published Wednesday, April 3rd, 2013

Pole tax: Government slows down broadband

Lawrence J. Spiwak

You probably don't give much thought to the wires attached to the utility pole outside of your home or business. Given current efforts by the Tennessee Legislature to increase radically rates that companies providing your Internet service provider must pay to government-owned and subsidized electric monopolies to attach to these poles, perhaps you should.

The expense of obtaining and using electric poles and other rights-of-way to deploy high-speed Internet services can amount to 20 percent of the cost of deploying modern broadband networks. Recently, in order to spur the deployment of high-speed Internet technology, the Federal Communications Commission called for reductions in the rates for pole attachments.

Increased deployment of Internet infrastructure is vitally important. According to Tennessee's Broadband Task Force, "high-speed Internet access is critically important to Tennessee's future, especially in jobs, education and health care." Indeed, it is widely held among economists, development experts and policymakers that the expanded availability and affordability of advanced communications services is vital to economic development.

In direct contradiction to the FCC's rational policy on reducing pole attachment rates, right now Tennessee's electric utility monopolies, such as EPB in Chattanooga, want the legislature to significantly increase the attachment rates paid to them by your Internet service provider. Pole attachment rates in Tennessee are already very expensive. The national average rate for pole attachments is about $8 a year for a cable company, whereas the same companies pay an average rate in Tennessee of about $18.55. That's more than twice the national average, and a significant deterrent to the widespread deployment of high-speed Internet services. Legislation presently being debated risks raising that rate even higher — nearly five times more than the national average.

Normally, it's the private sector that is accused of charging excessive prices. In the case of pole attachments in Tennessee, however, the guilty party is government. In some cases, including EPB, these government-owned and subsidized electric monopolies provide Internet services in direct competition with private sector Internet providers.

Tennessee's electric monopolies also contend that a lower price for pole attachments represent a "subsidy" to the private Internet service providers. There is not an ounce of truth in that claim. If there are costs to prepare the pole for an additional attachment, then the attaching provider pays those costs, and it also pays a monthly rental for the foot-or-so of space used as well as a contribution to the costs of the unused portion of the pole. The full cost of the attachment is paid for and then some. In doing so, economic science holds that no subsidy occurs.

Truth be told, economic analysis suggests that even this approach leads to attachment fees that are significantly in excess of those that best serve the public, implying that the current and proposed rates in Tennessee are grossly incompatible with good policy.

Expanding the availability of affordable high-speed Internet services is critical to Tennessee's economic future. If the Tennessee Legislature is truly concerned about its economy and its constituents, then calls for higher pole attachment rates should be rejected, and existing rates should, at a minimum, be reduced to reflect national standards. Efforts by government-owned and subsidized electric monopolies to extort the private sector, and in some cases prevent private-sector competitors from serving customers, should be rejected as anti-consumer and anti-competitive.

Lawrence J. Spiwak is the president of the Phoenix Center for Advanced Legal and Economic Public Policy Studies (www.phoenix-center.org), a non-profit research institute based in Washington, D.C.

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Volzman98 said...

Most people these days are cutting back on nights out. Taking the family to the movies, to dinner or a ballgame has become a rare treat. So family nights, watching movies or the Vols at home are more common. But a plan by Senator Bo Watson to raise our cable rates means fewer people will even get to enjoy even that small luxury. Watson is proposing that cable companies pay double their current cost to use public utility poles that deliver cable TV to our homes. Watson’s plan means that poles that are owned by the public will turn a higher profit for utility companies at the expense of those of us who pay the bills. Higher costs to the cable companies will mean higher costs for average families.

It’s about time politicians understood their efforts to help produce profits for their buddies have real consequences for real people.

April 3, 2013 at 4 p.m.
KatFloy said...

When Tennesseans elected a Republican Supermajority to the legislature, we did so hoping that Republicans would be better stewards of the public trust than we have seen in the past.

That’s why I was disappointed to learn about this proposal. This bill would nearly double the fees charged by public utilities for cable and internet systems to use electricity poles, leading to higher costs for providers and higher cable rates for the customer. Grover Norquist of Americans For Tax Reform has said this bill presents “massive barriers to private sector led growth.” As a Republican, I expect conservative leadership from the legislature. Schemes that result in greater profits for public utilities, larger burdens on consumers and hinder economic development don’t meet that test.

I will be asking my representatives to stand with the people and oppose this bill.

April 3, 2013 at 6:02 p.m.
anticorp said...

For the same reason Republicans oppose comprehensive immigration and a path to citizenship, they oppose broadband internet service to rural America.

Broadband internet is the 21st Century version of the Liberal education in public schools. As long as rural America's minds are melded to Fox News, Talk Radio and the Fundamentalist pulpit they can be propagandized and misled.

Tennessee is another Red State that is dwelling in the 20th Century, lagging behind and dependent on welfare from the rest of the country. They are one of the states that receives more money back than they pay in in taxes. With few exceptions, Republican controlled states fit this model. They are under educated and miss out on many entrepreneurial opportunities, education and health advances because of a dearth of information exposure.

April 4, 2013 at 1:07 p.m.
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