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Minnesota Providers Push for Draconian Limits on Public Networks in Minnesota

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By christopher on March 4, 2010

Minnesota is one of the eighteen states that have enacted specific barriers to prevent the public sector from building networks (protecting incumbents from any competition). It presently has the uniquely high - 65% - referendum requirement on communities that want to build a network that will offer telephone services (which thereby includes all fiber-to-the-home triple play networks).

However, up in Cook County, they could not meet that threshold. They had a referendum in which 56% voted yes - a majority but not satisfactorily large for a 1915 MN law. State Representative Dill and Senator Bakk realized this was crazy - state law set too high a bar for the County they represented. Cook would be unable to build the network they need - remember that the whole County was isolated following a single fiber cut because Qwest does not invest in communities where profits are scant (let's not blame Qwest though - private companies are not supposed to be charities and they should not be expected to build the essential infrastructure communities need).

Rep Dill and Sen Bakk introduced a bill to reduce the 65% to 50% referendum but the private providers must have thrown some sort of tantrum. Before the bill could even be heard, incumbent providers had reached some sort of a deal with Rep Dill and Sen Bakk, agreeing that they would not oppose the bill if it only applied to Cook County. Cook would be able to build its network, but all other local governments, many very rural and in similar but not equal severity, would be stuck with the 65% referendum requirement if they wanted to build a similar network. In the House, this "compromise" has flown through multiple committees with little debate.

In the Senate, some fought back, wondering if perhaps massive incumbent providers shouldn't be the ones to determine if communities can build modern networks -- especially when the providers won't. So the bill was introduced in the Senate. It was quickly amended to the incumbent demanded-text, but was then amended back again to a 50% majority for all MN (better than the 65% in current law). This was all in the Senate Committee dealing with Telecom. Confused yet?

It was next forwarded to the Committee dealing with Local Government, where the providers had created a new, super secret compromise with a number of Senators. Providers agreed to the 50% language for all, if they got some draconian additional language that made it incredibly difficult for communities in other ways. Just before the meeting, Qwest's lobbyist was hanging with some of the cable co lobbyists - that combination never bodes well for those of us that want competition.

As a side note, the 65% to 50% requirement should not require appeasing the incumbent providers. They already have tremendous advantages -- including decades of generous government subsidies and massive scale. The idea that Qwest, a massive company operating in 14 states, needs to be protected from a small community in outstate Minnesota baffles me. We need more competition, the incumbents shouldn't be able to attach conditions, further privileging their advantages in the market.

The Committee offered an amendment (attached here) that represented the provider "compromise." In return for incumbents not opposing the change to law, communities would have a 50% referendum requirement in addition to a variety of additional requirements, some far more onerous than the 65% referendum represented. In particular, the local governments would have to provide detailed business plans to their competitors, word the referendum in a specific manner not previously required by law, and subject any agreement between the local government and an entity related to the network to competitive bidding requirements -- which would totally disrupt the freedom of communities to choose their partners based on criteria they feel most important.

In short, the Committee took a bill intended to lower the barrier to entry for communities to build the networks they need, and they RAISED it. One might expect such a significant shift was debated, perhaps hotly. It was not. I was the lone testifier about the amendment but I might as well have sung a song. There were no questions, no discussion. Just like that, it was over. Few had known of the amendment's existence, let alone read it. Without so much as a word, the Committee announced its intention to create more barriers for community networks -- the one hope for competition and modern infrastructure in Minnesota outside the metro area.

More on this to come -- I certainly hope some of the Senators come to their senses. I do not know where the bill is headed next because its status is not yet updated, some 24 hours after the Committee adjourned.

These are the comments I intended to offer on the bill before it was hijacked by the amendment:

I am Christopher Mitchell, a researcher at the Institute for Local Self-Reliance. We are a 35 year old non-profit in Minneapolis that focuses on policies that encourage community development. Five years ago, we developed an interest in telecommunications because we recognized these networks are a necessity for communities. My research has focused on community networks, particularly fiber-to-the-home deployments.

I support this bill because it lowers a significant barrier to building the telecommunications infrastructure needed by Minnesotans. People in rural areas have found themselves unable to enjoy modern broadband technologies because building these networks is incredibly expensive and offers little hope of profits for the private sector absent public subsidization.

Just as many rural communities built their own electrical networks to ensure they could partake in the essential utility of their day, some have now started to build these broadband networks. The private sector is unable in many cases and unwilling in others, to build the necessary networks. Communities must already overcome many barriers to build a network.

Some, like the high cost of building a network, are inevitable. But the 65% supermajority, unique in the nation, is not.

The 65% referenda requirement invites providers who do not want to deal with competition to spend heavily, knowing that they only have to convince or confuse a minority of voters to maintain the status quo.

In truth, ILSR believes Minnesota should join the majority of states that have enacted no state barriers to public ownership of networks. In a time when the State itself has recognized the value of greatly increasing access to broadband networks, it should not be creating additional barriers to discourage the people most motivated to build them. After all, local governments are already structurally accountable to their citizens. If they cannot build these networks, the odds are that no one will.

To the extent we want to encourage competition in policy, barriers to public ownership have the opposite effect. Too many of our rural areas cannot attract even a single broadband provider. They will certainly never see the benefits of competition unless freed to build their own network.

One hundred years ago, we saw the results of expecting the private sector alone to build the electrical infrastructure. Some 90% of farms had no access. Though private utilities argued then that electricity was too complicated for local governments, the public sector stepped up and ensured all Americans could benefit from that essential technology.

