October 16, 2017

Telecom industry gains ground in opposition to public high-speed web option

Photo | Matt Pilon
Photo | Matt Pilon
East Hartford Mayor Marcia LeClerc with Finance Director Michael Walsh (left) and SiFi Networks President Scott Bradshaw (right) on the city's Main Street corridor. SiFi and the city are exploring the development of a $70 million fiber network across East Hartford.
Photo | Matt Pilon
Mayor Marcia LeClerc holds a fiber cable that would be “microtrenched” just 1 foot underground throughout East Hartford.

Internet providers appear to be gaining ground in a long-running dispute with Connecticut municipalities that want to offer competing ultra-fast web service by stringing up fiber cables on utility poles.

The Office of Consumer Counsel (OCC) — a key ally of cities and towns that had been trying for several years to build fiber networks within their borders before the effort eventually fizzled out — has been urging the state's utilities regulator much of this year to allow municipalities to use their statutorily reserved space on utility poles to erect broadband networks, which would compete with the likes of Comcast, Cox and Frontier.

The telecom industry has fought hard against the push, arguing it would create unfair, government-subsidized competition and be unconstitutional.

A key point of contention is whether or not adequate access exists to high-speed internet, which is seen as an increasingly important building block to a vibrant economy dependent on big data and technology. Internet providers say they're doing a good job spreading high-speed access; municipal broadband advocates argue more needs to be done and that high-speed service is too costly.

The telecom industry nearly won the fight when the Public Utilities Regulatory Authority ruled in June that cities and towns could only develop high-speed networks for use by town buildings. But the draft ruling was never finalized, due to a technicality.

Now, telecom providers have petitioned PURA, asking the agency to settle the matter once and for all.

"It would be a death blow to a statute that's been on the books since 1905," William Vallee, the OCC's broadband policy coordinator, said about the potential for PURA to take a narrow interpretation of what communities can do with reserved pole space, which is called "municipal gain."

The fight isn't over, but if the telecom industry wins out, there may be a new game plan for municipalities to follow.

East Hartford this month signed a development agreement with a company, SiFi Networks, that would invest approximately $70 million to build a high-speed network across the town. East Hartford officials say they would avoid the dispute over utility pole rights by burying the fiber cable underground.

However, the town and SiFi say they are anticipating pushback from incumbent telecom providers.

Municipal gain

Connecticut began allotting municipalities space on utility poles during the era of the telegraph.

In 2013, the legislature slipped a significant change into the law via the state budget — one that appeared to expand the ways in which cities and towns could use their reserved pole space.

The old law allowed local governments to occupy public utility pole space to develop telecom services for "municipal and state" use; in 2013 the language was broadened to use "for any purpose."

The telecom industry wasn't happy with the change. Telecom and IT services provider Lightower said "the statute was amended in the dead of the night as one paragraph of a 400-page budget implementer bill that was drafted behind closed doors and passed by the legislature with minimal review in a single day at the end of the legislative session."

The move, Lightower added, amounted to "typical sleight of hand."

Soon after the 2013 policy shift, OCC began coordinating a coalition of towns interested in bringing their constituents higher internet speeds at lower costs. CT Gig, as the 46-community group was called, issued a request for information in 2014, receiving responses from 11 potential network developers interested in building high-speed networks. But the effort didn't get much further.

"The towns never quite got it off the ground," Vallee said. "No town signed with an investor."

East Hartford was one of the interested communities. Finance Director Michael Walsh said the coalition, while it offered attractive scale to a developer, was unwieldy. Local politics and concerns about potential financing methods got in the way. The biggest hurdle was the potential for property tax hikes to pay for the network.

"When it came down to adding it to the tax bill, that was literally the death knell," Walsh said.

The legislature has refused to reverse its 2013 policy change, so the legal dispute has been left to PURA. (A bill introduced earlier this year that would have restricted use of municipal gain failed to get out of committee.)

On June 1, PURA commissioners issued a draft decision that concluded "the authorized governmental gain or duct space cannot be utilized by the municipality to provide broadband services to its residents and businesses nor can it be assigned to another party for the provision of broadband services to persons or entities other than the local government."

If the agency sticks with its conclusion, Vallee said it's possible OCC will appeal in court.

Joseph Rosenthal, an OCC attorney, said the June ruling would preclude future options municipalities have to foster competition in the high-speed internet market, where just several companies dominate.

"The ruling took a pretty negative broad brush about what municipalities could do," Rosenthal said. "If there's a reasonable chance that we can bring value to citizens in this enormously important area through more competition … we're going to keep at it."

Organizations that filed the PURA petition included Frontier, the New England Cable and Telecommunications Association (which represents Comcast, Charter and Cox), the Communication Workers of America, and a trade association of wireless providers, CTIA.

All but the telecom employee union either declined comment or did not respond to requests for comment for this story.

CWA Local 1298 President David Weidlich said his members are backing the petition because allowing municipalities to enter the telecom business could hurt Frontier, with which his union has a fruitful relationship (nearly 2,300 of his 3,300 members are Frontier employees).

"We have to make sure they're successful or we won't have jobs," said Weidlich, adding that he doesn't mind competition, but draws the line at government-subsidized service competing with telecom providers.

East Hartford's strategy

Over the coming months, SiFi will be canvassing East Hartford residents and businesses to see if a fiber network can be financially viable in the town. It would be the company's first East Coast deployment.

SiFi needs one in every three East Hartford addresses to sign up for the service in order to move forward with the project, Walsh said.

While the telecom industry points to various municipal networks that have run into problems over the years as cautionary tales, including one in Groton, Walsh said a key factor in the arrangement is East Hartford won't be left holding the bag if things go wrong.

SiFi will pay for and own the network. The town is offering to become a SiFi customer and to allow the company to use municipal rights of way.

"We don't want to share or guarantee or backstop an investment," Walsh said.

Burying fiber underground is more expensive than hanging it on poles, but Walsh said the cost isn't prohibitive to the project. SiFi would "microtrench" the fiber in 1-inch-wide, 12-inch-deep trenches.

In the end, SiFi will need to wrangle at least one internet service provider to agree to offer service over its fiber cables, but that could be dicey.

Walsh said Frontier and Comcast have indicated they have no interest in offering that service.

"However, I also look at that as a competitive stance that we would revisit if we successfully get in the ground," Walsh said. "I would love for Comcast and Frontier to embrace this, but they're going to fight it."

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