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The Challenge of Open Access - Lessons Learned Part III

To finalize our series on reflections from Seattle and Gigabit Squared, I discuss open access networks and how the requirement that a network directly pay all its costs effectively dooms it in the U.S. Read part one here and part two here. I started this series because I felt that the Gigabit Squared failure in Seattle revealed some important truths that can be glossed over in our rush to expand access to fast, affordable, and reliable Internet connections.

The benefits of public-private-partnerships in these networks have often been overstated while the risks and challenges have been understated. We have seen them work and believe communities should continue to seek them where appropriate, but they should not be rushed into because they are less controversial than other solutions.

Sometimes we have to stop and remember that we will live for decades with the choices we make now. It was true when communities starting building their own electrical networks and is still true today. I hope the series has provided some context of how challenging it can be without removing all hope that we can stop Comcast, AT&T, and others from monopolizing our access to the Internet.

In this final piece, I want to turn to a different form of partnership - the open access network. I think it follows naturally as many in Seattle and other large cities would be more likely to invest in publicly owned fiber networks if they did not have to offer services - that being the most competitive, entreprenuerial, and difficult aspect of modern fiber networks.

Chattanooga construction

The desire to focus on long term investments rather than rapidly evolving services is a natural reaction given the historic role of local governments in long term infrastructure investments. Fiber certainly fits in that description and as many have noted, the comparison to roads is apt. An open access fiber network allows many businesses to reach end users just as roads allow Fedex, UPS, and even the Post Office, to compete on a level playing field.

In an open access approach, the local government would build the network out to connect all residents and businesses but not directly deliver services. Instead, multiple independent Internet Service Providers (ISPs) would compete on the network for business, ideally specializing in different niches - some providing great video game optimizations and others focusing on meeting small business needs.

Unfortunately, there are reasons we have not seen this approach gain widespread traction. The model is more difficult than is readily apparent.

A large part of the difficulty comes from incumbent providers that refuse to use the fiber network. The cable and the telephone companies claim that they don't want to abandon their assets, but that is not the main reason they have refused to participate in these networks. The big cable and telephone companies know that they have terrible reputations and would be slaughtered in a competitive market - so they put great effort in ensuring that they face as little competition as possible. Allowing the open access market to develop would all but ensure mighty Comcast would have to compete against local providers that offer much better customer service, lower prices, and more.

From an economic perspective, an ideal open access network would be one physical fiber network on which all ISPs compete. With a take rate over 80 percent, the revenue would likely be sufficient to pay the costs of building the network, operating costs, AND the ISP costs. But because the cable and telephone companies have fought against open access, subscribers are often split among three different physical infrastructures (cable, copper telephone lines, and the fiber network), generating too little revenue to pay the costs of building the fiber network.

If a major metro area does a feasibility study to build a citywide open access network fiber, it will find that the network will almost certainly not pay for itself using a conventional private sector accounting system. The interest on the debt required to build the network accrues faster than revenue. Of course, the roads and bridges don't pay for themselves via user fees either, but we still invest in them.

Community BB Logo

In a recent podcast, we discuss how over the first five years, a network can save more in aggregate for the community that it costs to build. But those benefits acrue individually to households. Thus far, very few communities have used this approach - to raise monthly taxes by $3 to save $10 on household telecom bills, for instance. Leverett is a rare example of this approach.

That does leave another option - building an open access network incrementally, as Danville has done in Virginia and Palm Coast FiberNet in Florida, among others. This is a viable option for just about any community but comes with the difficult reality that connecting everyone could take decades. And there are still other gotchas.

Some communities that wanted to build an open access network have found it can be challenging to find service providers that will operate on the network. Sometimes a local ISP can step up, as in Danville and in other cases, but not always. Until a network has thousands of potential subscribers, ISPs may not be interested in offering services. But incremental approaches will often start with just tens or hundreds of subscribers.

We have written elsewhere of how important it is to have at least one strong, trusted provider on the network. An important lesson from Provo, among other places, is the difficulty in recovering once a network has a bad reputation. A bad provider can ruin the name of a perfectly good network, especially as most people will not know whether to attribute any problems to the physical network or ISP.

UTOPIA Logo

All of that said, open access offers a tremendous promise. Networks like UTOPIA and Chelan PUD (Washington) have been unable to pay the capital cost of building the network solely from revenues but offer some of the fastest speeds in the nation at a fraction of the price we pay elsewhere. I recall the testimony of a local business to the Utah Legislature who basically said, "Yeah, my taxes went up a little -- but my monthly telecom bill went down a lot."

