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Crazy Talk from Another Telco-Funded Think Tank - Community Broadband Bits Podcast 200

This week, we discuss a report with zero credibility from the State Government Leadership Foundation, which was written by a well-known telco economist from the Phoenix Center. Entitled, "The Impact of Government-Owned Broadband Networks on Private Investment and Consumer Welfare," the report [pdf] makes so many factual errors that one wonders just how much these telco think tanks really take pride in their work.

George Ford authored the report. Ten years ago, he demonstrated that municipal networks most certainly did not crowd out private investment. The biggest change since then is that his employer went from supporting competitive networks to opposing them - when BellSouth bought AT&T and took its name. Prior to that acquisition, AT&T actually supported competitive carriers and was even going to be an ISP on the UTOPIA network. As goes AT&T, so goes the Phoenix Center.

For episode 200 of the Community Broadband Bits podcast, we discuss this report and why it has no credibility. One of my favorite points is that Ford argues municipal networks average an incredibly high take rate, which flies in the face of all the other criticism municipal networks typically face. You just can't make this stuff up.

We want your feedback and suggestions for the show-please e-mail us or leave a comment below.

This show is 30 minutes long and can be played below on this page or via iTunes or via the tool of your choice using this feed.

You can download this mp3 file directly from here. Listen to other episodes here or view all episodes in our index.

Thanks to Forget the Whale for the music, licensed using Creative Commons. The song is "I Know Where You've Been."

Service Unavailable: The Failure of Competition - Community Broadband Bits Podcast 196

If you are paying close attention to discussions about broadband policy, you may have come across Fred Pilot's reminders that competition is not a cure-all for our Internet access woes across the United States. The blogger and author joins us for episode 196 of Community Broadband Bits.

Fred Pilot's new book, Service Unavailable: America's Telecommunications Infrastructure Crisis, discusses some of the history behind our current challenges and proposes a solution centered around federal funding and cooperatives.

We discuss the switch from telecommunications as a regulated utility, to which everyone was guaranteed access, to a system relying on competition, in which some people have many choices but others have no options. We also discuss the merits of a national solution vs encouraging more local approaches with federal financial assistance.

Fred's blog is Eldo Telecom and you can follow him on Twitter.

Read the transcript from this show here.

We want your feedback and suggestions for the show - please e-mail us or leave a comment below.

This show is 30 minutes long and can be played below on this page or via iTunes or via the tool of your choice using this feed.

You can download this Mp3 file directly from here. Listen to other episodes here or view all episodes in our index.

Thanks to Kathleen Martin for the music, licensed using Creative Commons. The song is "Player vs. Player."

Sale of OptiNet: BVU Caught Between Virginia's Rock And A Hard Place

For more than a decade, the people of Bristol, Virginia have enjoyed what most of us can only dream about - fast affordable, reliable, connectivity.  In recent days, we learned that Bristol Virginia Utilities Authority (BVU) has entered into a deal to sell its OptiNet triple-play fiber network to a private provider. The deal is contingent on approval by several entities.

As we dig deeper into the situation, we understand that troubles in southwestern Virginia and Bristol have led to this decision. Nevertheless, we urge the Bristol community to weigh the long-term consequences before they sacrifice OptiNet. Once you give up control, you won’t get it back.

"...A Few Bad Apples..."

If the people of Bristol surrender this valuable public asset to the private market, they run the risk of undoing 15 years of great work. None of this is a commentary on the private provider, Sunset Digital Communications, which may be a wonderful company. The problem is that Sunset will be making the decisions in the future, not the community. 

OptiNet has helped the community retain and create jobs, attracting and retaining more than 1,220 well-paying positions from Northrup Grumman, CGI, DirecTV, and Alpha Natural Resources. Businesses have cut Internet access and telecommunications costs. Officials estimate around $50 million in new private investment and $36 million in new annual payroll have come to the community since the development of OptiNet. The network allowed public schools to drastically reduce telecommunications expenses and introduce gigabit capacity long before such speeds were the goal among educators.

Schools and local government saved approximately $1 million from 2003 - 2008. Subscribers have saved considerably as well, which explains OptiNet's high take rate of over 70 percent. Incumbent telephone provider Sprint (now CenturyLink) charged phone rates 25 percent higher than OptiNet in 2003. The benefits are too numerous to mention in one short story.

