community broadband networks

As we previously noted, the city of Longmont, Colorado, is preparing for a referendum to allow the City to offer telecommunications services to local businesses and residents using a fiber ring it built long ago. This is due to a 2005 law (the "Qwest" law) that was pushed through the Colorado Legislature by incumbents seeking to prevent competition.

That law has succeeded -- most Colorado communities can only choose between slow DSL from the incumbent telephone company and comparatively faster services from the incumbent cable company. And when Longmont last attempted to pass a referendum to share its fiber infrastructure with local businesses, Comcast and Qwest swamped the town with unprecedented sums to confuse residents -- leading to the referendum failure with 44% voting yes.

But after the referendum passed and people had time to better understand the issue, many who voted against it realized they had been duped. We have seen the same dynamic elsewhere -- in Windom, MN, for example, where the second referendum succeeded. WindomNet has since saved a number of jobs and is expanding to eight other underserved rural communities around it.

Longmont built its fiber ring in the late 90's but it still has a lot of unused capacity that could be used to attract economic development if the publicly owned power utility were authorized to offer services to businesses. Without this authority, the community has a valuable asset that they are forced to leave unused -- even as local businesses could benefit greatly from it.

The Longmont Times-Call outlined the situation in July:

Without that vote, the city can't let homes or businesses use that fiber without a vote, thanks to a 2005 state law. It's a fight the city's lost once before in 2009, when opponents -- including the Colorado Cable Telecommunications Association -- spent $245,513 to urge the measure's defeat.

This time out, there's a different tack. The city has been underlining in discussions that the measure would "restore its rights" to provide telecommunications service. And it's stressing that no high-dollar project is on the table -- the first words of the ballot measure now read "Without increasing taxes ...

But Comcast and CenturyLink (previously Qwest) don't want to see their duopoly threatened by a new entrant that will create new competition. So they are again trying to swamp the referendum.
The incumbents have already started their FUD (fear, uncertainty, and doubt) campaign. The anti-competition group called "Americans for Prosperity" (that is the short name, the full name is "Americans for the Prosperity of a few Massive Corporations at the Expense of Everyone Else - or AFPMCEEE) is mobilizing its base to oppose the City. Funny how groups that support the most powerful corporations never seem to run short of funds.

The incumbents (and their hired minions) are robo-calling many citizens with misleading claims to scare people into opposing the referendum. They are framing it as the city using tax dollars to compete with private businesses to deliver cable services. They may or may not be aware that the City is not going to use tax dollars (ahem, the fiber loop is already built!!) but they will undoubtedly continue using these lies to scare voters.

The question is whether people will be swayed by these annoying calls, emails, and glossy mailers or by the debate they had last Friday night.

Note: We think having a debate is a great approach to airing pros and cons of broadband investments. We encourage you to record (video if possible, audio otherwise) to make sure people can revisit it as the referendum approaches. Many people are still not even aware of the issue and likely did not attend the debate but will later be curious.

At the debate, pro-incumbent spokespeople from outside the community came into town to convince others that Longmont should let Comcast and Qwest decide what Internet access is available and on what terms. They made the same old arguments, claiming that "most" of these networks have failed. When pressed, they were unable to offer specifics beyond UTOPIA and Burlington Telecom -- networks that we have demonstrated are not representative of community broadband in general.

They also made the same farcical claims that we should loudly laugh at when we encounter them:

"Right now, there's robust competition in wired and wireless," he said. "I'm concerned that when the government gets in, it'll drive away companies instead of attracting them."

Robust competition in wired and wireless??? Longmont has 2 wired choices - crap DSL and slightly better cable. In wireless, we are about to see the market go from 2 big providers and 2 small to 2 big providers and 1 small. Robust???

Longmont Mayor noted that Longmont wants to partner with businesses:

Baum said the city had no interest in being a telecommunications company itself, but wanted to partner with private businesses -- including those opposed to the measure, such as Comcast -- to help connect Longmont homes and companies to the loop. Comcast already leases fiber all over the country, he said; by doing so here, it could bring down its cost of doing business.

"I'm a free-market guy," Baum said. "I'm a capitalist pig. We're trying to create competition here."

This is exactly right. Communities desperately want more telecom competition while Comcast and CenturyLink desperately want to limit it in order to maximize their profits. They pretend local governments will "scare" away private investment but we have seen far more investment from the private sector in communities that have built their own networks.

If Longmont is allowed to use its fiber to offer services to local businesses, Comcast and CenturyLink are not going to leave town! They will invest more in the network, cut prices, and compete.

