community broadband networks

A rural Fiber-to-the-Farm project that started in Sibley County has added three new towns to its potential territory due to the extremely high interest in fast, affordable, and reliable connections to the Internet. The current providers aren't getting the job done and few expect that to change given the cost of improving services.

An article last year reported on present difficulties for many in Sibley:

Soeffker, who farms with her husband in rural Sibley County, said the dish receiver they must use works fine in good weather but balks during heavy rain and snowstorms.

Meantime, her husband struggles with a lagging Internet speed of .6 megabits a second that falls short of meeting his business needs when he’s selling commodities.

The committee organizing the network set a goal for demonstrating the interest of something like 50% of the population in the target area. There has been some confusion as to exactly how many they should have before committing to the project but with just two mass mailings, they have received nearly 3,000 positive responses (of the over 8000 households that could be served). This is a very strong response.

To keep the public informed, they have had numerous public meetings in each of the communities that will be involved. To be as open as possible, they would often have three meetings in a town per day -- a morning, afternoon, and evening meeting to accomodate everyone's schedule. As this project moves forward, no one can claim the group has been anything but open with the plan.

On January 19, they had a major meeting with over 100 people attending, including many elected officials from the towns. For over two and a half hours, they had five presentations and numerous questions. MPR's Jennifer Vogel was there and wrote about the project shortly afterward.

Participating communities--which include Renville County, Sibley County, Fairfax, Gibbon, Winthrop, Gaylord, Arlington, New Auburn, Green Isle, Buffalo Lake, Steward, Brownton and Lafayette--have been asked to decide by early March whether to continue with the project and release additional funds for marketing and administration.

Previously, the project included 7 potential towns. But some nearby towns in Nicollet County have expressed interest in joining and their density would make the project more viable. Most in Sibley have been dedicated to serving every household - town and farm alike. While the principle of equity is noble, it ultimately makes the project harder to finance due to the higher fixed costs required to serve the least dense areas. Bringing in a few more towns benefits everyone.

Unfortunately, the people around the those towns are frustrated that they are not slated for connections in the current plan -- see some of the discussions on their vibrant facebook page. They will have to draw the line somewhere but will undoubtedly be interested in expanding the network once they have built out in initial territory.

Minnesota law has a barrier to municipal networks and as a matter of law, it is not clear that it applies to a county-owned project. Under law, if a municipality wishes to own or operate a telephone exchance, it must have a successful 65% referendum -- an incredibly high bar given the imbalance of spending power in such contests. Incumbent providers can spend a lot to oppose a referendum whereas local governments cannot take a position and grassroots groups are limited in their financial resources.

However, as this network plans to neither own nor operate a telephone exchange, it should not have to pass a referendum. It seems as though the project is leaning toward a partnership with Hiawatha Broadband Communications, a well liked private firm from southeastern Minnesota. HBC already operates the muni-owned Monticello FTTH network.

While no financial plans are yet finalized, the most likely option appears to be non-recourse revenue bonds for nearly $70 million. These are bonds that are issued to private investors and will be repaid with revenues from the subscribers. If the network were to fail to produce enough revenue to make the debt payments, the towns and county would have the option of making up the difference from tax revenues but would be under no obligation to do so.

From Jennifer Vogel:

There would be some public obligation to the project, in the form of what McGinley called a "debt service reserve fund." In order to make the project appealing to investors, he said, the participating communities would be required to establish and replenish if necessary a $4.5 million rainy day fund that would cover any shortfalls. They also would have to cover the contributions of any communities that ducked out of the project down the road or couldn't pay into the fund.

If one town, Winthrop for example, decided not to ante up for the debt service reserve fund, other communities could cover the difference. As the network generates net income (perhaps 5-6 years down the road), the money comes back proportionally to those towns that created the reserve fund.

It bears noting that these people are not asking for any handouts. Whereas Frontier and other providers in the towns are incredibly unlikely to expand their networks absent taxpayer subsidies, the Sibley County Fiber Project will be locally self-reliant.

