Tag: "incumbent"

Posted March 1, 2010 by christopher

The Longmont Times-Call continues its coverage of the community network struggles of a Colorado community. This story has a lot of the history behind how Longmont developed a fiber ring and how they have used it even as they are prohibited from expanding it.

Longmont is not alone in working for upwards of a decade to bring better broadband to the community that actually meets local needs rather than maximizing profits. Other communities have also spent ten, fifteen, or even long with on-gain, off-again plans to build a publicly owned network. This reality provides a handy refutation of state preemptions based on the logic that communities will act too quickly in not considering their plan for a network. Communities take years in researching, planning, and developing networks.

In Longmont, the first public fiber investment came in 1996 and was expanded shortly thereafter by the Platte River Power Authority. The city moved more than 40 facilities to a gigabit network, leaving T1s to communities that prefer to vastly overpay for their telecommunications needs.

They worked with a private company, Adesta, to expand the network to residents and businesses but the company filed for bankruptcy in the following year. The arrangement certainly had its upside though - Qwest and Comcast mysteriously decided to start offering broadband in Longmont shortly after the Adesta agreement. This happens almost every time a community invests in infrastructure -- it leads to increased investment from incumbents.

They quote a techie from the Longmont Hospital who explains the one of the benefits of the publicly owned fiber already in the ground:

“It’s at least a three times reduction in cost,” Niemann said of leasing fiber from the city, versus contracting with a commercial provider. “And oftentimes, if you go with a commercial provider, you have construction costs.”

The city would like to expand the network, both to bring competition to the DSL/cable duopoly, and to invest in smart grid applications for its public power utility. Unfortunately, they have to win a referendum per Colorado's incumbent-protection law. The incumbents are more than willing to spend hundreds of thousands against any such measure, knowing they would lose far more in profits if they had to deal with competition in the community.

Posted February 16, 2010 by christopher

Andrew Cohill of Design Nine has released a report about Open Access networks: "Broadband for America: The Third Way." I wanted to highlight this report because open access is an important idea that should be promoted and discussed. I believe open access is the most promising way to create the world most people want to live in - fast and affordable networks offering many choices in services and service providers to all Americans. However, though I hold Andrew in high regard, I have some disagreements with the paper that are noted below. This paper comes at an important time. For more than a decade, we have ended each year with less broadband competition than we started with. Politicians and regulators have abandoned policies aimed at promoting competition despite their continued lip service in favor of it. Incumbents have more and more power over both subscribers and entire communities. If we want competition in broadband and cable (and I certainly do!), open access is the only feasible approach. The cost of building the networks is fantastically high whereas the cost of offering services to an additional user are tiny. The result is a network with strong natural monopoly characteristics. Without a network that shares infrastructure (wires, poles, CPE, etc.), the market will trend toward monopoly or duopoly. Wireless complements wired broadband but cannot provide the high speeds and reliability of fiber-optic networks. Even if some metro areas can support multiple networks, most rural areas can barely support one network. Without open access, significant parts of the country cannot have a choice in service providers. Further, when the infrastructure is publicly owned and encourages competition, difficult problems like network neutrality quickly fade. Network neutrality legislation is needed because of profit-maximizing companies who are emboldened by too little competition. Publicly owned infrastructure requires less federal regulation because its incentives are to be responsive to community needs, not to maximize profits. I recommend reading his paper before reading the issues I raise below. Though I am agreement with the majority of his points, I want to note that we will continue opposing state laws that require communities to build wholesale-only networks (where the community does not provide retail services) because communities must...

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Posted February 8, 2010 by christopher

As Karl Bode recently asked, "Should Fairpoint Really Be Giving Broadband Advice?" They have been lobbying against other stimulus projects in Maine that could allow FairPoint subscribers to actually get service that works and puts communities first.

Given FairPoint's horrendous track record in New England since taking over Verizon's run-down network, I'm glad to see a local paper taking them to task for their attempts to deny broadband to significant swaths of the state.

FairPoint is demanding that Maine law prevent the university from selling access to its network to any customer outside the governmental sector. Instead, those customers would have to take their business to FairPoint.

If FairPoint could take care of the customers it already has, and if it was keeping up with its promises to serve more of the state with high-speed Internet, it might have a stronger case.

People in Maine need to realize they will remain behind in network infrastructure so long as they depend on companies like FairPoint rather than the old New England values of self-reliance. Absent public competition, FairPoint will remain the only "option" because no private provider will find profits competing in these rural areas.

Posted December 9, 2009 by christopher

Following up on my previous post "Institutional Networks and Cherry Picking," I want to briefly note that the U.S. should reform how it funds Internet connections at schools and libraries.

Let me start with an assumption: we do not want to use federal taxes to support these local institutions except where most necessary. It strikes me that wherever possible, communities should take responsibility for their own community institutions.

With that in mind, the eRate program concerns me. Basically, eRate is a means for the federal government to aid local schools and libraries in affording broadband. I'm afraid that it indirectly encourages monopolistic service providers (mainly telephone incumbents) to overcharge for T-1 lines while removing any incentive for the school or library to invest in a better connection.

