Municipal systems do not “crowd out” private providers any more than the New York City Subway “crowds out” private taxi cabs and car services. To the contrary, studies and anecdotal evidence repeatedly show that where municipal systems take on the expensive task of building network infrastructure, the number of private providers increases.
Lake Minnetonka Communities Complete Market Study
The Lake Minnetonka Communications Commission has finished its market study of some 17 communities in the western suburbs of Minneapolis. LMCC has long been examining solutions that will expand fast, affordable, and reliable access to the Internet.
Dick Woodruff, chairman of the Tonkaconnect working group and a member of the Shorewood City Council, said that overall the results were positive. He said that the majority of the people surveyed indicated that they had no objections to the LMCC getting into a competitive FTTP business and that they would become customers if the Tonkaconnect services were offered at a lower price than providers already in the area.
While the results of the market survey are encouraging to the Tonkaconnect group, there is still more work to be done before they can deem the project feasible. Woodruff said that the next step in the process would be to complete a business plan and financial model for the fiber project.
LMCC will consider what to do next at a meeting in June but has not budgeted funds for the next step in building a universal FTTH network in those communities that choose to take part.
Regarding the survey:
The first question, though, asked if respondents believed that the LMCC and local governments should "provide locally-owned, competitive choice of TV, Internet and telephone services to every home, business, school, governmental buildings, etc. in the LMCC area."
Strong majorities consistently agreed that LMCC and local governments should get involved but the survey was also very clear that respondents were mostly concerned with price. We see the same results elsewhere, particularly in times of economic stress.
Consider a national cable network, "National Cable." In Anywhere USA, most people subscribe to National Cable at a monthly rate of $140/month for phone, video, and broadband. Anywhere decides to build a community fiber network and charge $105 for similar services but the broadband is considerably faster and more reliable using the next-generation network. National Cable responds by offering a deal for $95/month for what people had been paying $140/month for. After all, National Cable is so big, its costs are lower than the new community network. And National Cable, if it chose to, could run its Anywhere operations at a loss for many years due to its fat margins in all the communities without a real choice in providers.
Do not be surprised to see a lot of people going to National Cable to save that extra $10/month, even though it may deprive the community fiber network of the revenue necessary to meet the business plan. If the community network were to disappear, National Cable would raise its prices right back up to $140/month.
This is a real community conundrum. The community network provides tremendous benefits, but may not be appropriately recognized as the agent responsible for saving everyone in the community a lot of money.