Morganton officials oppose broadband bill; cable companies want fair competition

City officials say they oppose proposed N.C House and Senate bills that are meant to "level the playing field" between private communication companies and cities and towns who offer competing cable and broadband services.
The Morganton officials say the legislation — Senate Bill 1004 and House Bill 1252 — would be unfair and place unnecessary burdens on this city, which operates CoMPAS Cable, and other municipalities.
But lawmakers who introduced the legislation in the Senate say it is fair and that a city cable system should be able to support itself.
The legislation exempts municipalities already providing cable and broadband Internet-access. Morganton got into the business in 1993. But city officials say it wouldn't grandfather them in if they decide to offer telephone service.
Steve Settlemyer, the city's attorney, said the bill would seemingly prevent the towns from applying for federal economic stimulus money to offer broadband services. He's not sure whether stimulus money will be available to cities that already offer cable service.
Settlemyer said the bill places burdens on how Morganton would operate its system. Private companies don't have the same restraints, he said.
One of the restraints is not being able to move funds from one utility to another, even to pay a loan, Settlemyer said. That's something that private industry does all the time — transfers funds from one business division to another.
Ron George, the city's assistant manager, said there are years when its cable service has paid for itself and years it hasn't. He said CoMPAS Cable covers all of its operating costs, but not its debt-service payments from the system upgrade in 2004.
Another reason Morganton opposes the bill, Settlemyer said, is the legislation would make cities set its rates based on taxes it doesn't even pay, such as property taxes.
George said that means the city would have to pretend it has those costs and figure them into its rates.
Settlemyer said that would artificially drive up rates.
The bill also adds a level of regulation that private companies don't have, because it would require cities to submit audits to the N.C. Utilities Commission. Settlemyer said the commission doesn't regulate cable companies, but it does regulate telephone rates.
Time Warner Cable is one of the companies that wants the legislation passed. Melissa Buscher, director of media relations for the company's Carolina region, said the bill is about local governments' competing with private business with taxpayer dollars.
Buscher said the company welcomes competition from a municipality, but, "Simply put, we want everyone to abide by the same rules."
Buscher asked why a taxpayer should have to pay for a service they may not want or use.
She said that rather than using tax money, cities and towns wanting to get into the cable and broadband business should finance operations with the system's revenues. She said the trend among city systems shows, though, they are revenue-losers.
As for not serving certain areas, Buscher said her company is required to serve some areas as long as it meets Time Warner Cable's business model.
"We go to whole areas," Buscher said.
Sen. David Hoyle, D-Gaston, was the primary sponsor of the bill and Debbie Clary, R-Cleveland, Rutherford, was the co-sponsor on Senate Bill 1004.
Hoyle said he sponsored the bill because there's been some concern, mainly from cable and Internet providers, who say cities have an unfair advantage when it comes to offering the same services.
Hoyle said cities don't pay property or income taxes and they don't pay fees that private providers have to.
He said cities have huge powers over what goes on inside their corporate limits and they shouldn't make it disadvantageous for companies to do business.
Hoyle said cities can regulate cable and Internet companies "right out of business, and that's not right." He said private businesses should be able to compete fairly.
"They (cities) just shouldn't be given an unfair advantage because they have the power to do it," Hoyle said.
Clary said cities have the prime responsibility to provide basic services. Any time they overreach those basic services, it has the ability to be disastrous for the taxpayers, she said.
Clary said smaller cities also can't compete with major communications companies when it comes to keeping up with technology. When they try, she said, taxpayers end up paying more or the service eventually suffers.
Another unfair advantage cities have is using taxpayer money or funds from its other utility services to get into the cable or broadband business, say both senators.
Hoyle said he's been told that some cable companies won't provide services in certain areas and that is why he wants to hear both sides of the issue, he said.
The bill has been referred to the Senate Committee on Commerce. He is its chairman. At this point, Hoyle said, he's not sure what he will do with the bill.