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.

Monticello Minnesota, the small community located 40 miles northwest of the Twin Cities, recently returned to the news when its telephone incumbent, TDS, began offering a fast 50/20 Mbps residential broadband connection for $50/month.

Nate Anderson, of Ars Technica, covered both the story and backstory (something he has extensively reported).

But the entire congratulatory press release glosses over a key fact: the reason that Monticello received a fiber network was the town's decision to install a municipal-owned fiber network to every home in town… spawning a set of TDS lawsuits that went all the way to the Minnesota Supreme Court, which ruled in favor of the town.

I might also note that the press release and much of the coverage also glosses over a one-year contract and early termination fee (though it isn't clear if this is applied in all circumstances). However, Nate nails the story by framing it with the title "Want 50Mbps Internet in your town? Threaten to roll out your own."

We spoke to TDS about the situation last year, and its director of legislative and public relations told us that TDS didn't act earlier because it didn't actually know that people really, really wanted fiber; once the referendum was a success, the company moved quickly to give people what it now knew they wanted.

Of course, TDS did not start rolling fiber after the referendum. They waited. It was only after the City successfully bonded for the project that TDS acted (first by filing a lawsuit to block competition and second by investing in their network to be competitive when the doomed lawsuit would inevitably be dismissed). TDS did not change course because they suddenly realized that people wanted better broadband, they did it because they knew that they would have to invest or perish when confronted with actual competition.

Nate's article looks at other communities that have followed a similar trajectory. This story seems to have inspired another excellent post by Phillip Dampier at Stop the Cap: Municipalities: If You Threaten to Build It Yourself, Your Faster Speeds Will Come.

I take some issue with the title - hollow threats are rarely enough. While the threat of competition may be enough, in some circumstances, to temporarily boost investment from incumbents, only actual competition will ensure that investment continues and rates remain affordable.

Karl Bode picked up on the story which led to some interesting posts in the comment section ... especially toward the bottom when other TDS customers weigh in on their inability to get broadband at any speed. I have to fully agree with this commenter:

This might be one of the few instances when I feel a telecom did the wrong thing by offering FTTH. If TDS actually cared about being providing faster and better service to their customers they would be wiring cities that don't have a FTTH alternative.

After fighting, delaying and losing FTTH all in an attempt to maintain their monopoly, TDS has developed a new strategy. Undercut muni FTTH till it fails. They can subsidize FTTH in monticello with money from the rest of their network. As soon as muni fiber fails they can shut down or raise price of their own fiber network.

Maybe I'm wrong. Maybe Monticello MN population 10,000 (very rural) is such as lucrative market that TDS is a visionary by offering FTTH. That must be why verizon wires only rural cities and sells off urban and suburban ones. [sarcasm noted]

The commenter goes on to note that if people continue signing up with TDS (after overwhelmingly supporting the referendum to build the network), they will suffer from the fallout of not being able to pay off the revenue bonds and TDS will resume its poor practices if competition ceases.

Though TDS grabbed headlines with its bold (read: predatory) 50/20 offering, Monticello Fibernet is no slouch. See prices on right - no contracts, no "introductory" prices, and all connections are symmetrical. Some have asked me how Monticello will respond to the new pricing and speeds from TDS and I do not know the answer.

I think it important to note that Monticello owns the network, but the network is operated by, and services offered by Hiawatha Broadband Communications, not the municipal government. Though HBC (a company out of SE MN with a great reputation for customer support and meeting community needs) is far more responsive that the incumbents, Monticello has different constraints upon it than most community fiber networks where the services are offered by the network owner.

Meanwhile, this graphic from the comments of Karl Bode's DSL reports story reveals a fundamental truth: Monticello citizens have a unique opportunity. No one outside the community has access to faster speeds or lower prices. They have the deal with same annoying practices where the user very rarely achieves the advertised speeds and price spikes following the "introductory" period. Further, many of the DSL packages require a phone package as well, making prices higher than advertised.

The July/August issue of Broadband Properties features a number of stories relating to community broadband. Editor Masha Zager explains how the stimulus rules hurt communities:

The NOFA explicitly calls 768/200 Kbps broadband “sufficient access to broadband service to facilitate rural economic development,” but how many jobs will this kind of broadband really attract to a depressed area? How many new services can service providers sell over such networks? Will the networks support public needs for distance education or health care? And how long will it be before the equipment has to be replaced? In the words of a rural telco manager I spoke with recently, “You want to put money into something long-term if you’re going to start building networks. Don’t build something you’ll have to throw away in two or three years.”

Steve Ross takes a look at two networks in Minnesota - the much discussed Monticello FiberNet and a proposed network in Lake County (see Lake County Fiber Network Project FAQ):

Lake County is a rural area in northeastern Minnesota. Its planned network requires 800 miles of fiber to more than 7,300 homes and 500 businesses – every premises in the area that has electricity or telephone service now. It’s the first project of National Public Broadband (www.nationalpublicbroadband.org), a nonprofit helping communities develop and operate municipal fiber networks. NPB’s CEO is Tim Nulty, director of the ECFiber project awaiting funding in Vermont.

Steve discusses the crap that TDS is pulling to again prevent competition in Monticello. Despite being laughed (albeit slowly) out of court in their attempt to stop the city from building a fiber network, they are now attempting to incite a bondholder lawsuit by spreading more FUD (fear, uncertainty, and doubt). Interestingly, Steve suggests that TDS' numbers do not add up and that they are advertising fiber services while offering advanced DSL (not that any other private companies have similarly lied).

Finally, I recommend "Texas School District Delivers Online Learning Over Fiber." This is another why-rent-when-you-can-own story. Just as many other schools districts have found, they should own the networks rather than lease circuits from private providers. It results in better services at lower prices.

Ultimately, the economic inefficiency of leasing fiber, the anticipation of more bandwidth-intensive interactive learning programs and the proposed expansion of the number of network endpoints led the school district to investigate implementing its own fiber infrastructure. In addition to saving the cost of leasing lines, building its own fiber network enabled the district to have complete control over its network.

However, these networks should be built as part of a larger plan. It hardly makes sense for the schools to pay for an entire network that will likely overlap the network other community institutions needs. Therefore, these networks should be built in conjunction with a larger publicly owned network to ensure the entire community can benefit.