reasons, I will neither sign nor veto this bill.

“Instead, I call on the General Assembly to revisit this issue and adopt rules that not only promote fairness but also allow for the greatest number of high quality and affordable broadband options for consumers.”

The measure, one of the more restrictive among 18 other state measures limiting public funding for broadband, drew widespread attention, including a call in April for its rejection from FCC commissioner Mignon Clyburn. Characterizing the “Level Playing Field/Local Government Competition Act” as a “significant barrier to broadband deployment,” Clyburn said, “This measure, if enacted, will not only fail to level the playing field; it will discourage municipal governments from addressing deployment in communities where the private sector has failed to meet broadband service needs.”

Clyburn noted such bills run counter to the National Broadband Plan, which calls on Congress to make clear that state, regional and local governments should not be prevented from building broadband networks, especially if private providers aren’t willing to provide the facilities. “I fear that preventing local governments from investing in broadband is counter-productive and will impede the nation from accomplishing the Plan’s goal of providing broadband access to every American and community anchor institution,” she said.

By one count there are now 55 community-owned fiber networks in the U.S. and another 80 or more cable networks under public control. Several are in operation in North Carolina, protected with a grandfather clause from being shut down by the new bill but restricted with respect to how aggressively they can grow their footprints. South Carolina and Arkansas are considering similar measures.

As they press for such legislation, incumbent cable and telephone companies are up against more than just government-funded support for broadband expansion. There’s also growing competition from new competitors, including the communities that Google will be funding with its fiber initiative and the fiber networks built by independent companies like SureWest Communications.

Google at the end of March announced it had selected Kansas City, Kansas from among 1,100 cities competing for construction of the first Google-funded gigabit fiber network. The company said it will work with local organizations, companies and universities to build out the network to deliver fiber services directly to the city’s 150,000 residents at “a competitive price” starting early next year. “We’ll also be looking closely at ways to bring ultra high-speed Internet to other cities across the country,” the company said.

Meanwhile, in nearby Oloathe, Kan., SureWest is gearing up to expand its fiber-to-the-home network by another 5,000 passings, bringing to 15,500 the number of homes that have been added to the company’s 2011 capital plan for the city. SureWest, after pursuing an aggressive fiber build in the Sacramento region near its home base in Roseville, Calif., started building out fiber networks in the greater Kansas City area in 2009 with the result that penetration of the 11,600 homes passed in the first year has reached 34 percent, according to SureWest president and CEO Steve Oldham.

“Our goal is to reach 35-40 percent in total penetration on the new fiber homes, and in just a month we have already achieved 18% sales penetration on the first 2,000,” Oldham said. “In some areas, we are as high as 33 percent. These types of growth opportunities are expected to generate long-term sustainable free cash flow and additional value for our shareholders.”