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Whose Internet? NC Communities Should Defend Freedom to Build Networks

Durham's Herald Sun published our op-ed about community broadband networks in North Carolina. Reposted here:

Who should decide the future of broadband access in towns across North Carolina? Citizens and businesses in towns across the state, or a handful of large cable and phone companies? The new General Assembly will almost certainly be asked to address that question.

Fed up with poor customer service, overpriced plans and unreliable broadband access, Wilson and Salisbury decided to build their own next-generation networks. Faced with the prospect of real competition in the telecom sector, phone and cable companies have aggressively lobbied the General Assembly to abolish the right of other cities to follow in Wilson and Salisbury's pioneering footsteps.

The decision by Wilson and Salisbury to build their own networks is reminiscent of the decision by many communities 100 years ago to build their own electrical grids when private electric companies refused to provide them inexpensive, reliable service.

An analysis by the Institute for Local Self-Reliance ( compares the speed and price of broadband from incumbent providers in North Carolina to that offered by municipally owned Greenlight in Wilson and Fibrant in Salisbury.

Wilson and Salisbury offer much faster connections at similar price points, delivering more value for the dollar while keeping those dollars in the community. For instance, the introductory broadband tiers from Wilson (10 downstream/10 upstream Mbps) and Salisbury (15/15 Mbps) beat the fastest advertised tiers in Raleigh of AT&T (6/.5 Mbps) and TWC (10/.768 Mbps). And by building state-of-the-art fiber-optic networks, subscribers actually receive the speeds promised in advertisements. DSL and cable connections, for a variety of reasons, rarely achieve the speeds promised.

Curbing innovation

The Research Triangle is a hub of innovation but is stuck with last-century broadband delivered by telephone lines and cable connections. In the Triangle, as in most of the United States, broadband subscribers choose between slow DSL from the incumbent telephone company and faster but by no means adequate cable broadband from the incumbent cable company.

A few DSL subscribers may have access to U-Verse, but most are waiting for someone in Texas (AT&T's headquarters) to authorize the upgrade to U-Verse (faster than typical DSL but much slower than full fiber-optics). On the cable side, someone in New York (Time Warner Cable's headquarters) decided to force subscribers in the Triangle to wait for cable upgrades long after many cities had received them.

Perhaps by the end of 2011, all businesses and residents in the Triangle will have access to the best broadband TWC and AT&T have to offer -- which is still inferior to that offered by Wilson, Salisbury, any community with Verizon's FiOS, and just about every major city in Europe or Asia.

The opposition

Under state law, communities can organize and build their own broadband networks to ensure their citizens have world-class access to the Internet. The argument for preempting this local authority features two diametrically opposed claims:

  • Communities should not build these networks because they always fail.
  • Communities should not compete with the private sector because they will drive the existing provider(s) out of business.

Interestingly, the preponderance of evidence actually weighs against both claims. The vast majority of community fiber networks have performed extremely well against great odds. After winning the costly, frivolous lawsuits filed against communities by incumbents, community networks have successfully competed against temporary, artificially low prices by competitors who use profits from non-competitive areas to subsidize their efforts to deny any subscribers to a new network.

The few community fiber networks that have struggled against these odds are presented as the norm by industry-funded think tanks that try to scare any community considering a broadband investment.

A public monopoly?

There are few, if any, instances where community networks have driven incumbents out of business. It is true that once a community network begins operating, incumbent profits decline, often because they lower prices and increase investments -- each of which greatly benefits the community. But even if that were not true, why should a local government in North Carolina care more for the profits of two massive out-of-state companies than for what is best for their citizens and the future of the community?

The incumbent lobbyists will say that local governments can just raise taxes to unfairly cross-subsidize the networks. The reality is that citizens enjoy having their taxes raised about as much as having their cable rates raised. Citizens have little recourse when cable companies raise their rates, but they can directly express their dissatisfaction with elected officials who arbitrarily raise their taxes, by voting them out of office.

Local control

Remember though, the argument here is not about whether any given community should build a network. Right now, communities make that choice themselves. For years, lobbyists have pushed the General Assembly to take that decision away, either directly or by creating a web of contrived obstacles.