If a school or library is only paying 20% of the cost of a slow and overpriced line, it has considerably less motivation to seek a better connection -- especially as the only alternative to an existing connection may be building new fiber paths - as noted in "Libraries dying for bandwidth."

But another problem is simple availability. As the ALA's report (PDF) points out, "moving from a 56Kbps circuit to 1.5Mbps is one thing. Moving from 1.5Mbps to 20Mbps or to 100Mbps or even to a gigabit—depending on the size and need of the library—is another." Even when they can pay for it, many libraries are finding that higher speeds simply aren't available.

This program has been around since 1998 and has paid out $25 billion. Imagine if the program had encouraged the schools and libraries to build their own networks from the start - a truly sustainable approach rather than an approach that brought slow broadband to these anchor institutions while rewarding telephone companies significantly overcharging for slow services.

Consider Joanne Hovis of Columbia Telecommunications Company -

In Montgomery County schools connected to a community-owned fiber network are getting access to 100Mbps speeds and paying $71 per Mbps per month, whereas neighboring schools not on the network are paying $2,000 a...

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Posted December 4, 2009 by christopher

My friend, Geoff Daily at App-Rising.com, has questioned the wisdom of running fiber to all anchor institutions.

There's been a lot of buzz around the benefits and relative viability of wiring all community anchor institutions (schools, libraries, hospitals, etc.) with fiber as the way to get the best bang for the broadband buck. But recent conversations with my fiber-deploying friends have led me to worry that doing this could be a big mistake.

...

The reason is simple: if you build a network to serve community anchors, then those institutions won't be available to serve as anchor customers for a community-wide deployment. Without those community anchors as customers, the economics of deployment, especially in rural areas, becomes much harder and may actually make robust, sustainable broadband impossible in some areas.

This is a question I have wrestled with also, in trying to help communities understand the real impacts of decisions they make on whether to build their own broadband network.

My first reaction is on philosophical grounds - public institutions like schools, police departments, etc., do not exist to prop-up the business models of cable or telephone companies. Large entities like municipal and county governments should own their own network because it will save them money and expand their capabilities. When will the tea-party protesters start protesting government paying exorbitant fees to telephone companies for slow T-1 lines and the like? After all, these are our tax dollars and they should be spent wisely.

My second reaction is that I seriously doubt removing these institutional networks will impact the business model significantly. Maybe it would have last decade, but now we know that Comcast and probably many more have ">massive margins in their broadband operations. Losing the libraries and schools will do little to their bottom lines. Even if it takes a bit out of their profits, they won't go missing meals.

But really, the answer is more complicated. Many municipalities already get "free" services from their cable company as a part of the video...

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Posted December 1, 2009 by christopher

It looks like Palo Alto should move quickly on expanding its publicly owned fiber-based I-NET - as the city renegotiates the cable franchise with Comcast, the private cable company is trying to rip-off taxpayers with exorbitant prices for community anchor tenants.

California is one of several states to recently take negotiating power on cable television franchises away from communities and grant it to the state. Historically, communities negotiated a free or reduced rate for connectivity to schools, public safety buildings and other key community anchors in return for access to community Right-of-Way - an essential permission necessary to build a cable network.

However, as these agreements come up for review, the regulatory landscape is significantly different than it was when they were negotiated in the past. Federal and state decisions have limited the power of communities to gain concessions from cable companies as they continue to raise prices and post large profits.

In response, many communities have embarked on smart efforts to build their own fiber-optic networks connecting key institutions. These networks often save money while greatly increasing available bandwidth, allowing local governments to be more efficient and use cutting-edge applications. In some communities, these Institutional Networks have formed the backbone of next-generation networks that extend full fiber-to-the-home network access to businesses and citizens. Palo Alto has not yet connected all the necessary buildings with its network and still depends on Comcast for bandwidth to those areas.

Communities should beware - network ownership means power. The network owner can decide what price to charge schools - prices that must be paid with tax dollars. Communities building their own networks have slashed these prices and reduced pressure on the tax base. They don't have to worry as much when cable franchise negotiations are up again - like Palo Alto is now.

Joe Saccio, deputy director of Palo Alto's Administrative Services Department, said Comcast's proposed rates for I-Net would essentially enable the cable company to bill the communities twice for the fiber network. The network's construction was funded by cable subscribers and according to the staff report, Comcast has already largely (if not completely) recouped those costs.

"It's felt...

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Posted November 16, 2009 by christopher

As we have noted previously, Longmont, Colorado, has seen a number of private companies attempt to offer Wi-Fi broadband and then go out of business. As Colorado preempts local authority by requiring a referendum by the city before it can offer services itself, Longmont recently had a vote to authorize telecommunications services. Voters defeated the option.

As is common in these referendums, voters were blanketed with reasons to vote against it as incumbents (Qwest and Comcast) spent $200,000 opposing competition whereas the city is prevented by law from advocating for a ballot measure.

Now the Wi-Fi network will be auctioned off in pieces because it cannot pay taxes.

Ohio-based DHB Networks owes the Boulder County treasurer’s office $87,000 in unpaid business personal property tax, and the county demanded the company cease operations unless it pays those taxes.

