Verizon scores as telcos seek to crush municipal networks

Rethink IT, Jan, 2005

The relationship of government bodies and private operators has always been complex in the world of telecoms. Are communications a citizen's right, to be guaranteed at a fair price by the state; or a commercial product, to be decided by the free market? Deregulation and privatization of telcos round the world shifted the balance to the purely commercial, but the drive for broadband has redressed that somewhat, with most governments having some form of coverage target that regards broadband access as a basic right for the entire population, as well as a means to keep the country competitive.

Where remains fierce controversy, however, over whether state agencies should step beyond setting targets and capping prices, and actually take part in providing or funding services. Private telcos argue that governments should merely create conditions to stimulate investment in new services by commercial entities--rather than deter that investment by setting up competitive offerings fit prices that telcos cannot match. Their critics claim that the service offerings from the private sector have been of such a poor standard, and have largely ignored rural and poor areas, so that the public sector is forced to fill the gap.

While major regulators shift away from taking tight control of licensed spectrum services, they become nervous when addressing the anarchic world of unlicensed frequencies. Here, the absence of license fees and restrictions creates a competitive free-for-all and very low cost of entry for new operators, encouraging creative new services even in traditionally unprofitable areas such as rural communities. This has made the large telcos extremely wary of unlicensed technologies, especially Wi-Fi, find in the US, they have been wrongfooted still further by the trend for municipal authorities to offer public Wi-Fi and broadband wireless services, usually in the shape of hotzones, that blanket a city with free or low cost Wi-Fi access. The fear that such initiatives strike into the hearts of telcos is highlighted by a string of legal cases in the US where operators are seeking to prevent local authorities offering telecoms services, with a recent feud in Philadelphia, Pennsylvania at the center of the debate.

At the end of November, Pennsylvania governor Edward Rendell signed state telecoms legislation that, among its many clauses, would greatly restrict the ability of municipalities to offer telecoms services--a provision that had been lobbied for by local telco Verizon.

Verizon had also, citing the upcoming bill, challenged a plan by Philadelphia to create a citywide hotzone with low cost access for citizens. Although it is close to a compromise agreement on that particular project, this will not be applicable to other towns in the state, and it raises the wider issue of whether commercial telcos should be playing such a large role not just in creating legislation, but deciding when exceptions can be made to it.

The discussions--whose results will set precedents for other telco challenges to municipal hotzone plans--focus on allowing Philadelphia to go ahead with its citywide network, but making it hard for other cities in Pennsylvania to follow suit.

Verizon spokesperson Eric Rabe said: "We're willing to give them a formal commitment that we're not going to stand in their way", though details of the deal were still vague.

Under the new state legislation, municipal authorities would have to gain the local telco's permission to offer a commercial city broadband service such as a hotzone--though a wholly free network could be allowed. Should the telco refuse permission, it would have to launch a similar service itself within 14 months. Private networks are not affected by the laws.

The problem with a compromise with Verizon that affects only Philadelphia is that it makes that city the exception, in effect accepting that the new rules would be binding on other cities in the state with similar hotzone ambitions. It also sets a dangerous precedent that allows telcos to grant exceptions to a law, rather than legislators. Municipalities see subsidized Wi-Fi access as a means to make their cities more attractive to businesses, tourists and residents, and to help bridge the digital divide for poorer communities with services such as low cost VoIP.

Verizon said it would consider other projects on a case-by-case basis. Some threatened plans in Pennsylvania cities include fiber networks as well as Wi-Fi.

Tropos, the mesh specialist that is supplying equipment to Philadelphia, has written to the governor urging him to veto the bill on the grounds that it could slow down the roll-out of broadband and raise the cost of access. However, the clause about municipal services is only one in a far reaching piece of legislation that is designed to spur telco investment in next generation services in the state, and so the bill is unlikely to fail.

Even more extreme than the US situation is that in Spain, where the government has, in effect, barred any form of government funded Wi-Fi. The Spanish Telecommunications Market Commission (TMC) has shut down a Wi-Fi network that was up and running under the auspices of the Barcelona local authorities. This is despite the fact that the system is very limited in its uses mainly providing local information to tourists and residents in areas such as events listings. Access is free, but users can only surf about 60 web sites--which hardly seems to constitute unfair competition to commercial broadband providers.