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Transcript: Community Broadband Bits Episode 415
This is the transcript for episode 415 of the Community Broadband Bits podcast. In this episode, Christopher interviews lawyers Ken Fellman and Geoff Wilson to learn how broadband monopolies got an anti-local authority law passed in Colorado in 2005. Listen to the episode, or read the transcript below.
Ken Fellman: We hate this bill. We are local government people, we believe in local control, we believe that local communities ought to be in charge of their own destiny.
Jess Del Fiacco: Welcome to episode 415 of the Community Broadband Bits Podcast. This is Jess Del Fiacco, Communications Manager here at the Institute for Local Self-Reliance. Today Christopher talks with Ken Fellman and Geoff Wilson. They discuss how Qwest, now called CenturyLink, used their influence to get a bill that limits municipal networks adopted in Colorado. At the time, Ken and Geoff did what they could to change the bill to make it less restrictive. They helped to remove the limitations that would have stopped all municipal networks, like what we saw happen in North Carolina. Ken and Geoff also tell Christopher about what has happened in the state since then and how changes, over time, have resulted in the bill being less harmful than it was in the early years. Now, here's Christopher talking with Ken Fellman and Geoff Wilson.
Christopher Mitchell: Welcome to another episode of the Community Broadband Bits Podcast. I'm Christopher Mitchell with the Institute for Local Self-Reliance, which is located in Minneapolis, as well as several other cities. I'm coming to you from Saint Paul, Minnesota today. And I'm going to speak with Ken Fellman, a partner with the Denver law firm, Kissinger & Fellman. Ken's been representing local government in Colorado and throughout the country for over 35 years. Welcome to the show, Ken.
Ken Fellman: Thank you.
Christopher Mitchell: And I'm also welcoming Geoff Wilson, who is a special counsel at Murray Dahl Beery & Renaud, and who has worked at the Colorado Municipal League on these issues, where he was the general counsel. Welcome to the show, Geoff.
Geoff Wilson: Thank you. Pleased to be here.
Christopher Mitchell: And I feel like we should also just plug NATOA while we're at it, The National Association of Telecommunications Officers and Advisors. I'm sure we've all been to their events contributed and helped them out as they've led on a lot of these issues over the years.
Ken Fellman: Yeah. Thanks for mentioning NATOA. Chris, I know we're going to talk about the Colorado experience. And at the time that was happening, I was on the board at NATOA, so I know that NATOA was focused, not just on Colorado, but on these issues all around the country.
Christopher Mitchell: So I want to talk today with you two, because you were both around in the heat of it when Colorado decided to try to discourage municipal broadband networks. We're going to talk about what that was like, how that law got passed and what's happened since then. And maybe we could even make an argument that although it discouraged municipal networks in the short term, it may have even encouraged them over the longer term; classic backfire kind of issue. But let me dive in, and I'll point at you first, Ken, and tell me what it was like in Colorado prior to 2005, when this bill was pushed through.
Ken Fellman: At that point, we were... If you think back to 2005, so everybody had email, Internet was still slow and starting to get faster, we had cable modems, but there wasn't a lot, in Colorado, of municipal networks. The City of Cortez in Southwest Colorado had their own fiber network, and there was work being done, I believe, at that time with the Council of Governments in Southwest Colorado, the regional organization, to, starting with Cortez, use that backbone for a regional broadband network. Frankly, we weren't even using the term broadband much back in 2005. Let's see.
Ken Fellman: The city of Glenwood Springs, also on the West slope of Colorado, had a telecommunications network, and actually was providing service in some parts of the city. Other than that, there may have been others that were in place, in a few other communities like Longmont, that were looking at how to leverage their fiber assets through a public-private partnership to provide better service and competition in their community. But other than that, there was not a lot going on the municipal level.
Christopher Mitchell: And Geoff, what are your recollections?
Geoff Wilson: Pretty much the same as Ken. I remember when the legislation was first introduced, it served, really, as a consciousness raiser for us at the League. As Ken said, there wasn't so much focus on Wi-Fi and such at the local level at that time. It was unmistakably an assault on our authority to be creative in the provision of this service to our citizens. And as I recall, there were... Even though, as Ken was saying, things were in their earlier stages, it wasn't too early for people to begin to realize that they were not getting the kind of service that they wanted, particularly in rural areas.
Christopher Mitchell: I think that may have even predated the first of several efforts to use public money to help CenturyLink or other providers provide access all around the state. As we deal with this question about the state discouraging municipal networks, it's worth noting that the state and the federal government long have put money into these big private networks, and that it's sometimes forgotten. But one of the other things that I think was true about that time is that it was shortly after Nixon v. Missouri, which was in 2004, I believe, which decided that cities, they are not covered by Section 253 of the Telecommunications Act, which in short basically says that anyone can offer Internet service and states can't get in the way. And the Supreme court said, actually, states can get in the way of municipal networks.
Christopher Mitchell: We're going to have a future interview with Jon Chambers, who helped to write that part, and he'll talk about how they never anticipated that anyone could mistake the fact that when they used the word any, they meant any, and that they didn't intend to preempt states on this issue. So we'll have more coverage on this in the future. But I guess in Colorado, this bill... It is SB 152, right? I always confuse if it's SB or HB.
Geoff Wilson: SB.
Ken Fellman: SB, Senate bill.
Christopher Mitchell: Senate bill. But it's more colloquially known as the Qwest Bill, right? The Qwest law, maybe. What was the nature of Qwest's involvement with this?
