Telecom companies fighting to curb competition from public sector

KUTZTOWN, Pa. — Two years ago, this small college town thought it was blazing a trail for other Pennsylvania communities when it built a publicly owned fiber-optic network to deliver cut-rate Internet, telephone and cable TV service.

Then, in late 2004, Pennsylvania lawmakers bowed to the wishes of Verizon Communications Inc. and the state's other local phone providers, passing a bill that gives the companies the power to squelch any new forays into telecommunications by municipal governments.

The legislation, prompted by the companies' worries that other towns would follow Kutztown's example, marked the industry's latest victory in a series of similar clashes across the country.

Cities and towns from San Francisco to Philadelphia, viewing access to advanced telecommunications as pivotal to prosperity, are aggressively seeking ways to provide high-speed Internet connections, wired or wireless, for citizens and local businesses.

But telephone and cable TV companies have responded by flexing political and financial muscle at the state level, arguing that government has no business getting into their business.

So far, about a dozen states have passed measures either restricting or banning public sector efforts to deliver telecom services, while similar legislation has been introduced in about a half dozen other states.

And in related battles, Bellsouth Corp. is suing a North Carolina town that is leasing space on its fiber-optic network, while SBC Communications Inc. and Comcast Corp. mailed fliers and ran newspaper ads in Illinois last year to help defeat a three-town referendum on building a fiber network.

Opponents of Pennsylvania's new curb on public competition say they were overwhelmed by a lobbying effort led by Verizon, which has spent millions of dollars in recent years to sway legislators and other state officials and even bolstered its well-connected lobbying team by hiring Gov. Ed Rendell's former campaign manager.

The competition provision was slipped inside a wider piece of legislation that carried other regulatory concessions for the phone companies. To help win support for it, Verizon agreed to pony up as much as $60 million for school Internet connections.

Kutztown's technical services director, Frank Caruso, says he thought state legislators would view publicly provided services as good for development in towns like Kutztown, a community of 5,000 in eastern Pennsylvania where the horse-drawn carts of the Amish are common on town streets.