As the FCC continues to formulate a National Broadband Plan, the Institute for Local Self-Reliance has submitted comments [pdf] about publicly owned networks in response to the Request for Comments #7: "Comment Sought on the Contribution of Federal, State, Tribal, and Local Government to Broadband." In our comments, we highlight the importance of publicly owned broadband networks by noting many success stories and offering details on networks from Chattanooga, Burlington, Monticello, and Powell, Wyoming. We also offer some comments about middle-mile networks and networks that connect core anchor institutions, like libraries and schools.
Highland, a city in Illinois, has been recommended by the governor to receive a grant from the broadband stimulus program. Highland plans to build a full fiber-to-the-home network after first connecting the schools and public buildings (a phased approach that has worked well elsewhere). Stimulus funds would expedite the buildout that has already demonstrated strong community support.
Highland city voters passed — with 75 percent voting in favor — three referendums April 7 concerning the idea to bring fiber-optic cable connections to every home and business within the city. It will offer high-speed Internet service, telephone and cable TV.
Shortly after, the council had authorized construction and operation of a telecommunications and cable television system, while emphasizing the need for careful planning. The council also voted to set up a three-member Telecommunications Advisory Board to oversee the process.
One the goals of this site is to catalog reports, articles, and all things related to publicly owned broadband. A number of older articles about muni broadband still resonate today -- As part of its May 2005 issue, Broadband Properties offered a pro and con view of municipal networks. Carl Kandutsch, a former FCC attorney, wrote "The Case for Municipal Broadband." Other articles from that issues are also available here.
The piece generally focuses on matters of economics and law, but in an accessible manner. The threat of private, monopolistic service providers -- particularly in rural areas -- is indeed a significant motivation and reason to embrace public ownership.
He also delves into debunking specific arguments against municipal ownership and argues that publicly owned networks are at a disadvantage relative private companies:
The municipal balance sheet must then be compared with that of private firms existing actually or potentially in the relevant market, taking into account the often huge tax breaks granted to private sector communication firms, the economies of scale conferred on incumbents from ownership of pre-existing infrastructure and nationwide or international service areas, the freedom to contract with any other entity on any terms within the limits of the law and so on.
Moreover, whereas private firms are permitted to operate behind closed doors, municipal utilities must comply with numerous open-records requirements, and must secure public approval for all significant decisions. The level of public scrutiny under which a municipal utility operates ensures that significant operational inefficiencies will be short-lived, and that utility officials are politically accountable for their decisions.
For another real-world example of how companies respond to public entry into the telecom market (as opposed to theoretical arguments about crowding out investment), let's look back down to Lafayette and how cable incumbent Cox responded:
“Cox froze the cable rates in Lafayette, and they didn’t freeze the rates in other areas,” said Terry Huval, director of LUS, a municipally owned utility company which fought major incumbent opposition before building an FTTH network in Lafayette and starting to offer service earlier this year. “We figured our citizens saved over $3 million in cable rates even before we could offer them service.”
I have yet to see a cable company leave a market or reduce investment following the introduction of a public competitor. The opposite tends to happen - they increase investment and often drop prices or leave them lower than in surrounding, non-competitive areas. Often, the rates are not really advertised but if you call from the competitive area, they will offer a better deal:
Trae Russell, communications manager for EATEL, the local telephone franchise in Ascension, La., and some surrounding communities, had seen the same thing happen in his area, when EATEL started offering FTTH-based services in 2006. In fact, EATEL went so far as to take out an ad in the Lafayette newspaper, alerting cable customers there to the discounts that Ascension customers were getting and forecasting similar lower rates in Lafayette once the LUS network was in the works.
“It was an incredibly bold move on our part,” Russell said. “Cox came in with an incredibly aggressive promotion for TV service with every bell and whistle you could imagine. We couldn’t figure out how they could even make money on it. So we took out an ad in the Lafayette newspaper that basically said, ‘Hey Lafayette, look at the great prices you are going to get from Cox.’ Cox was not amused.”
This is also a lesson for those who want to build a public network. Don't expect to win just because you have a better service and you offer lower prices from what was available before a competing network is built. The incumbent has often already paid off its network. Additionally, incumbents are often larger companies that pay less for their television contracts, so they can lower prices farther than one might...Read more
Last year, Oklahoma City launched the world's largest muni Wi-Fi mesh network (not residential use, just public safety and other muni uses). Shortly thereafter, they won an award for the public safety aspects of the network.
A GovPro story now suggests networks like this Oklahoma City network could be leading a renaissance for muni wireless networks:
For instance, three years ago, Oklahoma City launched a muni-wireless broadband network using equipment from Tropos Networks covering 555 square miles. Today it has been adopted as the primary network used by all city departments.
Mark Meier, Oklahoma City’s chief technology officer recently indicated that the city has derived approximately $10 million in value from its broadband network to date. "Some of our critical public safety applications required redundant wireless connectivity, but the cellular data cards have remained virtually unused and handle less than 1 percent of our traffic which has resulted in significant cost savings for the city," he says.