On matters of essential infrastructure, communities should be free to decide whether they will build it or depend on others. For years, Mooresville and Davidson relied on Adelphia for cable access while the network fell into disrepair. In the wake of Adelphia's bankruptcy, they chose to take it over to avoid continued similar problems from TWC. In taking it over, they found it in even worse shape than expected, resulting in higher costs to fix it. This situation, fixing the failure of the private sector, is actually used by telecom companies to argue against public ownership.

There is a very good reason so many communities are considering a variety of broadband investments: private providers are not meeting their needs. The question is whether the General Assembly wants to let communities move forward as they choose, or let out-of-state companies decide the competitiveness of the state.

Interview with Wilson's Greenlight Community Fiber Network

This is a good 5 minute interview discussing what Wilson has done to build the first citywide FTTH network in North Carolina. Greenlight has a business customer taking 1Gbps -- something that would undoubtedly have been totally cost-prohibitive (and possibly just unavailable) if the City had not made its broadband infrastructure investment.

Toward the end, Brian Bowman is asked if he recommends all communities build a similar network. His answer is very wise: all communities should have the right to do it and they should decide for themselves based on their situation. That is our position as well.

Wilson's Greenlight Puts Election Debate on TV

When a debate between candidates for Wilson's sheriff proved too popular by far for the scheduled venue, Greenlight stepped in to televise it.

Jon Jimison, Wilson Times editor, said his phone has been ringing off the hook since the debate at Fike High School was announced. Fike holds a little more than 900 people. With the tickets snapped up on the first day of availability, televising the debate was what Jimison wanted.

"We're very happy the city and Greenlight are partnering with us on this event," Jimison said. "By having the debate aired on Greenlight it exponentially increases access to the debate so more residents can see it for themselves."

Greenlight is the community fiber network built by Wilson's public power company and is owned by the City.

Wilson is fortunate to have a publicly owned network able to step in and televise the network. In many towns, the incumbent is a private company that has little interest in helping out in such a situation. Thousands of towns do not even have a local cable presence they can call on if they were in this situation -- big carriers continuously consolidate and shut down local service centers to save money.

I recently visited Sibley County, Minnesota, where they are considering a publicly owned fiber-to-the-farm network. The programming they see on their TV comes from another state - Iowa! This is yet another reason communities should have networks that are directly accountable to them.

Wilson's Greenlight Ahead of Schedule, Deals with TWC Predatory Pricing

Wilson's Greenlight community fiber network is ahead of schedule. They continue to operate ahead of the business plan, despite a few difficulties that offer lessons to up and coming community networks.

We recently covered the fallout from their application to the broadband stimulus program where they had to disclose network information to their competitors.

Fortunately, that was not the only news last month from North Carolina's first all-fiber citywide network. They also surpassed 5000 subscribers and remain 6-9 months ahead of their business plan in take rate, according to the Wilson Times.

The number of customers is expected to reach 5,300 by the end of the fiscal year if the current trend continues, according to Dathan Shows, assistant city manager for Broadband and Technical Services. The city's current business plan calls for Greenlight to reach 5,000 customers by the end of the third full year of operation, which will be June 2011.

This is not the first time the network has exceeded projections; the network was built faster than expected and quickly jumped out ahead of take rate expectations.

One of the reasons Greenlight may be growing is its attention to local needs, as illustrated by the network finding a way to televise local football matches that otherwise would not have been available.

However, the Wilson Times story goes into much greater detail regarding the competition from Time Warner Cable. As we regularly see, Time Warner Cable is engaging in what appears to be predatory pricing to retain customers and starve Greenlight of new subscribers.

A lesson to other community networks, Wilson is documenting the deals TWC uses to keep subscribers. All communities should keep these records.

"Time Warner Cable's market tactics include anti-competitive pricing that interferes with Wilson's ability to secure customers through normal marketing," the application [for broadband stimulus] states. "TWC offers below-market rates to customers seeking to switch to Greenlight, locking them into multi-year deals in exchange for name-your-price rates that are not advertised and made on an ad hoc basis when customers call to switch to Greenlight."

