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New Broadband Law in North Carolina blocks Municipalities from entering the Broadband Market. May 27, 2011

Posted by TelUS Consulting Services in Data Networking catagory.
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Gov. Bev Perdue on Friday criticized a bill that restricts municipalities from building and operating broadband Internet systems, but said she would not use her veto power to block it. Instead, she urged the legislature to reconsider the issue, which had been championed by the cable and telephone lobby. By not signing it, Perdue is symbolically signaling her displeasure.

“I will neither sign nor veto this bill,” Perdue said in a statement. “Instead, I call on the General Assembly to revisit this issue and adopt rules that not only promote fairness but also allow for the greatest number of high quality and affordable broadband options for consumers.”

The governor said there is a need to establish rules to prevent cities and towns from having an unfair advantage over private companies. But she said she was concerned the bill would decrease the number of choices available to consumers. The bill would require towns and cities that set up broadband systems to hold public hearings, financially separate their operations from all other government operations, and bar them from offering below cost services. They also couldn’t borrow money for the project without voter approval in a referendum.

The five cities that now offer the service – Wilson, Salisbury, Morganton, Davidson, and Mooresville – would be largely exempt from the bill’s provisions.

The measure was opposed by the N.C. League of Municipalities, which argued that towns in less populated areas should be able to obtain better broadband services than private companies are willing to offer in order to attract industry.

Time-Warner Cable, which has been pushing for the legislation since 2005, has argued that it ought not to face competition from tax-paid sources. Time-Warner’s political action committee has contributed at least $214,000 to state candidates since 2008, most of them state legislative candidates, according to campaign finance records.

This ruling could present a serious challenge for rural residents desperately seeking broadband services. Providers such as Time Warner have little incentive to serve rural areas with high speed services as the financial returns are usually not there.

This ruling does however appear to present a window of opportunity for such infrastructure plays as Cadence Infrastructure (http://www.cadenceinfrastructure.com) who has been advocating a public-private partnership for broadband infrastructure growth. As companies increase their reliance on broadband service, such plays will become more prevalent if ruling such as this continue nationwide.

Joe Buck, NCE

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