Cable Industry Pushes Back Against Obama’s Pitch for City-Owned Internet Services

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As President Obama on Wednesday promoted the idea of community-owned broadband as a way to boost competition and spur development of high-speed Internet, the cable industry pushed back, characterizing such Internet service as a taxpayer risk.

“While government-run networks may be appropriate in rare cases, many such enterprises have ended up in failure, saddling taxpayers with significant long-term financial liabilities and diverting scarce resources from other pressing local needs,” said Michael Powell, president and CEO of the National Cable and Telecommunications Assn., in a statement.

In his appearance in Cedar Falls, Iowa, Obama pointed to the city as an example of a community that invested in its own broadband service and has seen a dramatic increase in broadband speed as well as investment from private-sector companies, lured by the locale’s technological capabilities.

But Obama also targeted cable and telco Internet service providers, suggesting that the lack of choices in many markets is leaving consumers at “the whim” of those companies. He said that customers “wonder why … rates keep on getting jacked up when service … doesn’t improve.”

Municipal broadband, he said, creates new competition in markets where consumers have one or maybe no choice for high-speed Internet connections, ever more vital for business. “This isn’t just about your ability to stream Netflix,” he said.

In singling out major ISPs, Obama is taking on an easy target. Cable providers in particular often rank low in customer satisfaction surveys. The White House also has said that special-interest lobbying (i.e., the cable and telco industry) is to blame for some of the state laws that prevent cities and other local governments from offering their own Internet service.

Obama also is taking on an issue that may not need congressional approval. He’s also supporting a potential FCC action that would be done without congressional approval. The agency is considering a proposal to preempt state laws and free municipalities to offer broadband service.

In his statement, Powell defended the industry. “America’s decades-long policy of promoting private investment and exercising a light regulatory touch has yielded substantial benefits for American consumers,” citing a report that cable’s top broadband speeds actually have increased 3,200% in a decade.

FCC commissioner Ajit Pai, meanwhile, suggested that a move by the FCC to preempt state laws would be challenged in court.

“As an independent agency, the FCC must make its decisions based on the law, not political convenience,” he said. “And U.S. Supreme Court precedent makes clear that the commission has no authority to preempt state restrictions on municipal broadband projects. The FCC instead should focus on removing regulatory barriers to broadband deployment by the private sector.”

Another organization, the American Cable Assn., which represents smaller- and medium- sized Internet providers from the private and public sector, praised Obama’s speech but also warned that his approach to net neutrality could hurt investment. In November, Obama announced his support for reclassifying broadband as a telecommunications service, a move that supporters say would give the FCC a firmer legal footing to impose robust net neutrality rules.

Matthew Polka, president and CEO of ACA, said that if reclassification covers smaller broadband providers, it “will serve only to create disincentives to upgrade plant and expand service areas.”