The North Carolina bill is called the "Level Playing Field/Local Gov't Competition" act, intended to "protect jobs and investment by regulating local government competition." Opponents call it just the opposite—a cable industry-backed proposal intended to make it almost impossible for cities to build their own broadband networks.

Whatever you call it, H129 passed the state's House of Representatives on Monday 81 to 37. Its sponsor, Marilyn Avila (R-Wake), told WRAL TV that the legislation would protect businesses from "predatory" local governments that want to build their own ISPs. "We have to have some sort of framework that everybody understands when you go into this," she explained. "This bill is going to establish those rules."

Baloney, responded Rep. Bill Faison (D-Orange). The law will "make it practically impossible" for cities to provide a "fundamental service," he insisted. "Let's be clear about whose bill this is. This is Time Warner's bill."

Limitations

Let's be even clearer about what is at stake in this fight. Muni networks are providing locally based broadband infrastructures that leave cable and telco ISPs in the dust. Nearby Chattanooga, Tennessee's city owned EPB Fiber Optics service now advertises 1,000Mbps. Wilson, North Carolina is home to the Greenlight Community Network, which offers pay TV, phone service, and as much as 100Mbps Internet to subscribers (the more typical package goes at 20Mbps). Several other North Carolina cities have followed suit, launching their own networks.

In comparison, Time Warner's Road Runner plan advertises "blazing speeds" of 15Mbps max to Wilson area consumers. When asked why the cable company didn't offer more competitive throughput rates, its spokesperson told a technology newsletter back in 2009 that TWC didn't think anyone around there wanted faster service.

When it comes to price per megabyte, GigaOm recently crunched some numbers and found out that North Carolina cities hold an amazing 7 of 10 spots on the "most expensive broadband in the US" list.

So what appears "predatory" to Avila might look like "competition" or even "faster, cheaper service" to others. In any event, here's what's in the legislation. Some of it seems reasonable. Other parts have us scratching our heads.

Below the cost

Avila's law wouldn't entirely apply to existing municipal ISPs, but it would completely apply to new ones. The reasonable bits include requirements that city plans to build a municipal network be accompanied by plenty of public hearings, open process, and opportunities for private companies to offer counter proposals. Projects seeking to provide service to "unserved areas" also get greater leeway. The general philosophy of the bill seems to be that any muni broadband network launched by a city ought to make a profit.

Interestingly, the law stipulates that new city ISPs must make it easy for private providers to use their ducts and conduit. The city service must provide "nondiscriminatory access to private communications service providers on a first-come, first-served basis to rights-of-way, poles, or conduits owned, leased, or operated by the city unless the facilities have insufficient capacity for the access and additional capacity cannot reasonably be added to the facilities."

Then comes this strangely worded provision stipulating that a muni network:

Shall not price any communications service below the cost of providing the service, including any direct or indirect subsidies received by the city-owned communications service provider and allocation of costs associated with any shared use of buildings, equipment, vehicles, and personnel with other city departments.

Apparently intended to prevent unfair competition from tax-subsidized business, the rule would actually put public networks at a disadvantage; private networks have long been able to offer "loss leader" offers and intro pricing to get people to sign up, and the large ISPs can all use profits from one area to subsidize below-cost prices in another.

Then there's this requirement for how muni ISPs must calculate their "cost":

The city shall, in calculating the costs of providing the communications service, impute (i) the cost of the capital component that is equivalent to the cost of capital available to private communications service providers in the same locality and (ii) an amount equal to all taxes, including property taxes, licenses, fees, and other assessments that would apply to a private communications service provider, including federal, State, and local taxes; rights-of-way, franchise, consent, or administrative fees; and pole attachment fees.

Beyond city limits

The proposed law goes so far as to require the network to pay to the city's general fund the same as "all taxes or fees a private communications service provider would be required to pay the city or county in which the city is located."

Note that the bill stipulates that cities would pay all taxes "that would apply" to a private provider, not the actual taxes that the relevant providers pay.

Finally, the proposal would limit any new service to "within the corporate limits of the city providing the communications service." Some communities, like Chattanooga, have made a big push to expand vital fiber optic lines into their surrounding rural communities; the North Carolina bill would prevent this.

The bill has been so controversial that cities like Asheville and Raleigh, the state capitol, have passed resolutions urging the bill to be voted down. Raleigh's resolution asked the General Assembly to "promote competition by curtailing predatory pricing practices that are used to push new providers and public broadband services out of the market" and to "reject any legislation similar to the Level Playing Field bills that would have a chilling effect on local economies and would impede or remove local governments' ability to provide broadband services, including WiFi, to enhance economic development and improve the quality of life for their citizens."

North Carolina's state Senate must now decide whether to pass H129 and send it to the governor's desk. Previous attempts at passing a bill like this have failed, but the state now looks quite close to turning the idea into law.