Geoff Wilson: Their lobbyists, together with Comcast, were the driving force for this bill at the Capitol. They have considerable influence, they're very liberal campaign contributors, had a considerable amount influence in both parties. And there was no particular effort just to hide the bill. We didn't have multiple incarnations of the bill being developed in smoke-filled rooms, they just came out and dropped the bill and there it was, and it was ours to deal with.
Geoff Wilson: The first argument was that it was this level playing field argument that they use every place, that we, in government, enjoyed considerable advantages over the private sector. And then the second argument, this... I'm always skeptical when telecommunications companies pretend to be consumer groups. But they would say that the legislation is necessary to protect folks in local governments from irresponsible local governments, which was just... it was an amazing argument. But those were the two ways in which they sought to make their case.
Christopher Mitchell: Ken, I'm curious if you remember the first time you saw the bill and sort of a reaction to it.
Ken Fellman: We did go back and look at some of our files before talking to you today, Chris. And it's funny how the sucker punch feeling comes back when you look at that stuff. I know we'll get into this. The bill we ended up with was a lot better, and as you said, resulted in probably some things the industry was not hoping for when they presented it. But as introduced, it was just a tremendous overreach into local authority. And Geoff mentioned the argument that we need to level the playing field and make sure government's on the same playing field. It had so many restrictions on government networks that not only did it not level and unlevel playing field, it created an incredibly tilted playing field-
Geoff Wilson: Yes.
Ken Fellman: ... that would have made it really next to impossible for local governments to be successful, and therefore would keep them from ever getting into the broadband or telecommunications businesses, something that we sometimes in local government called denial by approval. They're going to approve this bill, but impose so many ridiculous conditions on it that it'll have the effect of denying any local government the actual ability to build a network and participate in providing competitive service.
Christopher Mitchell: That's Actually similar to language that we've used in talking about North Carolina's restrictions, which is to say, "Oh, no, you can absolutely build a municipal network. All you have to do is bring me a leprechaun riding on a unicorn, and then-
Geoff Wilson: Yes.
Christopher Mitchell: ... you can go right ahead and build it. No problem."
Ken Fellman: Right, right. Don't forget the delivery of your first born child as well. There were, just to give you some specific examples, absolutely no cross-subsidies, was one of the conditions. So while you had telecommunications companies that were lobbying, and successfully lobbying, to get deregulated... And that was right around the time that we were starting to see convergence. So we were starting to see cable companies provide Internet service and telephone companies provide Internet and cable service. And there was very little restrictions on those companies, unless they were one of the traditional regulated provider of last resort voice services. There were no restrictions on being able to take revenues from one part of their business and put it into development of another part, but they wanted to restrict local governments from doing that.
Christopher Mitchell: I want to stick on cross-subsidies for a second, because I feel like in some sense, there's a number of states that limit cross-subsidies. In some sense, what I'm trying to say is that we don't want to encourage cross-subsidies. The challenge is that when you define cross-subsidies, it can mean lots of different things. Like, I think we want to make sure that any sort of transfers would be transparent and open, but one of the challenges is, like for instance, the accounting gets really complicated. So if you have Longmont and they already have a truck, do they have to buy a whole new truck to do the same thing for a different utility, or are they allowed to account for that using long adopted accounting standards, is what I'm trying to say. And so I just want to... I don't want to put words in your mouth, but I also just want to make sure people have a sense of that, we can say we don't want to cross-subsidize, but when you put it into law, it gets very complicated as to what that means.
Ken Fellman: Well, it does get complicated. And to your point, cross-subsidization is not always a great idea. The issue, for us, and I'm sure Geoff remembers as well, it wasn't that we were promoting the ability to cross-subsidize, we were saying, these are local decisions. Most communities may decide, "We don't want to cross-subsidize. We're going to create an enterprise fund, and we're only going to use the revenues from that fund to run this operation." But there has to be some way to start up, and seed money. And if a particular city or a county or a town said, "In our community, it's so important to get this service, we are going to take some of the money from these other funds and help provide the foundation to get this operation going." Shouldn't that be a local decision? What works in Denver is not necessarily going to work in Montrose. And we were there, fighting for local control, not promoting cross-subsidies. It was just an area that the legislature should not have stepped into.
Geoff Wilson: In distinction to the cross-subsidization that routinely occurs in the private sector, if cross-subsidization does occur, and I agree it's not always the answer, but when it's done by us in government, it's done by the people's elected representatives, and it is done transparently. When cross-subsidization is done in the private sector, nobody knows what's going on. If we cross-subsidize, it's in our public budget documents, so it's right out there in the light of day, and if the decisions of our elected officials are unpopular or don't serve the public interest, they pay a price in election. Again, a distinction between the private sector and the public.
Geoff Wilson: As Ken says, a lot of this argument was about a level playing field, but it was hardly a level playing field. There was no discussion by the proponents, for example, of operating under the open meetings laws or the Public Finance Act or the Public Deposit Protection Act or the Taxpayer's Bill of Rights here in Colorado, where revenue raising has to be preceded by a plebiscite, none of those things. So the level playing field argument was as much of a joke as was the, "We need to protect local government citizens from their rampant local governments." This is another premise of the bill.
Christopher Mitchell: I appreciate that. I want to have just a quick fuller discussion about that. And I would say further, as we look at how to make sure everyone has an Internet connection, cross-subsidies may be required to make sure that the lowest income families are able to be connected. And states like Tennessee and Iowa, that try to, again, stick their nose in those local business models just make it harder to develop models that will make sure everyone's connected. And yes, I also wanted to say like, the level playing field is just... it's atrocious.
Christopher Mitchell: One of the things I always think about is I want to see Comcast or CenturyLink forced to forego volume discounts from vendors. They can only buy things in increments of this town in which they were serving, because you certainly pay a lot less per unit when you buy a million of them than if you buy 10,000 of them. And so there's so many different ways in which they have advantages, and they try to take away a few things that often aren't even necessarily advantages of the public. So, Ken, what's the second item that you were adding on in terms of what the legislation would have done?
Ken Fellman: To the level playing field issues, Geoff alluded to them, it wasn't just, "We need to impose these new obligations on the local government." We were there, lobbying at the general assembly, saying, "These folks are private companies, and the public doesn't get to come to their board meetings. When they set their rates, we don't have public hearings, and they don't have input it. There's no opportunity for a citizen to file a records request and ask Qwest or ask Comcast, how you are paying for this service, or how many people you have employed serving this community versus that community." Those are all obligations that the local government had. So part of our argument was, you want a level playing field? Let's make it really level. Why don't you guys create all these other... which, of course, they never would do. And it was really crazy to even suggest that they would do, but it just pointed out how ridiculous the level playing field argument was.
Geoff Wilson: Another example is, right in there with the cross-subsidization prohibition, even though in Colorado, debt cannot be issued by government, bonded debt cannot be issued until approved by the voters. The proponents put in this bill, that if we want to issue debt for building telecommunications infrastructure, we can only pay those bonds off with proceeds from the telecommunications project itself, which... When a project is starting out, it doesn't generate a lot of revenue. How are you supposed to pay the bonds? It was the species of the cross-subsidization prohibition, but it was, especially, pernicious. Because in government, we operate on a pay-as-you-go way of running things. A lot of the time, we don't have a big pile of cash sitting around. And so debt financing was, at the time, something we... We had to seriously consider things work out a little bit differently down the road, and we'll get to that. But at the time, it was clear what the intent of this legislature was, and it was like... as Ken said, it was to prohibit it by allowing it.
Ken Fellman: One of the other things that was originally in the bill was that local governments would have to demonstrate, through their financial modeling, that the project would cashflow within a year or at the end of the year.
Christopher Mitchell: One year?
Ken Fellman: One year.
Christopher Mitchell: A whole 365 days.
Ken Fellman: Right. So when you think about level playing field, how many startup, private sector companies, whether they're funded by a bank or investment banking firms, how many of those actually cashflow within 12 months? None. So to impose that on local government, it was just another one of those things that was going to make it impossible for local governments to get involved. And we made those points during the lobbying on the bill, and eventually... We can talk a little bit about the strategy and how I got it, but eventually, those started getting pulled out of the bill.
Ken Fellman: One of the other arguments from the legislature was, of course, the always conservative, "The government shouldn't be competing with the private sector." We should have state legislation that just prohibits competition with the private sector. So one of the things we did was point out that there are a lot of other areas where local government actually is in the same business that private sector entities are in. So we've got public rec centers, we also have private gyms. We have public golf courses, we also have country clubs. And there are a number of examples...
Geoff Wilson: Trash hauling.
Ken Fellman: Right. If the legislature really believes that local governments shouldn't compete with the private sector, why just in telecommunications?
Christopher Mitchell: Can you imagine if local governments were just letting people read books for free without charging them?
Geoff Wilson: Yeah, where will that end?
Ken Fellman: Right, right. We had some good arguments to push back on. We also had no examples of anywhere in the state where there was a problem. I think, Chris, you probably remember at the time, there were some other municipal broadband Wi-Fi projects in other states that some had been successful, but a number of them had not been successful.
Christopher Mitchell: And this is one of the things I find fascinating. That's the time in which Cedar Falls was represented as being a failure. A lot of the networks today, it's very clear that they have this long-running track record, but no one knew, at the time, how successful they were, because we weren't as well connected. And so Cedar Falls was doing just fine on their business model. They've gone on to be one of the most successful networks. But if you probably were listening to the Colorado legislature, you would have thought it was a failure at the time.
Ken Fellman: Right. And that there were only failures. It was interesting how, when the industry told their story of why this was a bad thing and all these projects that were going down the tubes, and then we'd come in and either try to argue Cedar Falls or Lafayette or Bristol, or the other... I don't remember if they were all in place by then, but the other ones that were working and were working effectively. And again, like any other private business, some of them are successful, some of them don't work.
Christopher Mitchell: Yes. And this was the time of Wi-Fi bubble. People were very enthusiastic about the so-called third pipe. The vendors, at this point, I think, were still overhyping the technology and so we were seeing... I don't even think we were yet starting to see the business models fail. That would later be visited on, blamed on local governments. But we saw local governments, and private companies alike, try to build these Wi-Fi networks, and those networks often did not work out the way expected because of the vendor equipment not living up to spec and because of a lot of hype around it. But that was a business model that failed, whether it was public or private, for the most part. It really had nothing to do with whether it was publicly owned or privately owned.
Ken Fellman: Yep. That's right.
Christopher Mitchell: So you have a bill that comes out, and so you start educating people on it. What are some of the milestones along the way that you remember?
Geoff Wilson: We were confronted with this thing, and Ken and I took a look at the political lay of the land, and it looked this thing was going to pass. We quickly realized that the just-kill-it strategy wasn't going to be the, what happened. The proponents had been very clever in the way they had selected their sponsors. They selected Democrats as the lead sponsors, which is clever, because they could always count on every Republican supporting them. Where they needed help was on the democratic side of the aisle. So first, they start with selecting democratic sponsors.
Geoff Wilson: The big milestone, and I think our way out of the wilderness, was among everything else in the bill, the bill required a byzantine series of public hearings and notice to the public and notice to the other providers, and all of these hoops we had to jump through. Then there was a requirement for a public election on whether the government would be permitted to be involved in the provision of broadband service. And then the bill proposed that not withstanding public approval, there would be all these other restrictions, like the discharge of debt only through revenue, and so forth.
