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Small America Vs. Big Internet

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Small America Vs. Big Internet

Small America Vs. Big Internet

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UNIDENTIFIED REPORTER, BYLINE: This is PLANET MONEY from NPR.

KENNY MALONE, HOST:

When we met Grant Goings a few months ago, he was holding a copy of the local newspaper, and he was so proud of the story on the front page. It was about this new kind of municipal Uber system in his town.

GRANT GOINGS: So for, like, a buck fifty, you can call. They come pick you up, take you to where you're going. We're super excited.

WILSON SAYRE, HOST:

Grant Goings is a total, wonderful civics nerd. And for the past 15 years, he's been the city manager of Wilson, N.C.

MALONE: The city of Wilson has a population of about 50,000 people. Its downtown is full of these giant, old brick warehouses that used to be filled with tobacco, but now there's a microbrewery, a few barbecue restaurants.

SAYRE: The city has managed to transform itself into a manufacturing town. They attracted Bridgestone tires and Merck pharmaceuticals, but they were starting to worry about keeping those businesses.

MALONE: Because by the time Grant got to Wilson in the mid-2000s, the city had a problem - its Internet. They were hearing from businesses that the Internet - not so great. And maybe worse, they were also hearing from the Little League parents.

GOINGS: Facilities would go down frequently. And so someone would be halfway through registry to kid. There would be some type of break in service. They'd have to start all over again.

MALONE: Crashed Little League registration in 2005 - I mean, come on. In other parts of the country, people were discovering Nickelback on LimeWire with no problem. The Internet could be so much better.

SAYRE: So Grant Goings called a meeting with the local Internet provider, Time Warner Cable, and the local telephone company.

GOINGS: And then we sat down, and we basically had a few asks. So No. 1 was we asked them to heavily invest in upgrading the system. We'd sort of felt like we knew that answer at the time.

MALONE: Yeah.

GOINGS: No interest.

MALONE: Yeah. The answer was no. Time Warner Cable, now Charter, didn't agree to an interview for this story, but you can understand their answer there. Like, why would the existing company invest a ton of money just to wind up with the same customers they already have? It's a questionable business decision at best.

SAYRE: But that's OK. No problem. Grant had prepared option No. 2, partner with us. What if Wilson pays to build the top-of-the-line Internet infrastructure, fiber-optic cables? Then Time Warner could offer their service over these superfast lines the town had built.

GOINGS: The answer to that question was, we're the second largest cable provider in the country. Why would we partner with you?

SAYRE: Which only left option No. 3. The city would do it alone. Grant told Time Warner, fine, we're going to build and run our own fiber-optic network.

GOINGS: And that's when the laughing started. And they very quickly exited after that.

MALONE: Wait; they literally laughed at you in your office?

GOINGS: Absolutely, yes, and have admitted that.

SAYRE: Did that, like, light a fire for you?

GOINGS: Well, it did for me.

MALONE: That's the day that you said...

GOINGS: It's on.

MALONE: It's on.

GOINGS: Yeah.

(SOUNDBITE OF LIAM COOKE AND PAUL GREEDUS SONG, "MAN WITH NO NAME")

MALONE: Hello, and welcome to PLANET MONEY. I'm Kenny Malone.

SAYRE: And I'm Wilson Sayre - no relation to the city of Wilson.

MALONE: No. And not only would Time Warner Cable laugh in the city of Wilson's face, they would actively fight to stop the city from building faster Internet. It is a fight that has now spread to dozens of other states. We started reporting the story before the pandemic, but it's more relevant than ever because this is a big part of the reason that it's very hard to move to little towns around the country and make a living working remotely.

SAYRE: Today on the show, what happened when the city of Wilson decided to try and battle its way through all the legal thicket to start its own Internet provider. And also, should cities even do this at all?

(SOUNDBITE OF LIAM COOKE AND PAUL GREEDUS SONG, "MAN WITH NO NAME")

MALONE: Professor, how are you?

CHRISTOPHER YOO: I'm attempting to update my last two years of data into my spreadsheet, but I don't mean to keep you waiting.

MALONE: I will never stand between a person and their spreadsheet. I get it.

SAYRE: Christopher Yoo is a law professor at the University of Pennsylvania. He specializes in technology and the Internet. And in his spreadsheet is essentially the story of what happened to other cities that tried to do what Wilson, N.C., was trying to do - build and run their own fiber-optic network.

MALONE: Christopher says there are about 20 case studies with good data, as in separated audited financial statements.

YOO: Those are the data that Wall Street depends on to make its investment decisions. And more importantly, that's the things you can go to jail for if you lie about.

MALONE: (Laughter).

YOO: So, I mean, it's the best quality data we have. And I want to know what the story is. And there are some horror stories.

