Jim Baller of Baller Herbst

Monday Conversation: Jim Baller

Jim Baller is one of the foremost allies of municipal telecommunications networks in the country and has fought for the right of local governments to build new telecommunications networks all over the country. Baller now represents LUS and is the man that BellSouth and Cox will have to deal with should they choose to litigate LUS' entry into the telecommunications market. —Bringing suit is widely regarded as the likely next step in the incumbents' seemingly unrelenting opposition to LUS' hopes to build a fiber optic network in Lafayette.

They will face a formidable opponent in Mr. Baller.

Baller has defended local governments and utilities in more than 35 states has been involved in many of the most important cases in the area and has argued the right of municipalities to be so involved all the way to the Supreme Court. He has been involved in many of the most important community broadband projects in the United States; helping in their legislative battles over state barriers—like our own, infamous, Act 763, and fighting—and more often than not winning—court battles with the incumbents.

1) You are the founder and senior principal of the Baller Herbst Law Group, which has a national reputation in the field of telecommunications law. What areas does your firm specialize in and how did you get into this area? 

The Baller Herbst Law group represents local governments and public power utilities in a wide range of communications matters nationally and in more than 35 states. We provide legal counseling, representation, and legislative and litigation services surrounding the development and operation of municipal broadband systems, cable and telecommunications franchising and enforcement, right of way management, wireless tower and facilities siting, pole and conduit attachments, bankruptcy, antitrust, etc. In short, we help public entities to address just about any kind of legal issue that may arise in the communications area. In particular, over the last decade, we have been participated in most of the leading municipal communications projects in America and are currently involved in about a dozen public municipal fiber projects. 

I got into this field in 1993, when I represented the American Public Power Association (APPA) in the proceedings in which the Federal Communications Commission (FCC) wrote the rules that implemented the Cable Act Amendments of 1992. APPA is the national service organization that represents America's approximately 2000 public power utilities, including Lafayette Utilities System. In 1994-96, I helped APPA formulate and present its views to Congress on what was to become the Telecommunications Act of 1996. After the Act was signed into law, I represented APPA again in the FCC's new rulemakings to implement the Act. Next, I helped APPA and many of its members fight numerous battles before the FCC, state legislatures, city councils, and the courts, over the legality and wisdom of state barriers to public entry. I also helped dozens of local governments and public power utilities interpret and comply with federal and state communications laws. This included taking a number of municipal communications projects all the way from conception to startup to ongoing operation. 

2) In your experience, why have cities offered utility services like power or telecommunications that might compete with similar services offered in the private sector?

A key function of local government is to advance the community's economic development, educational and occupational opportunity, and quality of life. If the private sector is meeting these needs, municipalities rarely compete with private enterprise. Municipalities typically compete only as a last resort, where the private sector has failed to meet local requirements in some significant way.  Such failures may include not offering the services that the community wants, not providing adequate quality of service, not supporting the services adequately, charging too much for them, etc. 

More specifically, America has a long history of public involvement in the delivery of utility service. In the electric power area, thousands of municipalities formed their own electric utilities beginning in the 1980s to fill service gaps left by the private sector or because communities found that they could meet their own needs just as well as the private sector at half the cost.  The same thing happened in the telephone industry before the Bell System emerged. Localities were also pioneers in the cable industry. In fact, the cable systems were originally called "CATV" systems -- that is, Community Antenna Television systems. Now, according to statistics compiled by Render Vanderslice & Associates, which are available at www.ftthcouncil.org, municipalities are at the forefront of bringing fiber to the home in the United States.

3) Here in Lafayette we have seen a pretty amazing level of attack from the incumbents and, in our judgment at least, a pretty shocking level disinformation designed to make the community fearful and uncertain. Is this a common response? If so, why do you believe the incumbents choose to take what seems to be a fairly risky path? 

