Sunday, July 03, 2005

Smoke, Mirrors, Doubt, Delay and Corporate Power

The Daily Advertiser today runs a story under the breathless title "PSC may sidetrack LUS fiber project." Take a deep breath, Lafayette. This is only a late, inconsistent, stack of staff recommendations. We can anticipate one clear message from the PSC commissioner and I predict it right now: "Take this mess back to your cubicles and come up with something that is at least consistent to show us." One consistent, if unfortunate, feature of this campaign has been quasi-sensational coverage from the Advertiser. It's just their style of coverage generally. Don't let it get your goat.

Ok..good...don't hyperventilate.

Now, some background: the first thing to understand is that folks have been waiting for this shoe to drop for a long time. This initial staff report was due months ago. It's now clear why it was so long delayed. The staff was wrangling internally and still hasn't reached any agreement.

The next thing to understand is that the Public Service Commission (PSC) is notoriously a creature of BellSouth in this state. The company is the state's largest lobbyist. Most of the reason BellSouth bothers to lobby the legislature is not simply to literally write law for the legislature to pass. (Both the (un)Fair Competition Act and the recent Broome bill were written by the incumbents. The Broome bill infamously, so: its author denied understanding what it meant.) Its interest in the legislature is almost purely a product of wanting to shape the laws the PSC interprets. Then they develop an intricate set of ties with staffers and ambitious elected commisioners to further shade the law in their favor. So it is natural, easy and obvious to BellSouth that its special role in the incumbent axis is to somehow get the PSC involved in a law they write and then manipulate it to a fare-thee-well. It is as natural as breathing, something they do without real, conscious thought. And it's a large part of what they wanted to do and what they accomplished in the "Local Government (Un)Fair Competition Act."

The third thing to grasp is that this story hitting the Sunday paper two weeks prior to the election is not accidental. It is Placement. Think about it: when was the last time you saw a front page, banner headline in the newspaper on news that was 9 days (9 days!) old. This was feed into the editorial machinery at the Advertiser late this week or yesterday. It was placed to run today. If LCG really knew of this on June 24th, they made a mistake in not going immediately to the press with what I've just pointed out. Most politico types seem to agree that for the incumbents, who are clearly way behind in this campaign, the moment is already past when they could have started a positive election campaign with any hope of success. It takes longer than two weeks to build a positive message...which is why you have been seeing Lafayette Coming Together ground-level advertising in the field. On the other hand, negative advertising takes less time. Fear, Uncertainty, and Doubt (FUD) is only about sowing enough misinformation and doubt to confuse the issue at the critical moment. Confusion doesn't last; it peaks and has to be properly timed. That, the politicos tell us, can be done in two weeks, 14 days. Today is 13 days out, a hair late, but Sunday is your best circulation day in the daily. This story was feed into the editorial machinery at the Advertiser, not on the 24th, but late this week with the idea of producing a story this weekend. You, my friends, can do the math. BellSouth has struck back.

The fourth thing to understand while reading this story is that the central purpose of BellSouth's law was always to stifle competition by making your LUS rates higher without raising BellSouth's (that was the (un)fair competition part). So it should be no surprise that BellSouth, through the PSC, should continue to pursue that theme. I've written about that at length, and won't repeat it here. (LPF on the PSC situation.)

With that background out of the way, and feeling a little calmer, let's look at the report:

First, leave aside breathless remarks in the introduction. They banner what might happen if particular parts of the staff report make it into real regulation. That is simple sensationalism at this stage of the game.

The meat starts down the page, and makes it clear that it is literally impossible for all the staff recommendations to go forward since they contradict each other and the law itself:

Some of the recommendations appear to contradict themselves as well as the Local Government Fair Competition Act.

One section of the proposed rules says the bonds must be secured solely with revenue generated by the communications division and not with assets of other utility divisions. The next section says the municipality can pledge the resources of the regulated utility divisions to secure the bonds, said City-Parish Attorney Patrick Ottinger.

In addition, the Local Government Fair Competition Act says LUS can back its fiber bonds with revenues from the other utilities, he said.

I'm not sure why the Advertiser backs away from its breathless prose and opts for caution at this point. It's not what Ottinger says. It is what Ottinger, every reporter since the law was still in draft, and the law itself plainly says.

While I don't think it's time to be too worried about PSC rules, that is still too unformed, I do take very seriously the now near-certainty that BellSouth plans to litigate its way out of competition if at all possible. (LPF on the incumbents' litigation strategy.) This is part of the monopolistic DNA of the corporation. If they don't get exactly what they want, the citizens can know, without bothering to ask, that BellSouth will happily go to court to extend their monopoly profit regime. And LUS is serving notice that it will go to court to enforce the law if the PSC doesn't. That pattern is now set. Expect delaying lawsuits. Expect a vigorous legal battle from Lafayette in return:

If the PSC adopts the rules as written, LUS may consider legal action because of the contradiction between the fair competition act and the PSC rules, Huval said. LUS probably would not be able to issue bonds until that ambiguity is rectified, he said.

"As long as the people of Lafayette say 'yes' on July 16, we're going to use every legal means we can to be able to provide this service," he said.

This is an old tactic for the incumbents. Lawsuits in Bristol, Virginia led to a full year of Bristol having paid for a system on which incumbent lawsuits prevented them from offering cable service. But the people of Virginia rallied to the cause and Bristol is now a healthy system that is ahead of its business plan and on track to pay back its loans. (LPF on Bristol.)

The second issue raised in this report is very similar to the first—one of the proposed regulations has nothing to do with anything in the language of the act.

Under the LUS business plan, the communications division would not pay both imputed taxes (charges for sales and income taxes, for instance) and in-lieu-of-tax payments (amounts paid to local government instead of local taxes), Huval said. The LUS proposal calls for in-lieu-of-tax payments to kick in after the communications division begins to break even, about year five, he said.

Again, it is not just what the LUS business plans says, it is what every reporter since the law was still in draft, and the law itself, plainly say.

This isn't a tempest in a teapot, though. This report lays out important information that helps us understand how the fight will go in the long run: Lawsuit will likely delay implementation.

The battle is just begining. This little article is smoke and mirrors, calculated to produce doubt. But the real issues beneath it are delay and corporate power; and they are with us for the long haul.

Vote Yes! For Fiber on July 16th.

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