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How Telecom Monopolies Killed Competition in North Carolina With HB 129 - Community Broadband Bits Episode 412
We've written a lot about North Carolina's HB 129, the anti-competition law that prevents communities in the state from investing in broadband infrastructure. This week on the Community Broadband Bits podcast, Christopher dives deeper into the history of HB 129 with guests Catharine Rice, co-founder of NC Broadband Matters and project manager at the Coalition for Local Internet Choice, and Jack Cozort, a government relations consultant who has worked with the City of Wilson. In this first half of a two part conversation, Christopher and his guests discuss the years leading up to HB 129, which was passed in 2011, speaking frankly about the sway telecom lobbyists held over state legislators.
To start, Jack describes how Wilson decided to invest in its own broadband network Greenlight, after incumbent providers refused to partner with the city to upgrade the community. He goes on to explain how Wilson's decision led the regional broadband monopolies Time Warner Cable (now Charter Spectrum) and AT&T to advocate for legal restrictions on municipal broadband at the state legislature.
Catharine and Jack review some of the early bills — written by telecom companies and handed off to state legislators — that the monopoly providers introduced in an attempt to stop broadband competition. They share their involvement in those legislative fights and explain how difficult it was to counter the influence that the telecom industry had over politicians in both major parties. However, Catharine points out that there were also Democratic legislators during this time who defended local broadband authority and kept anti-competitive legislation from being passed.
In the November 2010 election, the North Carolina legislature shifted control to the Republican party. Christopher and his guests end the podcast by talking about how that set the stage for HB 129, which would be introduced the next year.
Today's episode is part one of two. Listen to the second half of this conversation on North Carolina's HB 129.
This is a special episode of the "Why NC Broadband Matters" podcast series, created in partnership with NC Broadband Matters, a nonprofit that's working to bring high-quality Internet access to all communities in the state. Previous epsiodes in the series touch on telehealth, the homework gap, and broadband mapping, among other topics relevant to connectivity in North Carolina.
We want your feedback and suggestions for the show-please e-mail us or leave a comment below.
Listen to other episodes here or view all episodes in our index. See other podcasts from the Institute for Local Self-Reliance here.
Thanks to Arne Huseby for the music. The song is Warm Duck Shuffle and is licensed under a Creative Commons Attribution (3.0) license.
Catharine Rice: I remember Jim Baller saying, "Catharine." I said, "Jim, I don't know how to be a lobbyist," and he's like, "Time to learn."
Jess Del Fiacco: Welcome to episode 412 of the Community Broadband Bits podcast, another installment of our series focused on North Carolina, sponsored by NC Broadband Matters. This is Jess Del Fiacco, Communications Manager here at the Institute for Local Self-Reliance. Today, Christopher is joined by Catharine Rice, Project Manager for The Coalition for Local Internet Choice, and Co-Founder of NC Broadband Matters. He's also joined by Jack Cozort, a government relations consultant who's involved with broadband and the North Carolina State Legislature. This is part one of a conversation about the history of North Carolina's HB 129, the law that preempted local telecommunications authority in the state. Chris, Jack and Catharine begin by discussing what the economic situation was in Wilson North Carolina in the years prior to the adoption of HB 129.
Jess Del Fiacco: In particular, how local leaders were working to take the community into the future with infrastructure investments. After attempting to work with the large incumbent providers, the city decided to invest in a broadband network on their own. They then faced pushback from Time Warner Cable, which wanted to put an end to Wilson's network and prevent other communities from having the ability to develop their own networks. Jack and Catharine describe the experience of being involved in the process as lobbyists and large corporate entities pushed misinformation in order to pass legislation to prevent competition.
Jess Del Fiacco: Don't miss the second part of this conversation, which comes out on Thursday. Now here's Christopher talking with Catharine Rice and Jack Cozort.
Christopher Mitchell: Welcome to another episode of the Community Broadband Bits Podcast. This is Christopher Mitchell at the Institute for Local Self-Reliance in St. Paul producing another in our special series of podcasts, brought to you by NC Broadband Matters. The organization that is really focused on trying to bring really high quality broadband to all of North Carolina, including a choice of it where we can. This is a discussion that's really going to hit at the heart of one of the things that's happened over the past, about 10 years ago, that really led to it being more difficult to expand broadband across North Carolina.
Christopher Mitchell: A particular bill that's known still by its name as it was going through the legislature, HB 129. To discuss it, I have Catharine Rice who is the project manager for The Coalition for Local Internet Choice, and a Co-Founder of NC Broadband Matters. Catharine, welcome back to the show.
Catharine Rice: Hey Chris, great to be here.
Christopher Mitchell: You were one of our very first guests when this series started, I think about eight years ago. It's just great that you're still working in this field and we get to share a microphone again.
Catharine Rice: Wonderful. I barely remember that, Chris. It seems very long time ago.
Christopher Mitchell: We also have Jack Cozort, a government relations consultant who has multiple clients, but has been very involved in broadband at the legislature. Welcome to the show, Jack.
Jack Cozort: Thank you, Chris. It's good to be here.
Christopher Mitchell: I'm excited to dig into this because I feel like, for a lot of years even, we tried to maybe tone down just how horrible the process of HB 129 was because we didn't want to alienate some of the people who were involved. We hope that eventually they would see the light of just how damaging that bill was for rural North Carolina. I don't know. At some point, we got tired of not being entirely honest with just how corrupt that process was. We want to talk about it now. Is that pretty fair description?
