In the case of muni systems, which are not-for-profit enterprises, one measure of “success” is defined as the level of their “take rate” – that is, the percentage of potential subscribers who are offered the service that actually do subscribe. Nationwide, the take rates for retail municipal systems after one to four years of operation averages 54 percent. This is much higher than larger incumbent service provider take rates, and is also well above the typical FTTH business plan usually requiring a 30-40 percent take rate to “break even” with payback periods.
Broadband for Libraries and Schools
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 month for T1 service at 1.54Mbps, and that price is subsidized by matching e-rate funds of an additional $2,000 a month.[quoted by App-Rising.com]
This is not to say eRate is a total failure because without it, many schools and libraries would not have been able to offer the services they do. Additionally, some smart communities have used eRate the help build publicly owned networks - as in Danville, Virginia, where the publicly owned utility successfully bid for contracts to the schools under eRate programs. But eRate should go further in encouraging these innovative and sustainable solutions rather than continuing to pay for connections that will only increase in price -- a rather unsustainable approach.
Many of these networks will be able to pay for the operating costs but they need assistance in being established. Thus, a smart program would push communities in the direction of local self-reliance rather than enabling endless, expensive dependence on companies that have little incentive to improve connectivity.
Federal programs should prioritize public ownership, if for no other reason than it pushes funding recipients to become responsible for the solution. Requiring responsibility encourages sustainable solutions, rather than defaulting to a lousy status quo.
Photo Courtesy of Christopher Chan on Flickr, used under creative commons license.