SAYRE: What Christopher's study found is that most cities very quickly get in over their heads. Many cities don't think about their Internet projects like a fire department or a library, where the service will almost certainly lose money, but that's fine. You make sure to budget for it.

MALONE: Instead, cities tend to assume these fiber-optic networks will pay for themselves. They borrow millions and millions of dollars and are often screwed because one of a million things goes wrong.

YOO: People forget that running a telecom company is a full-time job.

MALONE: Yeah.

YOO: Many other cities proceed on the belief that if they build it, they will come. And it takes a special talent and a lot of time to run an enterprise of this size.

MALONE: To run this like a business, you got to know about fiber splicing and network design and drop arrangement, customer service, customer acquisition, marketing.

YOO: We elect politicians for many things, but ability to market telecom products usually isn't one of them.

MALONE: Yes. And all of this has left a bunch of cities - like, struggling cities that really need money - on the hook for millions and millions of dollars because of bad Internet company decisions.

SAYRE: Christopher's not saying that no city should ever start their own fiber-optic Internet company. He's just saying there is a very good chance this goes very badly.

YOO: There are - many leaders have a huge temptation to put their stamp on something. And I think that it's important that people take a cold, hard look at what the numbers really say.

SAYRE: We brought this up with Grant Goings, Wilson city manager.

MALONE: Being an Internet service provider is something that is done by a handful of companies, Fortune 500 companies. And here is Wilson, a city of 50,000, saying, yeah. All right, we'll give it a shot. Like, that does seem...

GOINGS: It's bold.

MALONE: Bold is - yeah, bold.

GOINGS: Yeah. And it's not like those aforementioned companies were going to help us figure this out.

SAYRE: Right. The city of Wilson was on their own. So Grant went to the state capital, Raleigh, to try and get approval to take out around $30 million - big money for a city whose operating budget was roughly 250 million.

GOINGS: The state treasurer turned to us in the audience and said, congratulations. I hope you guys have tremendous success and that it will put some pressure on the private providers to invest in their infrastructure.

SAYRE: And with that, the city of Wilson stepped into the minefield of becoming a municipal fiber-optic Internet company.

MALONE: Step one - just, you know, the small matter of, does anyone here actually know how to do this?

GOINGS: There are skill sets that we didn't have anyone on staff that, for example, knew how to splice fiber.

MALONE: I mean, it's a knife and, like - I don't know.

GOINGS: No, it's highly intricate welding of just minute pieces of glass.

SAYRE: As luck would have it, there was a network engineer with fiber skills.

GENE SCOTT: Well, I am from Wilson, so it's personal to me to a point.

SAYRE: Gene Scott was working for the local phone company. He quit that job to try and make this fiber-optic network work for his hometown.

MALONE: And Gene remembers there was this early realization that as a few people started signing up for Internet and TV service, suddenly, the city had to deal with a lot of those people's Internet and TV service problems - very, very basic ones.

SCOTT: One of our early customers was an elderly gentleman. You know, and he had a set-top box with a DVR we put in for him. You know how you have to set those on, like, Channel 3 and you use your old remote? Well, he would accidentally, you know, every week or two, knock it off Channel 3. And he'd call in, and we'd try to walk him through that, and he would get confused.

MALONE: Essentially, all of our grandparents were now the problem of the city of Wilson.

SAYRE: Gene says the technicians got to know this guy, so they'd say, it's fine. I'm on my way to lunch and I can swing by and turn his TV back to Channel 3 so his DVR will work again.

SCOTT: And we don't charge for that.

MALONE: They didn't have to charge for all kinds of stuff because they were just trying to break even in the long run. And so, yeah, free channel changing, but also free hookups and rates that for this top-of-the-line service were relatively cheap and competitive with Time Warner.

SAYRE: But Grant Goings says what they were learning was that running an Internet company was really running a customer service company to some degree. So they hired more customer service people.

GOINGS: The local customer service element was probably, like, the most popular thing. You know, they'd call, and they're talking to someone on the other end of the line that went to high school with them.

MALONE: Right.

GOINGS: You know, and they're like, oh, yeah. I know where you live. We'll have a truck over there in 30 minutes or something. And so, like, these stories, they just sort of took a life of their own.

SAYRE: The city had calculated that in order for this to work, they needed to steal away about 30% of the Internet and TV market. They're heading for closer to 40%. The city was beating the odds, on track for a successful homemade fiber-optic Internet company.

MALONE: But that is when Grant started to hear the rumblings. Something weird was happening in the state capital.

GOINGS: We were hearing some rumors that there were a lot more lobbyists in Raleigh. And y'all might want to start paying attention to this. There are apparently some folks talking about a law that would make it illegal for cities to do what you're doing.