Jack Cozort: Fair enough.
Catharine Rice: Absolutely.
Christopher Mitchell: Let me start, Jack, let me ask you, do you want to describe how you were involved with this, and in particular what Wilson's motivations were then for why they decided to build a fiber network?
Jack Cozort: Sure, Chris. To do that, I need to give you a little history, a little background on Wilson. For years and years, Wilson was the single largest tobacco market in the world, not just in North Carolina, but in the world. It was a community that was built on growing and selling tobacco.
Christopher Mitchell: Yeah. Really big warehouses.
Jack Cozort: The warehouse in Wilson was the biggest and that market was the biggest every year. The leaders in Wilson, both the elected leaders and the professional staff for the city realized, oh, some 20 or more years ago, that that was not going to last, that the tobacco economy was going to go bust in North Carolina, and that a community like Wilson, which relied so much on tobacco, needed to look to other ways to do things. They began a process of building up their entire infrastructure. They borrowed money and built a water impoundment. They have one of the largest water supplies in Eastern North Carolina. During droughts, over the last 15 years, they are frequently a seller of water to other communities that don't have enough water.
Jack Cozort: They also use their money to build up their road infrastructure to have better access to highways, Interstate Highway goes right by Wilson. They decided to try to compete with larger cities in recruiting cleaner and better economic development. They went after pharmaceutical companies, for example. There is a tire manufacturing plant in Wilson. As their economy changed from a tobacco agrarian economy to a more modern market, they saw the need to have better access to high speed Internet to serve those new businesses that they were recruiting. Also, there were a couple of existing entities that needed better service.
Jack Cozort: One was Barton College, a nice university right there in Wilson, and another was the BB&T processing center. BB&T, which has now merged with SunTrust, a large bank in North Carolina, had its roots in Wilson. 2200 employees still work in Wilson at their data processing center. But in order for them to be able to communicate with the home office in Winston-Salem and other places, they also needed better high speed Internet. Wilson began trying to bring that in as a part of their developing better infrastructure. The first thing they did was go to Time Warner Cable, which was their primary server at the time, to ask them, "Can you upgrade our existing service? We need more high speed Internet or we're going to lose these entities we have and we're not going to be able to recruit the kind of things we need to do to keep this a viable growing city."
Jack Cozort: Time Warner basically said nay. Wilson came back with another offer. "Well, suppose we pay for it, we build it and then you run it." And Time Warner said nay. Wilson said, "Well, let's do a joint partnership. Let's build it together." Time Warner said, "We don't do that. We don't partner with anybody." So, Wilson was stuck.
Christopher Mitchell: I remember clearly they were trying to work with Embarq the telephone company that later became CenturyLink as well. Embarq actually entertained it for a little while, but then ultimately decided not to move forward with the partnership.
Jack Cozort: That's true. They were pretty deep into the discussions with Embarq, and that looked promising, but it just didn't work out. From what I have learned and read since then, there are very few places that the bigger companies like that have ever done these kinds of partnerships.
Christopher Mitchell: That's right.
Jack Cozort: It's usually the smaller Internet service providers who are willing to go in and do that kind of partnership with a local government entity. When Wilson found itself in that position, they didn't just jump into this, they spent a lot of time, hired a lot of consultants to try to find out, is this feasible? How much will it cost? Will it be worth it? This was not an overnight decision. They spent years working on this, seeing how much it would cost. One thing that was helpful to Wilson was, Wilson is an electricity. In the growth of providing power around the state, in smaller communities like Wilson, it was not economically advantageous, or the major power companies to run power to the city.
Jack Cozort: All across North Carolina, you have cities who built their own electrical power infrastructure. They would buy electricity wholesale from a provider like Duke Energy and then resell it to its own citizens. Wilson was an electricity, so they had an infrastructure in place.
Christopher Mitchell: Not just that, but the thing that amazes is that it's actually about 140 years old now. It's one of the original ones. There weren't many before they formed theirs. There's a deep history and we'll sort of making longterm smart investments.
Jack Cozort: There really is. That's one of the reasons I like working for them. It's one of my favorite clients, is we're dealing with people who have had that kind of foresight for a long, long time, and have always done things to try to make it a better place to live for their citizens, a better place to work, a better economic community. When Wilson had this infrastructure in place, they made the decision to go forward and borrow the money in order to build what they named Greenlight, their broadband network. They borrowed around $36 million to do it. A lot of money for a town like Wilson. Interestingly enough though, that was about the same salary that the chief executive of Time Warner was making per year. They were almost equivalent, but it was still a huge investment
Christopher Mitchell: I think it's always worth pointing out too, that there's two interesting things that deal with them borrowing the money. One is that, it's been alleged effectively in the legislature and elsewhere that they were using taxpayer dollars for it, and they weren't. They got the money from private investors. The second piece of it is, is that the main private investor was BB&T, the local business that loved the idea so much and recognized how important it was, they bought into it. Like you said, this wasn't something that Wilson just sprung up. This was something that was broadly supported in the community.
Catharine Rice: It wasn't something that was out of nowhere for BB&T. They told me a story of having a single fiber going from their processing offices in Wilson to Rocky Mount. One day, that fiber was cut and business went down, and never again. They were looking for all kinds of alternatives so that they could run their business in a reliable way.
Jack Cozort: Well, BB&T has been a great supporter through the entire process and still supports Wilson and supports Greenlight in this project. Wilson decides to move forward and build Greenlight, and immediately there were obstacles thrown in their path.
Christopher Mitchell: This is about 2006, if I remember correctly, 2005/2006.
Jack Cozort: 2006, and Time Warner in particular, knowing what Wilson was trying to do and considering that Wilson was going to be a competitor of theirs in providing service, not only in the city of Wilson, but outside the city. One of the things Wilson did through its development of its provision of electricity was to go outside the city limits and to go to the smaller communities throughout Wilson County, and even across County lines into other counties, so Pinetops, for example, in Edgecombe County. God, its power, still gets its power from the city of Wilson. So Time Warner started throwing up every obstacle in Wilson's path that they could from appearing at all the public hearings and talking about what a financial disaster it was going to be and what a fiasco Wilson was getting into.
Jack Cozort: Then eventually, going to the General Assembly and having legislation written and introduced that would stop Wilson from doing what it was doing. That's when I became involved. Wilson needed someone to help them in the General Assembly to make sure they were able to complete and operate Greenlight. So, they hired me as their government relations consultant to work for them. This was a pretty new topic that everybody was dealing with. The League of Municipalities did not have much background on this. We were pretty much on our own in Wilson in dealing with this. There were a couple of other places around the state which had some Internet service providers. Salsbury comes to mind. Morrisville, the town of Morganton had its own service.
Jack Cozort: There were a few others who were similarly situated, but none were about to do what Wilson was trying to do.
Christopher Mitchell: Right. I think actually Salsbury did come later. It was inspired by Wilson, I think.
Catharine Rice: They actually were twins. Mike and Mike were talking to each other the whole time.
Jack Cozort: One of the things that's interesting is how Wilson and others receive the authority to do Internet service. North Carolina is a state where local government can do only what the legislature allows it to do. It has no inherent authority of its own. Everything that a city or a town or a county wants to do has to have some statutory authority for doing it. There's general statutes covering all of North Carolina that set forth the things that cities, towns and counties can do. It never specifically talked about broadband or Internet because when the statute was written, those things didn't exist. But what the courts held, in a case that went up to the North Carolina court of appeals, was that providing this kind of service was inherent in a local government's authority to protect the health and welfare of its citizens and to make sure it could do the other things that were authorized. It was that court of appeals decision that allowed Wilson to move forward and allow other local government entities to move forward.
Jack Cozort: That court of appeals decision, the major cable companies were trying to overturn. Put something in the statute to say, you can't do this. Ironically, they named it the level playing field. Far from it.
Christopher Mitchell: When I first I think became aware of Catharine Rice, that was a presentation that you gave in Wilson in which you were discussing the pricing and how it was different from Time Warner Cable and Wilson then in all of the surrounding areas including Raleigh. I realize it's actually later than you want to start. Why don't you tell us what happened before then, what you were doing, Catharine, and then walk us up to that presentation, which I still think I have a video of somewhere.
Catharine Rice: Yes. There's so much history here, Chris. I think that was one of the reasons that Jack and I really wanted to this podcast because there'll be people out there who just weren't around at this time and there are people who won't remember. I actually had to look into my notes to see. But I started in North Carolina in this area around 2002. One of the first communities that I visited was Wilson. I'll never forget it. The city council was really tired of having to approve rate increases for Time Warner cable. That's because, at the time, they had federal authority to regulate cable rates. All their authority really had been ... the rules had been very much watered down and they really didn't have any choice but to allow the rates to be increased.
Catharine Rice: They said to my boss, "Is there nothing we can do? We really need competition." My boss said, "Well, yes, there is something you can do." And they said, "What?" He said, "You can be the competition." He said, "In fact, there's a new technology that's just become just about as affordable as the existing technology. It's called fiber-to-the-home, and I happen to have an expert here behind me," and I'm looking around. They said, all right, let's do a study. I think that was as far back, Jack, as 2003. When I was looking back at my notes, I was stunned that I didn't remember that there was actually a time in North Carolina's history where local governments had a lot more control and oversight over the cable television industry.
Catharine Rice: I think people forget this because the cable industry has been so good at removing that story from their history line. Chris, if it's okay with you, I just want to mention a few things about that.
Christopher Mitchell: The 2005 franchising fight.
Catharine Rice: Yes. In 2005, local government still had local cable franchising authority. They had this because there was a federal law passed in 1984 called The Cable Communications Policy Act of 1984, which basically, it was based on the premise that, because the cable companies were coming into local communities and using public land, public rights of way, the local communities had the right to go into contracts with these companies and ask for things in return. One of the things they'd asked for are public education and government channels. They would ask for free drops for their fire departments and their police departments, or an institutional networks for their schools. But they also had something called density requirements. What this meant was that, if the cable system passed, say between 20 or 30 households per mile, they had to serve those homes.
Catharine Rice: This was significant because you had more rural areas with 20 miles per home that actually had legal leverage to make these companies provide service. As Jack pointed out, North Carolina understood where the global economy was going. They lost their textile and their manufacturing overseas. They knew information was important. They knew this was basically the tool they had to get that pipe that had both video and Internet to people's homes. Fascinating, result of the growth of the cable industry and the development of monopoly markets and local communities, prices started going up and customer service started going down. There was a lot of public outcry about it to both local officials and a state elected officials, and the cable industry knew it.
Catharine Rice: In 2006, they preempted it, and they went to, Jack remembers this, AT&T and Time Warner, hand in hand, were visiting legislators and saying, look we get it. This market needs to be competitive. If you'll just get rid of these local governments, get rid of those regulations that are creating all these barriers for us to compete, which of course, they weren't. You couldn't make a company come serve your community. In fact, there were gentleman's agreements where they agreed not to compete with each other and local communities. If you'll just get rid of those snarky local government regulations, we will compete like no tomorrow. The free market will have open rain. You'll see prices go down, you'll see customer service get improved. Just let us out of these local contracts.
Christopher Mitchell: Right. It's amazing point at which you really have to wonder, if AT&T coming to you and saying, you know what we really want? We desperately want a lot of competition. You have to wonder, why are they saying this? Because frankly that may well be actually a crime against the fiduciary responsibility they have to their shareholders. Because if there was a ton of competition AT&T would have a lot fewer customers, even if they did a good job. But also ...
Catharine Rice: There's a lot of Kool-Aid going around that year.
Christopher Mitchell: Yeah. Well, and this is one of the challenges, as you well know, there's not a lot of people representing the user in any state house when it comes to telecom. On energy issues, there's often groups and they're overpowered. They're not at all equal.
Catharine Rice: Yes, same dynamics.
Christopher Mitchell: But there's at least groups on the energy side. There's not groups on the telecom side really, that are working in the state houses.
Catharine Rice: Well, and as Jack said, it was a brand new technology. Grant Goings, the city manager in Wilson, he would take these big posters into the hearings and he would try to demonstrate with these icons what we were talking about, that the telephone technology was created in the 1950s and he'd show this super old telephone and then he tried to explain what fiber-to-the-home was. I don't even remember what I used, but he had some sophisticated piece of equipment and he said, the times have changed and we need modern technology to serve North Carolina.
Christopher Mitchell: Well, Grant's a big guy. If the posters look big next to him, they must've been big posters.
Catharine Rice: At one time they even prohibited us from using power points in the hearings because they didn't want the images.
Christopher Mitchell: I want to speed ahead a little bit, but I want to make one other point because it's good to bring up that it's a good precedent for how the cable and telephone companies have been so strong in the legislatures. Many States got rid of local franchising. I live in one that actually did not. We've looked across the United States, and the amount of competition hasn't really changed that much in states that got rid of it. The level of competition is generally set by factors that are unrelated to whether the local government has any power. It's a lot of other factors that are involved. We saw AT&T in Tennessee promise like $400 million of investment, I think, or something like that. They made all these promises they never intended to keep and legislators bought it. Then, what's really frustrating is that, when those same lobbyists came back to them later, they were ready to buy more from them, even though they had been just totally lied to previously.
Catharine Rice: That's what we saw. They were successful in 2006, passing the Video Service Competition Act, which in essence was full deregulation. They preempted local state franchising authority. We now have the state as the franchising authority, which is important to remember. They have authority under that to re-regulate this industry and they're not using it. I think it was like a two page franchise in the end. Here you have, in 2006, completely deregulated market. You see that the cable industry has grown, and through buyouts has created monopoly markets. But you have the same situation for local communities. They no longer have the tool of the local cable franchise to require these guys to the pipe to there residents and businesses.
Catharine Rice: They have the same problem and they turned to themselves and say, "Well, I guess if the cable industry isn't going to serve our residents and our businesses, we're going to have to. What was the response to that? In 2007, Jack starts talking about it. The first remnants of really H 129 showed their ugly head in 2007 with The Local Government Fair Competition Act. The arguments that were used continue to be used every year after that. The cable industry argued that this was the public sector competing with the private sector, as if Time Warner Cable and AT&T and CenturyLink were the only private sector out there.
Catharine Rice: They argued that these systems would be failing left and right, and these communities needed to be stopped from failing. Which is a joke since, if you're the competition, why are you complaining about your competitor failing? They talked about it being an abuse of taxpayer money when they knew that these systems were not being funded with taxpayer money. They were being funded with, as you noted, Chris, things like certificates of participation, where the system itself is the collateral. In fact, this all underscored the fact that community systems were not failing. They were successful. That's what you were talking about, Chris, is the presentation that I did, actually it was a couple years later.
Catharine Rice: What we did is we were tracking cable rates. Time Warner cable had one ... it had two head ends that were serving the whole state.
Catharine Rice: Time Warner cable it had two head ends that were serving the whole state. I honestly think that's why they were afraid of community broadband because you did have Wilson and Salisbury implementing fiber to the home and they could interconnect. Time Warner had two head ends. They were using the same head end, providing the same programming to the research triangle area, Cary and Raleigh and Durham Chapel Hill, as they were providing to Wilson. But what we saw was that, in Wilson, they did not raise the rates. They sent the city manager, the same letter they sent the city manager and all those other communities, but it was zero, on we're planning to increase the rates, but in the rest of the communities, they raise the rates between 20% and 40%.
Christopher Mitchell: Do I remember correctly that they actually used white out?
Catharine Rice: Yeah.
Christopher Mitchell: It was just so silly.
