AT&T: Cities should never offer Internet service where ISPs already do or might later

In 20 states, legislators have protected Internet service providers from competition by passing laws that make it difficult or impossible for cities and towns to offer Internet service to residents.

AT&T wants to keep it that way. With the Federal Communications Commission considering whether these state laws should be invalidated, the company says that municipalities should simply never create their own broadband networks unless there’s virtually no chance that private ISPs will ever offer service to their residents.

“GONs [government-owned networks] should not be utilized where the private sector already is providing broadband or can be expected to do so in a reasonable timeframe,” AT&T attorneys wrote in a filing with the FCC on Friday. “Although many GONs have failed, or at least failed to live up to expectations, GONs can nonetheless discourage private sector investment because of understandable concerns by private sector entities of a non-level playing field. And any policy that risks diminishing private sector investment would be short-sighted and unwise.”

AT&T isn't opposed to government handouts, though, as long as they are flowing to the private sector. Community broadband networks “should not receive any preferential tax treatment,” AT&T argued. Only private companies should be given special treatment, the company said. “Indeed, any tax incentives or exemptions should be provided, if at all, to private sector firms to induce them to expand broadband deployment to unserved areas,” AT&T wrote.

Cities step in when private ISPs offer poor service

Community broadband isn’t widespread, but local governments have sometimes built their own networks when service offered by private ISPs was too slow, expensive, or both. While there have been failures, there are also successes. In both Chattanooga, Tennessee and Wilson, North Carolina, governments are offering speeds and prices attractive enough that customers in surrounding towns have asked for service. Both are asking the FCC to invalidate state laws that prevent them from expanding outside their boundaries.

AT&T claimed that it “does not necessarily oppose” community broadband networks but said they “should be used, if at all, only in areas where advanced telecommunications infrastructure has not been, and is not likely to be, deployed on a reasonable and timely basis.”

Such a standard would rule out community broadband almost everywhere in the US, even in areas where residents are dissatisfied with current offerings. AT&T pointed to industry data showing that “over 98 percent of Americans had access to broadband at combined speeds of 6Mbps downstream and 1.5Mbps upstream” as of mid-2013. That leaves less than 2 percent of the country where broadband doesn’t exist, and a smaller, vaguely defined portion where it isn’t likely to be “reasonably and timely deployed.”

This standard could have prevented successful community broadband networks from ever existing. Chattanooga officials told Ars last year that ISPs did offer service in their area already, but they weren’t interested in deploying the upgrades the city wanted. Thus, the community-owned electric utility created a fiber network—after fending off a lawsuit from Comcast, which tried to prevent it from being built. Finally, after the network was serving customers, Comcast and AT&T started upgrading their services, the Chattanooga officials said.

Chattanooga’s experience shows that competition from municipalities can force ISPs to stop neglecting residents in less profitable areas, and it contradicts AT&T’s assertion that “any commercial entity will be concerned about further investment in an area” where it faces taxpayer-funded competition.

Besides limiting community broadband to tiny portions of the country, AT&T said that commercial ISPs should be given a “‘right of first refusal’ to develop a solution to address the government’s broadband deployment requirements in order to minimize the need for government expenditures to meet those needs.” Community broadband networks also “should not have preferential access to rights-of-way or preferential rates for such access," AT&T wrote.

FCC Chairman Tom Wheeler has criticized state laws that ban or limit public broadband, and he said he believes that the FCC’s authority to promote competition in local telecommunications markets allows the commission to preempt these laws. The FCC’s deadline for initial comments on the Tennessee and North Carolina petitions passed Friday. Reply comments will be accepted until September 29, and a commission vote will presumably be scheduled sometime after that.

Groups that represent ISPs have made arguments similar to AT&T's. The Wireless Internet Service Providers Association claimed that the FCC lacks authority to preempt state laws and said that, instead, it should "encourage private investment in unserved areas."  Similar arguments came from the United States Telecom Association, which includes AT&T, CenturyLink, Windstream, Verizon.

“We’ve struggled to have an effective Internet connection”

There is much support for overturning the state laws, though. Consumer advocacy groups wrote in support of Wheeler's plan. So did John Thornton, a residential housing developer who is building a mountaintop development in Tennessee.

"I met with Joelle Phillips, President of AT&T, and their head lobbyist," Thornton wrote to the FCC. "They asked me to put 10 percent down ($130,000) just for them to design the Internet route up our mountain and be able to give us an exact quote for the work. Obviously, they were not interested in serving our area with their money but the problem surfaced when they didn’t want anyone else to do it either. I learned this after contacting the Electric Power Board of Chattanooga about possibly getting them to be the provider in our Marion County development as I am a very satisfied customer of theirs at my Chattanooga home. After finding out that EPB cannot provide broadband internet service to retail customers outside its electrical footprint, I found myself in what I learned to be a common situation: AT&T and other providers didn’t want to help, but the preferred provider that could simply isn’t allowed."

Tennessee residents Herb and Mary Anne Poulson expressed their frustration as well. The Poulsons live outside the Chattanooga service area and primarily rely on a Verizon Wireless mobile hotspot. "We've struggled to have an effective Internet connection," they wrote. "Some of our Internet usage is work-related, and it's frustrating when you can't connect or you have a slow connection to complete your work."

UPDATE: In another filing from Friday that was posted on the FCC website today, CenturyLink also criticizes municipal broadband and argues that the FCC shouldn't overturn state laws that restrict such networks. This comes just days after CenturyLink accused Comcast of trying to block competitors from its territory. It seems CenturyLink is not opposed to shutting out new entrants into broadband markets as long as it's not the one being shut out.