Running the numbers of these discounts leads to a total community savings of over $1million a year that subscribers to Time Warner Cable are saving over what they would be paying in absence of a community network.

The article goes on to quote Catharine Rice, someone who has a very strong grasp on the reality of broadband in communities across the country.

Rice describes what Time Warner Cable is doing as "cross-subsidizing" and charging higher rates elsewhere so it can offer lower rates in Wilson. Rice said Time Warner Cable is keeping pricing below cost in Wilson to try to drive Greenlight out of business.

"Somebody has to start looking at what Time Warner is doing in Wilson," Rice said. "When I step back and look at this whole thing, it's clear as a bell what's going on. Time Warner doesn't want to upgrade its cable plant."

Let's take a look at the broadband Time Warner Cable offers and compare it to Greenlight. All speeds in Mbps. Time Warner Cable does not make it easy to understand what the upstream speeds are, so I tried to piece it together from a variety of sources.

TWC has much slower options, from a .768/.384 package up to a "turbo" 15/1 (for $56.90). Wilson offers only one internet-only package - a 20/20 connection for $59.95. If bundling, Wilson has 5 packages from 10/10 at $34.95/month to 100/100 for $300/month.

It should be noted that the 15Mbps down TWC offer is faster that what TWC offers in nearby communities, suggesting they either upgraded their Wilson plant slightly or they are just being more bold in exaggerating their services. Either way, I'm willing to bet that the actual TWC "up to" 15 Mbps is slower than the 10Mbps service from Greenlight.

It is hard to compare TWC to Greenlight, much like comparing a Vespa to a Ducati. Nonetheless, TWC's size and market power allow it to try to run competition out of the market.

Finishing up, another lesson to communities who are planning to build their own next-generation network: be aware that you will have to deal with people who do not pay their bills. Wilson has had to deal with what seems to be an abnormally high number of these:

To date, Greenlight has disconnected just over 1,000 customers due to nonpayment. Shows said these are customers who received Greenlight service but never paid a bill. As a result, the city has had to "tighten standards," Shows said, on deposits. How much a customer pays for a deposit is based on their credit rating and on the services to which they subscribe. The city's finance department handles collections for Greenlight.

An Unlevel Playing Field: Wilson Forced to Disclose Network Information to Competitors

I recently heard that the only place one finds a free lunch is in a mouse trap. As we sift through the lessons from the broadband stimulus programs, we have learned that the federal government preferred funding private projects rather than those that are structurally accountable to the community.

Before the first round of stimulus applications were due, many communities recognized the costs of applying were too high for them. Now, some are recognizing the high costs of complying with the many federal rules that come with accepting federal grants and loans (as detailed by Craig Settles).

And now, North Carolina's city of Wilson has found that applying for the broadband stimulus may have disadvantaged its FTTH network. Though the application was not accepted, the city has had to turn over its full application (chock full with proprietary information) to its competitors.

This is yet another example of ways in which the "playing field" is tilted against the public. The Wilson Times explained the situation and settlement.

The application included a proposed expansion of the network to provide reduced-cost or no-cost broadband lines to homes of Wilson County school children, a health network, increased lines for police and other improvements that would enhance the network in the city, Goings said.

When the North Carolina Telecommunications Association (with prominent member Time Warner Cable - incumbent cable provider competing with Wilson's Greenlight) asked to see the full application, the City refused to turn it over -- even after a court ruled against the City. The City argued the application contained key information regarding the policy and utilities that should not be made public for security reasons. When the Department of Homeland Security ignored the City's requests to intervene, the City was compelled to release the documents.

This is a particularly interesting juxtaposition as privately owned telcos and cablecos regularly argue against having to disclose any information about about their networks as a security concern. In this case, they are on record arguing the same information should be in the public domain.

As reported in the Wilson Times article,

"We have known from the very beginning that, if we built a fiber-optic network, it would basically be a situation where we'll constantly be in court with Time Warner," Goings said. "We're not surprised. I think this won't be the last time we have a court case with Time Warner."

I have been told by many community owned network operators that they have to deal with constant requests for information from the private competitors as a form of harassment and a means to get all kinds of data they would never share themselves. I first became aware of this Wilson lawsuit when reading an editorial in the Salisbury Post regarding transparency and the Fibrant network.

