Like many Washington Public Utility Districts, Pend Oreille, has connect small portions of its electric territory with an open access fiber-to-the-home. But these projects have been difficult to finance in remote (and often mountainous) areas. Pend Oreille previously built a pilot project but is now expanding its network with a stimulus grant from the feds.

The work has begun and is expected to end by November 30, this year. From a previous press release:

The project will make highspeed Internet available to approximately 3,200 households, 360 business, and 24 community anchor institutions such as schools, libraries, and health care facilities. Residents and business owners will have the opportunity to subscribe to a variety of highspeed Internet services through local internet service providers.

As we recently noted in our coverage of the Chelan Public Utility District in Washington state, state law restricts the authority of Public Utility Districts to offer retail services over the fiber-optic networks many have built. But at least one Representative is pushing to expand PUD authority.

Representative John McCoy has been working to improve rural broadband access and spurring more competition in Washington State. He brought a bill, HB 1711 that would allow PUDs to begin offering retail services as well as offer telecommunications services outside their traditional boundaries.

The bill did not go far this year, likely due to the considerable influence of large carriers like Charter, Frontier, and others. But Representative McCoy plans to bring it up again next year and may have more support depending on the recommendations of a current study. The University of Washington Law School is studying options to expand broadband access in rural areas. The final report is due in December and will address the option of allowing PUDs to offer retail access.

I strongly encourage people who may be interested in such developments in Washington to contact Rep McCoy or email me to find out how you can get involved. Quite frankly, we need to develop better networks to ensure citizens are aware of efforts like this bill so elected officials can be contacted in a timely manner.

At the bottom of this post, we have embedded a six minute audio clip of Rep. John McCoy discussing HB 1711 and issues around access to the Internet more generally from a Progressive States Network conference call earlier this month.

Digging into this bill, the summary of the bill [pdf] offers some history:

Public utility districts (PUDs) are municipal corporations authorized to provide electricity, water, and sewer service. In 2000, the Legislature authorized PUDs and rural port districts to acquire and operate telecommunications facilities for the following purposes: (1) to serve their own internal telecommunications needs; (2) to provide wholesale telecommunications services within their district limits; and (3) to provide wholesale telecommunications services to other PUDs by contract.

Currently, 14 PUDs and three rural port districts in the state provide wholesale telecommunications services.

And for local governments,

According to a 2003 Attorney General Opinion, first class cities and code cities may provide telecommunications services as part of their "home rule powers," except as may be limited by specific statutory language governing particular services. Second class cities and towns, however, do not have the authority to provide telecommunication services.

The full summary of the bill:

A public utility district (PUD) or rural port district may provide retail telecommunications services in areas that are within or adjacent to the district. In addition, a PUD or rural port district may provide wholesale telecommunications services in areas that are adjacent to its district.

Retail telecommunications services is defined as the sale or lease of telecommunications services or facilities to public agencies, individuals, non-profit organizations, libraries, schools, institutions of higher education, or other public or private entities.

Any PUD or rural port district offering retail telecommunications services must ensure their rates, terms, and conditions for retail telecommunications services are not unduly or unreasonably discriminatory or preferential. In addition, PUDs and rural port districts must keep separate accountings of revenues and expenditures for their retail telecommunications activities and may establish a separate utility function. Revenues generated from the retail telecommunications activities must be used to pay off the costs incurred in building and maintaining the telecommunications facilities.

If a person or entity receiving retail telecommunications services from a PUD or rural port district has a complaint regarding the reasonable of the rates, terms, conditions, or service provided, the person or entity may file a complaint with their PUD or rural port district.

A city or town may construct, purchase, lease, operate, and maintain telecommunications services or facilities in order to provide its inhabitants with telecommunications services. The city or town has full authority to regulate and control the use, distribution, and price of the service.

A definition of "utility service" is added with respect to code cities. This definition includes telecommunications services as well as water, sewer, solid waste and electricity.

For the actual language of the bill, download HB 1711 [pdf]. If you care about these issues, get involved -- the cable and telco lobbyists will speak for you unless you get involved.

You are missing some Flash content that should appear here! Perhaps your browser cannot display it, or maybe it did not initialize correctly.

Representative McCoy Discusses HB 1711 and Access to the Internet in Washington state

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). So the PUD began considering an approach that would cap their cost while giving the potential subscriber different options to connect:

Under conditions of a recommended Line Extension Policy presented Monday, the PUD would continue making connections, at no additional cost to end-users, if they are estimated to cost the PUD less than $1,500. Any connection costing more than that would require the customer to pay the balance under arrangements to be made with a service provider – if the customer wishes. Without cost-sharing, no fiber connection would be made where costs are higher than $1,500.

In presenting the policy to the board for consideration before a vote next Monday, PUD General Manager John Janney said that for every dollar invested in the fiber network by the PUD, it loses 7 cents – something that needs to change. The PUD is evaluating the entire fiber-optic program to develop a new long-term strategy that is expected to be finished before the end of the year. In the meantime, Janney said the Line Extension Policy would allow work to continue on connections and give end-users a way to contribute to paying higher costs if they wish. The policy would protect the PUD in line with its new financial principles and still give end-users a voluntary option for a fiber connection.

The independent ISPs were not thrilled at the prospect of having to play a role in connecting these higher-cost subscribers:

Representatives from service providers LocalTel and Genext said they support the PUD's focus on controlling costs, but they aren't eager to develop procedures and hire staff to oversee and manage line extension requests, according to a press release from the district.

Both LocalTel and Genext said they would prefer that the district budget an amount each year to allow as many connections as possible at an average cost of $1,500 and hold to that spending limit, if necessary. They also said they look forward to seeing clear long-term goals from the district for the fiber program, the release said.

Of course, as the ISPs share none of the risk or costs in expanding the network to higher cost areas, their opinions may not carry much weight in the decision. Unfortunately, it seems the PUD is stuck forcing the ISPs to get involved due to the wording of the state law restricting PUD authority to offer retail services -- as noted in this story about the new policy:

A big difference with the fiber line extension policy is that the arrangements have to be made through a service provider - one of the retail firms that actually provide telephone, Internet or television service to the end-user over the fiber line. The district is only authorized to provide wholesale fiber services.

This line extension policy, which we wrote up here, gives more choices to households in high cost-to-connect areas:

Potential end-users of fiber services can also reduce costs by doing trenching or conduit work themselves, subject to PUD inspection before the final connection gets made. The procedures are now spelled out in the Line Extension Policy, matching options that have long been available for water, sewer and electrical connections. The big difference with the fiber Line Extension Policy is that the arrangements have to be made through a service provider - one of the retail firms that actually provide telephone, Internet or television service to the end-user over the fiber line. The PUD is only authorized to provide wholesale fiber services.

Armed with the new numbers regarding costs to expand the network, a number of officials became concerned about their obligations under the broadband stimulus rules and began considering whether they wanted to back out of the arrangement.

The network has cost $110 million to build, mostly debt financed, and has ongoing operating losses, not a major surprise given its rural territory and inability to offer retail services directly due to the state law. The network will likely never break even on spreadsheets, but residents and local businesses clearly saw it is a wise investment in their continuing support for its expansion. The benefits of robust, locally accountable broadband infrastructure go far beyond what is measured by those focusing intently on simply whether the utility is losing money or making money on the service. Benefits (including lower rates that keep more money in the community from incumbent providers like Charter and Frontier) from opportunities in education, health care and economic development are significant and must be balanced against the strictly financial metric of success.

Examining the situation, the Wenatchee World called for considered reflection in the decision of whether to proceed with the stimulus award:

It is not that the fiber optic network is not good. It is wonderful for those who have access. It is not that extending it to the rest of the county is wrong. If analysis shows the burden is close to tolerable it is the right thing to do. But there must be a lid on how much we can spend to subsidize ourselves. You don’t get $25 million every day, but there are times when you can’t afford all that free money.

A few days ago, the PUD decided to withdraw from the broadband stimulus grant:

Citing revised buildout costs that exceed original estimates by $20 million to $34 million, PUD General Manager John Janney told commissioners Monday that “the only viable option” was to decline the grant and discontinue a 2 percent electric rate increase to help fund the project.
Commissioners, who’d approved accepting the grant in August, were tipped late last week to the revised cost estimates and Janney’s decision. They unanimously agreed.

This seems like a wise decision given their present situation. Trying to make the project work on within the original flawed parameters with the contractual deadline could have ended quite poorly. It is better for the PUD to move forward as it feels comfortable, even if it means having less financial support from the federal government to do so. They are going to continue exploring opportunities to expand the network on their own terms:

Janney said the district hopes to pursue a long term fiber strategy by the end of the year and possible pursue other types of technology to make high speed internet available to more of Chelan County residents.

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. As with other early BPON networks, the speeds were asymmetrical. While other community fiber networks have upgraded to offer much faster symmetrical speeds, Chelan has opted to continue a heavily asymmetric offering.

They will continue the 6Mbps option (for service providers who are not ready to upgrade their equipment to offer faster speeds) while adding a 25/2 and 100/100 option. They are also adding a 1 Gbps commercial option.

Frontier and Charter advertise maximum connections at 7/.768 and 25/3 respectively.

Service providers on the network will have to pay higher rates to continue using the network, though they also will get a discount from the PUD when they sign up customers for more than one service (bundling).

Providers will have to pay an extra $4 per customer while the bundling discount will be $2 or $3.

Service providers will have to pay Chelan $22.35 for a 100Mbps connection to a customer and $19.35 for either a 25/2 or 6/.384 connection.

However, there are some complications (detailed in this article toward the end) -- because Chelan was such a pioneer of this technology, the earliest subscribers will have to wait longer to access faster connections.