Florida Has Strict Regulations About Municipal Fiber Projects, But Lakeland May Be Grandfathered In: What You Need to Know
UPDATE: During the commission hearing on 12-2-19, Lakeland’s interim city attorney Palmer Davis stated that he had spoken with the law firm that had helped to draft the bill about the “grandfather clause” and that Lakeland most likely would not be able to fall under the grandfather clause. This changes the dynamics a bit, but in an effort to stay transparent, LakelandFiberNOW is leaving the post public
Back in the 2010s, there was a push from many municipalities to build networks and connect their citizens with fiber internet. Cities like Chattanooga, TN, Utah’s UTOPIA, and Fort Collins, Colorado were busy building networks to supply their citizens with the internet. Entrenched providers felt threatened; they had enjoyed regional monopolies in their respective areas for decades and were not happy that citizens were fed up with poor service and inadequate speeds. So instead of investing in their networks and improving customer satisfaction, Telcos spent millions lobbying policymakers to shore up their monopolies using laws restricting the right of communities to build their own fiber networks.
In Fort Collins alone, Telcos spent 1 million dollars to lobby and smear the installation of these networks. Florida was not far behind, thanks to the millions spent by these Telcos, it has its own law that significantly restricts the rights of Floridians to build these networks. That law is entitled “350.81 Communications services offered by governmental entities” and was passed in 2012. In the following paragraphs, I want to take a close look at the law and try to decipher the loopholes Lakeland has to jump through if it decides to build its own network.
This law is onerous and filled with legalese, and to be fair I am not a lawyer, so please don’t take this like an expert’s advice on the subject, I invite anyone to correct me or point out fallacies. You can email me directly at [email protected] or leave a comment below.
Before I begin, I’d like to state that I think that the city of Lakeland may be exempt from a lot of these laws. It is my understanding that Lakeland registered in the ’90s as a communications provider, and this law specifically exempts many of these provisions. I will go over that law further down.
Okay, so I’m going to paste key parts of the law and then try to suss out the details afterward.
Public Hearings Requirement
“A governmental entity that proposes to provide a communications service shall hold no less than two public hearings, which shall be held not less than 30 days apart. At least 30 days before the first of the two public hearings, the governmental entity must give notice of the hearing in the predominant newspaper of general circulation in the area considered for service. “-350.81
So here is one of the first things this law requires. The city MUST have at least two public hearings about the project. These hearings are actually a lot like what the city has already done with the community forums. There are a dozen or so requirements these hearings must have, and I’m pretty sure those were all covered in those meetings. What I don’t know is if the city made an official announcement, so it may be required to do it over again.
“A governmental entity providing a communications service may not price any service below the cost of providing the service by subsidizing the communications service with moneys from rates paid by subscribers of a non-communications services utility or from any other revenues. “350.81
This rule makes it to where the price of the service must be higher than the cost of the service being issued. So if the cost to deploy the fiber costs 25 bucks a month, the city must price the service at 25 dollars or higher. I see no problem with that, except in situations where the community may want to give people with low incomes internet at reduced rates. But because the law states that it can’t come from non-communications services, that means that we could give some people who need it cheaper internet as long as the entire operation is self-sustaining. Basically, Lakeland couldn’t use Lakeland Electric rates to subsidize the cost of the service- a fair comprimise.
Where Can Lakeland Build Its Network?
“(e) The governing body of a governmental entity may issue one or more bonds to finance the capital costs for facilities to provide a communications service. However:
A governmental entity may only pledge revenues in support of the issuance of any bond to finance providing a communications service:
a. Within the county in which the governmental entity is located;
b. Within an area in which the governmental entity provides electric service outside its home county under an electric service territorial agreement approved by the Public Service Commission before the effective date of this act
c. If the governmental entity is a municipality or special district, within its corporate limits or in an area in which the municipality or special district provides water, wastewater, electric, or natural gas service, or within an urban service area designated in a comprehensive plan, whichever is larger, unless the municipality or special district obtains the consent by formal action of the governmental entity within the boundaries of which the municipality or special district proposes to provide service. For consent to be effective, any governmental entity from which consent is sought shall be located within the county in which the governmental entity is located or that county.
This is kind-of important because it delegates the service area Lakeland can offer its internet in. It must be within Polk County or within the service area of Lakeland Electric. So I think we’d be good for this as long as we stay in the service area of Lakeland Electric.
The Poison Pill
“(l) If, after 4 years following the initiation of the provision of communications services by a governmental entity or 4 years after the effective date of this act, whichever is later, revenues do not exceed operating expenses and payment of principal and interest on the debt for a governmental entity’s provision of communications services, no later than 60 days following the end of the 4-year period a governmental entity shall hold a public hearing at which the governmental entity shall do at least one of the following:”
This is the ultimate poison pill for municipal broadband and the big-daddy problem for any municipal fiber project. The issue is the forced profitability at the 4-year mark. Building a fiber network is not easy, it takes a lot of time, and none of it is “trendy” or “modernized”. It takes actual people. People armed with shovels, pickaxes, directional boring machines, bucket trucks, and bulldozers. This takes a lot of time and manpower. There are other issues too, it takes for people to become aware that there is even a fiber network available to them, exit their existing contracts with their current network and join the network. All of these issues mean that it takes time to carve a path to profitability.
The length of time for these projects to become profitable takes longer than four years. And this law requires that these projects become profitable within that time period or 1 of 4 things happen:
“1. Approve a plan to cease providing communications services;
1) Approve a plan to dispose of the system the governmental entity is using to provide communications services and, accordingly, to cease providing communications services;
2) Approve a plan to create a partnership with a private entity in order to achieve operations in which revenues exceed operating expenses and payment of principal and interest on debt; or
3) Approve the continuing provision of communications services by a majority vote of the governing body of the governing authority.”
The first three are a total non-starter. Nobody would “dispose or cease” the use of the fiber that would be worth millions installed. The 4th is the interesting one: Basically, we’d have to have a public vote on if we wanted to continue the fiber project. If the vote passes, then the project continues, if not, then we have to dismantle the program. For me, this is a risk. I could not reasonably tell you how the voting public would perceive the project four years after its inception.
The Grandfather Clause
“(4)(a) If a governmental entity was providing, as of April 1, 2005, advanced services, cable services, or telecommunications services, then it is not required to comply with paragraph (2)(a), paragraph (2)(b), paragraph (2)(c), paragraph (2)(d), sub-subparagraph (2)(e)1.c., paragraph (2)(f), or paragraph (2)(k) in order to continue to provide advanced services, cable services, or telecommunications services, respectively, but it must comply with and be subject to all other provisions of this section.”
Some have said that Lakeland may be exempt from many of these rules and I think they may be right, at least for the majority of the rules. Lakeland is already a licensed communications provider and has been for over 20 years. Because of that, Lakeland may be grandfathered in. I just have one lingering question; they did not exclude 2(L), which is the poison pill mentioned above. Because the city operated a municipality in the 1990s and made the investment back then, then the time to profitability would have been the 1990s+4 years. What’s Your Opinion?