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from: Wilson Times

Bill would protect monopolies
Tuesday, May 29, 2007

The short title of the bill is "The Local Government Fair Competition Act," but the honest title should be "The Monopolies Protection Act."

The bill, which is in committee in the N.C. House, would establish a series of hurdles for local governments seeking to provide communications services, including telephone, cable television and Internet connections. While some of the provisions can be justified, others are transparently intended to discourage cities or counties from creating competing networks, such as the fiber-optic network the city of Wilson is already installing.

The bill, whose sponsors include House Majority Leader Hugh Holliman and former Speaker Harold Brubaker, would for the first time require the N.C. Utilities Commission to regulate a municipal function. None of the usual municipal utilities — water, sewer, electricity or natural gas — is regulated by the Utilities Commission, which was established to protect consumers against monopolistic corporate giants. Because consumers are also voters and can change leadership at the next election, municipal utilities have been considered self-regulating.

House Bill 1587 changes that by requiring cities with communications networks to apply to the Utilities Commission for rate changes.

The bill establishes additional hurdles. Two public hearings would have to be held on any communications network proposal, and a detailed business plan would have to be filed for public inspection. These are not unreasonable provisions, and Wilson has already complied with these conditions.

However, the bill also requires a public referendum on any financing for the system. Because these networks are expensive (Wilson's estimated cost is $28 million), financing will be a necessity. While the bill requires a referendum, like a general obligation bond, it does not allow municipalities to repay the bond in the manner of a general obligation bond. In fact, it might make it impossible to repay the bond.

The bill forbids securing or repaying the bonds with anything other than revenues generated by the enterprise. It forbids paying any costs related to the bonds from "the local government's general fund or public enterprise funds." Because those are the only kinds of funds a municipality has, the bill essentially forbids making bond payments. And because it requires these networks to pay the equivalent of corporate and other taxes to the general fund, it requires the enterprise to subsidize the city.

Municipalities should not blend tax revenues and enterprise revenues. All enterprises should be self-supporting, including electricity, natural gas and communications. But making it impossible to finance improvements does not level the playing field.

If this bill passes, cable monopolies will be unstoppable.