Nonetheless, nearly every municipal fiber network has been built and financed with the expectation that it would pay for itself - generally breaking even years after the high upfront investments have been made. Each community should be free to choose what expectations it has in building the network it needs to ensure a vibrant economy and high quality of life for everyone. Our role has been to help them understand that choice and push back on those who want to take it away. I hope this series helps in that effort.

Many of the municipal fiber networks that now directly provide services started with a hope of working with a local partner or building an open access network. As they considered their options, they found they effectively had to choose between doing nothing and venturing into a very challenging business.

There are few easy answers for communities stuck with subpar Internet access, or even for those that regard "par" as unacceptable. When Lafayette Mayor Joey Durel was presented with the idea of a municipal fiber network shortly after taking office, he was skeptical. But he ultimately decided they should examine it - saying "shame on us" if they didn't at least see what they could do. Maybe they would hit a brick wall... or maybe they would build one of the most impressive broadband networks in the country. That was good advice.

No one solution works for every community. Thus our guiding philosophy: communities should be free to choose for themselves the solution they prefer.

Construction photo courtesy of Chattanooga Electric Power Board

Seattle, Gigabit Squared, the Challenge of Private Sector Cable Competition

This the second in a series of posts exploring lessons learned from the Seattle Gigabit Squared project, which now appears unlikely to be built. The first post is available here and focuses on the benefits massive cable companies already have as well as the limits of conduit and fiber in spurring new competition.

This post focuses on business challenges an entity like Gigabit Squared would face in building the network it envisioned. I am not representing that this is what Gigabit Squared faced but these issues arise with any new provider in that circumstance. I aim to explain why the private sector has not and generally will not provide competition to companies Comcast and Time Warner Cable.

Gigabit Squared planned to deliver voice, television, and Internet access to subscribers. Voice can be a bit of hassle due to the many regulatory requirements and Internet access is comparatively simple. But television, that is a headache. I've been told by some munis that 90% of the problems and difficulties they experience is with television services.

Before you can deliver ESPN, the Family Channel, or Comedy Central, you have to come to agreement with big channel owners like Disney, Viacom, and others. Even massive companies like Comcast have to pay the channel owners more each year despite its over 10 million subscribers, so you can imagine how difficult it can be for a small firm to negotiate these contracts. Some channel owners may only negotiate with a provider after it has a few thousand subscribers - but getting a few thousand subscribers without good content is a challenge.

Many small firms (including most munis) join a buyer cooperative called the National Cable Television Cooperative (NCTC) that has many of the contracts available. But even with that substantial help, building a channel lineup is incredibly difficult and the new competitor will almost certainly be paying more for the same channels as a competitor like Comcast or Time Warner Cable. And some munis, like Lafayette, faced steep barriers in just joining the coop.

FCC Logo

(An aside: if we are going to pretend that competition can work in the telecommunications space, Congress and/or the FCC have to ensure that small providers can access content on reasonable terms or the ever-consolidating big providers will be all but unassailable by any but the likes of Google. Such regulations should include rigorous anti-monopoly enforcement on a variety of levels.)

Assuming a new provider can secure a reasonable channel lineup, it now needs to deliver that to the subscribers and this is more complicated than one might imagine. From satellite dishes to industrial strength encryption to set-top boxes, delivering Hollywood content is incredibly complicated.

When confronted with this challenge for its Kansas City network, Google evaluated all the options and decided the only option was to build its own technology for delivering television signals to subscribers. Google has the some of the best engineers on the planet and even they encountered significant challenges, suggesting that route is ill-advised for new companies. Even if Google were willing to share their approach, it was written for the Google eco-system and would need significant porting to work for other firms.

Several of the recent triple-play municipal FTTH networks used Mediaroom, a technology developed by Microsoft that was recently sold to Ericsson, which has strong connections with AT&T. All of which suggests that delivering television channels is not becoming easier for small, local networks.

From the tremendous challenges of securing television channels to the difficulty of delivering them to subscribers, investors are aware of the mountain a new entrant has to climb before even starting to compete with a massive firm like Comcast.

Longmont Power and Communications Logo

It remains to be seen whether a network delivering only Internet access (or with telephone as well) will succeed today, but most have believed that television is needed to effectively compete for subscribers (and generate enough revenue to pay for the network). Longmont is bucking that wisdom in deploying a gigabit and phone network throughout its footprint north of Denver and many are watching intently to see how it fares (our coverage here).

The main lesson from Part II of our Seattle Gigabit Squared analysis is the difficulty of a small firm competing against a massive cable company like Comcast and the subsequent reluctance of most investors to fund such firms.