MALONE: Clearly targeted at you.

GOINGS: Oh, without a doubt.

SAYRE: The city of Wilson had stepped into the middle of something much bigger and much uglier. That's after the break.

In the late 2000s, Grant Goings had gotten word that this mysterious legislation was about to show up, effectively making the city of Wilson's Internet project illegal. And this is a big problem in large part because they had already borrowed tens of millions of dollars. And if they suddenly couldn't collect money from the Internet and television subscribers, they were in deep, deep trouble.

MALONE: So Grant headed to Raleigh, the state capital, to see what was going on. And the city of Wilson, for the first time ever, had even hired a lobbyist. They were ready to go to the capital and fight whatever was happening.

GOINGS: So, yeah, we - I guess we really thought that we were playing in the big leagues. We got a lobbyist and we walked up there and realized that the other side had almost 40.

MALONE: (Laughter).

GOINGS: So it was a real naivete on our part, I think, about just how difficult these battles in the General Assembly would be.

SAYRE: That army of lobbyists - telecom companies. Because simply put, why would you not try to kill off your new competitor?

ALISON KODJAK: It's really - I mean, it's a little bit that simple, but there's something more complicated in how they spin it.

MALONE: Alison Kodjak is an investigative editor at The Associated Press. If she sounds familiar, it's because she was our colleague at NPR for a while. And she's covered the battle over municipal Internet quite a bit in her career.

SAYRE: And she says if you zoom out and look around the country, you'll see that Wilson was just one piece of this bigger pattern.

MALONE: When Provo, Utah, announced their plan to build a fiber-optic network, a law popped up in the state legislature essentially blocking city Internet companies in Utah.

SAYRE: When Lafayette, La., announced a municipal broadband effort, same law popped up there. And parts of these laws were word-for-word the same.

KODJAK: You know, insert your state name here, your city name, your name, maybe a couple of particulars.

MALONE: Like a mad lib-style bill?

KODJAK: Kind of, yeah, a mad lib-style bill. I haven't thought of it that way. You know, very often, these bills are almost word for word, introduced state after state after state.

MALONE: This is a very specific kind of strategy, Alison says, by the telecom industry, by companies like Time Warner. Instead of trying to get one big federal law to kill off city Internet, you do it state by state. You quash the insurrection as it crops up.

SAYRE: And it's obvious why Internet companies want this. Instead of just competing with these newcomers on price or service, go beat them at a different game - lobbying, politics, glad handing. But the reason lawmakers sign on is more complicated than just donations from the industry, though there are donations.

KODJAK: I don't want to say - you know, these lawmakers aren't necessarily bad intentioned. They are people who believe in, you know, private enterprise and competition.

MALONE: And you can hear some of these lawmaker concerns in what unfolded in the case of Wilson, N.C., and what happened in the North Carolina General Assembly.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED PERSON: We're going to start the hearing on H129, Level Playing Field/Local Government Competition.

MALONE: The Level Playing Field bill was a version of the bill that Grant Goings had been warned about. And the playing field was allegedly unlevel because the government was playing on it.

The argument being made in the North Carolina General Assembly was that the government should not be competing with private sector companies. Even a city government is a big, powerful entity that could leverage that power unfairly. The government, for example, might not have to pay taxes, or it could even subsidize its own service with taxpayer money if things started going badly. Those are not things the private company can do.

SAYRE: The city could be pushing out an actual market competitor and maybe future better competitors. Why would a new company show up in Wilson if they have to compete with the city of Wilson?

(SOUNDBITE OF ARCHIVED RECORDING)

MARILYN AVILA: I am a definite limited government, free market individual, and I just felt like that we were allowing a competition that was unfair to the marketplace.

MALONE: This is Marilyn Avila. She's the lawmaker who sponsored the Level Playing Field bill in North Carolina.

SAYRE: She didn't agree to be interviewed for this story, but she did talk a lot about the city of Wilson back when this was all happening - about how it could be risky for other cities to try this.

(SOUNDBITE OF ARCHIVED RECORDING)

AVILA: And this particular issue in my mind is that municipalities' core services are being damaged by this particular approach in getting out into the business world and committing the responsibility for that success or failure to a very finite group of people.

MALONE: Marilyn Avila was also getting some campaign money from the telecom industry, which gets to the sticky issue here. It is sometimes hard to tell where the genuine concerns stop and the industry influence starts because telecom companies, like Time Warner, had a lot of influence to throw around against the city of Wilson and Grant Goings.

GOINGS: I think at one time, somebody told me that the legal teams they had representing them had more employees than the city of Wilson, so...