This is one of the big challenges a municipal system faces. It has to play by different rules than private enterprise does. While Time Warner can plan expansions in private, Fibrant and the city have to be open to public scrutiny, and competitors are part of the public.

If Federal programs want to create a "level playing field," they must require all applications are equally available to competitors. In the meantime, this is just another example of the ways in which privately owned massive incumbent providers have most of the advantages in offering broadband services.

Update: Our story kicked off greater tech coverage from DSL Reports and Ars Technica.

Wilson's Greenlight Releases Video Interviews with Satisfied Subscribers

Kudos to Wilson's Greenlight fiber network in North Carolina. They are featuring some interviews with people who like their services, two of which are embedded below.


Herald Tribune Series on County and Community Networks

A few weeks ago, the Herald Tribune ran a number of articles about broadband by Michael Pollick and Doug Sword that discussed some community fiber networks and efforts by Counties in Florida to build their own fiber-optic networks.

The first, "Martin County opting to put lines place," covers the familiar story of a local government that decides to stop getting fleeced by an incumbent (in this case, Comcast) and instead build their own network to ensure higher capacity at lower prices and often much greater reliability.

Martin County, FL

"We decided for the kind of money these people are asking us, we would be better off doing this on our own," said Kevin Kryzda, the county's chief information officer. "That is different from anybody else. And then we said we would like to do a loose association to provide broadband to the community while we are spending the money to build this network anyway. That was unique, too."

The new project will use a contractor to build a fiber network throughout the county and a tiny rural phone company willing to foot part of the bill in return for permission to use the network to grab customers of broadband service. The combined public-private network would not only connect the sheriff's office, county administration, schools and hospitals, but also would use existing rights of ways along major highways to run through Martin's commercial corridors.

Michael Pollick correctly notes that Florida is one of the 18 states that preempt local authority to build broadband maps.

However, they incorrectly believe that Martin County is unique in its approach. As we have covered in the past, a number of counties are building various types of broadband networks.

This is also not the first time we have seen a local government decided to build a broadband network after it saw a potential employer choose a different community because of the difference in broadband access.

From there, Michael Pollick and Doug Sword team up for "County faces a fiber-optic opportunity" discussing Sarasota County. Here, the original thought was to use fiber to coordinate traffic lights but they will use extra capacity for economic development.

Sarasota County, FL

The local government uses a Comcast I-Net but that is not available to businesses who are stuck with overpriced and underpowered connections from incumbents:

"Businesses upload stuff, while consumers download," said Rich Swier Jr., who works from a Central Avenue office where the only service comes from Comcast. Swier, the only entrepreneur on the Sarasota Broadband Task Force, is not happy with what he gets from Comcast. "They are repackaging a consumer grade service as a business service and charging three times more."

Swier is paying about $200 per month for what is supposed to be 50 megabits per second download and 5 megabits up. But in reality, it operates at half those speeds, he said.

For the time being, it appears that the county is mostly focused on some form of dark fiber approach using the conduit it has been opportunistically placing over the past 10 years.

Doug Sword wrote, "Municipalities butt heads with telecom companies," a look at Wilson's Greenlight network . It also covers the moaning of Fortune 500 company Time Warner Cable, which apparently is somehow at a disadvantage against a small city. (A reality check on TWC's claims about pole attachment fees.)

Wilson's decision to go into the broadband business was also spurred by the city's need to make up for the near demise in the 1990s of a pair of mainstay industries, textile and tobacco. The feeling is that whatever the city's economic future holds, having ultra-fast broadband will help it get there.
"The way we see it, you're going to have haves and have-nots in the next generation broadband world," Bowman said. "The fact is we wanted to invest in our own future; that's why we did this."

And finally, the Pollick / Sword duo discussed Lafayette's successes in "Dark lines are a draw for business." They note another economic development win for LUS Fiber:

Pixel Magic has since decided to maintain an office in Lafayette and plans to eventually employ 100 to 200 people there.
“The fact that we have the high-speed Internet between here and there is a big plus so we can show the clients the work in progress — production companies and studios,” said Ray Scalice, Pixel Magic's general manager.

