San Leandro, a Bay Area city of about 85,000 bordering Oakland, is in the news for its fiber optic infrastructure policies. A recent article in the San Jose Mercury News describes how this post-industrial city is turning itself into a center for tech jobs and investment through cheap rents, streamlined permitting, and the ease and low cost of fiber connectivity for businesses in some areas of town.
We featured San Leandro in an episode of our Broadband Bits podcast last year, when Christopher spoke with San Leandro Chief Innovation Officer Deborah Acosta and a Lit San Leandro consultant Judi Clark. Acosta and Clark gave the details on San Leandro’s innovative public-private partnership, which combines smart public investments in conduits and “dig once” concepts with private investment in the actual fiber optic strands themselves. The city has been able to access fiber for it’s own needs at minimal cost, while some businesses have access to up to 10Gbps connectivity, either through privately provided lit fiber or leasing their own dark fiber.
As the Mercury News article notes, the fiber assets have begun to pay off. Several technology parks have taken up residence in the area, including a hub of 3-D printing companies, sharing space and ideas while taking advantage of incredible data transfer speeds. One entrepreneur quoted in the article describes the office park, located in a former car factory, as “the world's largest cluster of 3-D desktop printer companies.”
The article also notes the growing awareness of San Leandro’s economic comeback, and the role played by fiber optic infrastructure:
"San Leandro is establishing itself as a city-scale lab for innovation. Only months ago, (it) was a relatively unknown Bay Area city," said Greg Delaune, CEO of UIX Global.
Lit San Leandro, the private company that worked with the city to do the initial fiber runs, is apparently also in talks with other Bay Area cities on potential similar projects. However, it is worth noting that there is no plan for connecting residents and this model may in fact make it more difficult to expand residental gigabit access.
The business case for residential access is always hard but is improved when high margin businesses can be connected at the same time. But when high margin businesses have their needs met first, there is little incentive for a profit-maximizing firm to invest in connecting lower margin customers, a phenomenon called cream-skimming in economics.
Communities should understand there is no magic bullet in solving the problem of expanding high quality Internet access. Lit San Leandro is seeing success but may not be the best model for all communities.
After having met City Councilmember Caitlin Copple at last year's Broadband Communities event in Austin and seeing the progress Missoula, Montana, has made in considering a municipal fiber network, I knew we should ask her to be on the show. This week, she joins me and Karen Palmer, the Director of Operations for a local tech company in Missoula, LMG, for episode 112 of Community Broadband Bits.
After surveying local businesses, Missoula found a strong need for better services and is examining its options for an open access fiber network. They are fortunate to have already identified some service providers that want to work with them on the project.
Additionally, the network would be a boon for community anchor institutions, from schools to hospitals, and facilities owned by either the County or City.
The culmination of more than a year of discussion, funding searches, vendor selection, and research, Missoula has released the results of its broadband feasibility study. The study’s final report makes a range of recommendations, highlighted by the urging to invest $10.5 million from various sources to construct an open access fiber optic network connecting local businesses and over 50 key anchor institutions.
Beginning in early 2013, Missoula City and Missoula County governments collaborated with the Bitter Root Economic Development District to win a grant from the Montana’s Big Sky Economic Development Trust Fund, which they matched with local funds. The result was a $50,000 pot from which to finance the feasibility study.
The long-awaited final study results indicate a significant demand for affordable, reliable high speed connectivity in the Missoula area from both businesses and public institutions, especially in the unincorporated areas outside the central city. In a survey (page 31 of the report), a shocking 73% of Missoula businesses reported moderate, severe, or total disruption of their business from Internet problems related to reliability or speed. A further 38% said their connections were insufficient for their businesses needs, but the vast majority of those reported that they were unable to upgrade because the needed connections were either unavailable or the price was out of reach.
The total cost of the network, which would include over 60 miles of fiber, is estimated to be just over $17 million. That figure is a conservative estimate, however, as it assumes 100% of the network would be built underground and minimal existing assets would be used or shared (neither of which is likely to be the case when all is said and done).
The study recommends bringing in local anchor institutions as key network tenants, while making dark fiber available to third party service providers who can sell connections to local businesses, in what the Bitter Root Economic Development District refers to as a public-private partnership:
The proposed network would connect more than 50 public entities to each other including K-12 schools, the University of Montana, healthcare centers and city and county facilities. Businesses could also take advantage of the network and what the study anticipates would be much more affordable pricing. The study recommends working in cooperation with Internet providers in a public-private partnership.
