Senate OKs Restrictions On Municipal Cable Systems
1:00 pm
Wed May 4, 2011

Senate OKs Restrictions On Municipal Cable Systems

Town and MI-Connection Communications System officials said Tuesday that legislation to set new rules for government-owned communications networks won't affect day-to-day operations of the system owned by Davidson and Mooresville. But they worry that the bill's proposed territory restrictions could hurt the system's value if the towns decided to exit the business.

The state Senate gave final approval on Tuesday to the"Level Playing Field/Local Government Competition" bill, which would set new limits on cities and towns that want to build communications networks and restrict where municipal cable TV, internet and telephone businesses can operate.

The bill specifically exempts a handful of existing systems from the new rules, including MI-Connection and city-owned systems in Salisbury and Wilson. But it limits where those systems can operate.

The Senate's 39-10 vote - without discussion - means the bill now goes back to the House of Representatives. Senate Bill 87 is a revised version of H129, which the House approved last month. The House now must either concur with the Senate amendments or the bill would go to a joint committee to reconcile the two bills. Once both Houses agree, a final bill would have be signed by Gov. Beverly Perdue.

Private cable and telephone companies, including Time Warner Cable, have sought legislation for years in North Carolina to limit competition from government-owned communications systems. The companies argue that municipalities have unfair advantages.

After the House approved the bill in March, Time Warner Cable applauded the vote, and a spokeswoman said the bill was"about municipal and private providers playing by the same rules."

The bill's opponents, including some cities and towns and the N.C. League of Municipalities believe local governments should be free to offer high-speed communications, especially in places where private companies have been unwilling to offer service.

'NOT A LEVEL PLAYING FIELD'

John Venzon of Davidson, who chairs MI-Connection's board, said Tuesday,"Overall, MI-Connection should be able to operate under the proposed legislation, although it certainly does not represent a 'level playing field,' despite the name of the bill. In fact, it further in restricts us. It imposes territory limitations, which are not imposed on our competition. Is that fair and level?"

MI-Connection currently has about 15,000 customers in Mooresville, Davidson, Cornelius and parts of south Iredell and north Mecklenburg counties. It's free to operate wherever it wants, just like a private company, as long as it files the proper paperwork with the state. It competes against private companies included Time Warner, AT&T, Windstream and satellite TV companies.

But the bill approved by the Senate Tuesday sets specific boundaries, encompassing the incorporated areas of Mooresville, Davidson, Huntersville and Cornelius, all of Iredell County south of I-40, except for Statesville and most of Mecklenberg County north of the I-485 corridor.

Davidson Mayor John Woods said Tuesday MI-Connection deserves to be treated the same as private companies."We strongly object to the territory limits that this bill will impose on MI-Connection which are not imposed on other broadband providers. In addition, MI-Connection would remain subject to open meeting laws, which do not apply to those other providers," he said.

Mr. Venzon also said local governments already face other rules that put them at a disadvantage to private competitors, including the requirement to operate under the N.C. Public Records Law. That"limits our board from operating as freely as a private company. Could we get access to the strategic plans, pricing strategies and competitive analysis for other broadband, cable and satellite providers? That would level the playing field," Mr. Venzon told DavidsonNews.net.

HARDER TO SELL

Some Davidson and Mooresville officials who were elected after the towns bought MI-Connection in 2007 have said publicly they'd like to see the towns sell it if they get the chance. At the moment, that's not possible because the towns still owe most of the $92.5 million they borrowed to buy and upgrade the network. If they tried to sell, they'd still be liable for the full debt, like a homeowner trying to sell a house worth less than its mortgage balance.

And Mr. Venzon said restricting the system's ability to expand could make an exit more difficult.

"Territory limitations are bad for free enterprise and in particular could limit our long-term value and the potential of our system. This could negatively impact our communities, the businesses we serve and the individual residents in Mooresville, Davidson and our surrounding communities," he said.

The bill's new rules would require cities and towns to get voter approval for any debt they issue to pay for communications networks. They also would have to hold public hearings on their plans. And since cities and towns are exempt from taxes, they would be required to make payments in lieu of taxes to themselves equal to what a private company would have to pay.

Tuesday's Senate vote was the second of two this week. As of 6 p.m., the vote tally had not been posted. On Monday night, the state Senate voted 37-9 in favor of the bill in a preliminary vote. Senators backing the bill in that earlier vote included state Sen. Fletcher L. Hartsell Jr. (R-Concord), who represents Iredell and Cabarrus counties. Sen. Malcolm Graham (D-Charlotte), who represents north and northeast Mecklenburg, voted against the bill.

RELATED LINKS

May 3, 2011,"Senate to vote on new rules for public data networks."

March 29, 2011,"House OKs bill to limit municipal broadband."

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