Catharine Rice: So, we put those up in one of Faison's hearings on the PowerPoint and showed the same language and then highlighted for Wilson it was zero. This is the most stark evidence that we had that cable communities that are on their own cable systems were the competition to the cable industry, and they knew it. That's why for the next four years they did everything they could to stop communities like Wilson.
Christopher Mitchell: I do want to note. I feel like our argument is that local governments should be able to do this. That's obviously our argument, but I'm getting at is that the issue about taxpayer dollars, I think is a bit of a red herring. It is true that Wilson has not used any taxpayer dollars. Now, Salisbury has. They issued general obligation debt, which is backed by the taxpayers. I don't feel like we should de-legitimized that approach. I think communities should be able to choose for themselves how they make sure that this essential service is available. I think people agree with us. I think it's important to note, while the other side was lying, there have been some cases in which public dollars have gone into some systems.
Christopher Mitchell: I've always felt that should be a local choice. I respect communities like, for instance, in Lafayette, Louisiana, the community themselves doesn't want to put taxpayer dollars into it. That's a red line for them, and I respect that. But for communities that say, no, we desperately need this service and we're going to get it however we can. I also respect that.
Catharine Rice: Yes. I think that that's actually the premise of the coalition for local Internet choice is the authority to make these decisions for communities about their economic future, for instance, their broadband future as we're seeing now with the pandemic. They need to have the authority to be able to make those decisions themselves. If the community is willing to risk, take on the risk, they should be allowed to do that, but it's their decision.
Christopher Mitchell: Jack, what happens after 2006? I recall that Catharine was busy every year making sure that, at this point, a democratically controlled legislature, the democratic party is in charge of the legislature, had been for 100 years I think, something like that. It was a very long run. Every year, there was a fight, but it was one that, I think of, I don't want to disregard your contributions, at the time, I always thought of it as Catharine winning.
Jack Cozort: So do I. The situation is, after 2006, it's a wide-open marketplace, and the big companies are supposed to be competing with each other. In reality, they were not. Wilson had wanted to do something with Time Warner. Time Warner had told them no with everything Wilson had proposed. They said, "We're going to build our own." Time Warner, AT&T, and the Cable Association said, "Over our dead bodies. We're going to do everything we can to stop you." In 2007, there was a legislation that would have stopped Wilson from doing what they were doing in building Greenlight and stopping other communities from moving ahead. That's when I was hired by Wilson. I got a call from Grant Goings one morning, didn't know him, but he called and he explained briefly what the situation was, and says, "We've got a bill in committee that would ruin what we're trying to do and we need help."
Christopher Mitchell: Remind me who Grant was at this time.
Jack Cozort: He was the city manager, still is the city manager in Wilson originally from Elkin North Carolina. He had served several cities working his way up to larger and larger communities. Found a home in Wilson, loved it, they loved him. I think he's visionary in terms of the way he looks at what local government should do for its citizens and its businesses. He just is really thoughtful, studious, does his homework, does his research, has great councils to work with. The elected officials in Wilson have just been terrific in this area. Grant calls me and explains what's going on. So, I go to my first committee meeting, and to my surprise, the bills are being written by the cable industry. When we go into a committee meeting, the proposed committee substitutes are delivered by the lobbyists for the cable industry and handed out to the members of the committee.
Jack Cozort: Of course, that's a revelation to me. I've been working in the General Assembly since 1971. My first year there was as an intern when I was at NC State, and I had never seen anything like that before. That's just not the way things are done. The General Assembly has a staff. They write the legislation. The staff people hand out things, but not in this situation.
Christopher Mitchell: Actually, I remember in 2010, Senator David Hoyle, in his last year, candidly admitted that Time Warner Cable had written the bill that he had championed to stop competition.
Jack Cozort: Yes. Through all of those years, that was what we were dealing with. The things that were said during those committee meetings by the cable industry, by AT&T, by Time Warner, and by the Cable Association were just outrageous. We were accused of being communist.
Christopher Mitchell: Literally, you're not saying that they hinted at it. They literally used the word communist since that's where you were.
Catharine Rice: Yeah.
Jack Cozort: I used to hear he's retired now, thank goodness. They made outlandish claims about the mayor of Wilson, Bruce Rose, somehow benefiting from this and having a luxury car that he drove around as a result of Wilson having Greenlight. Of course, we had to have him at the next meeting and bring a picture of his four door Buick, which was what he drove. Those were the kinds of things we had to deal with. The predictions of economic doom and gloom that it was going to cause Wilson that were just based on pure fantasy.
Christopher Mitchell: If I could jump in for a second, there's a deep history of that. I've gone back more than a hundred years to the electricity fights, and it was the same argument. The argument was, if you let cities build their own electric systems, it is the end of the free enterprise system in America. Frankly, that was a time when there really were communists and anarchists and they were different people who were fighting each other. Somehow, we got electricity to everyone without losing the free market enterprise system, which I think is good, but it gives you a sense of new-
Jack Cozort: That becomes a socialist country.
Christopher Mitchell: Right. Yeah. This is where you start to get into different debates. I am very firm, and have been. I am not a socialist. I think socialism is frankly, a set of policies that generally don't work well. I hate arguments about it because everyone defines socialism and capitalism differently, but I try to be very clear. I think the market is one of the most amazing things humans have ever built, right up there with the Internet. We need to make sure that we appreciate that and use it well.
