The People v. Time Warner

By Ryan Goldberg  APR 28, 2009 9:45 AM

Community cable providers take on industry Goliath.

 


In the city of Wilson, North Carolina, with a population of about 50,000, a real-life David-and-Goliath story is developing. Wilson -- which is roughly 45 minutes east of Raleigh, the state’s capital -- is David; 2 corporate cable providers -- Time Warner Cable (TWC) and Embarq (EQ) -- fit nicely into the role of Goliath.

Wilson’s residents, like many other Americans, had long complained about how much they were expected to pay for  Internet, cable, and telephone. In 2006, the city decided to do something about it: It launched Greenlight, its own Internet service provider (ISP). The ambitious program cost $28 million and delivered services essentially at cost.

Greenlight now offers expanded basic cable (81 channels), Internet service at 10 Mbps (download and upload), and a digital-phone plan with unlimited long distance to the US and Canada - all for $99.95. Time Warner -- which served Wilson for about 30 years -- offers a comparable plan, yet with fewer channels and lower upload speeds, for $137.95 - and that's an introductory rate, which can increase dramatically over time. In addition, Greenlight also offers a premium package at speeds that blow Time Warner away.

So did Time Warner invest in improving its product or lowering its price? Of course not - instead, it teamed up with Embarq, spending millions of dollars lobbying the state government to outlaw community services like Greenlight. They’ve nearly succeeded: North Carolina’s State Senate has recently proposed bills to not only effectively cripple or ban local services, but also to prevent such services from getting funds under the broadband portion of the national stimulus bill.

The story reveals the oligarchically cozy relationship between big business and government in the United States - a partnership more commonly found in emerging markets (otherwise known as banana republics).

The US's broadband infrastructure would make a former Soviet bloc country blush. Rural areas are often stuck with slow dial-up or expensive satellite Internet service. Even urban centers lack better high-speed service options, as the increasing deregulation of the telecommunications industry has helped prop up monopolies - which then have no incentive to improve broadband speed or lower costs.

The city of Wilson, when it started Greenlight, found itself on the cutting edge of the American municipal broadband movement. Along with more than 50 other municipalities, Wilson is trying to correct this huge gap between what the telecom industry provides and what America needs.

Legislators in North Carolina’s state assembly are doing their best to stymie progress. Although Time Warner and Embarq argue that they can’t compete on a level playing field against public investment like Wilson's, their argument rings rather hollow. Given their monopolistic control and multibillion-dollar coffers, are they really so cowed by local mom-and-pops? And even if they are - what does that say about their management practices?

The argument also stinks of hypocrisy, since Wilson approached Time Warner and Embarq with its idea first, according to local newspaper IndyWeek. But the cable companies, unwilling to cut into their profit margins, refused.

Now, the city of Wilson isn’t giving up: It's urging state government to reject the initiative. A blog for Greenlight says that almost 3,000 citizens are already subscribing to the network after less than a year of residential service.

Brian Bowman, the city’s Public Affairs manager, writes: “If the cable/phone companies really want a level playing field, they’d open their books just like we do in the spirit of open meetings and open records law. They don’t want a level playing field. They want to be the only team on the field."

He continues, “Bottom line, these companies are using your state lawmakers to protect monopolies.”
No positions in stocks mentioned.

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