by Phil Kent, SLF President
As appeared in Marietta Daily Journal, June 20, 2002
Despite new state law limitations on "unfair" competition between local governments like the city of Marietta and private cable TV and fiber optic providers, the end result may still be the same. Georgia municipalities, in cooperation with other "municipal" service providers, are finding ways around the ban through cross-subsidization.
The Local Government Cable Fair Competition Act of 1999 claims to stop local governments in Georgia from using taxpayers as the underwriters for maintaining ongoing cable TV and fiber optic services. Under the law, public funds may be used to develop such services.
In the face of valiant efforts by the cable industry to end public competition with private enterprise in Georgia, the Georgia General Assembly approved such competition if - and only if - a local government did not subsidize the maintenance of a public cable/fiber optic system. Apparently, the use of taxpayer funds to help create the new public companies was just dandy with lawmakers.
Marietta, among may cities in Georgia, is now facing serious questions about the feasibility of a city-based cable and fiber optic system. Private cable providers, concerned that local governments could create an unfair market advantage for themselves, stress that cross-subsidization (forbidden in the new law) thought use of vast public resources would undermine the marketplace.
Mariett FiberNet, a wholly owned subsidiary of the Marietta Board of Lights and Water, is scheduled to face an outside audit this month. The company has returned $3.1 million in red ink for the taxpayers' $31 million investment in infrastructure for the public company. The company is one of the first municipally owned firms to be certified as a "competitive" local communications carrier serving north metro Atlanta. An overriding question for the audit will be whether public dollars are funding the deficit-ridden municipal company - a fact that would jeopardize the legality of Marietta FiberNet.
In other cities, the vague law has been equally taxing for the public. The city of Trion, Georgia, for example, is turning to its citizens to fund bond issues to save the struggling city cable provider - to the tune of $1.2 million. With city reserves depleted, the money to make good the city's "investment" will have to come from other sources - taxes and utility billings.
In the city of Elberton, marketing materials make it clear that cross-subsidization is common practice. A recent flyer promises a $10 rebate on next month's energy bill if a home or business owner chooses to sign up for municipal cable service. This outrageous offer, seemingly innocent and perhaps a good deal for the consumer, is nevertheless a lousy deal for the taxpayer and utility ratepayer. A basic principle of Economics 101 is that someone will eat the cost for doing business. In this case, the tax/ratepayers are it.
Many cities are re-examining costly inefficiencies in providing basic services like water and waste collection. At a time when cities like Atlanta are privatizing such services to increase efficiency and cut costs, does it make sense for the same cities to enter the highly competitive, costly, and technology intensive cable and fiber optic markets?
More importantly, the 1999 state law is unclear enough to warrant a revisit. Specific bright lines need to be drawn to ban taxpayer indebtedness when municipalities choose to enter the highly competitive cable and fiber optic markets. The blur between public utilities and services, like water, electric, and gas, and the "value-added" services like cable and fiber optic, demand a full accounting in the court of public opinion, if not the courts of law.