I recently stumbled across a great point regarding the spectacular failure of the US (mostly the FCC, but Congress should certainly share some of the blame) to properly regulate broadband connections to the Internet. US policy results in a few massive providers dominating the market. Fred Goldstein, a principal of Interisle Consulting Group, wrote the following:

In truly competitive markets that display some degree of commodity-like characteristics, large and small vendors tend to coexist. I'm drinking coffee right now, which is a good example. Maybe Maxwell House and Folgers (and their parent companies) have a large share of the market, competing on price for their swill. But there is plenty of room for others to differentiate their product. Dunkin and Starbucks have built huge chains on their own style of semi-premium product, while another couple of niches of premium and superpremium beans are easy enough to find. Food markets tend to be like this; check out any Whole Foods (a/k/a The Museum of Modern Vegetables) for a supply of priced-above-commodity products. I feel foolish for selling most (not all, thankfully) of my Whole Foods stock when it was in the dumps a couple of years ago.

The same thing happens in many fields. Apple itself sells computers above commodity price levels. There's a whole "high end" audio business catering to those who like to show off how much they can afford to spend. The automobile industry has mass-market commodity cars and several premium tiers.

Internet access in the US lacks that because the natural monopoly on outside plant is not properly regulated. If it were treated here by EU norms, then any number of ISPs could access the wire. Some would just be cheap; some would offer premium help desks among their services. That doesn't happen, however, when the usual number of "competitors" is two. Even more so when those competitors agree that they should divide up markets between themselves rather than overbuild, or (heaven forbid) let outside information providers onto their facilities.

The wire should be regulated. ISPs shouldn't.

Amen. Physical connections are a natural monopoly. Even if the economics supported many physical providers, having so many would be terribly inefficient. Much better to have networks that are owned by the community and have independent service providers competing to deliver services -- just like the roads.

The SouthEast Association of Telecommunications Officers and Advisors has its annual conference in Chattanooga this year - March 12 and 13th. The conference includes a tour of EPB's Gigabit network (the largest muni network in the nation) and its PEG operations.

This conference will undoubtedly be buzzing about the legislation in South Carolina and Georgia that aims to shut down community networks just like North Carolina did last year.

Deena Shetler, the associate Chief of the FCC's Wireline Competition Bureau will be giving the keynote. Give it a look if you are in the neighborhood.

With AT&T again pushing a bill in South Carolina to revoke local authority to build community broadband networks, the National Association of Telecommunications Officers and Advisers has sent a letter to the Chair of the Senate Judiciary Committee [pdf] opposing H3508. The bill will be considered by that committee on Thursday, January 26. South Carolina already restricts local authority to build networks but this bill would essentially close off any possibility of doing so.

Dear Senator Rankin:

The National Association of Telecommunications Officers and Advisors (NATOA) joins the growing chorus of business, consumer, and government groups and associations in opposing H. 3508 (Government Owned Communications Service Providers). This bill will harm your state’s economic growth and do little if anything to promote competition or to bring advanced communications services to the citizens of South Carolina. Hamstringing local government efforts to provide fiber networks will simply result in the further flow of millions of investment dollars to neighboring states such as Tennessee.

NATOA has long supported community broadband networks because they offer the promise of increased economic development and jobs, enhanced market competition, improved delivery of e-government services, and accelerated and affordable Internet access for all. Communities across America are ready and eager to bring the economic and social benefits of broadband access to their citizens. But private providers alone will not bring these advanced services to all parts of our country, especially to those communities that do not fit into the companies’ business plans.

As a result, hundreds of cities have launched community broadband initiatives, either with private partners or on their own, and many more are now in the planning stages. Communities should be encouraged to step forward to do their part to ensure the rapid deployment of broadband to all Americans, and they should have the freedom to choose what makes the most sense for their citizens. H. 3508 will simply make it more difficult for public broadband providers from building the advanced broadband infrastructure necessary to stimulate local business development, work force retraining, and employment in economically depressed areas.

Among other things, the bill’s definition of “broadband service” – 190 kilobits per second (“kbps”) at least one direction – is extremely low. In its 2010 Sixth Broadband Progress Report, the Federal Communications Commission raised its decade-old minimum broadband speed threshold from services in excess of 200 kbps in both directions to services enabling actual download speeds of at least 4 Mbps and upload speeds of at least 1 Mbps. But even this threshold is viewed by many as too slow to support the applications available in the marketplace today, as well as rapidly emerging technologies and applications for teleworking, distance learning, and telemedicine. Unfortunately, even with this minimum threshold speed, South Carolina, according to a recent FCC Internet Access Services report, has the fifth worst level of broadband in the United States (out of 44 states with data reporting) with only 17% of households having that level of access available.

Rather than erecting further barriers to entry, South Carolina should be encouraging community leaders to develop networks that make sense for their communities, including public-private partnerships and systems wholly owned by municipalities.

