Call In The Lawyers And Lobbyists

“The first thing we do, let’s kill all the lawyers.” Shakespeare gave these words to Dick the Butcher in Henry VI Part 2, by far the most famous words from one of Shakespeare’s earliest and least distinguished plays. While the scene has slapstick elements, Dick is part of a conspiracy to depose Henry VI that led in time to many deaths. As Henry VI, who became King at the age of 9 months, lost everything his father famously won in France, the regicide idea is not without dramatic interest. But it is hard to resist a sense of irony, that lawyers in some ways uphold the kingdom and the law.

We find ourselves in a similar position. We have had to retain lawyers to uphold the law. We needed lawyers to help craft new laws. And the issue, while not about the kingdom, still resonates, as our contest is also about the prospect of something lost. Communities in Connecticut need the power to construct broadband networks when private carriers do not provide full coverage or the latest technology. That power is now either lost or seriously compromised through a kind of usurpation, our Public Utilities Regulatory Authority (PURA) stripping municipalities of the power by squeezing the meaning out of Connecticut Statute §16-233. That statute gives communities the right to install networks “for any purpose” without paying recurring pole fees, a reasonable bargain as communities in Connecticut, unlike most other states, do not charge pole owners for use and maintenance of the public right of way into which they are installed. PURA restricted “for any purpose” to “municipal purposes” on grounds that free pole access was an illegal competitive advantage. Our story relates how this happened and how we might get it back.

What’s At Stake?

Municipalities in Connecticut can only build and own broadband networks if given such authority by the state.  At present municipalities have only three legal means available to them: (1) form a Competitive Local Exchange Carrier (CLEC), a basically private institution, to supply a network; (2) create a municipal electric utility which in Connecticut has the legal title to construct a broadband network but with pole fees; and (3) invoke Connecticut Statute §16-233 that enables communities to construct networks without paying pole fees.  There is no Connecticut law that enables a municipality to simply build and own a municipal network and pay pole fees.  The first two of these options have obstacles that usually bring them to a halt after some consideration, although Norfolk is presently fighting through the business of forming an electric utility, both for its own sake and to construct a fiber optic network for the town.  When PURA strangled §16-233, it strangled community networks for all practical purposes.

There is a fourth alternative, the one proposed by Frontier to many communities in Connecticut three years ago, in which the communities would basically fund Frontier to build out a fiber optic network.  As far as we know, no one complained at the time about the prospects, perhaps because they knew Frontier couldn’t close a  deal (they didn’t).  But surely such an arrangement would make the supposed anti-competitive nature of free pole access pale before the privileging of one carrier through direct community subsidies with no control over service pricing.

In response to PURA’s actions, several legislators introduced a bill into this year’s legislative session to make it crystal clear that §16-233 means broadband to residences and businesses, not just municipal buildings. The bill also asks PURA to adopt the “One Touch Make Ready” protocol adopted by the FCC in 2018 but not applicable to Connecticut.  That bill has cleared committee and awaits consideration by the full Senate and Assembly. It is numbered Senate Bill (SB) 846.

So what’s at stake can be stated in simple terms: passing SB 846 into law very likely enables towns in Connecticut, or the state itself, to create universal broadband networks with the latest technology starting within a year; leaving §16-233 in its current fuss through the court will delay that process for most of the state by years, potentially many years. We are not given to hyperbole on the subject, but the fate of Connecticut’s economy hangs in the balance.

The Story

This is one of those stories without an ending yet.  It is being carried out now in Connecticut courts and the Connecticut legislature. The whole story would require an examination of the role played in our system by regulatory agencies, incumbent carriers in contest with the public good, how the legislature really works, our legal structure, and some really confusing technical issues around what the word “broadband” really applies to.  We are not going there.  Instead, we are going to follow the saga of Connecticut Statute §16-233, the so-called “municipal gain law,” or “muni-gain” for short.

The Law

Unlike the 333 pages of the 1996 Telecommunications Act, the muni-gain statute occupies a single paragraph:

Sec. 16-233. Use of gain by town, city, borough, fire district or Department of Transportation.  Each town, city, borough, fire district or the Department of Transportation shall have the right to occupy and use for any purpose,without payment therefor, one gain upon each public utility pole or in each underground communications duct system installed by a public service company within the limits of any such town, city, borough or district. The location or relocation of any such gain shall be prescribed by the Public Utilities Regulatory Authority. Any such gain shall be reserved for use by the town, city, borough, fire district or the Department of Transportation. (emphasis added) (A “gain” is one foot of vertical pole space.)

This law dates from 1948, when the words “for any purpose” read “for signal wire.”  An enterprising state Senator, Beth Bye, snuck the words “for any purpose” into a budget bill as an amendment into the law in 2013 after many frustrating hours trying to convince largely Republican members of the legislature that municipalities needed authority to build out their own networks given the reluctance of incumbent carriers to bring our state—all of our state—into the modern digital world.  As noted above, most states charge pole owners for use of the public right of way. Connecticut does not, a subsidy in effect in a deal reached decades ago with carriers as an inducement to provide universal service.  That deal is now broken relative to broadband networks.