Many have held up the CyberSpot Wi-Fi network in Florida's Saint Cloud as a successful example of public provisioning of wireless. From my perspective, the network was always interesting in that it did not attempt to pay for itself out of network revenues. The city built the network and provided services over the 15 square miles for free - they viewed it as a public service. The network start-up cost was $2.5 million and was funded by the Economic Development Fund. It cost another $370,000 each year in operating costs - some $30,000 a month. Some 77% of the city used the network within half a year according to Free Press. St. Cloud has some 30,000 people and had at least 8500 unique devices connect to it monthly in recent months - due to NAT routers (non-geeks, ignore this) we can safely assume that there are more than 8500 devices using the network. In order to keep the local taxes level, the City Council decided to cut Cyberspot along with a number of a other programs. Popular outrage led to another meeting in which many people testified that they wanted the network to remain funded. The Orlando Sentinel covered the extension of the city service for 3 more months and public reaction:
Scores of angry residents packed commission chambers Thursday, demanding that the city not pull the plug. " St. Cloud is not a hick town anymore," said resident Keith Harris. "We're country folks, but we're not backwards. One of the reasons for that is our Internet."
One of the people (in part 2 - the second video below) noted that the cost to him for raising taxes to cover CyberSpot would be a few dollars a month. The cost of eliminating CyberSpot to him is far greater - he will now have to pay ten times as much to get an Internet connection. I watched the first half hour of the meeting and found the public comments quite interesting. The rest are probably interesting as well - you can find all the videos here. Update: The network stopped offering public service on February 16, 2010.... Read more
At a general discussion yesterday at the NATOA National Conference down here in New Orleans, I was stunned to hear someone from the muni world accept the idea that some municipalities do not want to compete with the private sector. I say stunned, not because I'm surprised to hear that some towns do not want to provide telecommunications services in competition with the private sector, but because towns "compete" with the private sector in many ways that go unnoticed.
Police and education are two examples in which every community provides services in competition with the private sector (security guards and private schools). Most communities have libraries - taking sales away from hard-working bookstores. Some towns provide municipal golf courses or public swimming pools. There are many ways in which it is acceptable for the public sector to "compete" with the private sector.
The problem with accepting the blanket statement that the public should not compete with the private sector is that it 1) is factually inaccurate and 2) suggests that to provide telecommunications services would be a substantial deviation from the historic role for municipal and local governments.
The truth is that local governments have long stepped in, where necessary, to ensure the community has everything it needs to be successful. Interestingly, this has included both municipal liquor stores and lumber yards in many remote communities. Properly posed, the question is not whether communities should deviate from their historic role of avoiding competition with the private sector, but whether telecommunications falls into that area that communities have long elected to serve when a community need is unmet.
This is a question with which most communities will wrestle, but they should do so on honest terms. Though providing telecommunications services in some communities may be novel, they have long "competed" with the private sector in other generally accepted areas. Communities will come down on both sides of providing services and time will tell if they made the right decision for their community.
On Tuesday, September 15, EPB, the public power utility serving Chattanooga and nearby communities in Tennessee, rolled out fully fiber-powered triple-play services to 17,000, a number expected to grow by July 2010, when services will be available to some 100,000 people and businesses. It will take three years before all 160,000 potential subscribers are passed.
Chattanooga has had a relatively rough time creating the network due to the litigious nature of its incumbents, who have filed 4 lawsuits to stop the project only to have each of them dismissed by the courts. (This is a predictable outcome, many of these companies file frivolous lawsuits to intimidate communities with lost time and legal fees - leading to a no-lose situation for companies that invest more in lawyers than in the networks communities need in the modern economy.)
Prices and Options
All broadband speeds are symmetrical; prices by month
|15 Mbps and basic phone||$68.83|
|15 Mbps / basic phone / basic cable||$92.97|
|15 Mbps/ phone & 120 min long distance / 77 Channels||$117.24|
Caveats: an extra $5.99 a month for HD Capability on the TV, but even the basic phone package comes with caller ID and 3-way calling
The Tennessee Cable and Telecommunications Association kicked off the lawsuits in 2007 and Comcast chimed in a year later. As has been done in other communities, the private companies alleged the power utility was cross-subsidizing its triple-play telecom offering with revenues from the electric side. Aside from this just being a poor business practice, the companies say such cross-subsidization would be unfair to them even as major carriers routinely cross-subsidize from community to community - overcharging in non-competitive markets to make up for keeping prices low in competitive markets.
Nonetheless, public power companies and other public agencies have learned to keep meticulous books to show they are not cross-subsidizing, something courts recognize each time their time is wasted by lawsuit-happy incumbent providers.
EPB has long offered some telecom...Read more
San Francisco has leveraged its municipally-owned fiber in a program to overcome the digital divide. Projects like this are a good early step for larger communities. First, invest in fiber to public buildings, schools, etc., to cut costs from leased lines (often, while upgrading capacity). Second, begin to leverage that fiber to increase affordable broadband availability in the community. Expand until community needs are met.