Carriers throw their weight around towns

Cities tired of waiting for broadband buildouts find it ain't so easy to go around the phone and cable giants.

When Annie Collins walked into a meeting with her local paper's editorial board, she didn't expect to see four executives from her local phone and cable companies waiting for her.

Collins, a housewife from Geneva, Ill., was heading a grassroots effort to have municipalities install and run a high-speed fiber optic Internet network across the Tri-Cities region just west of Chicago. Her group, Fiber For Our Future, collected enough signatures to put a referendum on the November ballot, prompting the region's top executives, including the president of SBC Communications in Illinois, to show up for the meeting.

Fiber For Our Future didn't stand a chance. Against a tidal wave of attack ads and mailings funded by SBC and its local cable provider Comcast, the group lost its referendum vote by about 10 percentage points.

"We simply got steamrolled by SBC and Comcast," she said. "It was a huge marketing blitz against a local citizen's group."


What's new:
Baby Bells and cable companies are teaming up to block cities from building their own broadband Internet services.

Bottom line:
Cities with broadband ambitions should expect a no-holds battle from incumbent providers trying to protect their turf.

The fact that industry giants are flexing their muscles in this community, known for its annual Swedish Festival and its kitschy French stores, illustrates a new wrinkle in the nation's ambitions to embrace broadband. As competition between cable and phone companies becomes increasingly cutthroat, these arch-rivals are shelving their differences, teaming up to derail community broadband projects such as the one in the Tri-Cities.

"The trend is definitely that they're working together and pooling resources," said Mike DiMauro, who heads the industry group Fiber to the Home Council.

This alliance of odd couples is making a multipronged attack, from lobbying state legislators to ban government-run broadband networks, to flooding airwaves and mailboxes with messages against these projects. As evidence of their success, the incumbents won a huge victory in the spring when the U.S. Supreme Court ruled that states can pass laws barring municipalities from building broadband networks that could compete with private companies.

Just weeks ago, Verizon Communications successfully lobbied for a state bill to bar local governments from offering their own broadband services. The bill, which was signed into law late Tuesday, was considered a blow to an ambitious effort by Philadelphia to offer wireless broadband service to its residents. Though city and carrier reached an agreement that will let Philadelphia's plan go forward, the law demonstrates the political power major providers can wield.

Protecting their investments
Cable companies and the Baby Bell phone companies have their reasons for resisting municipal plans. In the 1990s, the cable industry invested an estimated $75 billion to upgrade its networks, allowing providers to sell broadband Internet access, phone and digital TV to their customers.

The Bells are planning their own ambitious upgrades as a competitive response to cable. SBC will spend $4 billion to upgrade its aging copper network with fiber optic lines that will stretch to neighborhood "nodes." Verizon this year is expected to spend $800 million to bring fiber into customers' homes, and plans to reach 3 million homes by the end of next year.

With so much money being invested for better services and more bandwidth into homes, cable and the Bells consider government efforts unfair to private businesses.

"The issue is (that the municipalities) control rights of way, and to regulate us at same time they're competing with us is a recipe for trouble," said Dave Pacholczyk, an SBC spokesman.

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The firms also point out that many projects across the country are awash in red ink, warning that residents will eventually foot the bill for government missteps.

Efforts by cities to create their own broadband networks are not new. But most municipal broadband projects can be found outside major cities, particularly in smaller, rural areas beyond the Bells and cable's immediate expansion plans.

Most of these smaller cities are choosing fiber optic lines, which can deliver up to 100mbps of bandwidth into each household. Many of these small cities feel their providers are too slow--or too leery of the return on investment--to bring them the broadband service they want. They've chosen to take matters into their own hands, hoping their broadband projects will attract more businesses or empower their local utilities.

Whether or not these initiatives can reach their goal of at least paying for themselves, residents in underserved areas are sending a signal. They're tired of waiting for their only broadband providers to get around

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