Before picking Lafayette, Pixel Magic “was looking at New Orleans and found this was just a better deal and the fiber had a lot to do with it,” said company spokesman Patrick Flanagan. “Downloading a film frame, we are getting speeds of two, three seconds per frame.”

This is a good series of articles at accurately shows the total disconnect between what private companies are offering for broadband (they keep claiming we do not need anything better) and what forward-thinking communities are doing to take advantage of the disconnect.

In North Carolina, Wilson Sets the Record Straight

What do you do when the media gets key facts about your community network wrong? Set the record straight!

This blog post from the Public Affairs Manager in the city of Wilson, North Carolina, demonstrates a good response to errors in an article. In the first case, it offers "clarifications," a better term than errors when dealing with reporters, especially as many reporters have less expertise than we would like in the complicated world of broadband networks, policy, and technology.

This is a good excerpt - with the City's response in blue text.

Other conflicts can arise as well. For example, in 2007, when Wilson was developing its Greenlight service, the town tripled its rate for using municipal utility poles from $5 to $15 a year. That raised the pole fee for Time Warner Cable from $82,000 to $246,000 a year, but Time Warner is still paying the old rate while it negotiates with town officials over the issue.

Before 2007, Wilson’s pole fee had stayed the same since 1975. The attachment fee increase was not related to Greenlight. The old fee schedule was outdated. By comparison, the cable company’s standard rates have doubled since 1997.

“When the regulator becomes your competitor, it’s not a good situation,” said Marcus Trathen, a lawyer for the cable lobby.

Wilson and other cities regulate only the pole attachments. The cable and telecom companies are regulated by the State of NC. The local regulation of cable services ended in 2007 after intense lobbying from the cable/telecom companies.

The main issue is to make sure false claims are corrected at every opportunity. These networks and local policies around pole attachments are greek to most people. Any false claim without a response (and some that are responded to) will be believed by many in the community.

Wilson Wins Awards for Community Broadband Blog

Wilson has won two awards for communications due to its efforts on the Save North Carolina Broadband Blog. The city of Wilson's public power utility built a citywide FTTH network called Greenlight.

Their blog has featured a lot of content both about Greenlight's successes and efforts by cable and telco lobbyists to ban community broadband in the state. Cities should strongly consider creating similar blogs as helpful communications tools with citizens... but if such a blog is created, the community must make an effort to keep it updated.

LUS Files Complaint: Cox and NCTC Limit Competition

Lafayette Utilities System has filed a complaint with the FCC following what seems to be a rather arbitrary decision by the National Cable Television Cooperative (NCTC) to deny Lafayette as a member. This is a crucial issue for communities that want to build fiber-optic networks, so we will dig in and offer an in-depth explanation.

It all starts with the business model. Fiber-optic networks are fantastically expensive and are expected to be financed entirely with revenues from subscribers. Though communities typically want fiber-optic networks for the broadband capacity, they find themselves having to offer cable television services also to ensure they will attract enough subscribers to make the debt payments on the network.

Unfortunately, cable television services are the most difficult and expensive part of the triple-play (broadband, telephone, cable tv). A community network has to sign deals with different content providers in order to put together its channel lineup. Even a community network with 100,000 subscribers has little power over the companies with channels like ESPN, the Disney Channel, Discovery, MTV, Food Network, and others. Thus, it will have to pay more for those channels than massive networks like Comcast that have many millions of subscribers and therefore a stronger negotiating position. LUS has noted that video programming is the "largest single on-going cost" it incurs in the network.

Enter the NCTC. By forming a cooperative, many small providers (public and private) were able to gain negotiating power over content owners and even hardware manufacturers to cut costs to members by buying in bulk. In recent years, the size of NCTC rivaled that of major national providers like Charter and Cox cable. All three parties stood to gain by bringing Cox and Charter into NCTC in 2009. The addition grew NCTC significantly -- only Comcast has more subscribers currently.