This is not to say it is impossible for small entities to compete, especially entities that can handle a distant break-even point or justify its network by the many indirect benefits created by such an investment - including more jobs, lower prices for telecommunications services, and improved educational opportunities to name three (see our recent podcast on this subject). In most cases, the kinds of entities that are willing to include indirect benefits on their balance sheets in addition to cash revenues are nonprofit entities.

We strongly support the right of communities to decide for themselves how to ensure their residents and businesses have the connections they need to thrive in the 21st century. We also recognize that many cities, particularly the larger metro areas, would prefer not to directly compete with some of the most powerful firms on the planet, even if they are also tops among the most hated. Few local governments relish the opportunity to take on such a new challenge and understandably search for firms like Gigabit Squared that can assist them, reduce the risks of building a network, and shield them from charges of being godless communists by think tanks funded by the cable and telephone companies.

However, we are not optimistic that many communities will find success with this public-private-partnership approach. Indeed, with recent news suggesting that Gigabit Squared left at least $50,000 in unpaid bills behind, the risks of going with such a solution may indeed be greater than previously appreciated.

It is for the above reasons that we continue to believe most communities will be best served by building and operating their own networks, though some may choose to do so on an open access basis where multiple ISPs operate on the network.

That is where we will turn in the final segment of this series. Read that post here.

Big City Community Networks: Lessons from Seattle and Gigabit Squared

A few weeks ago, a Geekwire interview with outgoing Seattle Mayor Mike McGinn announced that the Gigabit Squared project there was in jeopardy. Gigabit Squared has had difficulty raising all the necessary capital for its project, building Fiber-to-the-Home to several neighborhoods in part by using City owned fiber to reduce the cost of building its trunk lines.

There are a number of important lessons, none of them new, that we should take away from this disappointing news. This is the first of a series of posts on the subject.

But first, some facts. Gigabit Squared is continuing to work on projects in Chicago and Gainsville, Florida. There has been a shake-up at the company among founders and it is not clear what it will do next. Gigabit Squared was not the only vendor responding to Seattle's RFP, just the highest profile one.

Gigabit Squared hoped to raise some $20 million for its Seattle project (for which the website is still live). The original announcement suggested twelve neighborhoods with at least 50,000 households and businesses would be connected. The project is not officially dead, but few have high hopes for it given the change in mayor and many challenges thus far.

The first lesson to draw from this is what we say repeatedly: the broadband market is seriously broken and there is no panacea to fix it. The big cable firms, while beating up on DSL, refuse to compete with each other. They are protected by a moat made up of advantages over potential competitors that includes vast economies of scale allowing them to pay less for advertising, content, and equipment; large existing networks already amortized; vast capacity for predatory pricing by cross-subsidizing from non-competitive areas; and much more.

So if you are an investor with $20 million in cash lying around, why would you ever want to bet against Comcast - especially by investing in an unknown entity that cannot withstand a multi-year price war? You wouldn't and they generally don't. The private sector invests for a return and overbuilding Comcast with fiber almost certainly requires many years before breaking even. In fact, Wall Street loves Comcast's position, as penned in an investor love letter on SeekingAlpha:

We're big fans of the firm's Video and High-Speed Internet businesses because both are either monopolies or duopolies in their respective markets.

Seattle Conduit

Seattle has done what we believe many communities should be doing - investing in conduit and fiber that it can use internally and lease out to other entities. This is a good idea, but should not be oversold - these kinds of conduit and fiber projects are typically deploying among major corridors, where the fiber trunk lines are needed. But networks require far more investment in the distribution part of the network, which runs down each street to connect subscribers. With this heavy investment comes the modern day reality that whoever owns the distribution network owns the subscriber - that owner decides who subscribers can take service from. (We have more conduit tips from previous Seattle coverage.)

Additionally, different conduit and fiber segments may be owned by various entities, including different departments within a city. This may introduce administrative delays in leasing it, suggesting that local governments should devise a way of dealing with it before a network is actually being deployed.

Even if a city wanted to lay conduit everywhere for the entire network (trunk and distribution), it would need to have a network design first. Different companies build different networks that require different layouts for fiber, huts, vaults, etc. Some networks may use far more fiber than other designs depending on the network architect preference. The result is a limit on just how much conduit can/should be deployed with the hope of enticing an independent ISP to build in the community.

In deciding the size of conduit and where to lay it, different types of fiber network approaches are either enabled or disabled (e.g. GPON vs Active Ethernet). In turn, that can limit who is willing to build a fiber network in the community. The same can be true of aerial fiber, attached to utility poles.

Investing in conduit and/or fiber along major corridors may go a long way to connect local businesses and some residents but almost certainly will not change the calculations for whether another company can suddenly compete against a massive firm like Comcast.