Following a path too circuitous to report here, our Public Utilities Regulatory Authority (PURA) ruled in May of 2018 the “for any purpose” in 16-233 cannot include commercial broadband services because free pole use constitutes an illegal competitive advantage compared to those who pay pole fees, such as Comcast.  Pole attachment costs Comcast about $15 a year per pole if used to carry Comcast cables; that comes to less than a dollar a month per customer in urban areas assuming 50% take rate.  How not paying this sum constitutes a significant competitive advantage to municipalities that have none of the scale or experience of Comcast (who has a monopoly on broadband in many communities) remains a mystery because PURA never explored the issue.  PURA argued as a matter of law that free pole use was discriminatory, and that’s it.  Not coincidentally, the language PURA used in its ruling was supplied by Frontier.

Let us digress a moment

The tone of this short essay suggests animus towards incumbent carriers, particularly Frontier. Frontier has no broadband service in Northwest Connecticut if broadband means the FCC definition of 25 mbps downstream. Those in the region have broadband from monopoly cable television carriers or not at all.  Three years ago Frontier and Northwest Connect went through nine months of negotiation to bring a Frontier broadband fiber optic network to the region with the provision that Frontier would connect everyone.  But the deal reflected commercial reality.  In return for the network, Frontier wanted guaranteed subscriptions of $20 per month from every house and business whether they took the service or not.  This was a tax—no other word for it.  Thus Frontier recognized then the two things central to our claims today: (1) universal broadband is necessary, and (2) carriers cannot afford to provide it on a universal basis in rural communities (and most urban communities) because the incremental returns do not justify the incremental expense.  Communities must pay something for the pleasure.  Talks with Frontier broke off in July of 2016 for reasons that stay still in the shadows. (You may read a fuller account of the Frontier experience here.)

We do not gainsay the commercial realities facing incumbent carriers.  We do not gainsay their rights to defend themselves in the marketplace by any legal means afforded them.   We bear no animus towards their actions with PURA and the legislature; it is what they must do.   It is a battle joined by the natural conflict between commercial necessities and universal service, between private enterprise and the public good.  They often align; we would be nowhere without the inventive power and capacity to grow networks of incumbent carriers.  But now they do not serve everyone, probably cannot serve everyone.  So we are where we are with roads—municipalities must take responsibility for part of the network to have a network with universal service and the latest technology at all.  This is true everywhere in America. This is the heart of the fight over §16-233.

Back to the story—Litigation Of Course

Three groups brought suit against the PURA ruling: the Office of Consumer Counsel (OCC) with Manchester, New Haven, and West Hartford; the Connecticut Conference of Municipalities (CCM) representing 100 Connecticut communities; and Sharon as a coattail for Northwest Connect, representing in effect 25 communities in the northwest corner. We filed in the late summer of 2018. Briefs (and legal bills) flowed like water from both sides.  Those defending PURA included PURA, Frontier, the Communication Workers of America, and a trade association representing cable television companies.  The contest thus took the form of communities against carriers at the outset.  Oral arguments are now scheduled for 25 April; a ruling will come forth from the Appellate Court within four months after.  Unless the Court remands the issue back to PURA, the losing side will appeal to the state supreme court, and wait it out for at least two more years. (You can read the various court documents here   .)

The PURA ruling is not without superficial weight—free pole access does seem like a competitive advantage. While we believe all the arguments against glisten with absolute truth, there is no assurance that the court will agree. Furthermore, the nature of the PURA ruling means that no outcome will officially endorse the rights of communities to build their own networks.  Appellate courts can only rule on the record.  The record does not include an analysis of relative cost structures in the broadband network community.  Thus the court can do no more than uphold the PURA ruling or send it back for more work, either directly through remand or indirectly through reversing PURA’s reasoning on grounds of insufficient evidence; the court cannot declare from the record that free pole access does not constitute a competitive disadvantage. (The appellants’ argument that PURA does not have jurisdiction could also be upheld by the court, ending the matter in our favor, but we think that extremely unlikely.)

Reroute to the Legislature

It became clear to many of us that the best solution to the problem (as we see it) was legislative; make §16-233 absolutely clear in its intentions, with an overt or clearly implied demand that municipalities be authorized to build fiber optic networks to residences and businesses, as happens now in so many other states.  Thus three legislators introduced a bill to amend the language of §16-233 accordingly. It was assigned to the Energy and Technology Committee, where such matters are hashed out before asking the entire Congress to wrap its head around the problem’s complexities.  That committee decided to combine this suggestion with two others to create Senate Bill (SB) 846.  The two additions are: (1) a requirement that PURA adopt so-called One Touch Make Ready procedures similar to ones issued by the FCC in July of 2018 to make the process of attaching new wiring to existing telephone poles much more efficient; and (2) a set of rules for the proper fiscal management of municipal networks, including the establishment of an Enterprise Fund to channel money in and distribute money out.

This bill was passed out of the Committee on March 19 by a vote of 18 to 7.  It will now be considered by the Congress as a whole. It requires majority votes in both houses, and then a signature by the Governor.  It is subject to amendments as it winds through this part of the mill. One such amendment already suggested would preclude municipalities from “selling” its right to pole access to a third, private party without pole fees, that is, the third party would have to pay pole fees.  It is a reasonable if potentially confusing demand, as it prevents communities from simply handing the free pole use to, say, a cable company who now has to pay pole fees.  However, the pole fees themselves are not of sufficient size to determine winners and losers in the broadband market when municipalities enter.

The Arguments

The Committee held public hearings before passing the bill on.  Some 45 people provided written comments.  Some represented organizations such as PURA, DEEP, AT&T, AARP, and Northwest Connect.  The split was the same as the litigation.  Everyone representing a community or a community association (the vast majority of comments) favored the bill for all the reasons given on this web site.  Comments from PURA and DEEP focused more on removing the compulsion in the bill to have new pole attachment regulations completed by the end of the year, asking that PURA alone settle on new rules.  Curiously, PURA did not defend its own ruling on municipal gain.  All comments can be found at https://www.cga.ct.gov/asp/menu/CommDocTmyBillAllComm.asp?bill=SB-00846&doc_year=2019.  For what its worth, we offer the comments from Northwest Connect here.

The response from AT&T bordered on the hilarious.  While intoning the common canard about unfair competition arising from free pole attachment, it handed out all the false news items incumbents parade before congress year after year, that Connecticut is so advanced, that competition is pushing the state to next generation networks, that 5G is coming so fast that nothing else need be done (this by implication).  But the high point was observing that municipalities had more important things to spend money on, like education, public safety, and transportation, and they should not be squandering their dear tax dollars on competing with private carriers.  If we measure Connecticut just by the number of potentially gigabit connections available to homes today, we would be a third-world country, with none. Broadband has become as important as education, public safety, and roads.  Indeed, many critical community functions now require universal broadband services.  Other than its efforts around 4G and 5G, AT&T isn’t even in the mix; they sold their Connecticut telephone network to Frontier, so dedicated are they to the future of Connecticut.

Perhaps the most telling argument was the absence of one.  No incumbent carrier represented to the Committee that they were committed to universal broadband heading for gigabit speeds throughout the state, or anywhere in the state for that matter.  These have to be the cardinal questions to carriers: when are you going to really serve everyone, not just say you are, and when are you offering gigabit symmetric speeds, as can be obtained now in many other states?  Answers like “we don’t believe demand is there now” or “our plans are being formulated around those goals” or “trials will begin soon in select markets” are equivalent to “we haven’t any real plans for such a thing in Connecticut yet.”  And that would be the real answer.

Is There a Happy Ending?

PURA recently asked contestants around §16-233 litigation to suspend oral arguments until after this legislative sessions on grounds that passage of SB 846 would render the litigation moot.  The contestants have agreed with the condition required by Frontier that if the bill passes they have the right to rebrief the question before the court, no doubt to observe that the new law does not address the inequity of free pole use. As the question of free pole use has also concerned some congressmen, an amendment has been proposed by the Office of Consumer Counsel that would require municipalities to pay pole fees unless the municipality can demonstrate that pole use was to provide services to homes otherwise unserved (the language is rather convoluted).  However, as pole fees themselves do not constitute a significant cost (or competitive advantage) it does not constitute a significant competitive disadvantage, and it would not surprising to see this bill pass, if it passes, with pole fees restored under any circumstances.  This may fell like a loss, but the substantive benefit of §16-233 is its grant of power to communities to create and own a broadband network at all, and that would be gained.

The Political Divide

We are divided, perhaps as never before, between two political parties.  Democrats tend to be suspicious of large corporations, Republicans tend to defend them.  As the carriers involved in this dispute are all huge corporations, they naturally elicit suspicion from one side and support from the other.  We are advocating a middle road, indeed, a road for both sides.

We are not proposing that communities get into the network business by themselves; most wouldn’t know how to start.  We are proposing that communities think about networks like roads, something that abets communications as roads abet transportation, but are not the thing itself.  We are proposing that communities pay for and own the trunk wiring on poles or underground, just as they pay for and maintain roads.   But we are proposing that private carriers do the rest, in a fully competitive manner.  If the state were to adopt this model, wire the whole state, it could open up the drop wire and consumer side of the business to every existing carrier who would then really compete for user business without having to make huge capital commitments before hand.  This is the only sensible model that truly fulfills the intentions of the 1996 Telecommunications Act for competition and investment in broadband andthe provision of universal service at the same time.  It is the perfect blend of central control and free market forces, a blend we have become so used to in other areas that we forget how successful they have worked. Our sewer systems, our transportation systems, our education systems, our health care systems, our national defense systems, rely crucially on public/private partnerships in which portions of each system are owned and operated by the public and other portions are owned and operated by the private sector.  We just have to face the fact that broadband communications have reached the same state, for the same reasons, as these other business sectors.

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