The advantages of NCTC are quite significant and worth reiterating because it is a reminder of the ways in which massive private companies have the playing field tilted in their direction. Without access to NCTC, communities have to pay more for the same content and equipment (NCTC savings may start at 15%-20%. From the complaint:

NCTC market power also enables it to obtain much bigger, better, more flexible, and less costly packages, than any individual small cable operator or any smaller buying group can obtain. Video programming distributors typically dictate terms to small cable operators on a take-it-or-leave-it basis. Aside from the price per channel, these terms often dictate the tying of related channels to the ones the operator wants, requiring mixes of standard and high-definition channels, placing channels at specified positions in the line-up, and locating channels in the most popular basic and expanded basic programming tiers. In other words, in order to get the “must-have” video programming that they need to be competitive, small cable operators must typically pay for many channels they do not want, incur substantial costs for extra equipment to support these unwanted channels, and pay fees based on the number of subscribers in the largest programming tiers, rather than in smaller tiers based on subscriber interests and preferences. NCTC has the clout to negotiate much more flexibility for its members in all of these areas.

NCTC also provides its members another advantage over non-members: they do not have to negotiate individual arrangements with 300 or more video programming distributors. Since each such arrangement involves multiple issues, the time, burden, and cost involved in individual, one-on-one negotiations is enormous. Moreover, this assumes that the programming distributors are willing to deal with small cable operators one-on-one on a timely basis. Often they are not.

Communities that are denied entrance to the NCTC have a much harder road when it comes to competing with massive entrenched incumbents. Philip Dampier of Stop the Cap! wrote about this issue, noting that NCTC has strayed from its original purpose:

As someone who personally was involved in the passage of that legislation [1992 Cable Act], the ironic part is we were fighting -for- the NCTC back then. Of course, those days the cooperative was made up of wireless cable providers, utility co-ops, municipal co-ops, and other independent cable systems that were constantly facing outright refusals for access to cable programming or discriminatory pricing. Satellite dish-owners were also regularly targeted. NCTC was a friendly group in the early 1990s but has since become dominated with larger corporate cable operators, especially Cox Cable and Charter Communications.

Recently, NCTC began discriminating against publicly owned networks, refusing to let Wilson (North Carolina), Chattanooga (Tennessee), and Lafayette join NCTC. There was no explanation for the discrimination against muni networks, so LUS is asking the FCC to force the NCTC to admit them.

The specifics may be found in the Official Complaint:

LUS alleges that the Defendants are violating Section 628 of the Communications Act, 47 U.S.C. § 548, and the Commission’s implementing rules, 47 C.F.R § 76.1001 et seq., by engaging in unfair, deceptive, and anticompetitive conduct that has the purpose and effect of preventing LUS from becoming a member of NCTC and thereby obtaining the huge quantity discounts, and other benefits that NCTC negotiates for its members. These discounts and benefits total millions of dollars annually.

The TeleCompetitor coverage of this lawsuit notes NCTC has been selective in the past with membership:

This type of charge is no news to some IPTV operators, many of whom claim access to NCTC has also been denied to them. NCTC, a traditionally closed-lip organization, has never offered any official response to these claims. In my communication with them, they’ve always said they’ve never blocked any company from joining because of who they may compete with. But they do admit to a selective admission process, reviewing each applicant individually to ensure they meet NCTC ‘criteria’ before offering membership. That criteria is a ‘gray area’ to say the least. There is also a pretty significant membership fee to join – a fee that some operators claim is an additional barrier to entry.

However, NCTC has specifically noted it has concerns relating to municipalities. Despite opening itself to new members, it ignored the applications of Chattanooga, Wilson, and Lafayette for months at a time. When rejecting their applications eventually, it offered no explanation.

After NCTC was notified that Chattanooga and Wilson would be joining the LUS complaint for this anti-competitive behavior, NCTC decided to admit both Wilson and Chattanooga but not Lafayette. The only discernible difference between LUS and the others? Wilson and Chattanooga compete with Time Warner and Comcast (respectively) and neither is a member of NCTC. Lafayette competes with Cox, the single largest member of NCTC.

So long as massive scale is rewarded in broadband and cable networks, competition will be elusive. Only by ensuring small providers can join groups like NCTC can competition even have a chance. If the FCC wants to encourage competition, it will quickly require NCTC to admit LUS on fair terms.

A local editorial notes the LUS has already spurred competition locally: