Tales of the Sausage Factory: Ohio the New PA? I don't think so.

It appears to be my day to pick on poor Esme at the truly amazing and wonderful Muniwireless website. Recently, she published this article on Ohio House Bill 591. Esme and others think it is the next in a series of bills like the recent HB 30 signed into law by Governor Rendell. Me, I’m not so sure. My analysis of Ohio’s 591 (and why, even if stupid, it is not evil) below.

No one can accuse me, I hope, of being either soft on the incumbents or naive about their wiley ways. But sometimes a cigar is just a lousy, stinkin’ smelly piece of chewed up leaves and not a hidden explosive device.

Such is Ohio’s HB 591. A stinky weed it may be, but not a cause for major alarm. Still, I hope anyone in Ohio who reads these words will (a) educate the good legislators about the problems and (b) make sure the bill is not hijacked by the forces of darkness for their nefarious purposes.

Unlike other bills, it seems to me that this is really designed to be a technical correction to a previous bill regulating municipal cable. The previous law already contained all the key provisions. The only changes are to extend the provisions on municipal cable to “telecommunications services.” This is not unreasonable, since the much ballyhooed convergence of cable and telecom is going on and the 1996 Act explicitly encouraged cable and telephone providers to get into each other’s business.

So already we have something of a presumption of innocence, as opposed to wholly new vehicles introduced by incumbents to create new laws for themselves. Still, incumbents are sneaky little buggers and I am not inclined to be charitable. Lets take a look under the hood . . .

O.K., flipping through the sections on this episode of “Lawyer Eye for the Activist Guy (Gal),” We come to the first critical question. The Act does not speak to or define broadband at all (contrast this with PA HB 30, which explicitely included any broadband services of any flavor). It speaks of “telecommunications services,” a term of art as defined in the Communications Act and by the FCC. Is municipal broadband (of whatever flavor) a telecom service? This is a major debate at the FCC and policy circles generally. This may or may not be determined by the litigation in Brand X v. FCC, which is getting briefed to the Supremes and may or may not be argued sometime this term. (i.e., either April or October 2005 for oral argument).

Section 1332.01 (R) defines “telecommunications service” and “telecommunications equipment” with reference to the definitions in the Telecommunications Act of 1996 (which are fully incorporated in the Communications Act of 1934, as amended, so I will continue to refer to the sections of the Communications Act).

Section 1332.04 (A) requires any political subdivision of the state to provide cable or telecom services through the provisions of this section. I’d need a local lawyer well versed in Ohio law to know if this impacted State colleges. This statute limits itself to “political subdivisions” rather than just any publicly funded entity. (Another difference from PA, which cast a broad net over any publicly funded entity.)

1332.04 (B) prohibits any political subdivision from favoring its own cable or telecom system over a private system or showing any special treatment for its own systems. This is arguably problematic in that it potentially does not allow a municipality to offer free use of public property to municipal systems. It will need to charge itself a reasonable price for lamposts and so forth. Also unclear if it can give a CWN special terms. OTOH, it is usually regarded as non-discriminatory to say “we will make space free for anyone who agrees to provide service free or at reduced costs. For those wishing to charge [whatever], we will charge $X for use of public property.”

In any event, however, it clearly does not prevent a municpality from offering a system.

Another potentially problematic, but not fatal to muni systems, provision is 1332.04 (B)(1)(d), which prohibits any subsidy of public systems from “public money” as defined in Section 1332.01. So any municipal system would need to be entirely self-supported. The term “public money” is arguably broad enough to include any indirect cost savings and any contributions of property, but I don’t think that is intended.

We now come to Section 1332.04 (C), which has generated considerable alarm in some quarters. Those alarmed interpret this provision as a limitation on serving more than 50% of the local service area. This somewhat mistates the case. The prohibition is on serving “extraterritorial” recipients. I take “extraterritorial” to mean “outside the boundary of the political subdivision.” In other words, if the Town of Harold decides to set up a cable or telecom service, it cannot service customers outside the borders of the Town of Harold unless the number of customers outside the Town of Harold is 50% or less of the customers inside TOH (if I am servicing 100 customers in TOH, I can service an additional 50 customers outside of Harold). The provision explicitly permits joint service by multiple municipalities, so a consoritium of political subdivisions can team up and share cost and expand a system logically. It does require all municipalities to pay based on a statutory formula, so Richville cannot subsidize Poorville.

I think this is poor public policy, but it does not strike me as inherently evil. It appears designed to prevent localities from competing for businesses in neighboring franchise areas. I can’t say I love it (if the system is good, why shouldn’t Richville subsidize Poorville), but it is not as bad as some have read it. And there is a colorable argument that if muncipal systems are justified on the grounds that they represent a decision of local citizens to spend public money on infrastructure, that justification does not extend beyond the political boundaries of the subdivision.

Section 1332.04(D) prevents a municipality from discriminating against the transfer of a private system to another private holder. OTOH, I don’t think it does more than restate the standard found in the Communications Act. Congress preempted state power in 1984, and partially restored it in 1992. I don’t think Ohio takes more away from its local franchising authorities than Congress.

Section 1332.05 Requires extended public notice before a political subdivision can do anything relating to offering such services, including sending a special letter to potential competitors saying “Hi, we’re thinking about setting up a competing system and we invite your comment.” While a bit onerous, it is not a killer.

1332.06 has to do with raising and spending public money for the project and how to do the accounting and issue financial reports. It requires municipalities to keep money related to public cable or telecom systems separately and to account for it separately from the general funds. It also requires publication of the accounting. I imagine this is designed to ensure public oversight and prevent any hidden subsidies. Again, while probably a nuisance, it should not be so onerous as to kill potential systems. And the state and citizenry do have a real interest in monitoring how these things are administered.

1332.07 says that if a political subdivision violates the terms of the agreement, any private systems get to enjoy equivalent treatment. Much of this last section describes court review and arbitration proceedings.

So, as I say, I may quibble with some of the provisions, but I can’t regard it as evil incarnate. OTOH, I hope the people of Ohio keep an eye on it. I should hate to see this get modified into something truly awful while no one is looking.

Stay tuned . . . .