Tuesday, September 9, 2014

Towns Ask Feds at FCC to 'Preempt' NC State Law

In a case with potentially national repercussions, the Towns of Mooresville and Davidson have waded into the fray over municipal broadband network ownership.

On August 28th, both towns submitted comments supporting petitions to the Federal Communications Commission by Wilson, NC and Chattanooga, TN asking the FCC to 'preempt' North Carolina law governing municipal owned communications networks.  This State legislation passed in 2011 as H129 with strong bi-partisan support and commonly goes by the name - the 'Level Playing Field' law.  This law outlines the requirements municipalities must meet to operate their own retail communications networks.  It does not strictly prohibit them from doing so, but it does ensure that public coffers are not a limitless backstop for any funding shortfall.  Maybe most importantly for taxpayers it requires that any debt incurred for this type of operation be voter approved.  (In a bit of irony, Mi-Connection is actually exempted from most provisions of this law because it was created before the law passed.)

In their comments, the towns that own the money losing Mi-Connection cable operation "strongly support and encourage" the Federal Government to invalidate this State legislation and force North Carolina to allow municipalities unfettered access to make the same mistake they have made by entering the competitive telecommunications marketplace.  (See here and here for the Davidson and Mooresville submissions.)

Mi-Connection was formed without voter approval of the massive debt which now weighs down the operation.  For residents of these two towns there can be little doubt that the decision to form Mi-Connection is the most damaging financial decision in their towns' histories.  This is particularly true for tiny Davidson where at one point its annual subsidies to the cable company equaled nearly a quarter of the town's annual budget. 

This damage was caused by a lack of due diligence prior to getting into the business, a poor initial management team that needed to be replaced, and operational decisions that took years to reverse - all examples of exactly why local government should not be involved in a private sector business.  These are all examples of exactly why a law like H129 is needed.  Mi-Connection is the poster child for the Level Playing Field.  These things combined with a brutally competitive industry landscape have resulted in millions of dollars in annual subsidies from the towns.   However, in the towns' submissions one gets the impression a large part of the failure of Mi-Connection is actually due to the Level Playing Field law - a law that would not pass until four years after Mi-Connection was formed in 2007 and began wracking up deficits.

Here's what the towns told the FCC:

"Numerous plans that were in the works by various local North Carolina communities to build fiber networks for retail business and residential use ground to a halt with the passage of Section 160A-340 (known as “H129”).  The uncertainty caused by the proposed legislation was a major reason a collaborative effort by the towns of Cornelius, Davidson, Huntersville, Mooresville and Troutman and Mecklenburg County ended with 3 of the entities dropping out.

Really???  An unpassed law was the reason for these town's dropping out and that's why Mooresville and Davidson were left holding the bag when a risky decision went south?  That seems a bit unlikely, so we checked with a couple of elected officials from towns that dropped out who were involved with this decision back in 2007.

When asked if the threat of Level Playing Field legislation impacted the decision-making process to join Mi-Connection here's what State Legislator Charles Jeter had to say. 

"I was a member of the Huntersville Town Board at that time.  I was also one of the two Huntersville Commissioners to be assigned to the working group committee of the parties that met often on behalf of the Town of Huntersville.
As to your question regarding the level playing field law… I don’t remember it being discussed.  In fairness it was some eight years ago and there were a great number of moving parts that were discussed."

Cornelius Commissioner David Gilroy was more direct.

"Absolutely no role whatsoever.  We pulled out because it was stupid in countless ways frankly."

So, there you have it.  The failure of Mi-Connection lies at the feet of the politicians who supported it and not with some blocking state legislation.

There are also other issues with these submissions...
Documents obtained by aShortChronicle show that the towns' comments were hardly more than canned copy provided to Mi-Connection by the local government telecom lobbying group SEATOA with instructions to customize the letter as needed.  (If you look at the two links above, you will notice that the two documents are identical except for the names of the towns.)  It appears the towns did hardly any customization of this lobbyist content and where they did update this copy it was more of an attempt to rewrite the history of Mi-Connection as described above than to provide any real justification for why the Level Playing Field law should be preempted.

Making matters worse, it appears the decision to submit these comments to the FCC was not fully discussed by the town Boards before these supporting comments were submitted by staff on the towns behalf.  This created a somewhat uncomfortable moment in Davidson when Commissioner Beth Cashion brought the issue up at the town's September 9th monthly meeting expecting to engage in further discussion on the subject only to be told by Town Manager Leamon Brice that the comments had already been submitted - a decision that was clearly made by staff on its own.

So, here you have our towns asking for the Federal Government to overturn a state law - a law that has bi-partisan support.  They are using canned lobbyist content modified in a way that is factually incorrect.  And the effort appears to driven more by staff than our elected officials.


Action Opportunity:  If you want to submit your own comment to the FCC telling them how bad an idea it is to overturn this type of state law, they are taking comments until September 29th.  Here's the link.  It's for proceeding 14-115.

Correction: Commissioner Cashion brought up this issue at the September monthly meeting for further discussion - not August as was incorrectly reported earlier.

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