Earlier this decade, several N.C. cities were piling up multi-million-dollar debts trying to offer broadband services. It was so bad, the new Republican majority passed the Level Playing Field Law in 2011 to:

  • stop (some) unfair competition
  • require new local government broadband systems to comply with the same federal, state, and local laws binding their private competitors
  • prevent required subscribership from individuals or developments
  • end the use of cross-subsidization to cover losses and price services below cost
  • forbids local governments from using bonds not approved by voters to fund the services

To sum up: Cross-subsidization, unfair competitionand taxpayers being on the hook for service costs were particularly bad problems leading to the Level Playing Field Law.

But look at what HB 431 would do:

  • let a local government to build broadband infrastructure and service to lease to a private company
  • expressly allow the local government to use property taxes, revenue bonds, and other unrestricted funds to fund it
  • create an exemption in current law so that the lease could extend up to 25 years

Then it would:

  • exempt the system from the Level Playing Field Law.

In writing about HB 431 in Carolina Journal, I asked:

Are legislators less worried than they used to be about governments getting intertwined in private markets and raising taxes and costs on their own citizens? That would be a shame if so. Especially if the real costs of the service were hidden in property tax hikes instead of direct service costs.

This sleight-of-tax is exactly the sort of cross-subsidization problem the General Assembly of 2011 sought to prevent.

Who would compete against a company awarded such a lease? The local government would build the company’s infrastructure, charge the locals for it in their involuntary role as taxpayers (not as voluntary consumers), and lease it to a chosen “winner” company.

It’s unlikely a small innovator would take on a propped-up competitor. But maybe a new entrant with a next-generation idea could. Either way, local taxpayers would still be paying for the infrastructure on lease, obsoleted or not.