Catharine Rice: But I would jump in here because one of the arguments that we made in 2007, very quickly, was that this was a free market that had failed. Where you had the market not responding to the needs of the community and their businesses by modernizing their networks, by competing with each other. This is when local governments typically have to come in, and it's really the only time ... They don't want to compete with Time Warner and AT&T or CenturyLink. It's because they have no other choice.
Christopher Mitchell: Right. That's why it's such a perfect analog for the electricity debates.
Catharine Rice: Jack, the name of that 2007 bill was The Local Government Fair Competition Act, if I remember, right?
Jack Cozort: I think that's right.
Catharine Rice: Yes. I remember there were four months of some pretty intense lobbying. Also, that I believe Google got involved that year, and Vint Cerf was editing a letter that was sent saying don't do this. Local communities are doing this to help the private sector to create the infrastructure that we all need in a free market economy. That bill finally was change to a study bill.
Jack Cozort: Yes, that's correct. I don't remember exactly how many lobbyists the industry had involved in the legislation at the time, but it was about a dozen or so.
Catharine Rice: Oh, I thought it was more like 25.
Jack Cozort: That was in 2011, was when they really beefed up. There were only about a dozen involved in the four years previous to that because each of the major cable companies had two or three lobbyists on staff. Then the association had their lobbyists, and then they all hired who were generally considered the top independent lobbyists to come in and work for them as well. Here I was representing Wilson. Thank goodness Catharine was there to command some sanity into it.
Catharine Rice: I was not a lobbyist.
Jack Cozort: No, but you were there to provide information, especially to me.
Catharine Rice: Well, I became a lobbyist because of it. I remember Jim Baller saying, "Catharine." I said, "Jim, I don't know how to be a lobbyist." He's like, "Time to learn." I found Jack pretty quickly.
Christopher Mitchell: There are some local folks too, like Jay [Avatore 00:36:04] who stepped up later.
Catharine Rice: He came in later. Salisbury, we'd always joke about, well, we knew it was going to rain and that there was going to be a committee hearing because, poor Salisbury, they come in for these hearings and they get in the car to drive the three hours back, and sure enough, the committee would announce at the last minute that they were going to have another hearing, and those guys would have to change clothes, turn around, come back, and it would always be in the pouring rain.
Jack Cozort: Yeah. I had same thing with Grant Goings. My senior management in Wilson just back and forth constantly.
Catharine Rice: With no notice.
Jack Cozort: No notice during that time. It was interesting. The bills that were introduced generally had bipartisan support. Both houses of the legislature were controlled by Democrats at the time, and the bills were generally introduced by the chairs of the committees that were going to be considering the bills. We had some things stacked against us, but we had some real heroes who stepped forward, and who would stand in the breach and say, this is just not the right thing to do.
Catharine Rice: I think that can't be emphasized enough because I think people are so afraid of talking about the Democrats versus the Republicans. They're even afraid of giving the name of the companies that were doing all of this. But there were some real leaders back then. In 2006, when everybody drank the Kool-Aid, it was bipartisan, but there were a few Democrats that really felt burned that understood late in the game that they had been conned. People like representative Lipke from Durham, he was one of the sponsors of that legislation. He voted against his own legislation. In 2007, when the cable industry came back asking for favors, it actually was killed in his committee. He was the chair of the finance committee. How Speaker Hackney also, on numerous occasions, really stood up to these guys. They play mean. A point needs to be made about that because it hasn't been that way since 2011.
Christopher Mitchell: Right. One of the things that's important about the way we've structured our government, I think is that we've made it hard to be a hero who stands up against the money. Because fundamentally, if you make powerful enemies, you're just making it that much harder for you to get your message out, for you to get other bills through. If you're going to take on powerful companies, you're really going to pay a price for it. I think it is good to appreciate those who have done it, and especially those who learned from mistakes.
Catharine Rice: I think the public needs to understand these companies have such deep pockets that they can just say it to a legislature, "Well, okay, you don't want to support us. We'll just run somebody against you in a primary." That wipes out their finances and gives them a very long election cycle.
Christopher Mitchell: I would think this might be more the case in the Republican party right now with them being in power. But if you're a Republican who comes from a district where you want to champion Internet access, and you stand up and say, I'm going to make this my issue, House leadership might say, "Well, we're not going to support you in your primary, and because they're getting so much money from AT&T and Charter behind the scenes. Charter, for people who aren't familiar with it, bought Time Warner cable back in the day. Now, everything we say about Time Warner Cable, it's the same people who are doing it for Charter now.
Catharine Rice: I guess, Charter's reputation wasn't good enough so they changed the name to Spectrum.
Christopher Mitchell: Charter Spectrum. Comcast did the same thing. They created a product name for all of their services to try to disassociate themselves. So, yes, Charter Spectrum.
Catharine Rice: That was a very vicious battle in 2007. I think everybody was exhausted after that. It was a new technology, Chris, and there was such an uphill battle to try to educate legislators who didn't even have computers. To Jack's credit, and the work of many, many communities. I think we counted, at the time, there were about 42 communities that had plans in the works to do something. We bought ourselves actually two years, I think in 2008, probably in no small part, because Wilson was in negotiations with CenturyLink about that public private partnership that you talked about.
Jack Cozort: That's right.