However, BVU is emerging from a dark period marked by corrupt management. This sad reality actually makes its considerable achievements all the more remarkable. Last summer, several officials from BVU's OptiNet utility were indicted and found guilty of a number of federal charges including falsifying invoices, taking kickbacks, and misusing funds all for personal gain. Four people were fined and sentenced to prison. One other official is still being tried for her involvement in misuse of funds and tax offenses.

When this small number of officials violated the trust in Bristol that accompanies a locally managed utility, their actions negatively impacted the entire community. The actions of a few bad apples may have put the entire barrel at risk.

An Unsolicited Offer

logo-sunset-digital.jpg

A few months later, Sunset Digital Communications approached BVU with an offer to purchase OptiNet. Sunset had its financing in place prior to making the offer.

Sunset worked with the LENOWISCO Planning District Commission on its 2001 Fiber-to-the-Home (FTTH) project in Lee and Wise Counties in southern Virginia and Tennessee.

The company, based in Duffield, Virginia, serves 80,0000 residents and businesses. They also provide services to anchor institutions, and other Internet service providers. Sunset wants to use the OptiNet infrastructure to start an expansion into rural areas. In a recent Herald Courier article, Sunset President and CEO Paul Elswick described the relationship between OptiNet and Sunset as "friendly competitors."

Virginia Doesn’t Care About Rural People

BVU has been effectively prevented from expanding into nearby rural communities by Virginia law, which limits which business models BVU can use despite an utter lack of interest from existing providers improving their services in that region. 

BVU Authority Board Chair Jim Clifton told WCYB:

"We have peaked in our ability to compete, and again, if we can't get grants, and even with the grants, we can only go into certain areas. We can only go into a 75 mile radius of our footprint," Clifton said. He said as a public utility, they have reached the peak for providing those types of services.

Bristol's neighbors want OptiNet because of the great things it has accomplished for Bristol but state legislators will not allow the city to share the wealth. The pressure to expand through privatization is testament to OptiNet's success in a harsh, anti-muni environment.

In Steps Richmond

Rather than allowing BVU to bring its high capacity connections to those who desperately want it, legislators are using the actions of a few corrupt officials to further harm one of the few sources of economic growth in southwest Virginia.

While Sunset was pursuing BVU, State Senator Bill Carrico (R-Galax) was preparing a bill the Bristol Herald Courier described as a "wrecking ball for a job better suited to a hammer." The bill, a knee jerk reaction to the federal indictments, would reduce the size of the BVU authority and effectively transfer broad decision-making to state leadership by appointment. The editorial board described it as a way for the state to revoke local authority from Bristol for more than just OptiNet. From the Herald:

At the same time, Carrico wants to reduce to just two board members the representation from Bristol, Virginia, where the customer base represents 46 percent of OptiNet, 86 percent of wastewater, 98 percent of water, and 53 percent of electricity service business. 

We believe stronger oversight is required — and new blood on the board is essential — but not necessarily appointed from the governor’s office.

The City Council also opposed the bill but managed to get an amendment that allowed more Bristol representation on any new Board. Those members would only vote on water and sewer issures. SB 329 has passed through the Committee on Local Governments and now awaits a vote by the full body. It is not clear what will become of the bill if the sale of OptiNet is finalized.

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A Tempting Offer But At What Price?

Sunset has offered $50 million to purchase OptiNet, which now carries approximately $24.4 million in long-term debt, reports the Herald Courier. A portion of that includes interdepartmental loans from the electric division to OptiNet. The electric system, water and sewer systems carry about $20.9 million combined, the bulk of which belongs to the electric system. BVU CEO Dan Bowman told the Herald Courier that the sale of OptiNet "would enable BVU to pay off all its $48 million in long-term indebtedness in all four divisions." There is some debate about whether or not this is possible, according to the agreement between the city and the BVU Authority.

The idea of becoming debt free is intrinsically appealing, but at what cost? BVU generates the necessary revenues to service its debt. Should Sunset decide to sell to one of the big corporate providers like Comcast, subscribers will be subject to the same price hikes and sub-par customer service like the rest of us. The purchase agreement has not been made public yet, but unless Sunset agrees to retain ownership or BVU is allowed a right of first refusal if Sunset decides to sell OptiNet, the risk is real.

Moving Along

On Tuesday, the Bristol City Council quickly approved a 2009 agreement between the city and BVU to clean up loose ends so the purchase can move forward. The agreement ensures that after debts are paid, half of all proceeds from a sale of OptiNet will go to the city. The City Council seems poised to approve the purchase, which must also be approved by the Cumberland Plateau Company (CPC), U.S. Department of Commerce Economic Development Administration, National Telecom and Information Administration and Virginia Tobacco Commission. 

CPC is part of the Cumberland Plateau Planning District Commission, an entity established by the state legislature to improve economic development. CPC has the right of first refusal to purchase OptiNet because it was a partner in its deployment and its infrastructure is located in the CPC service area. If CPC and the other entities approve the transaction, the sale is expected to be finalized in May or June.

Rocks Carefully Placed For Maximum Effect

The deal is not over but momentum is moving toward the sale. No one can deny that BVU is under intense amount of pressure from several fronts. Virginia legislated a hostile environment that pushed OptiNet to privatize if it wanted to continue expanding to meet the needs of neighbors. The only interests served by this policy have been the big cable and telephone companies that maintain lobbyists in Richmond so they can pay less attention to the rest of the state.

When legislators are too cozy with big corporate Internet access providers, the only choice for expansion may be privatization. If the Virginia State Legislators were considering their constituents first, they would do what it takes to grow more networks like OptiNet. In other words, remove all barriers in the form of onerous requirements that limit expansion and discourage public investment in Internet networks.

The actions of a few corrupt BVU officials have played right into the hands of those that want to limit local Internet choice. 

Local Governments and Internet Access Debate - Community Broadband Bits Episode 185

For this week's Community Broadband Bits podcast, we are trying a discussion/debate format between myself, Christopher Mitchell, and Ryan Radia, Associate Director of Technology Studies at the Competitive Enterprise Institute. We have debated previously and prefer a style of seeking to flesh out the argument rather than merely trying to win it.

We start by discussing the role of incumbents in limiting competition and what might be done about it. Next we move to bandwidth caps. On both of those points, we have pretty significant disagreement.

We finish by discussing the role of conduit and poles, where we have some agreement. If you like this show, please do let us know and we'll try to have more in this style.

The transcript from this episode is available here.

We want your feedback and suggestions for the show - please e-mail us or leave a comment below.

This show is 22 minutes long and can be played below on this page or via iTunes or via the tool of your choice using this feed.

You can can download this Mp3 file directly from here. Listen to other episodes here or view all episodes in our index.

Thanks to Arne Huseby for the music, licensed using Creative Commons. The song is "Warm Duck Shuffle."

Pioneer Press Op-Ed: Competition and Community Savings

The Pioneer Press published this op-ed about Minnesota high speed Internet access and availability on December 3, 2015. 

Christopher Mitchell: Competition and community savings

Minnesota has just one more month to achieve its goal of high speed Internet access available to every resident and local business. In 2010, the Legislature set a 2015 goal for universal Internet access at speeds just under the current federal broadband definition. But the state never really committed to anything more than a token effort and will fall far short.

Even for those of us living in metro areas that have comparatively high speed access, we don't have a real choice in providers and most of us lack access to next-generation gigabit speeds.

The big cable and telephone companies excel at restricting competition by manipulating markets, state and federal government policy, and other means. This is why so many local governments across the nation are themselves expanding Internet infrastructure: to ensure local businesses and residents can access affordable next-generation services and create a real choice. We should be encouraging these local approaches.

The Institute for Local Self-Reliance is tracking more than 450 communities where local governments are expanding choices with direct investments in networks. Just this month, some 50 communities in Colorado and two in Iowa voted to move forward with plans for their own networks or partnerships.

Here in Minnesota, we have seen a variety of successful approaches. Eagan's modest network attracted a data center.

Dakota County has saved itself millions of dollars by placing conduit for fiber in the ground at very low cost as part of other projects. Now it can use that to help local companies to compete with the big cable and telephone companies.

Scott County's fiber network has helped create more than 1,000 jobs and tremendously improved access in area schools. In Sibley County and part of Renville, cities and townships joined together to help launch a new cooperative, RS Fiber, which shows tremendous promise. Cooperatives, which are effectively community-owned as well, offer some of the best connectivity in rural regions of the state.

Some municipal networks have been accused as being failures. For years, cable and telephone companies claimed Windom in southeast Minnesota was a disaster. WindomNet is one of the most advanced networks in the state and has been expanded to serve nearby towns that had been ignored by the big telephone companies.

In our 2014 study All Hands on Deck, we identified more than $400,000 in regional savings from WindomNet every year. In addition, the network helped keep 47 jobs in the community from one employer alone that previously couldn't get the service it needed from the national telephone company serving it. This is a threat to cable and telephone monopolies, not local taxpayers.

With Windom's success, the cable and telephone companies now attack Monticello's municipal FiberNet for not having yet broken even financially. However, that is the not the only metric by which it should be judged.

Ten years ago, Internet access in Monticello was dismal, harming local businesses. They demanded the city take action and the city asked the telephone and cable company to improve their services -- but those companies insisted everything was fine. So Monticello voted by 74 percent to build its own network.

The telephone company sued, costing Monticello millions in lost time despite its prevailing easily in court.

During the case, the telephone company improved its services, and, after Monticello built its own network, the cable company dropped its rates dramatically. The same package that residents in Rochester and Duluth pay $145 per month for was offered for $60 per month guaranteed for two years. Prices in Monticello from all providers are a fraction of what we pay in the metro.

We estimated the aggregate savings in the community at $10 million over the past five years in All Hands on Deck.

Rather than allowing communities to decide locally on the best strategies to improve Internet access, Minnesota discourages them by requiring a supermajority vote before a community can offer telephone service. This requirement particularly harms Greater Minnesota, where mobile phones are far less reliable and telephone service plays a more important public safety role.

We need an "All Hands on Deck" approach to improving Internet access. The state should be lessening barriers to investment, not maintaining them at the behest of large cable and telephone companies. Local government strategies will play an important role in ensuring our communities can thrive in the digital age.

Christopher Mitchell, St. Paul, is director of the Community Broadband Networks Initiative at the Institute for Local Self-Reliance. He is on Twitter @communitynets

Roanoke Valley Broadband Authority Moving Forward

After multiple delays, the much anticipated Roanoke-Salem fiber network in Virginia has its feet on the ground. The network has secured an executive director who will provide greater project oversight and find Internet service providers (ISPs) to operate on the open access network.

Now that the project is under way, it is moving at a rapid pace. The Broadband Authority already secured a contract for $2.9 million to lay the conduit for the fiber optic cable, and crews are already at work. By year’s end, the project should finally be complete.

Two years ago, a completion date seemed far-fetched. The cities of Roanoke and Salem and the counties of Roanoke and Botetourt met to discuss the growing problem of poor Internet access in the region. The area had the reputation for being in a "doughnut hole" - too large to qualify for federal grants but too sparsely populated to attract investment from large telecom providers. The city of Roanoke, for instance, ranked 409th out of 429 US metropolitan areas for basic Internet access.

Officials knew the situation was bad for economic development. Affordable, reliable broadband access could help grow, and keep, local companies in the region and attract new businesses and institutions - especially the important textile and manufacturing jobs that had driven the local economy for generations. The two cities and two counties came together to fund a $50,000 study. The study recommended the creation a Roanoke Valley Broadband Authority and a 60-mile, $8.2 million, open access network.

After the initial stage, disagreements between the entities complicated the project. Botetourt County already had open access fiber managed by Mid-Atlantic Broadband Communities Corporation and felt additional redundancy from another fiber line was not worth the investment. Botetourt County Administrator Kathleen Guzi:

“We don’t believe we need the redundancy yet.” 

In Roanoke County, officials were hesitant to fund the network. Each government entity had agreed to provide $2 million to the project, and that presented a budget concern for Roanoke County. The county board also saw it as government encroachment on the private sector, distinct from an infrastructure project. Eventually, both Roanoke and Botetourt Counties withdrew from the project.

The cities of Roanoke and Salem expressed disappointment but acknowledged that they would move forward without the counties, according to Salem City Manager Kevin Boggess:

“If whatever we decide to do ends up going into a community that’s not fully participating, it’s still open access broadband for whatever business happens to be there. We’re not going to restrict anybody’s access to it. That’s the whole idea of this. We’re going to create something that’s open to every potential provider, every potential customer. It’s open access. That’s what it’s there for.”

After Botetourt and Roanoke counties withdrew, Roanoke and Salem entirely revamped the project. Scaling back the network to just 47 miles, they cut down the cost to less than $4 million. Salem's Municipal Electric Department uses existing fiber that can be integrated into the project, so the majority of the new fiber will run through Roanoke. Some of the fiber will still extend into parts of Botetourt and Roanoke counties.

The Virginia Resources Authority has issued a $6.2 million bond to cover the network’s construction and any unforeseen costs. Both cities have committed to repaying the debt on the bond until the network generates enough revenue to cover network costs and debt service. 

From philosophical disagreements to changing plans, it has been a long road for the fledgling Roanoke-Salem network. Now with an executive director and a $6.2 million bond, the Roanoke Valley Broadband Authority should complete the 47-mile, open access network by the end of 2015.

Roanoke Valley map from Foundation For Roanoke Valley

Debate on Municipal Networks by Federalist Society Now Available

Our own Christopher Mitchell recently participated in a debate hosted by the Federalist Society. You can now listen to the debate at the Federalist Society website. We think it offers an intelligent airing of different points of view.

Chris, who is also Policy Director at Next Century Cities, disscussed the role of municipal networks in improving competition, reveiwed reguatory issues, and debated the anticipated legal outcome of February's FCC decision on local authority in Tennessee and North Carolina. He squared off against Charles M. Davidson, Director of the Advanced Communications Law and Policy Institute at New York Law School, and Randolph J. May, President of the Free State Foundation. Both organizations have spoken out against community broadband networks.

Rachel M. Bender, Senior Policy Director of Mobile Future, moderated.

Want a Gig? Ask Consultants the Right Questions

For years, we have been frustrated at the tendency of communities and consultants to view municipal fiber networks as a binary decision. Should we or shouldn't we? Should they or shouldn't they? At its worst, it is framed with the most expensive approach - borrowing for a citywide all-at-once approach.

Consider this framing by a recent story in a Portland, Oregon suburb from the Oregonian:

Hillsboro officials have heard back from the consultant they hired to examine the feasibility of building a municipal fiber network that would bring high-speed, lower-cost Internet service to city residents.

The answer? Don't do it.

Stories like this make my blood boil. It is the absolute wrong question. But to delve into it, I want to abstract away from any specific consultants or approaches. This is not a failing of a single consultant, but something we have seen to various degrees from many.

Jumping ahead, the correct approach is to develop a description of the problems a community faces or wants to solve relating to Internet access. Then, examine a variety of approaches to pick the best option rather than only evaluating the single most expensive option.

Some consultants are very happy to bid a project, answer a narrow question, and then let the community go on its perhaps puzzled way. They have the list of phone poll questions, the spreadsheet full of assumptions, and final feasibility report template all ready for the next community. (We do not offer consulting services.)

Other consultants go out of their way to educate, guide, and otherwise help the community develop and achieve its objectives. These consultants may appear to cost a bit more, but actually can be much more cost effective. Some consultants bid the bare minimum, planning to charge extra later for supposedly supplemental information that is actually essential for continuing the process.

A consultant should be a guide to achieving objectives rather than simply evaluating a single, likely over-simplified question. It all starts with what questions a community asks. After doing some initial research (possibly perusing our Community Connectivity Toolkit), community leaders may be tempted to ask a consultant whether they should build a citywide municipal fiber network.

This is not recommended. Instead, we recommend developing a vision (discussed in our Santa Monica City Net case study).

What is the primary problem that needs to be solved? Hint: It isn't "how do we get a gig??" Be more specific. Common problems include poor business service availability that discourages economic development opportunities, slow connectivity, high prices (for residents or businesses or both), poor reliability, lack of access for historically marginalized populations etc.

Identifying specific problems is important because the preferred solutions for encouraging economic development will be different from those focusing on connecting low-income neighborhoods.

Having established the problems, the vision needs a sense of the opportunities from policy options. Here it is important to remember that the same technology deployed by different entities will create different opportunities. If Chattanooga had decided to beg Verizon for FiOS rather than building their own network, they wouldn't have created thousands of jobs and wouldn't have one of the best networks in the nation today. But both FiOS and Chattanooga's fiber network are technically similar. A FTTH network owned by a massive telco can have dramatically different outcomes than a FTTH network owned by a community. The tradeoff is the responsibility of running the system, likely over decades.

After establishing the problems and opportunities, the consultant should be charged with recommending paths to achieve the vision. "No" is not acceptable answer. An acceptable answer is an analysis that explains how the community can trade off cost, time, risks, and benefits. That is to say a community may decide to take greater risks in anticipation of greater benefits by borrowing significantly to rapidly build a citywide network. Or a community may decide to minimize risk with incremental investments over many years to expand conduit and fiber in the first phases of a long term plan. There are many permutations.

In the year 2015, municipal fiber is not a yes/no question. The models are many and varied - the best question is what does the community need and how motivated it is to take meaningful action.

Had Hillsboro taken this path, they would have a variety of options to discuss to solve the problems with connectivity that were demonstrated by the study. But instead, they have a document that only examined high risk, high cost approaches and found the recommended project to be "marginally viable."

If I were an elected official there, I would be examining what low cost incremental strategies could improve access to the Internet locally.

As a final thought, this is not just a problem with consultants. There are definitely elected officials who are privately happy to hear that a project is not feasible because it gives them cover to take no action. If they were already hesitant to upset power cable and telephone companies, they then have a document that "proves" the costs are too great to take any action.

Longmont Gig Finds Many Takers - Community Broadband Bits Episode 161

The community reaction to Longmont's NextLight gigabit municipal fiber network in Colorado has been dramatic. They are seeing major take rates in the initial neighborhoods, driven in part by the opportunity for a $50/month gigabit connection if you take service within three months of it becoming available in the neighborhood.

This week, Longmont Power & Communications General Manager Tom Roiniotis joins us to tell us more about their approach and how the community has responded, including a block party celebrating freedom from a well-known monopoly.

We discuss how they have connect the schools, the history of the network, and how incumbent providers are reacting. Along the way, I make a case for why what Longmont is doing is substantially different from the upgrades that CenturyLink and Comcast are making in some areas. See our other stories about Longmont here.

Read the transcript from this discussion here.

We want your feedback and suggestions for the show - please e-mail us or leave a comment below.

This show is 24 minutes long and can be played below on this page or via iTunes or via the tool of your choice using this feed.

Listen to other episodes here or view all episodes in our index. You can can download this Mp3 file directly from here.

Thanks to bkfm-b-side for the music, licensed using Creative Commons. The song is "Raise Your Hands."

Gilberts Voters Say No to Tax Increase for Muni

On April 7th, voters in Glberts, Illinois, chose not to raise taxes to deploy a municipal fiber network, reports the Daily Herald. According to the article, 81 percent of ballots cast voted against the proposal. Voter turnout was low, with only 682 ballots cast out of 4,002 registered voters in town.

As we reported last month, local developer Troy Mertz plans to deploy fiber to each structure in a new housing development, The Conservancy. His fiber company will also install fiber to nearby municipal and public safety buildings and the Gilberts Elementary School. The plan was to issue General Obligation (GO) bonds to finance a publicly owned network throughout the rest of the community. The proposal would have raised taxes approximately 1.8 percent or $150 per year on properties with a market value of $250,000.

For the developer the plan will remain the same:

Mertz still plans to go ahead and connect The Conservancy's planned fiber optic network to municipal and public safety buildings plus Gilberts Elementary School, saying it was built into his development plans.

"The goal of village was always to getting fiber to our industrial areas," said Gilberts Village President Rick Zirk. "As a community, we asked the rest of the village, 'Do you want the same service and the same options that the new part of town and the industrial park?' And it seems that they don't want to pay for it."

There is a definite lesson here for any other communities considering a similar plan - educate the voters and make sure they are excited about it! From what we can tell, there was little effort to make people aware of the plan and the turnout for the vote suggests that no one was particularly excited to make it happen.