The level of industry disinformation in Lafayette is outrageous and disturbing, but it is regrettably not unusual. In fact, in a paper on our website comparing the communications industry today with the electric industry a century ago, we showed that, as early as a century ago and repeatedly since then, private power companies have been using virtually the same arguments and tactics as incumbent cable and telecom companies are using against municipal involvement in the communications arena.  http://www.baller.com/library-art-history.html These arguments are virtually all wrong, as we and our predecessors have shown over and over again, but the incumbents still persist in making them. Why? There are many reasons, including anti-government ideology, ignorance or distrust of the facts, shareholder pressure to maximize short-term profits, and many more.  In fairness, some representatives of industry genuinely believe that public involvement is a bad thing, and they summon the "facts" and arguments that tend to confirm their views. It's like religion—you simply can't change a person's views by any amount of argument.  
I disagree that spreading disinformation is a "fairly risky path" for incumbents. Where's the risk? They're protected by the First Amendment, so they're entitled to say whatever they want. We can't spank them for fibbing. We can only tell the truth as often as we can and trust the public to be fair-minded and wise.  The private power companies spent vast sums to keep localities from forming their own electric utilities, but their efforts ultimately failed to stop widespread municipal electrification. Now, a century later, history has proven that municipal electric utilities greatly benefited the localities that built them and the Nation as a whole. Let's hope that future generations in Lafayette and elsewhere can say the same thing about municipal fiber projects.   

4) The Louisiana legislature, in response to the idea that Lafayette might add telecommunications to its utility services, recently passed a law that  affects public bodies that might want to offer a telecommunication utility in their locale. How common are these sorts of laws and how do they work? 

A number of states have enacted measures that prohibit municipal entry outright or do so indirectly by imposing terms and conditions that no new entrant, public or private, could possibly meet. The bill that the incumbents originally proposed to the Louisiana legislature last Spring would have made it impossible for Lafayette or any other local government in the State to develop its own fiber system. Fortunately, Governor Kathleen Blanco did not believe that the bill was good for Louisiana, and she urged all concerned to work out a compromise that everyone could support. Much to everyone's surprise, we did it. It took nearly a month of hard bargaining, but industry and municipal negotiators eventually came up with a bill that left no one fully satisfied, but should prove workable in practice. 

Now don't get me wrong -- I do not think that the new Louisiana law is a "good" law. Instead of putting hurdles in the path of our municipalities, I believe that we should be doing everything possible to encourage municipalities to step forward and do in the telecom area what they did so successfully in the electric power area. As the Federal Communications Commission recently reported, America is rapidly falling behind other leading nations in broadband penetration, in the bandwidth that we are offering users, and in the prices that we are paying for comparable levels of bandwidth in other countries. We've now fallen to about 10th or 11th among industrialized nations, and both President Bush and Senator Kerry have said that this is unacceptable for America. Other leading countries encourage and give financial incentives to municipalities to support the rapid deployment of advanced communications networks, and so should we. Unfortunately, that was beyond our reach in the negotiations that led to the Louisiana legislation.   

5) How do state laws regulating public utility telecoms affect the utilities after they are up and running? 

Generally, state laws treat public communications providers the same as other new entrants and impose minimal requirements on them. The new Louisiana law is similar to most other state laws in this respect. The new Louisiana law does have various special requirements to prevent cross-subsidization, but these requirements generally reflect what public communications providers do anyway.  Ironically, it is the private sector, rather than the public sector, that routinely engages in cross-subsidization, but the new law does not deal with this. 

6) Based on your national experience, what can people expect from the incumbent providers after a telecom utility has begun offering services? Do things settle down to fair competition?

Practices vary widely across America. Incumbents sometimes engage in anticompetitive practices, but this is not universally true. In some markets, incumbents have started down the path of anticompetitive behavior, lost a ton of money, and then abandoned these practices after coming to realize that the public saw through their tactics and would not support them. I genuinely hope that the incumbents in Lafayette will engage in fair competition from the outset.

posted:10/24/04