States, telecoms fight over turning highways into networks

A legal flare-up between local phone giant Verizon Communications and the state of West Virginia this week has temporarily put on hold a project under which the state would have given a company the right to lay high-speed fiber-optic cable along its highways.

For a rural state like West Virginia, where modern telecommunications infrastructure is far more limited than in urban centers, this type of project is critical. But the flare-up could have ramifications well beyond the sparsely populated Mountain State.

The land-for-bandwidth deal has been a common feature of the wider state government landscape for the past few years. Most of the arrangements, which have closely resembled what West Virginia is attempting to do, have been implemented without considerable pain.

But in a few other areas--notably Minnesota, which is now pursuing its own project after a Supreme Court fight and an ambiguous ruling from the Federal Communications Commission--the powerful local telephone companies have also balked. Frustrated officials, who say they can't possibly open the highways to anyone who asks, charge that the telecommunications companies are using stalling tactics.

"They want to delay," said Adeel Lari, director of the Minnesota Department of Transportation's office of alternative transportation financing. "The longer they delay, the longer others use their infrastructure. And sometimes, projects delayed are projects killed."

Building blues
The state projects, generally run out of departments of transportation, have become a way for governments to gain access to critical data network resources without dipping into the sometimes-fragile public purse. The general model, which varies slightly from state to state, is to hold a bidding process for exclusive access to the highway rights-of-way. The company that wins cedes a certain amount of the bandwidth and unused "dark fiber" capacity to the state government and is required to sell or use the rest at market rates.

Boosters say the contracts are also a way of bringing data projects to areas that the private sector hasn't reached on its own.

"Even if you can afford the cost (for data services), sometimes the carriers can't provide the service," said a frustrated Samuel Tully, director of West Virginia's state technology office.

This part of the issue is a classical "digital divide" argument, and one that the FCC has spotlighted for several years. Policy-makers are worried that cities and wealthy areas will develop strong data and telecommunications infrastructures at the expense of rural and less populated areas. In annual reports, the FCC has highlighted regional concerns over the issue while stating that overall progress has been acceptable, however.

Last week, the West Virginia governor's office released its version of this model after consulting with federal regulators and representatives from other states who had gone through the same process. But Verizon--the dominant local phone provider in the region--sued, arguing that the project was illegal under federal law.

"It is our belief that it violates the (1996 U.S.) Telecommunications Act, particularly the exclusive nature of this," said Verizon spokesman Harry Mitchell.

That law was responsible for injecting competition into many areas of the market that had rarely seen it before, most notably supporting rivalry in the once-monopolistic local phone markets. Federal regulators have consistently balked at giving any company monopoly access to any tiny pieces of markets, such as in a recent decision barring building owners from selecting a single exclusive provider for the entire building.

But transportation officials say this is impractical in the case of laying cable underneath public highways. It's bad enough to dig up city streets repeatedly for urban fiber projects, but doing the same thing on highways would create hazards, they note.

"If we were to make the expressway open to the public on a free and nonexclusive basis...we would significantly increase the risk to the traveling public," West Virginia's Tully said.

On Tuesday, the governor's office withdrew its proposal for the project, and Verizon subsequently withdrew its lawsuit pending further discussion of the issue. But because the state is in the midst of changing governors, it will be up to the next administration to continue the fight.

The issue has gained enough momentum that the FCC and the U.S. Department of Transportation are creating guidelines for this type of state project. Already out in draft form, a final version is expected within the next few months.

State officials await these anxiously, saying they need stronger support from the FCC. Federal regulators have previously ruled on the issue in the case of Minnesota, but only ambiguously. The ruling said the state's project raised serious questions, but it stopped short of halting the project.

"People who live in big cities don't realize how much of a problem this is," Minnesota's Lari said. "Less-populated areas are going to keep falling behind. Unless the government intervenes to some extent, we will never wire this country."