The crowd supported allowing Longmont to offer services to the private sector:

"You say you want government not to interfere with business," audience member Bernie Stoecker said to Paige and Gifford. "What we've got right now is a state law that interferes with our business."
"How is it a risky bet if the infrastructure's here and we're not using it?" someone else asked.
"Think of the city as a landlord and owning a commercial building that has offices for rent, but there's a prohibition that says it can't rent space to businesses," Joel Champion said. "We're wasting an asset."

Finally, Geek News Central has published an interesting story by Susabelle that explores the issue from the perspective of someone who recently moved to town:

Fortunately, I think people are a little smarter than they were a few years ago.  Every time they write that check to Qwest for $80 for Internet and basic home phone, they wonder if the city offered broadband, would it be a little cheaper?  Maybe a LOT cheaper?  Considering our municipal-run electric utility sells us electricity for about 6.9 cents a kilowatt hour, I can only imagine that the broadband cost might be pretty darned low.

And even if it isn’t, and Qwest or Comcast end up being more cost-effective, that’s great for them, and will keep them customers.  If they are worried about losing customers to a cheaper alternative, then maybe they should examine their pricing a little more closely and see if they can find a more competitive pricing structure.
I’m hoping that the people of my town don’t fall for the ridiculous counter-advertising that the tel-cos and cable companies will be spreading our way in the next month or so.  I hope they all look at that exceedingly cheap electric bill, do the math, and realize that our little city can give us a much better deal on broadband, the same way they are giving us a much better deal on electric service.

People supporting local authority to use the fiber ring for economic development have set up a website as a hub for information about their campaign - Longmont's Future. Check in there to get more information.

Also, Craig Settles interviewed Vince Jordan, CEO of a local service provider RidgeviewTel and supporter of the City in the referendum, on Gigabit Nation. (Audio to come.)

I wrote this short case study of the Powell network in Wyoming for our Breaking the Broadband Monopoly report but it never got published on this site. As we noted a year ago, Powell bought its system back from investors last year.

The city of Powell started talking about a fiber network in 1996 but did not make progress for almost ten years. They developed a plan to build a FTTH network and lease it to an outside operator. The incumbents declined to partner with the City and later spent considerable effort to derail the City’s efforts. However, the City found a local cooperative, TriCounty Telephone (TCT), willing to offer triple-play services on the City’s network.

Financing the deal took more time than expected because the City was unwilling to commit public money directly or even as a backstop if the network fell behind on debt payments. While the City worked on the financing, cable incumbent Bresnan and telephone incumbent Qwest tried to convince the state legislature to abolish Powell’s authority in this arena. The legislature did create new obstacles for cities building such systems but Powell was grandfathered in.

In late 2007, the City agreed to an arrangement where TCT would exclusively lease the network and make up shortfalls in debt payments if required for a period of six years. After that period, the network would be open to other service providers as well and it would be the City’s responsibility to cover any shortfalls if needed. If the City chose not to appropriate in that situation, the investors could take the network. Estimates suggested a 33% take rate would allow the network to break even by the fifth year but most expected a higher take rate.

In early 2008, Powell completed the $6.5 million bond financing. As is more common in small builds, they immediately connected a line to the home rather than waiting for the subscriber to sign up. They trenched a fiber to the side of every house regardless of whether they were taking service, putting the fiber in a box on the side of the house. If the occupant signs up, a crew only has to install electronics rather than bringing a line down from the pole. This approach increases the capital cost slightly but can significantly decrease operating expenses as residents subscribe.

TCT began offering services in early 2009, creating a price war. Bresnan and Qwest significantly lowered their promotional prices in response to the network, ensuring that even residents who do not subscribe to the new city owned network will benefit from it. Bresnan has lowered its prices considerably, offering deals to Powell customers that are unavailable in nearby communities without competition. Incumbent providers often engage in what appears to be predatory pricing – a matter we discuss below in Obstacles to Community Ownership.

Powellink, built with the slogan “Our Fiber, Our Future,” offers much faster speeds than Qwest and Bresnan, both of whom are limited to asymmetrical connections that leave upload speeds at 1Mbps or less. TCT, whose network can offer 100Mbps symmetrical connections, does not fool around with promotional rates and long-term contracts.

Responding to critics of the City’s investment, Powell’s mayor noted that small communities like Powell always have to wait for companies to get around to them:

"It was 10 years ago when people at Qwest said they would be bringing us a fiber-to-the-home system," he said. "I found a letter from 1997 saying, 'It's coming soon.' Obviously, 'soon' for us is different for them."

The network has attracted jobs that require these high speeds – teaching English to students around the world using tele-presence applications. The company intends to hire 100 people, a major economic development win in a community of 5,000.

Powell’s City Administrator, Zane Logan, argues that building a modern network offers much more bang for the buck on the matter of economic development. Some communities work out tax breaks and other advantages for a company that announces it will create a certain number of jobs. In Powell, they instead focused on providing great infrastructure. They started by upgrading the public power system to ensure the highest reliability. Then they built an impressive network, offering speeds rarely available in even the densest urban areas of the U.S. and at prices below existing packages. Now, as Powell expands, developers will pay the majority of costs to expand the network in newly built neighborhoods in the same way they connect sewer systems.

Powellink Photos, courtesy Ernie Bray.

On the heals of our story announcing a new open access community fiber project in Idaho, we have learned of a similar project in Cortez, Colorado. Cortez is the county seat of Montezuma County in the extreme southwest of the state and has approximately 8,000 residents.

Much of Colorado has long suffered from Qwest's refusal to invest in modern networks -- though a more charitable take on it would be to say Qwest's inability because it simply does not have the capacity to invest in the kind of networks communities now need to take advantage of modern communications technologies.

In the late 90's, Qwest's services in Cortez were served by microwave links incapable of meeting local needs and Qwest refused to invest in a better connection due to an insufficient business case. In the words of Rick Smith, Director of General Services for Cortez (and in charge of the network), the city then decided "to take its destiny in its own hands." They began building their own network.

The initial phase was an I-Net, built with the City's capital funds, to connect schools and other public facilities. They were able to later expand that under Colorado's Beanpole Project, a program that sought to aggregate community traffic in an attempt to lure more private sector investment in networks.

Along the way, they began leasing some dark fiber to private companies that needed better telecommunications options. When Qwest pushed through a bill in 2005 to limit local authority to build networks (click on Colorado on the Community Broadband Preemption Map), Cortez was grandfathered, leaving it with more authority to invest in this essential infrastructure than most communities.

A press release details the financing for this latest phase:

Southwest Colorado Council of Governments secured the initial funding for this project which came from a state grant of one million dollars from oil, gas and coal leasing rights. The City of Cortez provided the 25% match for the grant funds. The funds are being funneled back into developing the economy and growth of Cortez and the surrounding area by offering potential large employers or data center providers the bandwidth and technology to grow their business from Colorado.

The Cortez Journal reported on the new network and local enthusiasm:

Ernie Young, a technical supervisor for Baja Broadband in Cortez, spoke at a Cortez Area Chamber of Commerce luncheon Wednesday, saying the proposed network is comparable in technological capability to networks in major metropolitan areas.

"It's really impressive to see how far advanced this community is going to get with this fiber-optic (network) that is going to be put in as a backbone," Young said.

Young believes the network will draw businesses to Cortez by offering information infrastructure capable of supporting satellite businesses, software companies and video conferencing.

The local Chamber of Commerce is fully supportive of this public investment:

Chamber of commerce Executive Director Dena Guttridge agreed.

"Everybody is keeping an eye on little Southwest Colorado," Guttridge said. "Here we are right on the verge of launching this amazing project. I don't think people really understand what we're doing in this area. This is huge. We have the potential of having the fastest, most capable Internet in the state, and all over the Southwest."

From what we have heard, many nearby communities (including from nearby states) have been sending people to see what Cortez is doing and start investigating how they could duplicate it.

Cortez is not immediately building the network out to all residents and businesses -- trying to build a universal open access network in a single phase is very difficult to finance. This phase will connect local businesses and will be expanded when opportunities allow for it. It is likely that this network will start by offering only data and phone services. Delivering television services require more investment and fewer providers are able to do it for smaller networks like Cortez and Ammon, Idaho.

The Cortez Community Network Fiber Project web site has a significant amount of information as well as Frequently Asked Questions to help people to understand their approach.

They list some great principles for the network, including Universal access, geographic equality, level playing field, community control, symmetrical and unlimited bandwidth. These principles are each elaborated on. Stating and defining these principles is a smart move for any community network.

Though Qwest has not been able to build a next-generation network in Cortez, it has attempted to lock its customers into long-term (3 year) contracts in order to make life more difficult for the public network.

Minnesota Public Radio, as part of its Ground Level Broadband Coverage has profiled WindomNet with a piece called "Who should build the next generation of high-speed networks?"

Dan Olsen, who runs the municipal broadband service in Windom, was just about to leave work for the night when he got a call. The muckety-mucks at Fortune Transportation, a trucking company on the outskirts of town, were considering shuttering their office and leaving the area.

"They said, Dan, you need to get your butt out here now," Olsen recalls. "I got there and they said, 'You need to build fiber out here. What would it take for you to do it?'"

Fortune, which employs 47 people in the town of 4,600, two and a half hours southwest of the Twin Cities, relies on plenty of high-tech gadgetry. Broadband Internet access figures into how the company bids for jobs, communicates with road-bound truckers, controls the temperatures in its refrigerated trucks and remotely views its office in Roswell, New Mexico. Fortune even uses the Internet to monitor where and to what extent drivers fill their gas tanks in order to save money.

Yet, when it was time to upgrade company systems three years ago, Fortune's private provider couldn't offer sufficient speeds.

That's where Windomnet came in. Though Fortune was a mile outside the municipal provider's service area, "We jumped through the hoops and made it happen," recalls Olsen. "The council said, "Do it and we'll figure out how to pay for it.' We got a plow and a local crew. We had it built in 30 days."

I have thought about this story frequently when I hear claims that publicly owned networks are failures. For years, lobbyists for cable and phone companies have told everyone in the state what a failure WindomNet has been - they crow about debt service exceeding revenue while ignoring the fact that all networks -- public and private -- take many years of losses before they break even because nearly all the costs of the network are paid upfront.

Toward the end of the article (which should be read in its entirely rather than in the snippets I repost here), Dan puts the matter in context:

Dan Olsen retorts that Windomnet was never designed to make money; one of the benefits of a municipal system is that nobody takes profits out of it. He says the plan was to break even by year five, which arrived in 2010, and it looks like they'll come within $50,000 of doing so.

"We don't charge enough to make money," says Olsen, noting that Windomnet serves the vast majority of the town's 2,000 homes with internet, phone, cable or all three. They also provide free service to city buildings and the library. "The point is not to make money, but to break even," Olsen says. "The number one goal of the system is to provide broadband to the residents of Windom."

And the vast majority of residents take service from WindomNet. With a population of 4600, meaning probably 2000 households, the network has 1846 fiber drops that are active with at least one service. They have people working for companies in South Dakota but able to work from home regularly due to the Internet connection. Compare that to Sibley County, where Qwest has not even bothered to offer DSL in the county seat of Gaylord!

And the customer service comes highly recommended. Again, from the MPR article:

For his part, Dale Rothstein, who runs the IT systems at Fortune in Windom, says, "I get three calls per month from people trying to get me to convert. I say 'no.' Dan and Windomnet took care of us. I'm not going anywhere. It's a great relationship. When there is a problem, I call and it's taken care of. It's great to have a local company to deal with."

Major providers, like Frontier (famous for some of the worst DSL in the nation) pretend to be reasonable on the issue by claiming that publicly owned networks will make it harder to reach the highest cost households. This must be why Frontier is trying to derail the Sibley County project from building fiber-to-the-farm when Frontier can't even provide reliable slow DSL across all of its phone lines in the area. Not only does Frontier have no plan to connect these farmers, they have no reason to as such an investment would not generate sufficient return for them to be interested.

TDS has been the king of BS in this arena, putting out patently absurd press statements that reporters feel compelled to repeat no matter how implausible. Regarding Monticello, MN, which built a FTTH network compelling TDS to upgrade their poor DSL service (while also delaying the Monticello network with a year-long frivolous lawsuit that was eventually tossed out of court):

Fast forward to today, a city with two fiber networks. Andrew Petersen, director of external affairs for TDS, acknowledges "the importance of broadband to stimulate economic development in urban and rural communities" and says his company would have built a fiber network eventually, without prodding from the city. He believes the network may be somewhat ahead of its time, though.

Ha! Monticello begged TDS to invest in a modern network and TDS refused, saying that their DSL was perfectly suitable for what Monticello needed. They suddenly changed their mind when the City decided to build their own network to ensure not only faster, more reliable connections, but a LOCAL option.

Keep an eye on this MPR coverage of broadband - they have several of the few reporters in the state that have developed a good background in telecom and can get beyond the soundbites too common in broadband coverage. Well done.

This article led to a great response on Connected Planet Online by Joan Engebretson:

Take this quote from a Frontier executive cited in the MPR story. “Simply pouring money into projects that overbuild and compete with networks built by private investment discourages private investment and does not help reach those highest cost households,” the exec said. “Duplication of the network is no guarantee of success, and is often simply a waste of both public and private resources.”

This argument, of course, ignores the fact that if the new facilities truly were simply a “duplication” of what was already there, there would be no need for them and local municipalities would not be taking on the task of building the new higher-speed networks.

Exactly.