• by Wendy Davis  @wendyndavis, May 6, 2009

Commercial Internet service providers will face off today against broadband access advocates in North Carolina, where lawmakers in the House public utility committee are slated to vote on a proposal aimed at preventing municipalities from offering broadband service in the state.

Internet service providers Time Warner and Embarq are backing the measure, which imposes a host of potentially crippling financial terms on cities and towns that want to build high-speed Internet networks.

Among other provisions, the law would prevent cities from using revenue from other public utilities to finance broadband networks. The measure also appears to prevent cities from using federal stimulus funds -- including the $4.7 billion Congress specifically allocated to improve broadband -- to build new networks.

The incumbents argue that the financial terms will prevent towns from gaining an unfair advantage over commercial providers. "We think there needs to be a level playing field if the municipalities that we pay taxes to are going to compete with us," says Marty Bocock, director of governmental affairs for Embarq.

But opponents to the measure say it is aimed at protecting incumbents from competition. Among the critics is Google, which this week sent a letter to the North Carolina House warning that the measure "will thwart public broadband initiatives, stifle economic growth, prevent the creation or retention of thousands of jobs, and diminish quality of life in North Carolina." Other signatories include Alcatel-Lucent, Educause and the Telecommunications Industry Association.

Consultant and analyst Craig Settles says that around two dozen cities throughout the country have built their own municipal broadband networks -- and that jobs have followed. "They're creating a pro-business resource, from which the city generates revenue," he says.

Settles adds that some towns that have provided broadband have seen a surge in people running home-based businesses, such as eBay stores. Also, at least one town in Louisiana was able to use its fiber-optic network to lure a new call center to the city, generating 600 new jobs, Settles says.

Three towns in North Carolina have already created their own networks -- largely because residents wanted faster and cheaper service than what the incumbents offered. The city of Wilson, for instance, built a fiber-optic network that offers residents service at Web speeds of 10 Mbps in both directions, more than 80 cable channels and a digital phone plan for around $100 a month.

"Even though we're a small city, we believe our citizens deserve the best service available. We asked the cable/landline companies to provide it and were turned down so we built it ourselves," writes Wilson's Public Affairs Manager Brian Bowman on SaveNCBroadband, a blog devoted to opposing the law. (Wilson would be exempt from the new legislation.)

A bill similar to the one in North Carolina is also pending in Pennsylvania.