As proposed, the city and county together would invest $10 million toward a $17 million system, with the local government funds leveraging other money, [Missoula City Councilwoman Caitlin] Copple said. The local money would be paid through user fees, not taxes, and it would build roughly 60 miles of an “open access” fiber-optic network.
The report also made recommendations for outreach, education, and changes in city and county policy. Notably, it emphasized the need for “dig once” policies that ensure conduit is laid during unrelated construction projects and can be shared by different entities, eliminating the cost and disruption of tearing up streets multiple times to lay different lines. The report also recommended updating city and county building codes to account for broadband engineering requirements, as well as streamlining permitting processes and reducing fees for broadband projects.
The last few years have seen a race among Montana cities to increase their communications infrastructure through a variety of methods. Butte recently debuted a limited private fiber optic network run by Fatbeam, spurred by long-term contracts with public and private anchor institutions. Bozeman, as we’ve reported, kicked off their own broadband feasibility study and planning process in July.
With a meeting on July 17th of city officials, local residents, institutional stakeholders, and technology consultants, Bozeman officially began its process of creating a master plan for its Broadband Initiative. The process will be lead by Design Nine, a consulting firm based in Virginia, and will include a survey of existing assets and needs, feasibility studies, and public outreach, among other elements. The entire process is expected to take about 6 months, with the end goal being a road map for improving access and affordability for businesses and public institutions in the Bozeman area.
The Montana city of almost 40,000 was initially inspired to examine the issue of municipal broadband by former Montana State University Chief Information Officer (CIO) Dewitt Latimer, who had previously worked on the Metronet Zing open access network in South Bend, Indiana, an innovative public-private partnership involving the University of Notre Dame that we have covered before. Unfortunately, Lattimer passed away in early 2013. But the seed of an idea had been planted.
In March of 2014, the City of Bozeman issued an RFP for a design firm willing to develop a plan for how the city could expand internet access going forward. After receiving a surprisingly competitive group of 12 responses, City officials eventually chose Design Nine to undertake the comprehensive study and make recommendations.
The City was able to secure $55,000 in grants from state and federal sources to fund the planning process, and solicited a further $80,000 from supportive local institutions including Deaconess Hospital, the local school district, and several local Tax Increment Financing (TIF) districts.
The business community has been a driving force for the initiative as well, with the Bozeman Area Chamber of Commerce committing $5,000 to the planning fund and expressing its enthusiastic support in a letter to the Mayor in April:
Affordable broadband access is essential to the health of our community. Technology firms, banks, businesses, and startups require fast, reliable, and secure connections to their clients. Broadband connectivity is presently only available at high prices or at disparate locations. We believe that increasing the availability of affordable broadband is essential to [the] well-being of this community and we are invested in making this critical infrastructure widely available.
The City’s own press release about the July 17th meeting highlights the competitive atmosphere among Montana cities as they strive to upgrade their communications infrastructure and foster economic development:
Several Montana cities are evaluating their broadband options. The Montana Economic Revitalization and Development Institute (MERDI) built a fiber optic ring in Butte utilizing a public-private partnership with Fatbeam. MERDI’s fiber ring lured a Bozeman-based internet security firm, Hoplite Industries, to uptown Butte. Missoula is about to release the results of their community broadband feasibility study. Livingston is also considering developing a broadband master plan.
According to David Fine, an official with the City’s Economic Development Department (which is overseeing Design Nine’s planning process), the city would be open to public ownership of fiber infrastructure if that ends up being a recommendation of the nascent master plan. The city has no interest in operating the network itself, however, and does not have a municipal electric utility that might fit easily into that role. From the City’s press release:
The City envisions a public-private partnership model in which broadband providers, anchor businesses, School District 7, the City of Bozeman, and Bozeman Deaconess Hospital collaborate to support a new community fiber optic network. The master plan will investigate options for public-private partnerships, viable business and financing models, and potential build plans. It will also explore regulatory options that can speed the deployment of broadband by the private sector.
Fine also emphasized the potential for direct public savings from a new fiber network. The city and county governments pay $70,000 and $50,000 per year, respectively, for their data connections from a private provider. The school district is charged $105,000 per year for internal ethernet connections, and another $50,000 per year for a shared gigabit connection to the broader internet. With recurring costs that high, it is not hard to imagine a capital investment in fiber infrastructure paying off in the long run through significantly lower monthly bills.
The local Deaconess Hospital stands to benefit from a new public network as well, as they strive to meet electronic records requirements. Their need for fast and secure connections has grown quickly in recent years, as they have expanded their footprint to various clinics around town and look to make telehealth and remote medicine a viable option for patients in a large, mostly rural state.
The problem is not that fiber is nonexistent in Bozeman. There are several firms in the area focused on cloud computing, including the tech giant Oracle. Large, well-capitalized firms that can afford to run their own fiber lines or exert serious leverage in negotiating prices can often meet their fiber needs. The problem is bringing affordable and adequate connectivity to small and mid-sized businesses, startups, schools, hospitals, and ordinary citizens.
For local news coverage of the plan, highlighting its importance for local businesses, watch the video below:
We reported back in June on Huntsville, Alabama's decision to undertake feasibility study to evaluate its options for increasing next generation fiber optic internet access throughout the city. AL.com is now reporting that Huntsville Utilities hopes to hear the results of the study within 90 days, allowing it to decide whether it will take steps to expand its minimal existing fiber infrastructure and offer connections to businesses and the public.
The sense of urgency in Huntsville is not surprising, given that it sits just South of the Tennessee border and a less than 100 miles from Chattanooga, the Gig City. News coverage in Huntsville on the possibilities of a future municipal fiber network make constant reference to Chattanooga's example, including this list of valuable lessons Huntsville can learn from its neighbor.
The scenario Huntsville fears is laid out in another AL.com article, featuring the story of Matt Barron, a young tech entrepruener who moved his startup from Huntsville to Chattanooga this summer. Barron describes the attraction of a city with a commitment to next generation infrastructure, above and beyond the advantages of speed:
"I want to live in the sort of city that puts a high-speed Internet in," Barron said. "It might have nothing to do with the bandwidth. It has everything to do with the community and the people, the people that stand behind what is basically a human right, right now."
Barron sees the Internet as fundamental. People "can't even apply for a job without bandwidth," he said, and "you have the right to free speech, but speech happens largely on the Internet these days. So, it's a human right."
Chattanooga is forward-thinking enough "to even think about putting a high-speed Internet in," Barron said. "Those are the people I want to be around."
It should be noted that Barron gave those quotes at the annual GIGTank event in Chattanooga, a conference designed to help startups and web-based firms, while surrounded by like-minded entrepreneurs and investors eager to capitalize on Chattanooga's network.
Huntsville itself has a history of being a tech- and innovation-friendly environment, having served as the home of NASA's Marshall Space Flight Center since 1960. Marshall is a rocketry and spacecraft propulsion research facility, and played a crucial role in the Saturn, Apollo, and Space Shuttle programs. With a community full of rocket scientists, doing the math on a municipal network for Huntsville shouldn't be too hard.
Sanford, a city of about 21,000 in far southwestern Maine, is weighing its options for a limited fiber optic network. The Sanford Regional Economic Growth Council has been the driving force behind the project, hiring Tilson Technology Management of Portland earlier this year to develop a Broadband Plan for Sanford.
The Growth Council began exploring broadband issues only after realizing late last year that they had been left out of Maine’s “Three Ring Binder,” a federally-funded high capacity fiber backbone running through much of the state in three loops. Wary of being left behind economically by neighbors with better communications infrastructure, the Growth Council hired Tilson to evaluate their options.
The resulting report has not been made publicly available, but according to an op-ed by James Nimon, the Growth Council’s executive director:
Tilson has completed their assignment and provided “Good,” “Better” and “Best” alternatives, with the conclusion that the implementation of the Broadband Plan’s ‘Best’ scenario, which connects all the key CAIs [community anchor institutions] in Sanford, “has the potential to provide impressive public economic benefits, including adding between $47 and $192 million to the Sanford-Springvale region’s economic output over the next ten years.”
The anchor institutions to be connected include municipal buildings, local schools, a mill yard, a hospital, and industrial parks. According to a recent Sanford News article, the costs projected by Tilson range from $362,000 for the most limited deployment to $961,000 for the “best” alternative.
The city and the Growth Council will now begin the process of exploring federal, state, and private partnership funding opportunities, in an effort to bring the advantages of a high speed fiber network to their community.
Wabash County, Indiana wants to expand its access to high speed internet through a fiber optic network build out, and is planning to use a distinctive financial tool to do so. The Wabash County Redevelopment Commission has begun the process of assigning a special Economic Development Area designation for the purpose of helping to finance new fiber deployment through parts of the mostly rural county of 33,000 people.
Tax Increment Financing (TIF) is method of public financing that uses future gains in property or sales taxes within a defined area to subsidize a redevelopment or infrastructure project. A local jurisdiction can borrow money up front, build the project, and then use the increased tax receipts it generates to pay off the debt over a period of years. The concept is actually pretty simple: capture the value that something will have in the future to build it now.
TIF has been a popular approach among local politicians around the country for decades as a way to work around tight budgets and finance improvements in blighted areas, often in the form of public infrastructure. It has sometimes drawn criticism, especially in cities like Chicago where it is very heavily used. One downside is that it effectively takes properties off the general tax rolls.
More important for our purposes, however, is that the use of TIF for next generation fiber optic networks is a fairly new phenomenon. While municipal networks around the country have used a wide range of financing approaches to cover upfront costs, most have revolved in some way around bonds that are repaid from network revenue. Using TIF to capture the increased property value that a fiber optic network would create is an interesting approach.
In the case of Wabash County, it’s not yet clear exactly how the funds would be used. There is a local private incumbent provider, Metronet, which received $100,000 last year to match its own $1 million investment to bring fiber to a town on the north edge of the county. The county also has a cooperative utility (Wabash County REMC) that provides power and telephone services in rural areas and has expressed interest in using TIF to build out a fiber network. Whichever entity ultimately receives TIF money, it does not appear that the county is interested in owning the network itself.
Wabash County is not alone it its pursuit of TIF-backed fiber networks. Other counties and municipalities in rural Indiana have been moving along the same lines, from Chesterton in the north to Dubois County in the south. The Indiana Association of Cities and Towns, meanwhile, recently helped defeat an attempt by telecom industry lobbyists (ahem, AT&T) in Indianapolis to pass legislation eliminating the authority of local governments to use TIF - but only for fiber optics and other telecommunications equipment.
Whether or not TIF eventually proves to be a good tool for building high speed fiber optic networks in rural areas and small towns remains to be seen. Taking a broader view of the value of a the public and private value a municipal network creates, beyond a simple glance at network revenues, is a step in the right direction. In any case, the right of local communities to make their own choices about how best to finance, plan for, and pursue their shared needs is paramount.
If you have doubts that we can or will connect rural America with high quality Internet connections, listen to our show today. Alyssa Clemsen-Roberts, the Industry Affairs Manager at the Utilities Telecom Council, joins me to talk about how utilities are investing in the Internet connections that their communities need.
Many of these utilities are providing great connections, meaning that some of the folks living in rural America have better -- faster and more affordable -- Internet access than residents of San Francisco and New York City.
We discuss the demand for better Internet access and the incredible take rates resulting from investment in some of the communities that rural electric cooperatives are serving.
UTC has a been a strong ally of our efforts to prevent states from revoking local authority to build community networks. Within UTC, the Rural Broadband Council is an independent operating unit.
We want your feedback and suggestions for the show - please e-mail us or leave a comment below. Also, feel free to suggest other guests, topics, or questions you want us to address.
This show is 17 minutes long and can be played below on this page or via iTunes or via the tool of your choice using this feed.
The Lake County fiber network is now serving a limited number of customers in northern Minnesota. According to the Lake County News Chronicle, the network's triple-play services are lit and bringing better connectivity to Silver Bay and Two Harbors.
About 100 customers in Silver Bay take service via the network; beta testers in Two Harbors are helping Lake Connections, the entity managing the network, straighten out any kinks in Phase One. Phase Two, which is more than 60% complete, will bring service to Duluth Township, Knife River, Silver Creek Townships, and Beaver Bay Township. Phase Two is scheduled for completion this summer; Lake Connections anticipates network completion in the fall of 2015.
The Lake County project has been plagued with problems, including delays cause by incumbents. Mediacom filed complaints with the Inspector General based on unsound allegations. While the cable company was not confident enough to sue, its accusations wasted time and money for Lake County. Frontier asserted ownership of a significant number of Two Harbors utility poles, even though the City has maintained them, and the two are still involved in negotiations over ownership and fiber placement on the poles. The Minnesota Cable Companies Association (MCCA) delayed the project further by submitting a massive data request.
The FTTH project is one of the largest stimulus projects, totaling approximately $70 million in grants, loans, and local matching funds. The project will cover almost 3,000 square miles when complete, connect almost 100 community anchor institutions, and provide services to over 1,000 businesses.
As we have noted before, the project was sorely needed. On more than one occasion, a single fiber cut to the area created Internet black outs to homes, businesses, hospitals, government, and any other entity depending on connectivity to function.
In Two Harbors, outdoor equipment supplier Granite Gear is on the new network. In the past, the entire company shared one DSL connection, forcing the company art director to work at night when bandwidth was available. Now, everyone works normal hours. From the article:
Dave Johnson, the strategic accounts manager for the 28-year-old company, said fast internet has become essential to Granite Gear in recent years.
“It’s not just nice having faster internet, but it has become an absolute necessity,” he said.
“Business is not just pushing emails back and forth. We maintain a website,” he said. “Doing business has become real bandwidth intensive.” A new technological era has dawned and companies are evolving to keep pace with their competitors.
Johnson told us via email that uploading files for customers in the past used to take hours but now the task takes a few minutes and does not disrupt service for other employees.
Delays have created extra expenses and Lake County will need more customers like Granite Gear to make the network strong. According to the article, the County has already started making loan payments:
[County Commissioner Rich] Sve said he understands his constituents’ concerns that the network may not be viable.
“I share that concern as a taxpayer. I think it’s legitimate,” he said.
But, he added, private companies have not stepped forward to provide the service, despite encouragement by federal and state government to do so. The county, therefore, opted to undertake the task.
“So far, we’re pleased with what we’re getting in Silver Bay and hopeful that it continues,” [Lake Connections Project Manager Jeff Roiland] said.
Businesses and residents interested in signing up for service from Lake Connections can contact them today to make arrangements:
“The biggest thing to do is contact our staff,” Roiland said. “They can call in (or) walk in and the gals at the office can explain to them what to do.”
Amanda Gloyd, marketing and community relations manager, told the Daily Reporter:
Since SMU first began offering Internet service to customers the amount used by customers has increased and we expect to see that continue. For example, the average peak usage from customers in the fall of 2010 was 125MB and today it averages around 800MB with maximums over 1,200 MB. The project to convert the whole town of Spencer will take several years and we continue to develop plans for future projects.
In April, the SMU Board of trustees approved a modest rate increase for video and Internet access to help defray increased costs for video content and increased demand on the system. The last time rates went up for video service was early 2013; residential Internet access rates have remained the same since November 2011.
New rates went into effect on June 1. Internet access rates range from $20 per month for 1 Mbps/256 Kbps to $225 per month for 100 Mbps/10 Mbps. Basic level video service begins at $14 per month; "Basic Plus" is $50.75 per month. Digital service and a range of channel choices are available as add-ons.
SMU also provides voice and partners with T-Mobile to provide wireless phone service in the community. The network began serving customers in 2000.
Spencer, population 11,300, is located in the northwest section of the state. In the Community Broadband Bits podcast episode #13, Chris spoke with Curtis Dean of the Iowa Association of Municipal Utilities (IAMU). Dean shared a story about Hansen's Clothing, a local upscale clothier in Spencer. Thanks to the presence of the SMU network, Hansen's was able to expand its sales to the online marketplace. Hansen's was struggling until it obtained the ability to reach clientele in New York and Los Angeles. The fresh business allowed Hansen's to flourish.
Consider the rapid response of a locally-owned and operated network when the local Amateur Radio Emergency Service (ARES) in rural Mitchell County, N.C. recently needed an Internet link on a mountaintop tower to test and operate its emergency service. Utilizing the local Mountain Area Information Network (MAIN), the ARES volunteers had a secure network connection the same day of their request. “We would still be waiting for an answer” from the non-local phone company, said ARES volunteer Bob Rodgers.