DHB also owes the city of Longmont. Longmont-based RidgeviewTel is running the network, at least until the Wi-Fi equipment is auctioned off Thursday — at which point, 400 to 600 customers will be without Internet access, RidgeviewTel CEO Vince Jordan said.

Though the city already has fiber assets that could be used for backhaul as well as other expertise it could use in continuing to run the network, it cannot step in to run a network that would be useful to the community:

While the city can step in and operate the system, it would be only for municipal needs — such as police, fire and utility services — and not to provide Wi-Fi to customers.

“Our hands were always tied,” Roiniotis said. “We could buy the system and operate it, but only for our own purposes. We can’t provide the retail part of it.”

The city’s hands also were tied when it came to campaigning. State law bans governments from spending public money to campaign for or against local ballot questions.

Though 400-600 people may not seem like a lot of people to leave stranded, many of those on the network were the ones that needed a low cost alternative. This is one of the reason some hoped for a last minute resolution to the...

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Posted November 6, 2009 by christopher

Minnesota's Ultra High Speed Broadband Task Force (created by the legislature last year and largely appointed by the Governor) is releasing its report today (the report will soon be available here). I've had a chance to skim it and found it disappointing in some ways but otherwise to be better than what I expected when I learned about the Task Force.

Being in Minnesota, I guess we should just be thankful the Governor did not attempt to make the report a secret as he recently did with other public broadband information. The Task Force was remarkably open as it went about its process - something I think we can attribute to Chairman Rick King's seriousness in running the operation and trying to move Minnesota forward.

Unfortunately, the political reality of such a task force is that many private interests have to be represented. So the irony of having a Task Force to study why the private sector has failed to invest in the broadband Minnesota needs is that those who have failed to invest get to make demands or refuse to sign off on the report. This is how Task Force's typically devolve into a colossal waste of time. My observation is that while this Task Force seemed headed in that direction, in did not get there.

While the report sets decent targets for future levels of service, it is relatively silent about how to get there. There is some talk of local governments "partnering" with the private sector to aggregate demand (meaning, collect customers for the companies) but when the local governments partner in other ways (say, to build a modern network) they get sued as did Monticello. Thus the report is rather timid in its suggestions of what kind of public-private partnerships should be pursued - we are left to believe that the best partnerships are those where the public sector does the work and the private sector collects most of the benefits.

The report is silent on the role of municipalities directly building their own networks although Chairman King is reported to have said that some on the committee had doubts about the abilities of local governments to run these in the long term. Surveying the landscape, I have to wonder about the ability of private companies to run these networks over any...

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Posted October 29, 2009 by christopher

Monticello Minnesota, the small community located 40 miles northwest of the Twin Cities, recently returned to the news when its telephone incumbent, TDS, began offering a fast 50/20 Mbps residential broadband connection for $50/month.

Nate Anderson, of Ars Technica, covered both the story and backstory (something he has extensively reported).

But the entire congratulatory press release glosses over a key fact: the reason that Monticello received a fiber network was the town's decision to install a municipal-owned fiber network to every home in town… spawning a set of TDS lawsuits that went all the way to the Minnesota Supreme Court, which ruled in favor of the town.

I might also note that the press release and much of the coverage also glosses over a one-year contract and early termination fee (though it isn't clear if this is applied in all circumstances). However, Nate nails the story by framing it with the title "Want 50Mbps Internet in your town? Threaten to roll out your own."

We spoke to TDS about the situation last year, and its director of legislative and public relations told us that TDS didn't act earlier because it didn't actually know that people really, really wanted fiber; once the referendum was a success, the company moved quickly to give people what it now knew they wanted.

Of course, TDS did not start rolling fiber after the referendum. They waited. It was only after the City successfully bonded for the project that TDS acted (first by filing a lawsuit to block competition and second by investing in their network to be competitive when the doomed lawsuit would inevitably be dismissed). TDS did not change course because they suddenly realized that people wanted better broadband, they did it because they knew that they would have to invest or perish when confronted with actual competition.

Nate's article looks at other communities that have followed a similar trajectory. This story seems to have inspired another excellent post by Phillip Dampier at Stop the Cap: Municipalities: If You Threaten to Build It Yourself, Your Faster Speeds Will Come.

I take some issue...

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Posted October 13, 2009 by christopher

Not too far away from Chattanooga, Tennessee, (home to the largest muni fiber network in the U.S.) lies Cleveland (Tennessee). Five prominent residents asked why they cannot get broadband:

The homeowners have discussed the problem with Charter Communications Director of Government Relations Nick Pavlis three times.

Pavlis said in a telephone interview it would cost the cable company $130,000 to run an underground cable 2 1/2 miles and “it’s just not a reasonable payback.”

He said the company spends $500 per house as a general rule, which gives them a 36-48 month return on investment.

Yet Charter has no problem lobbying the states to prohibit publicly owned networks. Tennessee probably has more fiber-to-the-home initiatives than any other state - perhaps it is time Cleveland looked into their own or cajoling a nearby network into expanding.

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