Thank you for your consideration.

With all the great community broadband network projects out there that are owned by local governments, I hope readers will take some time to nominate some of them for the "Innovations in American Government" awards from the Ash Center at Harvard's Kennedy School.

Deadline for nominations is March 1.

Winners of the Innovations competition are eligible for awards of up to $100,000 for replication and dissemination. You may apply directly or you can be referred through an adviser to the program, which assures that program staff will follow up with you to make sure you are eligible and that you successfully complete the application.

Santa Monica won this award last September.

The Georgia Senate is considering SB 313, a bill that would overrule local decision-making authority in matters of broadband. Even as connections to the Internet have become essential for communities, the Georgia Legislature is poised to make it harder for communities to get the networks they need.

We saw very similar language in North Carolina pass last year after many years of lobbying by Time Waner Cable and CenturyLink. These massive companies use their lobbying clout to stop any form of competition they could face, and they are presently threatened by the examples of many communities that have built incredible next-generation networks. For instance, see the thousands of new jobs in Chattanooga that are credited to its community fiber network.

Community networks spur competition -- it is why Chattanooga got Comcast's xfinity service before Atlanta, despite Atlanta having long been prioritized over Chattanooga previously. It is why Cox Cable, which is headquartered in Atlanta, launched its upgrades in Lafayette, Louisiana -- they felt the competition pressure from a community fiber network.

Bill supporters are already claiming that this is just an attempt to level the playing field:

"The private sector is handling this exceptionally well," Rogers said. "What they don't need is for a governmental entity to come in and compete with them where these types of services already exist. We're not outlawing a local government entity from doing this, but if they're going to compete, they can play by the same rules and ask the voters if it's okay before they go out and spend all these dollars."

We have mapped the states that enacted barriers to community networks,written extensively about level playing field arguments, and even produced a video about the level playing field:

As for whether the private sector is providing enough competition or high enough capacity networks, I leave that to individual communities to decide.

SB 313 effectively removes such decisions from local communities. It purports to just set additional terms that the public sector must meet, but many of these terms are sufficiently onerous (especially when taken all together) that communities will not be able to build the network they need.

The bill first requires communities to ask the private sector to build the necessary network. This ignores the basic fact that community networks are operated with different incentives that privately owned networks. Due to the scarcity in the market, private providers tend to keep prices higher than necessary to maximize their short term profits. Publicly owned networks lower prices (while still paying their costs) in order to spur job creation and increase digital inclusion.

The bill requires communities to pass a referendum before building a network and requires inaccurate, damning language be included on the ballot. Broadband referendums tend to invite deep-pocketed incumbent providers to spend heavily to buy the votes necessary to stop competition - see the Longmont saga for an excellent example of how hard it is for a community to stand up to these big cable corporations.

Communities that somehow get this far are then subject to all the regulations as are private providers in addition to numerous additional regulations imposed on them by this legislation and their inherent duty to operate in an open and transparent manner. Despite being nonprofit, they are required to pay taxes and still face additional barriers that private operators do not.

They will be restricted in how they price their services and where they offer services in ways the private sector is not.

In short, this bill will make it all but impossible for communities to build networks -- even in areas that are presently unserved. The bill purports to exempt some unserved areas, but does so in a cynically evasive way. The only way a community could meet the unserved exemption is if it vowed to only build in the least economical areas -- meaning it would have to be significantly subsidized. Serving unserved areas and breaking even financially almost always requires building a network that will also cover some areas already served (because that is where you can find the margins that will cover the losses in higher expense areas).

The bill is presently in the Senate Regulated Industries and Utilities committee. We will continue covering it and attempt to learn which interests are pushing to revoke local authority and replace it with what distant legislators think best.

Photo used under Creative Commons license, courtesy of Flickr's PhotoPhiend.

Minnesota Public Radio has once again covered some of the many benefits coming from the stimulus-funded Southwest Minnesota Broadband Services that grew out of WindomNet, a small muni network. It is now offering some of the fastest connections in the region to people who previously only had dial-up or slow DSL.

Schensted and his wife are the first in their southwest Minnesota community to connect to a new high-speed Internet service. He said the new service is everything it was advertised to be.

"We're getting anywhere from 50 megabits downloading and about 20 to 30 uploading," Schensted said. "It's just really incredibly fast."

Stimulus dollars spent on expanding publicly owned networks gets the most bang for the taxpayer's buck and should have been a much larger focus for the broadband stimulus.

