taxes

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.

The Minnesota Independent took Pawlenty's Administration to task last week for its decision to give more money to the telecom company front group Connected Nation. To be clear, this is not the money for infrastructure (yet - time will tell how the state encourages the feds to allocate the grants). This was the mapping money.

Peter Fleck, of PF Hyper blog, put it well:

“My understanding is that we have allowed the companies that have not provided the needed broadband coverage in our state to steer the broadband mapping process itself because of a stated need for confidentiality. That need is questionable,” said Fleck.

“And it puts the state in a position where if the maps show there is no problem with broadband coverage, then we won’t need legislation, regulation, or any other policies and it creates the risk that the telecom industry can continue to provide inadequate coverage to underserved areas — usually areas of low-density and low-income. And because of the inadequacy of these maps, eventually we will have to undertake broadband mapping again at taxpayer expense. To me, this is an irresponsible use of public money.”

The story also quotes me and links back to our story on Connected Nation in Minnesota.

I want to note that states and federal agencies can demand more in terms of better maps and data transparency. It is somewhat disingenuous to lay the blame solely at the doorstep of this telecom-front organization when elected officials refuse to demand more from an industry that has long retained legions of lobbyists. Make no mistake, Connected Nation's conflict of interest is a serious problem, but we need our elected officials to stand up to the telecommunications companies and demand better mapping data. We had higher hopes from the NTIA, but clearly that was misplaced.

More recently, Sharon Schmickle of MinnPost wrote about plans for a publicly owned network in Cook County, Minnesota. It touches on the major issues that many communities face when deciding whether to build their own network.

I wanted to add some comments to it that will add perspective to the story - I encourage you to read the whole Schmickle piece because I pick only a few points below to expand upon.

Regarding Cook County's application for broadband stimulus funds, the incumbent phone provider to much of the area (Qwest), has brought a we-won't-build-it and we-won't-let-you-build-it-either attitude. Local businesses and the Forest Service cannot even get a T-1 line (which would offer about 1.5 megabits and would probably cost $800/month give or take $500 depending on Qwest's mood at the time). The phone lines are in such a state of disrepair that dial-up is even slower than average and businesses can go days without any telecom services.

Dana MacKenzie, the information systems director for the County, previously told the MN Broadband Task Force that when the single connection to the area goes down (somewhere on the road to Duluth), all telecom stops up there. No redundancy means no credit card transactions, no 9-11 service, no nothing until the line is repaired. Profit-maximizing companies have little incentive to provide redundancy when residents have no real choice in providers.

Unfortunately, Jack Geller lets these companies too far off the hook. I find Geller, a member of the state's broadband task force, to be a deep-thinking person, so I hope this quote was out of context.

"Whether you agree or disagree with how good a job your incumbent providers are doing, you have to admit that they have invested millions of dollars in your community," Geller said. "Now we are saying we need more, and the government should provide it … should use taxpayer dollars to compete with the private sector."

These companies have not invested millions out of charity - they were originally granted a government-sponsored monopoly to ensure they would be profitable and they have continued to make profits while refusing to invest in better networks (here, I aim my criticism at the large, absentee companies - the smaller independent telcos that are rooted in their communities have continued investing in the community).

As for whether taxpayer dollars should compete with the beneficiaries of government-granted monopolies (though such monopolies ceased to exist, their legacy continues to shape our telecom landscape), I think the answer is muddier than he suggests. Further, most community networks emphatically do not use taxpayer dollars, so the argument is largely academic anyway. Jack and I have previously discussed the role of government competing with the private sector, but that is different from phrasing it as "taxpayer dollars" that are funding the networks - something almost guaranteed to result in a knee-jerk reaction opposing the idea (creating more heat than light rhetorically).

Finally, I think Jack's larger point would be that private companies cannot, even if they were willing, build out the networks that are needed in many rural areas. The costs are too high and returns too low. This is something I agree wholeheartedly on - which is why I find it ludicrous that some still think the private sector is capable of building this essential infrastructure throughout the country without continuing to damage our ability to compete with peer nations. And it remains frustrating that these companies, who will not build the needed networks, have the money and lobbyists to prevent others from doing it.

A final criticism of Shmickle's piece is that I was disappointed to see her treat the Monticello lawsuit as though it had any merit. It was thrown out by every court in Minnesota at the earliest opportunity - the only reason it lasted so long is because we have a massive backlog of cases and too few judges. It was a frivolous lawsuit meant to delay competition and it succeeded. It was an abuse of the justice system that has successfully scared other communities from exercising their legitimate power for fear of being locked in an expensive court battle (is there any other kind?) that would drain their resources despite an inevitable victory. Large companies like TDS have lawyers for this very reason - they probably profited from their court loss due to the delay of more than a year whereas Monticello had to hire representation to respond.

Photo by Jackanapes, used under creative commons license.