DISCONNECTED: Charting The Charlotte Observer's Failure To Cover The Fight For Internet Access In North Carolina

››› ››› BRIAN POWELL & SALVATORE COLLELUORI

CORRECTION: Media Matters has identified a serious error that resulted in the omission of several Charlotte Observer columns and articles discussing municipal broadband during the time of this debate. We cannot support our earlier conclusion that the Charlotte Observer did not inform its readers on the issue of North Carolina's "digital divide" over the past two years. Media Matters prides itself on a long history of accuracy in its media studies, and we apologize for the error.

Over the past two years, North Carolina's largest newspaper, the Charlotte Observer, has almost entirely ignored efforts to restrict broadband internet access for thousands of North Carolina residents -- efforts that proved successful after passage of the "Level Playing Field" law in 2011, effectively prohibiting underserved North Carolina communities from creating their own municipal broadband networks. Broadband internet access boosts a community's economic output and quality of education, creates jobs, increases government efficiency, and reduces the costs of doing business, but the readership of the Charlotte Observer was left in the dark on the debate.

What Is Municipal Broadband?

Municipal Broadband "Is The Building Of A Public Broadband Infrastructure" That Can Be Used For A Variety Of Purposes To Serve The Public. From CNET:

Municipal broadband is the building of a public broadband infrastructure that can be used as a platform to offer things like free public Wi-Fi in city spaces.

But free Wi-Fi paid for by taxpayer dollars and subscriptions to residential service is not its only use or business model. [...]

Public broadband infrastructure can be used to host applications for managing municipal services like surveillance, meter reading, controlling traffic lights, and administering databases, media and proprietary communications systems for police, firefighters, first responders and municipal workers. It can be used to offer things like VoIP for residents. [CNET.com, 6/6/07]

PTI Report: "Municipal Fiber Networks Can Increase Efficiency, Reduce Costs, Expand Opportunity And Help America's Public And Private Institutions Better Serve Its Citizens." According to a report by David Chaffee & Mitchell Shapiro published by Public Technology Institute:

Among the key lessons learned from these pioneers is that well-planned and well managed muni-fiber operations can pay for themselves. In fact, it is reasonable to expect that financial success will be even easier for future projects, given that FTTH construction costs have already fallen by as much as 40% from the prices paid to deploy the first generation of muni-fiber networks.

As this report has shown, investments in municipal fiber networks are not only able to generate enough revenue support their costs. Perhaps more importantly, they can provide a 21st century electronic equivalent of the 20th century public road network.

Like that road network, which was funded as a long-term investment in public infrastructure, municipal fiber networks can increase efficiency, reduce costs, expand opportunity and help America's public and private institutions better serve its citizens. And, in doing so, they can help revitalize local and regional economies, enhance the quality of life in American communities, and help these communities compete in a global marketplace in which other nations have taken an early lead in leveraging fiber's power. [Public Technology Institute, 2008]

Municipal Fiber To The Home [FTTH] Broadband Systems "Have Generally Been Successful To Date" With An Average Of 54% Of Those Offered The Service Subscribing To The System. According to a report by the Fiber To The Home Council:

Municipal FTTH [Fiber to the Home Broadband] systems have generally been successful to date. In some cases, as expected, projects have had to deviate from their original business plans in order to respond to realities and ensure success in the field. A number of systems have far exceeded original expectations, while a few others are behind early expectations... As of this printing, not a single muni FTTH system has failed.

In the case of muni systems, of which many are not for-profit enterprises, one measure of "success" is defined as the level of their "take rate" - that is, the percentage of potential subscribers who are offered the service that actually do subscribe. Nationwide, the take rates for retail municipal systems after one to four years of operation averages 54 percent. This is much higher than larger incumbent service provider take rates, and is also well above the typical FTTH business plan. Deployments usually require a 30-40 percent take rate to "break even" within planned payback periods. [FTTH Council, October 2009]

Report: "Many Communities Have Found That Public Ownership Is The Only Way They Can Achieve A Truly Competitive Information Economy." According to a May 2010 report by the New Rules Project:

At the local level, these communities understand that their interests are quite different from massive corporations. Companies have a fiduciary responsibility to do what is best for their shareholders, which may mean putting off network upgrades in rural communities and charging as much as the market will bear. However, unreliable networks and high prices hurt all citizens and businesses, which is why "public v. private" mischaracterizes the decision. The decision is between the needs of a whole community and one or two absentee companies.

