Incumbent providers, grown lazy on a steady diet of public subsidies and monopoly rents, have done their best to cast this as a debate between efficient private competitors and inefficient government monopolies. But it is the incumbents that would rather regulate than compete. They resist municipal entry not because it is incompetent – no one resists incompetent competitors – or because it is unnecessary. Rather incumbents resist municipal entry because they recognize the ability of local government to offer a genuine competitive alternative to a high priced monopoly or duopoly services.
How a Muni Network in The Dalles Led to a $600 million Data Center
As I recently mentioned in my endorsement of Tubes by Andrew Blum, the book explains how a municipal fiber network helped to attract Google to town. Google sited its first "built-from-scratch data center" there, a $600 million investment according to Stephen Levy.
According to Blum, it all started back in 2000 when the community got fed up with incumbent telephone company Sprint.
The Dalles was without high-speed access for businesses and homes, despite the big nationwide backbones that tore right through along the railroad tracks, and the BPA's big network. Worse, Sprint, the local carrier, said the city wouldn't get access for another five to ten years. "It was like being a town that sits next to the freeway but has no off-ramp," was how Nolan Young, the city manager, explained it to me in his worn office...
The Dalles was suffering economically due to its reliance on industrial jobs that were slowly disappearing.
"We said, 'That's not quick enough for us! We'll do it ourselves,'" Young recalled. It was an act of both faith and desperation--the ultimate "if you build it they will come" move. In 2002, the Quality Life Broadband Network, or "Q-Life" was chartered as an independent utility, with local hospitals and schools as its first customers. Construction began on a seventeen mile fiber loop around The Dalles, from city hall to a hub at the BPA's Big Eddy substation, on the outskirts of town. Its total cost was $1.8 million, funded half with federal and state grants, and half with a loan. No city funds were used.
Once Q-Life's fiber was in place, local Internet service providers quickly swooped in to offer the services Sprint wouldn't. Six months later, Sprint itself even showed up--quite a lot sooner than its original five-year timeline. "We count that as one of our successes," Young said. "One could say that they're our competitors, but now there were options." But the town couldn't have predicted what happened next. At the time, few could have. The Dalles was about to become home to the world's most famous data center.
Blum goes on to describe how the investment played out, with Google hiding its involvement in the project for years by working through other companies. The guy who coordinated it - Chris Sacca of "Design, LLC" - made the following observation:
"It was visionary--this little town with no tax revenues had figured out that if you want to transform an economy from manufacturing to information, you've got to pull fiber,"
Many public utility districts and other publicly owned networks in the Oregon/Washington area have also attracted new jobs and data centers by making fiber optic networks plentiful and affordable. They already had incredibly low cost electricity and a moderate climate -- but fiber was "the ace in the hole" as described by Blum.