Geoff Wilson: Some point fell upon the idea that here in America, the voters get to approve local projects and local initiatives, even if the scope and form of those projects is not what the utilities would support. And we started to make headway with legislators by arguing that, "Shouldn't we just be able to go to an election? If we don't make our case well, then we will lose at the ballot box. And if we make our case with the voters, then the voters will approve the project. And shouldn't we be able to proceed if that's what the voters want to do?" It was hard argument for the other side to attack.
Geoff Wilson: So we made some headway with the other side on that argument, and that opened the door to getting rid of this other junk in the bill. Because the voters could decide whether... If the voters wanted to limit the discharge of a debt to revenues from the project alone, the voters could so-provide. If the voters wanted to prohibit cross-subsidization, that could be part of the issue locally. It did not have to be mandated by the legislature, it was better determined by the voters.
Geoff Wilson: And this put the industry in the position of arguing that the general assembly knows better than the voters or the [inaudible 00:22:55] industry know better than the voters. And at that point, we started to have some leverage, and fairly early on, got that agreement. The main amendments that took a lot of this big junk that Ken and I have been talking about out of the bill came in the Senate committee, the first committee of referencing the process. And all this cross-subsidization stuff came out and the debt restrictions came out, and we got rid of a whole lot of various stuff, attended definitions.
Geoff Wilson: And the bill, at that point was a, you got to have an election to do this. And then there were some other exceptions that became the focus of further discussion as the bill went through the process, for example, an exception that provided that in unserved areas, which is a subject of definition, in unserved areas, the bill didn't apply and the government could provide service, provided we'd jump through a whole bunch of hoops. And among them was a right of first refusal for any incumbent provider who wanted to come in and provide the service. I don't know how you could have an incumbent provider in an unserved area, but that's the way that bill was written.
Christopher Mitchell: Well, visited a lot of the CenturyLink territory, but just... I know Ken will jump in in a second. I wanted to also note one of the parts of it that I found interesting is, we have seen this in practice, what you're saying. Centennial decided to move forward with an authorization in which they chose to only be able to offer services indirectly. And that's what the city decided to put in front of the voters, the voters approved that, and so they have limited themselves in ways they didn't necessarily have to. Ken, go ahead.
Ken Fellman: Yeah. I was going to say, what we were left with, with the bill, and what we were not able to get changed were some incredibly stupid definitions. And-
Christopher Mitchell: I wanted to ask you about those. Some of the worst that we've seen.
Ken Fellman: It basically prohibited the provision of cable and telecommunications and advanced service. Back at the time, we were looking at... Boy, I don't even remember what the speeds were. 256K, maybe? Very slow. But it also said the provision of service was prohibited. You couldn't provide it directly or indirectly. And it defined indirectly as utilizing any government resources, even with private sector companies, even where the government was not actually going to be the service provider. So leasing dark fiber, the way it was first written, we got an exception put in, but even like leasing space on the water tank for antennas would have been prohibited without a vote. We got that, thankfully was taken out. So you couldn't provide service indirectly to subscribers. Now, if you ask the average person on the street, "How would you define a subscriber to a service?" You'd get an answer, something like, somebody who signs up and pays for the service that they're using.
Christopher Mitchell: Absolutely. Write a check.
Ken Fellman: They define subscriber in this bill as anyone who used the service with permission. You don't have to sign up, you don't have to pay, it's just that there's an advanced server. If there's anything over 256K out there, and if you are using it with permission, then you are a subscriber, and the government cannot be involved in providing that service. So, if you fast forward, just a few years, within five years after that bill was passed, you had free Wi-Fi at the library, you had free Wi-Fi at town hall, some communities had free Wi-Fi in the park or in the rec center. Every one of those communities was violating the statute. And the industry, at first, would say, "Oh no, no, that's not a violation." And then you would show them the language and they would kind of admit, "Well, yeah, it is."
Ken Fellman: Even the way it ended up, where we could live with it, it was still so broad in some areas that had had these unintended consequences. And I would get, and Geoff would periodically get calls at the League. In his position as general counsel for the League, he's not giving legal advice to individually municipalities. So he has those people calling me and then they ask, is it illegal? Can we do free Wi-Fi at the library? And after a while, my advice to local governments was, "Technically, you are violating the law here."
Ken Fellman: Now, the good thing was, there was no penalty if you violated. If somebody were to challenge you and you go to court, the remedy was, stop doing it until you have an election and your citizens say it's okay. And the industry realized that the bill was overbroad as passed. And a lot of my advice, and I'm paraphrasing a little bit, was, you're probably not going to get challenged on this. All these cities are already doing it, so if you start doing it, there's no really good bet that they're going to pick on you as opposed to any of the cities who've been doing it.
Ken Fellman: But at the end of the day, neither Comcast not Qwest, which eventually became CenturyLink, or any of these other companies want the headline in The Denver Post to be, Comcast Ends Free Wi-Fi at the Library. It was politically untenable. So it ended up... We had these crazy definitions that, technically, a lot of what was going on was illegal when it was happening and nobody was going to challenge it, and everybody just realized the bill is crazy on that point. But the public-private partnership was problematic, because you started seeing, over the years after that, local governments that had fiber infrastructure, or even empty conduit that they could have used to incent broadband deployment, and they needed to go to a vote before they could do that. I don't know, there may be some more things Geoff wants to say about the bill and how it got passed, but we can also move on to sort of what happened once we had this thing-
Geoff Wilson: I don't have anything more on the bill. I think that was a good segue into that excess capacity issue. We have to have an election to allow use of open conduit that's already in the ground? That is silly. It's ridiculous. Yet, we had to do it, still have to do it.