Many communities have found that public ownership is the only way they can achieve a truly competitive information economy. A community with no power to create competition by requiring the private cable company to share its lines with competitors may choose to build its own network and allow independent service providers to compete fairly - creating a true market for broadband services. Rather than having to beg for upgrades to remain competitive, the community has the power to choose how quickly to invest in new technologies. Owning the network means an end to paying monopoly prices - and keeping that money in the community rather than exporting profits to distant shareholders. Given the supreme importance of broadband for modern commerce, owning the network is a key element of self-determination. [New Rules Project, May 2010, emphasis added]

ILSR: Municipal Broadband Initiatives Are Doing What Private Companies "Have Largely Refused To Do." From the Institute for Local Self-Reliance:

It should be understood that public entities are doing what the private entities have largely refused to do: overbuild existing networks. Most Americans have a choice between a single cable provider and a single DSL provider. The big cable companies have refused to compete with each other each other; Time Warner Cable has no interest in going head to head with Comcast. The largest telephone companies, AT&T and Verizon, have ceased their investments in next-generation wired networks to focus on higher returns from wireless investments. [Broadband At the Speed of Light: How Three Communities Built Next-Generation Networks, ILSR.org, April 2012]

Rural Communities Are At A Distinct Disadvantage When It Comes To Broadband Penetration: According to a study funded by the Rural Cellular Association:

[T]he broadband supply gap represents a critical issue for states with a considerable rural economy. While at the national level, unserved or underserved broadband households represent 6.1% of all households, this metric increases dramatically in rural geographies, for example reaching 14.0% in Kentucky, and 21.8% in West Virginia. Obviously, the supply gap, which measures service coverage, does not equate to penetration, which measures adoption of broadband. However, the rural lag still exists: while national broadband penetration has reached 64% of households, in Kentucky it is 54% and in West Virginia it is 52%.

It is expected that, even under universal coverage conditions, a portion of the non-adopting households would not be subscribing to broadband service simply due to demand issues such as affordability and educational factors. Nevertheless, unless these communities are given the opportunity to connect to the Internet, they will remain permanently marginalized and the economic penalty would be significant. [Rural Cellular Association, 2/24/11, emphasis added]

North Carolina And Other States Have Banned Or Severely Restricted Municipal Broadband Initiatives

North Carolina Passed The 'Level Playing Field' Law Restricting Municipal Broadband Initiatives. From the Triangle Business Journal:

The hope of extending a broadband network being built by the town of Chapel Hill to the municipal school system and to UNC-Chapel Hill has been thwarted by a new law that prohibits local governments from selling such service. [...]

The town's plans for its $500,000 network were changed with the passage of House Bill 129, titled "Level Playing Field/Local Government Competition" on May 21. [...]

The broadband law, which restricts municipal networks from selling high speed internet, essentially barring them from the consumer market, was passed after a five-year battle between municipal leaders across the state and the proponents of the bill, Time Warner Cable and CenturyLink. [Triangle Business Journal, 6/17/11, via Nexis, emphasis added]

  • North Carolina's Anti-Municipal Broadband Law Will "Make It Almost Impossible For Cities To Build Their Own Broadband Networks. From Ars Technica:

The North Carolina bill is called the "Level Playing Field/Local Gov't Competition" act, intended to "protect jobs and investment by regulating local government competition." Opponents call it just the opposite--a cable industry-backed proposal intended to make it almost impossible for cities to build their own broadband networks. [...]

Apparently intended to prevent unfair competition from tax-subsidized business, the rule would actually put public networks at a disadvantage; private networks have long been able to offer "loss leader" offers and intro pricing to get people to sign up, and the large ISPs can all use profits from one area to subsidize below-cost prices in another. [...]

The bill has been so controversial that cities like Asheville and Raleigh, the state capitol, have passed resolutions urging the bill to be voted down. Raleigh's resolution asked the General Assembly to "promote competition by curtailing predatory pricing practices that are used to push new providers and public broadband services out of the market" and to "reject any legislation similar to the Level Playing Field bills that would have a chilling effect on local economies and would impede or remove local governments' ability to provide broadband services, including WiFi, to enhance economic development and improve the quality of life for their citizens." [Ars Technica, 3/30/11]

  • Law Passed Despite Report Showing NC Is Home To Seven Of The Top Ten Worst Broadband Deals In The Country. From TechJournal.org:

Craig Settles, of Successful.com, a consulting firm with a heavy emphasis on municipal broadband and government use of mobile tech, tells us, "What we have here is a handful of corporations going into some of the most broadband-deficient states in the country, and subverting communities' efforts to claw their way into the digital 21st Century. These entrenched incumbents are trying to pass rules that would make even Google's support (similar to the Kansas City Gigabit City announcement) illegal. At least we're now getting some attention from DC."

