FILE - 5G broadband wireless

Gov. Kay Ivey signed into law a bill previously passed by the Alabama Legislature that will allow electric utilities to offer broadband services. While the legislation received some modifications to better protect ratepayers, pushed by such groups as the Taxpayers Protection Alliance (TPA), critics warn the language still isn’t strong enough.

HB 400, sponsored by Rep. Randall Shedd, R-Cullman, will give Alabama utilities the right to build out broadband infrastructure along their systems of power poles, with the hope that cooperatives in particular will help close the broadband gap in unserved and underserved rural regions.

As passed by both chambers, HB 400 provides a small amount of protection for electric ratepayers by preventing the co-mingling of funds between the electric service and broadband. The initial language would not have prevented the utilities from co-mingling electric and broadband revenues, a concern since such blending of money is believed to have led to power rate increases in such places as Muscantine, Iowa, and Bristol, Virginia. The Senate agreed to make some changes (reflected in a substituted bill) after groups that included TPA spoke on that issue at a state Senate committee hearing.

But Travis Kavulla, a former Montana public utility commissioner and director of energy policy at Washington, D.C.-based R Street Institute who described the initial bill as “deeply problematic,” told TPA that while the substituted bill is better, it still suffers from a number of issues.

He described the new language prohibiting cross-subsidization as “so weak as to be meaningless.”

“It sets up a situation where a single board, which sits over both the electric utility and its broadband affiliate, is approving ‘loans’ on ‘such conditions as the board approves.’ In other words, these loans could be made with any conditions the board chooses, even interest-free, even with no repayment schedule, even without any recourse whatsoever.” 

Kavulla said that under this bill, if an electric ratepayer of an Alabama utility offering broadband thought their power money was being used to subsidize the service, the board of the utility could say “that’s not a subsidy, that’s a loan.” 

“And that would be the end of the story,” he added. “No judicial review, no Public Service Commission review, not even a requirement to have two different boards bargaining at arm's length.”

While the bill now requires a utility to establish standard pole-attachment rates that will not favor their own broadband-offering affiliates, Kavulla said the provision is meaningless because the legislation still lets a utility exclude any broadband providers from its easements entirely.

“Nothing here gets the bill away from the risk of putting customers of electric monopoly on the hook for that monopoly's entry into a competitive business which it has a financial incentive to under-price,” Kavulla said.

A companion broadband bill from state Sen. Clay Scofield, R-Guntersville, SB 90, also signed into law, increased the grant program for broadband providers started last year called the Alabama Broadband Accessibility Act.

That act is administered by the Alabama Department of Economic and Community Affairs, which can revoke grants if recipients don’t complete outlined projects within two years. Despite the efforts of lobbyists at the Alabama Legislature, HB 400 has no such watchdog overseeing it, a concern for critics of the bill.

SB 90 also requires money to be allocated to unserved areas, a provision not contained in HB 400.

Scofield told Yellowhammer News this year’s legislation was an attempt to “make the program work better and more efficiently.”

For the past few years, Scofield has attempted to pass legislation that would have offered tax incentives for rural broadband projects, but he told TPA last year he had to switch the delivery method from incentives to taxpayer-funded grants because it “was clear” his original bill wasn’t going to pass the House.

SB 90 requires recipients to offer speeds that meet the Federal Communications Commission’s minimum broadband standard of 25 megabits per second download and 3 megabits per second upload (and increase from 10/1) and allows those providers building middle-mile infrastructure to be eligible. Middle-mile might be thought of as the backbone of internet networks, with the fiber running to homes and businesses as the last mile.

Johnny Kampis is investigative reporter for the Taxpayers Protection Alliance Foundation.

Johnny Kampis is an investigative reporter for the Taxpayers Protection Alliance Foundation, and has been published in The New York Times, Time.com, FoxNews.com and the Atlanta Journal-Constitution.