SAYRE: So, yeah, Grant knew he was in for a fight at the state capital. If this Level Playing Field law passed, then the city of Wilson could end up eating their $35 million investment and miles and miles and miles of fiber-optic cable.

MALONE: So Grant was driving to the state capital, like, three times a week, trying to convince lawmakers, this is ridiculous. Time Warner doesn't want to provide this faster service for us, so why are you trying to stop us from doing it?

GOINGS: They had a huge advantage on us not just because of money and resources and lobbying and politics, but because they could sort of reduce their argument to one sentence, which was this is, you know, unfair government competition with the private sector, yeah. And, you know, to any American, that would raise a red flag.

MALONE: Yeah.

GOINGS: And we needed a few minutes of time to actually explain to people why we were doing what we were doing.

SAYRE: Grant noticed he seemed to get more time to speak when there were news cameras covering the story in the Statehouse. And so one day, when no press showed up, Grant thought, you know who does have cameras and microphones? The city of Wilson's public access television team.

GOINGS: And so I called our staff at 8 o'clock in the morning, and I said, go set up in this room. Just act like you're news media, you know, by asking questions. And so we faked them out to where they thought that the news media was in the room, and they let us speak.

SAYRE: Grant felt like he wasn't just fighting this for Wilson but for all the communities in North Carolina who might want to do what Wilson was doing. Grant and the city of Wilson did manage to fight off this Level Playing Field law three times. But in the end, they're just outgunned.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED PERSON: Next speaker, Grant Goings from - he's Wilson city manager.

MALONE: There's this moment that happened shortly before the Level Playing Field law is going to pass. This was maybe Grant's last chance to try to say something publicly before the state essentially kills his city's fiber-optic Internet project.

SAYRE: Grant goes up to speak to these lawmakers and says, look; even if you kill every future project, let us live. Our project is working. And also, we've already poured tens of millions of dollars into this.

(SOUNDBITE OF ARCHIVED RECORDING)

GOINGS: And so regardless of your opinion about municipal broadband, if you could put yourself in the seat of a city council member in Wilson, obviously, we think it's very important that we have a full and complete exemption for Wilson.

MALONE: The Level Playing Field legislation passed easily, effectively making it impossible for city governments to treat the Internet like a utility and provide that service to its residents.

SAYRE: And this same law, or slightly tweaked versions of it, has now been passed in around 20 different states. That's 20 different places where there's now this problem that has no solution. If you live in a rural city in Virginia or Alabama or Minnesota and you have terrible Internet or sometimes no Internet, it is incredibly hard for your government to step in and provide that service.

MALONE: And, look; maybe that is a dodged bullet for some places. The track record of cities saying, we can do this; it'll pay for itself - it often will not, and that is partly why private companies aren't there doing it in the first place.

SAYRE: But it also means that cities that could pull it off, like Wilson, they're not allowed.

MALONE: Except Wilson is allowed. Grant, maybe that lobbyist the city hired, they did manage to get an exception carved out. Wilson is allowed to operate their service, but they are prohibited from extending that fiber-optic network across the county line - a clear marker that this idea is contained and is not going to spread.

GOINGS: It was really - it was a sad day for us, and we weren't celebrating. Yeah, it was a disappointment for our state. I think we had hoped to set an example that maybe some other communities could follow.

SAYRE: And they really could have been a blueprint. Wilson did not become one of those fiber-optic horror stories. Wilson's Internet is affordable, reliable and sometimes even turns a profit. The city is even scheduled to pay off the project debt in the next two years. But basically no other town in North Carolina is allowed to try this now.

MALONE: On the flip side, that has turned the city of Wilson into this kind of oasis. It is one of the very few places you can go to get tons of space surrounded by beautiful farmland, world-famous barbecue and some of the fastest Internet in the country.

(SOUNDBITE OF ANDREW DAVID PROSSER AND MARK DAVID ALLAWAY'S "DIAMOND DOG")

MALONE: Have you found yourself stymied by a room full of lobbyists and a mad libs-style bill? I guess we'd love to hear about that. You can email us. We are planetmoney@npr.org. You can also find us on Facebook, Twitter, Instagram. We are generally @planetmoney. And we are also now on TikTok. If you would like to see what, like, a Dadaist, surrealist take on economic concepts looks like, find us on TikTok.

Today's episode was produced by Alexi Horowitz-Ghazi and James Sneed. Bryant Urstadt edits our show. Alex Goldmark is our supervising producer.

SAYRE: I'm Wilson Sayre.

MALONE: And I'm Kenny Malone. This is NPR. Thanks for listening.

(SOUNDBITE OF ANDREW DAVID PROSSER AND MARK DAVID ALLAWAY'S "DIAMOND DOG")

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