That's not just talk. Bandwidth.com, which does broadband mapping, shows that seven of the ten U.S. cities with the worst broadband connections at price per Mbps are in North Carolina. They include Greensboro, Winston-Salem, Raleigh, Cary, Durham, Wilmington, and Charlotte. Columbia, SC, is also on the list. South Carolina is also considering a bill to restrict municipal broadband. [TechJournal.org, 4/5/11]

Nineteen States Have "Enacted Barriers" To Municipal Broadband Networks. From the Institute for Local Self-Reliance:

Nineteen states in the U.S. have enacted barriers to either make it difficult or impossible for communities to build publicly-owned networks. The map below displays states with barriers based on our analysis of whether they have an outright ban, a de facto ban, or various barriers to communities owning this essential infrastructure.

As peer nations surpass U.S. capabilities in broadband networks - the key infrastructure in the 21st century - eighteen states have decided to make it more difficult for their communities to build for themselves what the private sector will not. [MuniNetworks.org, accessed 4/4/12]

Three States Are Attempting To Enact Municipal Broadband Restrictions In 2012. According to the Baller Herbst Law Group, who has compiled a history of municipal broadband-related legislation, three states -- Georgia, South Carolina, and Minnesota -- are in the process of limiting publicly-owned networks in 2012. [Baller.com, accessed 4/4/12]

The Charlotte Observer Ignores Attacks On Municipal Broadband While The News & Observer Informs And Debates

The Charlotte Observer Has Mentioned "Level Playing Field" Once Since The Bill's Original Text Was Filed. The Charlotte Observer has discussed North Carolina's digital divide three times since April 2010, but only once since February 2011, when the "Level Playing Field" bill was filed:

  • June 2010: In the "Regional briefs" section, the Observer briefly notes that the NC Senate Finance Committee approved a bill that would "impose a freeze on cities and towns that want to sell cheaper, faster Internet service than companies offer." [Charlotte Observer, 6/3/10, via Nexis]
  • October 2010: A news item describes the impetus for a conference held by the Alliance for Digital Equality -- drastic disparity in broadband Internet access along socioeconomic lines. [Charlotte Observer, 10/1/10, via Nexis]
  • April 2011: The only item published after the introduction of the "Level Playing Field" bill discusses the restrictive effects the law will have on the already established municipal network MI-Connection. [Charlotte Observer, 4/13/10, via Nexis]

In Contrast, Raleigh's News & Observer Has Provided Significant Coverage And Debate On Municipal Broadband Initiatives In Over A Dozen Items. Since April 2010, the News & Observer published 13 items furthering discussion of the push to ban municipal broadband in North Carolina -- over four times the coverage provided by the state's largest newspaper, the Charlotte Observer. The coverage included:

  • Five straight news reports updating readers on Time Warner Cable's unsuccessful 2010 attempt to put a moratorium on municipal broadband development, the tens of thousands of dollars Time Warner and other telecoms spent to push through the "Level Playing Field" law in 2011, and Gov. Bev Perdue's (D) refusal to veto said law. [LexisNexis, 4/4/10-4/4/12]
  • Four guest columns discussing the pros and cons of a ban on municipal broadband initiatives. [LexisNexis, 4/4/10-4/4/12]
  • Three letters to the editor opposing the "Level Playing Field" bill. [LexisNexis, 4/4/10-4/4/12]
  • One editorial questioning whether large corporate campaign contributions affected legislators' decisions to restrict municipal broadband. [LexisNexis, 4/4/10-4/4/12]

METHODOLOGY

The above is a record of mentions of the "Level Playing Field" bill in the pages of North Carolina's two largest newspapers (the Charlotte Observer and Raleigh's News & Observer) during the bill's debate and after its controversial passage. The search was based on LexisNexis records going back two years (4/4/10-4/4/12), using a broad string of terms to ensure all related stories would be caught (string: broadband OR "municipal broadband" OR "community broadband" OR "municipal internet" OR "community internet" OR "municipal communicat" OR 129).

(NOTE: Wire service reports appearing in a newspaper are not always included in the Nexis database.)

Posted In
Economy, Trade
Show/Publication
News & Observer, Charlotte Observer
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Corporate Ethics, Telecommunications
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