The people and businesses served by this network have faster connections at lower prices than we can get in the metro area of Minneapolis/St Paul.

Schensted's house is connected to the nearly $13 million Southwest Minnesota Broadband Service project that will serve eight communities: Bingham Lake, Brewster, Heron Lake, Jackson, Lakefield, Okabena, Round Lake and Wilder.

Internet equipment
Schensted said he has never had that kind of Internet speed, even when he lived in the Twin Cities.

"This is perhaps overkill for even my home," he said. "I'm not complaining about it, but it's a wonderful overkill. My wife and I can both be using a computer, we can be streaming something on the television, all at the same time which is something we wouldn't have dreamed of before."

Smart public investments can connect everyone in this state, at a fraction of the price that it would cost to subsidize the big private companies to do it. They are too inefficient and require too large a margin of profit, in addition to a host of other problems.

One of the great conferences, Freedom to Connect, is back for 2011! I'll be in Washington, DC, (well, Silver Spring to be accurate) on May 21-22 to mingle with and learn from a lot of great people that have helped to create the Internet of today and are creating the Internet of tomorrow.

Very early bird registration is now open but ends on January 31.

Confirmed keynote speakers include Vint Cerf, Cory Doctorow, Rebecca MacKinnon, and Aaron Swartz. The program is still being put together - check in from time to time to catch the latest updates.

We'll be talking about community broadband in addition to myriad other issues where democracy intersects with communication.

The Media Action Grassroots network is holding a digital dialogue phonecast from 1-2pm EST on January 25. The discussion features Traci Morris of Native Public Media, Danielle Chynoweth of Urbana-Champaign Independent Media Center, and me of here on the topic of "Beyond Access: Owning Community Broadband Networks."

You have to RSVP to join but there is no charge.

In the last few years local communities, governments, non-profit organizations and neighborhood residents from across the U.S. have successfully launched community broadband initiatives. 54 U.S. cities own citywide fiber networks and another 79 own citywide cable networks. These local initiatives, in rural and urban areas alike, have served as community scale infrastructures that are sustainable and allow participation and decisionmaking on the most local level. Research has shown that community scale infrastructure is more cost effective to build out and lowers the cost of sustaining connectivity at the community level. As we know broadband Internet access is vital for civil engagement and integral to our daily lives. For community media advocates it's not just about having access to broadband services, it's also about owning the infrastructure and gaining access, rights and power to media that provide marginalized community members with needed broadband access. Moreover, these broadband networks are directly accountable to the community they serve.

AT&T, one of the few dominant Internet access providers in South Carolina, is again pushing a bill in the state legislature that will gut the self-determiniation of local communities in the digital age. The market power of AT&T and Time Warner Cable has already driven most private sector competition from the market -- now they want to use their lobbying clout to ensure that the communities themselves cannot build the networks they need to attract economic development and maintain a high quality of life.

Last year, we were deeply concerned about House Bill 3508 but it was orphaned in committee after AT&T lost its credibilty by encouraging the state adopt a broadband definition lower than even the much-maligned 200kbps previously used by the FCC.

The bill is back this year and would have been taken up by the Senate Judiciary Committee today but that meeting now appears to be cancelled. Nonetheless, AT&T will undoubtedly find a way to bring it back this year and we shouldn't count on AT&T's stupidity to save us again from its massive lobbying clout.

Phil Dampier has issued a call to action at Stop the Cap!, calling AT&T's bill the Profit Protection Act. He has a list of the Senate Judiciary Committee members so people in South Carolina can contact them.

It is crucial that Senators and Representatives hear from constituents on these matters. Issues of telecommunications policy rarely generate phone calls, so even a few calls can make a different and will serve notice to elected officials that they are being monitored on this issue.

There is no need for additional barriers in South Carolina for rural communities to build the networks they need. As we show on our community broadband preemption map, South Carolina has already enacted additional regulatory barriers that public sector entities must surpass in order to build this essential infrastructure in their community.

South Carolina's communities have very poor access to the Internet compared to regional and international peers. AT&T is not expanding its super-DSL product called U-Verse and no major private companies are building fiber-optic networks. Making it harder for communities to build the necessary infrastructure simply means that South Carolina will be unable to attract the jobs or workforce of the future.

If you have questions or want to assist in the effort to preserve local decisionmaking authority in South Carolina or anywhere else, let us know.