Catharine Rice: There was no legislation introduced, but then, back we go in 2009, obviously that partnership had fallen apart, and CenturyLink was going to go back at it with Time Warner and AT&T. That was the year of the Level Playing Field Act.
Jack Cozort: Then you have some cities like ... who were deciding to build things.
Catharine Rice: Yes, they were one of those 42. They had 270 miles of fiber and wanted to use it to help serve with the military basis with better broadband.
Christopher Mitchell: Now, On top of that, I recall they had a major street in which one side of the street had service from Time Warner Cable and the other half didn't. Time Warner Cable didn't think it was worth it crossing the street to offer a service.
Catharine Rice: Yeah. That came out in 2011. I remember that in the Senate battle. In 2009, it was Ty Harrell, do you remember, Jack?
Jack Cozort: I do.
Catharine Rice: A Democrat from district 41 who later resigned I think for campaign finance, ethical issues.
Jack Cozort: That's correct.
Catharine Rice: But the environment then was extraordinary. It was 2009. It was a time when our economy tanked. It was the year that the federal government stepped in and identified $4.7 billion for state and local governments to build broadband infrastructure. The private companies could go for the money as well, but it was specifically identified for local communities or state legislatures, which is extraordinary to remember.
Christopher Mitchell: If I remember correctly, the House of Representatives in the Senate had two different approaches. One of them, yes, was giving the money directly to the localities. The final legislation just made it available to anyone who wanted to apply.
Catharine Rice: That's what it was.
Christopher Mitchell: Ultimately, the roughly $7 billion was given out by NTIA and the BTOB program or which was Broadband Technologies Opportunities Program, I think. Some balance of the money was given to USDA through the rural utility service, through the Broadband Improvement or Broadband Initiatives Program, BIP.
Catharine Rice: BIP. Yeah.
Christopher Mitchell: That's how those were distributed.
Catharine Rice: Yeah. You have all this federal money that it's like after the depression in the 1930s, where the government is wanting to invest money in infrastructure and create jobs. I think at the time there were 600,000 unemployed, which seems like a drop in the bucket these days, but back then, that was big news.
Jack Cozort: Big number.
Catharine Rice: You had a Democrat who was initiating legislation for Time Warner Cable, and AT&T, and CenturyLink to stop communities from having the authority to build those networks in an economic environment that was quite troubled. That didn't go over very well at. It did with people like Thom Tillis and representative Avella who were sponsoring that legislation. Going back, that's the first time that I saw their names crop up as sponsors. Jack, you can talk about this time too, but that bill was flipped to a study bill quite quickly.
Jack Cozort: Right. Well, Tillis, his involvement in this goes back to his local government roots down near Charlotte, when he apparently didn't like a lot of the things that local government were doing and came to the General Assembly with pretty clear intentions of cutting back on the authority local government had. He took that position when he was in the legislature. Then when he became speaker in 2011, it was just wide-open warfare against local government for an entire decade now.
Christopher Mitchell: Which is one of the reasons that also made it harder on organizations like the North Carolina League of Municipalities when they're getting attacked on a hundred different fronts. It's very hard for them to focus on one broadband.
Jack Cozort: Yeah. Their sources were being taken away, their authority to regulate business development, environmental issues were all under attack. When we get to 2011, we've weathered the storm with the Democrats being in control by having heroes like have me Hackney and Lipke stand up and say, "Not in my house, you're not going to do that here," and converting them in this study bills.
Catharine Rice: We probably should talk about 2010, the Kidney Awareness Bill.
Jack Cozort: Yes. Why don't you do that one?
Christopher Mitchell: Does this just have to do with bathtubs full of ice and strangers you've met in a bar?
Jack Cozort: Not quite, but close.
Catharine Rice: Once again because of strong leadership, particularly in the House and in the Finance Committee and with representative Faison from Caswell, representing Caswell and Orange County, that cable industry Bill was, in 2019 ...
Christopher Mitchell: 2009.
Catharine Rice: 2009, I'm sorry. The Level Playing Field Act was again flipped to a study bill. 2010 arrives and representative Faison is controlling a lot of the conversation through his House Committee and we're having good hearings. Particular, I remember one slide, Jack, where the committee stood up and said, "Well, here are the communities that want to provide their own broadband." There were five tiny dots on the entire state of North Carolina, with the rest of the area being served by these multibillion-dollar companies. This is why we were meeting endlessly week after week to talk about what a threat this was to the cable industry.
Catharine Rice: The House, there wasn't anything that really there was a lot of good hearings, a lot of good discussion. But in the Senate, Senator Hoyle did introduce the No Competing System Act. As Jack has mentioned, I think Chris you mentioned it too, Senator Hoyle was proud to call himself a businessman's businessman. He is quoted publicly as saying he has carried more water for the cable industry. Jack and I would see cable industry lobbyists answering the telephone in Hoyle's office.
Catharine Rice: Representative Hoyle was not at all ashamed about doing their heavy lifting for them. Although he got that bill out of his committee and through the Senate, it was flipped to a study bill. The problem with that study bill was that it had moratorium language in it. In essence, it was a prohibition because it was saying the Local Government Commission would not be able to approve any local communities financing for these systems, until 2011 when more legislation could be introduced. That bill went over to Faison's Committee and died. But again, to the credit of our democratic leaders in the House in the Senate, at something like one o'clock in the morning on the last day of the legislature, this bill that had made it through crossover, it was a Kidney Awareness Bill.
Catharine Rice: Senator Clodfelter with the cable industry gutted that bill and dumped in it the moratorium language from Hoyle's legislation, and it went back and forth and back and forth. Finally, at 3:00 AM with the help of representative Lipke and representative Hackney, the bill died. No legislation in 2010, then we go into 2011.
Christopher Mitchell: In 2010, it's worth noting, not only do Republicans have historic gains around the country and in North Carolina. North Carolina, in particular, I think of it as a new breed of Republican. One that is much more focused on what I think of now is the ... I hate to call them pro-business because they're not pro-business, they're pro-monopoly.
Catharine Rice: Pro-multinational.
Christopher Mitchell: Their policies, I think often harm local businesses, and they cloak them in a pro-business language that people tend to like. It's a new Republican party in North Carolina in 2011.
Jack Cozort: Just a word about 2010 before we go away.
Catharine Rice: Yeah, because the election was in November of 2010.
Jack Cozort: The election was in November of 2010, the so-called short session. It was during the summer of 2010. In North Carolina, we have a two-year legislative cycle. In the odd numbered year, like '09, it's a long session. It lasts six, seven, sometimes eight months, and the legislature takes up 2,000 bills. Passes a budget, and then adjourns until the following summer. They'll usually come in, in May of 2010, and they're in for five or six weeks. The idea is to make adjustments to the budget, take up any issues that were left over from the 29th session, and that's how they were able to take the Kidney Awareness Bill that had passed one house in '09 and was still eligible to be considered in the short summer session in 2010. By now, the cable industry is really starting to gear up it's lobbyists.
Jack Cozort: As Catharine pointed out, they go to certain offices and literally take them over. They answer the phones, they screen people that can see the legislator. I remember having to get a meeting with Hoyle at seven o'clock in the morning. That was the only time we could get. Thank goodness, his wonderful legislative assistant, Penny Williams, was there, instead of one of the cable lobbyists, and was able to work us into the Senator's scheduled at 7:00 in the morning. We had our meeting with Hoyle, but he made it pretty clear where he was and what he was doing and that he was not going to be in a position to help us. Hoyle was a powerful legislator. He was co-chair of the Senate Finance Committee. All major budget legislation has to go through the finance committee. If you're on the side of the finance chair, you've got a leg up on everybody.
Jack Cozort: We generally didn't have those kinds of folks supporting us, but we did have people like the speaker and representative Lipke and others like that who would step in and speak up for us and do what had to be done sometimes in the late night hours or early morning hours. As you get near the end of the session, they try to finish up in a week so that they don't have to recess for weekend and come back. They started having these incredibly long sessions start at 10:00 in the morning and last through midnight, early into the next morning. That's exactly what happened as they were trying to wrap up this day and made that one last effort to get that bill through in 2010, was well after midnight, right at the end using whatever tools they could get to try to keep their issue alive, and held them off.
Catharine Rice: Hopefully, Chris you'll ask us, what messages we would leave people with and what lessons we learned, but clearly one of them is that individuals' matter. A single person can matter, and also, who you elect really matters because leadership matters.
Jack Cozort: It really does.
Catharine Rice: There we are, November, 2010 an election is held and 100-year reversal of control of the House and Senate and governorship happens.
Christopher Mitchell: Not the governorship, right? Governor Perdue remained a Democrat.
Catharine Rice: That's right. It was a historical reversal of control of the House and Senate with representative Hackney out in the house and representative Thom Tillis in.
Christopher Mitchell: Right. We'll explain why that matters so much in the next episode. This has been a really good history of leading up to this historic decision that basically shut down the community networks in North Carolina, really basically made partnerships much more difficult and have generally harmed North Carolina. There was one thing I wanted to throw in, which is that, I meant to mention this earlier, but in the time in which these bills are being debated, and this is true in 2011 too. North Carolina rural broadband is not very good. The state is ranked rather poorly. I think is in 2011, which number reflects the same thing in 2009, 2010.
Christopher Mitchell: Time Warner Cable was a real laggard. Their speeds were slow enough that because so much of North Carolina only had Time Warner Cable, seven of the worst 10 cities in America to get broadband in were in North Carolina, according to some research at the time.
Catharine Rice: Also, Chris, because of the deregulation, Time Warner was selling off all its rural systems. It wasn't serving the rural areas anymore as all this legislation is rolling out. We kept telling the legislators that this is going to hurt your rural communities more than any other communities. The urban areas will get served. In fact, they had some token competition from AT&T, but we kept telling them, don't do this. It's really going to hurt the rural areas.
Christopher Mitchell: That's where we'll come back. Thank you so much for this part one, Jack and Catharine. This has been really useful to get this all on the record.
Jack Cozort: It's a pleasure.
Catharine Rice: Absolutely Chris.
Jess Del Fiacco: That was Christopher talking with Catharine Rice and Jack Cozort. We have transcripts for this and other podcasts available at muninetworks.org/broadbandbits. Email us at email@example.com with your ideas for the show. Follow Chris on Twitter. His handle is @communitynets. Follow muninetworks.org stories on Twitter. The handle is @MuniNetworks. Subscribe to this and the other podcast from ILSR, Building Local Power, Local Energy Rules and The Composting for Community podcast. You can access them anywhere you get your podcasts.
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