Chelan PUD is asking the people of their rural community whether they “love” or “just like” their beleaguered and pioneering fiber-optic network. At a series of public input meetings to be held across the county over the next month, residents will have the chance to hear opinions from business, economic, and marketing consultants, as well as express their devotion, or lack thereof, to the network. The future of the network is in question and the Chelan PUD needs to hear from its owners.

At the first meeting, on February 28^th, most residents of Chelan County said that having a locally owned and controlled network available to them was a priority. Consultants hired by the PUD said the fiber-optic network could be self-sustaining in the long term with changes in business planning. Recommendations included writing off internal debt, more aggressive marketing efforts to existing and ready locations, and collaborating with ISPs to obtain more subscribers in the open access network. Yes, the PUD Fiber-optic network has had its problems, including high installation costs due to the landscape and lack of conduit, changes in PUD leadership, and incompatible existing residential technology. Nevertheless, experts and the local community appear patient and cautiously optimistic. More meetings will follow; the next is scheduled for March 19^th.

Providers lease from the PUD (state law prohibits them from competing directly with retail services) and proceeds from wholesale electricity sales have allowed the network to continue expanding. As we have reported in the past, the PUD is an open access network and while it has not been able to pay down its debt, and has had some difficulties, the PUD network has recognized value in the community, as evidenced at this first meeting. It certainly beats not having access to the essential infrastructure necessary to succeed in the modern economy.

Last year we noted that a bill to expand local authority to invest in publicly owned broadband networks would return in 2012. HB 1711 is in Committee and causing a bit of a stir. "A bit of a stir" is good -- such a reaction means it has a chance at passing and giving Washington's residents a greater opportunity to have fast, affordable, and reliable access to the Internet. Washington's law presently allows Public Utility Districts to build fiber-optic networks but they cannot offer retail services. They are limited to providing wholesale services only -- working with independent service providers to bring telecom services to the public. Unfortunately, this approach can be financially debilitating, particularly in rural areas. Building next generation networks in very low density areas is hard enough without being forced to split the revenues with third parties. Last year, House Bill 2601 created a study to examine telecommunications reform, including the possibilty of municipality and public utility district provisioning. The University of Washington School of Law examined the issues and released a report [pdf] that recognizes the important role public sector investments can play:

Broadband infrastructure is this century’s interstate highway system: a public investment in an infrastructure that will rapidly connect Washington’s citizens statewide, nationally, and internationally; fuelling growth, competition, and innovation. Like highway access, the path to universal broadband access varies with the needs of the local community. Our primary goal is to expand broadband access. We believe allowing municipalities and PUDs to provide broadband services addresses the most significant hurdles to broadband expansion: the high cost of infrastructure. In conjunction with a state USF, PUDs and municipalities are well placed to address the needs of their consumers. A secondary goal is to promote a competitive marketplace.

For the last 6 weeks in Chelan, Washington, the Public Utility District has had to make some hard decisions regarding expanding its rural FTTH network using a broadband stimulus award from the federal government. Chelan was an early pioneer of rural FTTH, operating a network that serves over 2/3 of a rugged county that offers great rock climbing and hiking opportunities (I checked it out personally). As we reported last year, Chelan's citizens had strongly supported accepting the stimulus award and paying for their required match by modestly increasing electrical rates (which are among the least expensive in the nation). At that time, the PUD believed its network passed over 80% of the county. But after reassessing their coverage and changing the leadership of the group in charge of the fiber-optic aspect of the utility, they found the network passed closer to 70% of the population. They also re-examined assumptions about the cost of expanding the network's reach:

The PUD’s financial review resulted in a series of revised statistics that PUD engineers presented to commissioners Monday. Of the county’s 43,000 premises — mostly homes and businesses — 30,000 have access to fiber. Some 6,000 don’t have access because they live in areas where hookups are more costly, despite their often urban settings. In these areas, the cables that supply electricity are buried directly in the ground. Fiber hookups require costly trenching and installing conduit. Another 7,000 premises don’t have access because they’re very rural. Fiber access to all but the most rural of these locations will be funded jointly by a $25 million federal stimulus grant and PUD matching funds of about $8 million.

Of the 30,000 with access, some 37% are taking a service (though they have to subscribe through independent service providers that contract with Chelan PUD due to Washington State law denying the opportunity for PUDs to offer retail services on their own network. Nonetheless, they are signing up 100 new customers per month. The problem is that some of the new connections are in high cost areas (whether due to distance or underground utilities).

The Chelan Public Utility District in Washington state is upgrading network capacity as it starts expanding the network following its broadband stimulus award. We previously covered their consideration of whether to expand from passing 80% of the territory to 98%. Chelan is one of the most rural publicly owned fiber networks as well as one of the oldest ones. In a rarity, it looks likely to run in the red permanently (the pains of rural, mountain terrain) with the support of most ratepayers. These ratepayers recognize the many benefits of having the network outweigh its inability to entirely pay for itself. The utility also runs a sewer project that is subsidized by wholesale electricity sales. Though some areas in Chelan are served by Charter and Frontier, the more remote folks would have no broadband access if not for the PUD. With the planned upgrades in 2011, Chelan's open access services will offer far faster speeds than available from the cable and DSL providers. Under Washington law, the PUDs cannot sell telecommunications services directly to customer. The PUD builds the network infrastructure and allows independent service providers to lease access while competing with each other for subscribers. Though this is a great approach for creating a competitive broadband market, it has proved difficult to finance (if one believes this essential infrastructure should not be subsidized as roads are). When the PUD considered whether to pursue the expansion (meaning taking a federal grant covering 75% of the costs and agreeing to run the network for 22 years), it asked the ratepayers for feedback:

Sixty-four percent of 450 randomly chosen Chelan County registered voters who were part of phone survey in August said they favor taking the grant and completing the buildout, even if it means their electric bills will go up by as much as 3 percent — about $1.50 more on a $50 per month power bill.

On November 9, PUD Commissioners approved the rate increase. Chelan's service providers currently offer connections of 6Mbps/384kbps or 12 Mbps/384kbps.

The Chelan Public Utility District in Washington began its county-wide fiber-optic network build. They have since passed some 80% of the county but are temporarily pausing expansion efforts. Chelan is a rural county and the network is not expected to break even for quite some time. In Washington, state law limits the powers of public utility districts to offer broadband. As with communities in Utah, these public sector entities are forced to operate an open access network and are unable to offer services directly. While the open access model is a great one for some communities (and one we encourage when the numbers work), it can be difficult to implement depending on local circumstances. The Wenatchee World recently covered the decision to hire a consultant to identify means of lowering costs. The network has cost $80 million to get to this point and will require an additional $40 million to connect the remaining 15-20%. The network can provide access to over 30,000 residents, businesses, and community anchors (schools, hospitals, muni facilities). Subscribers choose from a variety of service providers for services and take rates vary from 30%-60% depending on the area. The network is operating at a loss (probably due to a combination of the high costs of FTTH in rural areas, the low take rates, and lower revenues from operating on a purely wholesale basis). Residents were conflicted about the network's inability to pay for itself but a majority have continued to support it because they often have no other broadband options. However, the current economic climate has resulted in more concern about the costs. Chelan PUD has apparently covered the losses from broadband (as well as some sewer and water services) with the sales of surplus electricity on the wholesale market.

A video from Chelan shows the benefits of a publicly owned fiber-to-the-home network in a rural public utility district in Washington State. The network has literally saved lived with tele-medicine applications. Citizens also cite educational advantages and increased business opportunities thanks to this smart investment.

This video is no longer available.