I urge the Committee to reduce, or ideally remove, this barrier to essential infrastructure.

Photo by Jackanapes, used under creative commons license.

Qwest Isolates Entire Minnesota Counties with Fiber Cuts

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By christopher on February 4, 2010

For some 12 hours last week, entire communities found themselves without access to telecommunications due to a fiber cut to a Qwest cable that services the entire region. This is not the first time such a cut has marooned everything from Homeland Security to long distance phone calls to businesses that can no longer accept credit card transactions -- but Qwest has refused to invest in a redundant cable, showing their disregard for those communities.

I wonder how many businesses were hurt by their sudden and unplanned isolation from clients, partners, and others. How many missed contracts or deadlines?

It shows the insanity of putting barriers before communities that are trying to build the very networks companies like Qwest promise but never deliver (barriers like the 65% referendum to offer telephone services for publicly owned networks). Both Lake and Cook Counties are waiting to hear the status of their applications for federal broadband stimulus funds, with which they will build broadband networks. Companies like Qwest and Mediacom have opposed new networks in an effort to protect their turf, even while refusing to invest in those areas because they do not generate sufficient profits.

These County initiatives have not been denied stimulus funding but have also not moved into the "due diligence" phase, placing them in limbo and forcing them to prepare additional applications for the second round of funding before they even know why their application was denied (if it is denied) in the first round. Somewhere, Joseph Heller is smiling.*

MPR provided good coverage of this fiber cut even though they did not air an explanation as to why Qwest finds it reasonable to keep these communities connected with a single cable.

Bank ATM's failed. No one could use their credit cards. But as bad as that was for business, the 12-hour-long outage knocked out what the federal government calls a "vital part of our nation's emergency response system."

The outage killed 911 emergency service in Cook County, Chief Deputy Leif Lunde said.

...

With no 911 service, county officials turned to volunteer firefighters to field emergency calls from normally un-staffed fire halls. Fire truck radios relayed the information back to Grand Marais. Ham radio operators provided a backup way for the Grand Marais hospital to consult with Duluth medical facilities.

U.S. Customs and Border Protection officers received help from their counterparts in Canada, according to Public Affairs Liaison Chris Misson.

Read, or listen to, the entire story - it is well worth it and a good reminder that these networks are essential infrastructure.

Update: Resident Jim Boyd has a great piece as well, describing the impact of this Internet dislocation:

County and state police officers lost the ability to check driver's licenses and vehicle plate numbers and to make warrant checks on people pulled over or behaving suspiciously.

...

Banks lost access to all of their online records and their ability to connect with other financial institutions. Business ground almost to a halt, save for the few simple transactions that required only a temporary paper record, such as cashing small checks or accepting deposits.

I won't quote more because you should read his entire analysis. The conclusion is impossible to dismiss: these networks are essential infrastructure and communities must have the option of building their own network to avoid these problems.

Many communities around the country have built their own networks to ensure redundancy to first responders and other vital entities. In New York and DC, the local government runs its own network because their public safety departments cannot be just another customer to the phone company. In North Carolina, the non-profit Mountain Area Information Network provided broadband access to ham radio operators to recover in the event of a natural disaster - the incumbent (a national company) is far less responsive to local needs.

Disruptive cuts to these networks are not infrequent around the country -- but they don't always make the news, unfortunately. 2 months ago, I got an email from an exasperated person in Nebraska who noted thousands had lost Internet for 12 hours at that point and they didn't know when it would end. Once again, it was caused by a cut to Qwest fiber. Googling it, I cannot find news of it anywhere except for some social media sites. Nebraska is one of the worst states when it comes to preempting communities from building their own networks -- they need to reconsider that decision to bring some competition to town.

*Author of Catch-22 for you non-literary types.

Photo by Jackanapes, used under creative commons license.

Results of Tuesday's Elections

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By christopher on November 5, 2009

A few local elections on Tuesday had questions relating to publicly owned broadband networks. In Seattle, candidate McGinn strongly supported a publicly owned fiber optic network for the city and he may yet get his way as the race is a dead heat and ballots are still being counted. We previously discussed Seattle's broadband deliberations.

In Longmont, Colorado, voters voted against giving the municipality authority to expand the city owned fiber-assets into a network offering retail services. As usual, the proponents of the public network were significantly outspent by incumbents seeking to prevent competition.

A group called No Blank Check Longmont, backed with $150,000 from the Colorado Cable Telecommunications Association, spent more than $143,000 in cash and benefited from more than $46,000 in in-kind contributions in its campaign to defeat 2C.

Up on top of Minnesota's North Shore, the Cook County Broadband project got a mixed reception. Though they received the authority to raise a 1% sales tax that would have helped pay for the project, they failed to achieve the necessary 65% super majority required under ancient Minnesota law (1915) to operate a telephone service. A majority supported the idea - 56% - but without the ability to offer a triple-play, the county will have to reconsider its approach.

Though such results are disappointing, every community with a locally owned community network has had to deal with such setbacks. The question is how organizers can respond to challengers and how badly the community wants fast and affordable broadband networks.

In the near term, I hope that both the Minnesota Broadband Task Force Report (due Friday) and the FCC National Broadband Plan recommend abolishing such barriers to public ownership as a 65% referendum.

More Minnesota Broadband News

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By christopher on October 6, 2009

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.

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