Christopher Mitchell: Right, well and as we fast forward to after the bill is implemented, we don't see anyone really attempting to have that referendum for a while. I think people were intimidated by it. But eventually, Longmont decides to move forward and to try it. And it was 2009. Ken, do you want to just weigh in a little bit with what led up to this?
Ken Fellman: Sure. I wasn't directly involved with those issues at the time, but from what I recall, Longmont is very fortunate, they have a municipal electric utility, they had a bunch of fiber assets through a consortium of local governor that they are involved with called The Platte River Power Authority, and they had the opportunity to leverage those assets in a way that it would bring a good service and competitive service to their community. And they were growing communities, still are very highly educated, and they decided to go forward, at first, with a private sector partner. And not to get into the details of that particular activity, but it didn't go well, because the private sector partner went under and wasn't able to perform.
Ken Fellman: And I know that Longmont went out and tried to find somebody else to come in. "And how can you use our network? And we will help you leverage a competitive product against the incumbents that we have currently in the area." They couldn't find anybody, so they decided, maybe we'll do it ourselves. And they went to the voters in 2009, and what they found was... We have these organizations during elections that we call AstroTurf organizations, which was the opposite of grassroots. AstroTurf is fake grass. And the AstroTurf organizations are basically these entities that have these real cute names, like citizens for better broadband, but they're actually funded by the industry.
Christopher Mitchell: Right. Usually, the cable association of the state, so even individual cable companies, have plausible deniability. So you might have... I assume the way it works is that may have Comcast giving an exceptionally large amount to the trade association. The trade association turns around and hires a public relations firm, but everything is credited to the state association and not to the individual provider that's trying to shape public opinion.
Ken Fellman: Yeah. And I don't remember exactly how... I think that's definitely true more today than it was 15 years ago. I seem to remember at the time that the opposition group, through this AstroTurf organization, put in $300,000 - $400,000, which was a huge investment, on a local ballot issue. And the city of Longmont was probably 70,000 people at the time?
Christopher Mitchell: Mm-hmm. Yeah. I think actually, in 2009, I think it was on the order of $250,000, and it broke previous records. And then the fracking set a new record, but I think they broke it again afterwards when Longmont went back to ballot, because, spoiler alert, Longmont voted no the first time around.
Ken Fellman: Right. Well, yeah. Well, and the second time around was before the fracking stuff started, they may have broken the record in Fort Collins a couple of years ago.
Christopher Mitchell: Okay. Sure. Yeah.
Ken Fellman: But in any event, what happened in Longmont was the election lost. And this was another pitch that... I'll just take a step back, that Geoff and I, and some of our colleagues made during the legislative debates was, under state law, local governments can't spend any public money on elections. Which means, not only do we have to have the citizens approve it, we got to find some people out there who will run a campaign who want this, because the government can't fund that. So-
Geoff Wilson: Should have mentioned that earlier, that was... I think that was central to the deal happening at the Capitol that favored the election as the way to determine all of this stuff, is that in the election, if we wouldn't have a level playing field there either, we can't be advocates in our own elections, as Ken says. We have to have the Chamber of Commerce or a citizen group or somebody else carrying the ball, and the industry, perfectly well, understood that.
Ken Fellman: Right. So, in Longmont, in 2009, they lost. They had a group that was promoting the election, and as you said, $250,000 or $300,000, I'm not sure what the exact number was, but a lot of money was spent on this. And it was not widely known in the community who was behind this AstroTurf organization. After the election, it became known. And my recollection is a lot of people in the community were pretty upset about it when they found out that the opponents were actually their incumbent cable company and their incumbent telephone company and their state associations, who were trying to limit competition.
Christopher Mitchell: If I recall correctly, I don't remember if it was the first or the second election, but there was actually actors paid to dress as firefighters, with signs, suggesting that if money was spent on broadband, the firefighters would be laid off or somehow would be disadvantaged.
Ken Fellman: Yeah, I think that was the second election, because more money was put into the second election. I think the community in Longmont... And by the community, I mean both the city government, as well as people in the community who realized they were snuckered in the 2009 election, came back again. I think it was 2011, I think it was only two years.
Christopher Mitchell: That's correct.
Ken Fellman: And they fought harder this time. There was another $300,000 or $400,000 that was put into it. They were doing commercials on local television. And then if you think about election time in November and all the political ads that you see, you didn't see political ads most of the time for a state Senate district or a state House district, and here we have a city ballot issue, where Denver TV is showing commercials against this proposition. But the second time, Longmont voters said, yes, and they went forward and... They actually came back a couple years later, because the first ballot was simply to say, "Can we do this?" And if you say yes, voters, we will study the issue, we will look at how it has to be funded, we will come up with a plan for funding it, and we'll come back to you for another election to get your approval on how we do that, which is exactly what happened in Longmont over the next few years. And then if we were to fast forward to today, we've got what has been recognized in some places as the best municipal broadband network in the country.
Christopher Mitchell: Yeah. Consistently top 10 of speeds.
Ken Fellman: Right. Right.
Christopher Mitchell: One thing I did want to note about the second election was that it was fascinating. I think you're right, I think it was on the order of between $400,000 and $500,000 that was spent to oppose it, and they couldn't find anyone locally. And I think this was true of both elections. There was no one locally that represented the campaign, because... And I know this is true in the second time around. Every single person on the ballot, whether it was for mayor, city council, dogcatcher, whatever, they all supported it. There was no opposition in the community. Usually, these activist groups can... The AstroTurf groups that you mentioned, they can find someone that will carry the torch for them, but in Longmont, they couldn't. And so you had the newspapers supporting it. There was not a sort of local, true community opposition at all. And so it was entirely manufactured from Denver.
Ken Fellman: Yeah, yeah. That was the case. And Longmont passed it, other communities started looking at it, and frankly, they were nervous at first, are we going to face that kind of money to fight this in our community? But a few communities did go forward and adopt this. Montrose, Colorado is one of, I believe, the earlier ones. For your listeners who aren't familiar with some of our communities, Montrose is on the western slope, it's a small city. And I used to tell people shortly after that, if you were to walk down the street in Montrose and interview a hundred people and ask them, "Should the government compete with the private sector?" The answer would not only be, no, it would be, hell no. Over a hundred people.
Christopher Mitchell: Right.
Ken Fellman: And yet, when the question was, should our city have the authority to invest money to improve our telecommunications infrastructure and the services we get? The answer was an overwhelming, yes. It was over 70%, as I recall, that approved it. Now, the industry did not come in and fight in Montrose. There's a lot of speculation about why that is, and my speculation is in the smaller communities, it wasn't worth the investment. They had a network, sometimes they got upgraded, sometimes they didn't get upgraded. They certainly weren't on the priority list as some of the bigger networks in the more dense communities, and they just didn't fight it.
Ken Fellman: And that then led to a bunch of additional small communities to say, "Well, maybe we should adopt a ballot issue." As you mentioned earlier, that Centennial went forward, they decided, as a policy reason, we never are going to provide service. We'll do a public-private partnership, and that's all we're going to ask the voters for authority to do. We're not going to have a blanket authority for the city to do anything, including the provision of service. May or may not be a good answer in other communities, but that was the policy decision that Centennial wanted to make.
Ken Fellman: And if you're a local government advocate, as Geoff and I are, it's not for us to say what the right answer in Centennial or any other community is. The right answer is whatever their elected officials and their community decide. So Centennial was a great example of local control and local decision making. Other communities did broader exemptions and said, "May we have the authority, basically, that we had before 2005 to make decisions about whichever way we want to go as best." And many of the citizens said yes. And it started happening in these small, rural, mostly politically conservative communities.
Ken Fellman: Another one that I've had the privilege of doing some work with is Ray, Colorado, out on the Eastern Plains. They had a fiber network, or put in a fiber network, and they ended up doing a public-private partnership with their local rural telco. And it's been very successful. There is another community, that if you would have said, "Should we start doing work in competition with the private sector?" The community probably would have said no. But when it comes to, do you want better broadband? Absolutely. We need to incent that.
Ken Fellman: And of course, it follows the position that we've made to the state and in other places. If you really support closing the digital divide, we have to encourage any entity that wants to build a broadband network to build broadband. And we shouldn't care whether it's the biggest cable company in the country or a local government of a town of 450 people. We shouldn't care.
Christopher Mitchell: Well, let me ask you a question related to that, because... Welcome back, Geoff.
Geoff Wilson: Thank you.
Christopher Mitchell: Was that a hiccup on the telecommunications side?
Geoff Wilson: Yeah, it sure was.
Christopher Mitchell: So for listeners, Geoff disappeared and Ken and I carried on. It's 2020, and frankly, the fact that we still have to deal with this... It's every 10th or 15th interview that I do, I have some sort of problem, where we have to pause the interview and deal with it, so-
Geoff Wilson: As I was frantically trying to reconnect, I was thinking of the irony of all this.
Christopher Mitchell: Ken, one of the things that we hear is that the level playing field is needed, because the amount of taxpayer dollars that are available is infinite, and therefore they could drive any provider out of business by just running an operation that loses money year-after-year and subsidizes it with taxpayer dollars. Now, there is no actual evidence of this happening anywhere. This is entirely a theoretical exercise. And so as such, I'm curious, how do you think people would react to a mayor that says, "Hey, I want to be reelected this year. And yes, I'm going to pledge to raise your taxes, so that we can try to run this business out of town."
Ken Fellman: That's an amusing question, because you're right, it was an issue that would come up from time to time, and it's an absolutely theoretical issue, no evidence that it's happening anywhere. Aside from my law practice, I was a mayor at the time that this bill was passed. I was a mayor of a city that, at the time, was probably about 85 or 90,000 people. And one, we could never say, "I'm running on a platform to raise your taxes," because city councils don't have the authority to raise taxes here. Under our taxpayer bill of rights in Colorado, only the voters can do that.
Ken Fellman: So it made the argument even more ludicrous here, because one, it just... No one is going to get up and say, "I don't care if we're taking money away from hiring more public safety officials, I don't care if we're taking money away from snowplows, I don't care if we're taking money away from park maintenance; we need to run this other company out of town." Especially because once you started to see some of these networks be successful, what happened was in Longmont, for example, it wasn't that they spent a bunch of money to try to get rid of the other guys, what the other guys started doing is lowering their prices and actually hiring workers to go door-to-door and knock on doors and say, "Have I got a deal for you?" And they would undercut the market and offer prices that were anti-competitive.
Ken Fellman: And I know of one community that actually... It wasn't one of my clients and it wasn't in Colorado, but it went to the justice department and said, "We think there are anti-trust violations here." And the justice department said, "Yeah, probably there are, but we have so many cases that this doesn't rise to the level of a case we would take." And the way that that community addressed the problem eventually was to send a note out to all of its residents and say, "Look, we are your local broadband company. And look at the price that they're offering, which is admittedly five bucks less than what we are. But look at what they offer that at in your neighbor community here. Same service, and it's 35 or 40 or 50 bucks higher. Their goal is to put us out of business. And if we go out of business, do you think you're still going to get this price they're offering you now, or are you going to get the price raised to what it is next door of our community?"
Ken Fellman: And in that community, where that happened, it stopped the bleeding of losing customers. So I think this argument, that local governments would try to put the incumbents out of business, was not just a false argument, but in fact, it was the incumbents, in some places, that tried to put the local government networks out of business.
Geoff Wilson: I have to interpose. And through what device? Through cross-subsidization. The reason they could offer that five bucks below Longmont while they're charging 40 bucks more outside of town is because they were cross-subsidizing lower rates for market advantage. Another example of why the 152 does nothing to advance a level playing field.
Christopher Mitchell: As we go to wrap up, I think it's worth just talking about the overall dynamic then. Colorado has had well over 100 local jurisdictions that have opted out of the law. In some ways, that makes it seem like there's this massive movement for community broadband in Colorado. It's hard to tell exactly, because some of those are multiple jurisdictions within a single county. And if you look at all the counties that opted out, and now Delta-Montrose Electric Association, for instance, building out. Of course, they're not going to do anything with that authorization now because their co-op is doing things. So there's a lot of good things that are happening. But I'm curious, like, what is the honest evidence that, over time... Because this is structured as an opt-out at the beginning of the process, it seems like it offered an opportunity for people to feel that opting out in and of itself was a statement and led to more communities doing it.
Geoff Wilson: I think that's right. Ken and I were talking about this the other day, that the evolution in thinking about Senate Bill 152, from something we wanted to beat our heads against down at the state legislature, to something we could work around through the election opt-out device. And these elections ended up being, as you suggest, a statement on the quality of service people were presently enduring in the community, so it was a protest vote. It also served in something I didn't foresee. The election itself was a consciousness raising device in the communities. It sought to channel and focus the discontent with local broadband service and sensitize folks that this is something where your government can play a role or we can help. And in the later days, mostly through private-public partnerships, these questions passed and these elections too, as you may know, 80, 90%.
Christopher Mitchell: I think of them as Saddam Hussein numbers. It's wild. You don't see anything else passing with that level of popularity. And the fact that it happens in Boulder, and then it happens in Montrose or... I'm guessing, Cory Gardner carried with an 80% vote. I mean, very Republican areas. It's across the whole state, so, sorry-
Geoff Wilson: No, no, that's right. Somebody commented, you could put a ballot question about whether you support Bob on the ballot and it would a lower turnout.
Ken Fellman: So the other thing that sort of played into this that Geoff and I were talking about the other day, for a few years after the bill passed, we looked at ways to amend... I had mentioned the definitions of terrible, and can we get rid of the vote for the public-private partnership? And we were trying to see if we could pick off a couple of Republican legislators from the rural communities, because this, really, would benefit the rural communities. And they would all say great things about it and then vote no to kill the amendment.
Ken Fellman: So after a few years of beating our heads against the wall at the legislature... And clearly, Geoff, in his role at the municipal league, had many, many other areas to be involved in, in legislative lobbying, beyond broadband. And we started seeing all of these communities pass it. The League made a decision, which was exceptional, which we're not going to the legislature anymore, we're not going to waste any more time. What we're going to do is we're going to put together a handbook, and we're going to compile the stories of these other communities and copy their ballot language and talk about the different issues and educate all of our municipal members, so that if they want to do it, they will do it.
Ken Fellman: And that's basically, that shift in strategy, is what helped promote, not just municipal opt-outs, but counties. We have school districts who have voted to opt out, so they could make better use of their excess fiber capacity. It really has turned into something that we didn't expect, in a good way, and probably that the industry didn't expect, in a way that they would say is not what they had in mind.
Christopher Mitchell: I think it's worth reiterating, though, that that's because you were able to strip out the additional limitations that would have further handicapped and prevented good projects from moving forward after they had a public authorization. Because I don't want people to walk away from this and think, "Oh, well, as long as there is a referendum, that's fine." In part, because I don't think people understand. Fort Collins looked at almost a million dollars of opposition from the Cable Association and the Chamber of Commerce.
Christopher Mitchell: And frankly, our analysis of it suggested that even without having the level of success that Longmont's had, Comcast and CenturyLink will lose well over a million dollars per year because of competition in the market. And so they would have been smart to spend $5 million, $10 million. I don't know, at a certain point, you can be out on an issue so unpopular that money won't make a difference. But frankly, I can imagine that they could get more aggressive still to try to swing referendums. And it will require an engaged citizenry to oppose. So I don't want to be very cavalier about it. Things can change and they can change back.
Ken Fellman: I'm glad you brought up Fort Collins-
Geoff Wilson: Yeah, right.
Ken Fellman: ... because we went through this period of time, post-Longmont, where the industry basically didn't challenge any of these. And it wasn't just the small communities, but some of the suburban communities, like my city, where I live in Arvada. When we did our opt-out election, our population was over a hundred thousand. At that point, no opposition. Fort Collins, I think, was different, because similar to Longmont, they have an electric utility, they have infrastructure already in place, and the industry saw that as a place where they could lose a huge market share. So after going years of not seeing the industry fight these, there was a huge fight in Fort Collins, massive amounts of money and the city prevailed. I don't know that there are too many big markets like that that are left in the city.
Christopher Mitchell: There's at least one in which you're going to have a vote.
Ken Fellman: So I'm not too concerned about it. I do think if one of our largest cities decided to get into the business at some point and went to a vote, there would be a fight, but I'm not sure what the likelihood of that really is. But the point you're making, Chris, is a good point. People should not get the impression that we like this bill. We hate this bill. We are local government people, we believe in local control, we believe that local communities ought to be in charge of their own destiny.
Ken Fellman: And thank you very much, General Assembly, but we don't need your help to tell us what we can't do, because you want to protect our citizens from city council making a bad mistake. You don't do that in other areas, you shouldn't do it in this area. What you're really doing is protecting one industry, is creating a special set of rules to favor one industry over all the other industries in the state, and it's wrong. Any kind of state preemption of local authority in that context is wrong. So we don't have a good bill, we have a... I have described our bill compared to some of the other bills around the country that have these really bad things in it. I wouldn't call Senate Bill 152 a good bill. I would say, compared to all the other municipal broadband restrictions around the country, Senate Bill 152 sucks the least.
Geoff Wilson: There you go, Chris. It's sucks the least.
Christopher Mitchell: I like that. One of the things that you noted was that there is no wiggle room. If a city wants to do just about anything, they have to opt out, and I think that's driving a conversation in Denver. And that's what my comment a minute ago was, is that we may see a vote in Denver. And I'm very curious to see how that goes. Because I would not expect Denver to have a plan to build a Longmont-style network, but at the same time, if they want to just start trying to connect low income households in public housing and things like that, they may have to get an authorization.
Ken Fellman: Right. And that's where I think you see how these elections are going to play out in many communities that don't want to be service providers, don't want to create citywide broadband networks. But as you say, maybe they have excess capacity and they can help provide additional service in a low income area, or an area where maybe there is decent broadband from the private sector, but the prices just make it unaffordable. You may have communities that have an economic development opportunity with an area that is under redevelopment, but there's a lot of costs involved in cleaning up the hazardous materials and building the new infrastructure and creating a new development. And maybe one way to incent that is to provide access to city fiber, so that there'll be gigabit connectivity at every structure in the new development.
Ken Fellman: So there are these pieces of communities. And I haven't been involved in the specifics of why Denver is looking at this, but I would suspect that those kinds of opportunities are the kinds of things that Denver's saying, "Maybe we ought to have the flexibility to address those." And because of this bill, they can't address it unless they go to a citywide vote. And should there be an election in Denver, and I don't think one is definitely on the horizon right now, but I'm not kind of privy to their internal discussions, it'll be very, very interesting to watch how the industry responds to that.
Christopher Mitchell: So Geoff, any concluding comments, as we wrap up?
Geoff Wilson: Well, this is something out of order, Chris, but I wanted to mention Ken alluded earlier to the fact that the government doesn't raise taxes in Colorado, the voters have to vote to raise taxes. And it's the same thing with debt. We don't issue debt in Colorado after the Tabor amend, either revenue debt or general obligation debt without a vote of the voters. And we knew this at the time that we were working on Senate Bill 152. And one of the reasons the election option was attractive to us is we figured that in a lot of cases, the entity would be having to go to the voters anyway, under the Tabor amendment in order to get debt for this project.
Geoff Wilson: And if we could get rid of this ridiculous provision that our debt had to be served only from the proceeds of the project, that we talked about earlier, we'd be in business, and that's what ended up happening. Anyway. I guess my final comment is I've been surprised by how 152 has developed over the years, because I spent a lot of time fighting it, hating it, just like we all hate it. But we've worked around it in many ways, and that's the nugget of good news here.
Christopher Mitchell: Any concluding thoughts, Ken.
Ken Fellman: I have been pleasantly surprised to see how the longterm reaction in the local government community to Senate Bill 152 has played out. I think in those communities that have not only opted out, but have then taken steps to try to approve broadband in their communities, there have been more success stories than there have been failures. And there has actually been some recognition by the state, that the state needs to play a more active role in addressing gaps in broadband coverage, helping rural areas, closing the homework gap. We have a long way to go still. But I think some of the movement that we're seeing today, and certainly just the recognition by local officials...
Ken Fellman: If I think back to the time when I was mayor in 2005 and six, if you asked any mayor in the state, "What are the top three issues in your community?" Telecommunications was not one of them, except for a handful. Today, if you asked any mayor in Colorado, or any County commissioner in Colorado, council member, board of trustee member, "What are your top three issues?" A lot of them are going to have broadband connectivity somewhere on their list. So the way that we have evolved with local government broadband projects after Senate Bill 152, I think, has helped create, not just better broadband in some communities, but a far better awareness of what is possible. And it has caused a lot of communities to look at, should we be looking at this in our community, and what would work best for us? And that's a good thing.
Christopher Mitchell: Excellent. Well, thank you both for taking this time, and also spending your careers working for local communities. Much appreciated.
Ken Fellman: Thanks for-
Geoff Wilson: Thank you Chris.
Ken Fellman: Thanks for having us.
Jess Del Fiacco: That was Christopher talking with Ken Fellman and Geoff Wilson. We have transcripts for this and other podcasts available at muninetworks.org/broadbandbits. Email us at firstname.lastname@example.org with your ideas for the show. Follow Chris on Twitter, his handle is @communitynets. Follow muninetworks.org stories on Twitter, the handle is @MunieNetworks. 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.
Jess Del Fiacco: You can catch the latest important research from all of our initiatives if you subscribe to our monthly newsletter at ilsr.org. While you're there, please take a moment to donate. Your support, in any, amount keeps us going. Thank you to Arne Huseby for the song, Warm Duck Shuffle, licensed through Creative Commons. This was episode 415 of the Community Broadband Bits Podcast. Thanks for listening.
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