And paradoxically, beginning to connect some businesses with fiber and a private partner could make a citywide system less feasible. The firms that are prepared to meet the needs of local businesses may not have the capacity nor inclination to connect everyone. But without the high margin business customers among neighborhoods, a firm that wants to connect neighbors may struggle to build a successful business plan. Additionally, some firms may only be interested in serving high end neighborhoods rather than low income areas.

Community BB Logo

This is a major consideration in our continued advocacy for community owned networks. They have an interest in connecting businesses as the first step in connecting the entire community. An independent ISP may only find it profitable to focus on the businesses, though some ISPs share our values of ensuring everyone has access.

In the first Geekwire interview, Mayor McGinn returned to his original position when campaigning - that the City itself should be playing a larger role and investing its own resources rather than pinning its hopes on distant firms.

McGinn noted that “we haven’t given up on the private sector,” but said that if he were continuing as mayor, he’d start garnering political support to build a municipal fiber utility. That’s actually something the mayor considered back in 2010, after a consultant recommended that the City find a way to build an open-access fiber-to-the-premises communication infrastructure to meet Seattle's goals and objectives.

A feasibility study looking at one particular way of building an open access fiber network put the cost at $700-$800 million. However, there were other alternatives that they did not pursue, opting instead for a far less risky (and with far less payoff) public-private-partnership with Gigabit Squared.

Over the next few days, I will explore other lessons. A review of lessons from today:

  • Comcast and other cable companies have tremendous advantages that other would-be competitors in the private sector will generally fail to overcome
  • City owned conduit and fiber helps to encourage competition but is subject to significant limitations
  • Communities should invest in conduit in conjunction with other capital projects but should not inadvertantly weaken the business case for universal access

Update: The Gigabit Squared deal with Seattle is officially dead. Part II of this series is available here.

Fibrant Network Gains Subscribers Despite Technical Difficulties

As we emphasize time and time again, communities build their own networks because they have to, not because they want to. North Carolina's Fibrant network in Salisbury is no exception and a recent technical headache is a reminder that no network is built without problems developing.

Fortunately, Salisbury's strong reputation for providing great, local customer service is helping as it deals with service interruptions that are the fault of the gear that runs the network. 

According to an Emily Ford article in the Salisbury Post, there have been several outages this month. While some outages are attributed to unreliable access gear, the city is still investigating to determine what other factors continue to cause problems. The network currently serves 2,160 subscribers, with 220 of them being commercial customers.

A November 9th Post article on an earlier outage, noted the problem with faulty equipment. A statement from Fibrant General Manager Mike Jury also attributed the outage to a lack of redundancy, which has since been repaired.

While Zhone has been the access gear supplier, Fibrant is now testing Calix equipment. Calix has long been a favored choice among community networks and has a very solid reputation. This is a reminder to communities of the importance of due diligence in choosing vendors -- make sure to talk to other community networks about their experiences with vendors. All equipment is subject to failure, so a key question should be how quickly different vendors respond with solutions to problems.

This technical problem comes on the heels of political problems as Salisbury has been targeted by Time Warner Cable for attacks. Readers will recall how Time Warner Cable successfully pushed the Legislature to pass H129 in 2011, a bill to neutralize publicly owned networks

Even though there have been recent outages, more people continue to take the service than to drop it. From the Ford article:

The week before the outage, 23 new subscribers signed up.

"Despite the outage, our customer base has grown," [City Manager Doug] Paris said, crediting Fibrant staff's dedication to customer service.

Jury said Fibrant's trials are to be expected, especially with a network built from scratch.

A 24-year veteran of the cable industry who took over Fibrant in March, Jury said Salisbury's network is so advanced he refers to it as "bleeding edge."

With no blueprint to follow, Fibrant is breaking new ground, he said.

 

Lafayette Dealing with Expected Headaches

No matter how much community broadband advocates prepare the community and elected officials for the expected difficulty of building a successful local project, in the midst of the deployment, times are tough.

A local paper in Lafayette claims "LUS Fiber [is] at a crossroads" but starts with an admission that these problems were forecast and expected:

Competitors will pay less for programming than you do, and in turn play hard ball by lowering rates for customers. Good luck keeping up with technological advances, expansion needs and growth costs; it's a risky proposition for a public entity used to maintaining rather than adapting. Your opportunities will be limited because you can't provide services outside the city limits. You'll be criticized for offering programming such as adult movies, and you'll be told you really should be focusing on your core business: running power, water and wastewater plants.

Terry Huval delivered that message in 2000, long before Lafayette committed to building their community fiber network -- a network that delivers some of the fastest speeds in the nation at the lowest rates and has already delivered hundreds of jobs.

Nonetheless, LUS Fiber is behind the take rate goals they had set in the business plan. The expenses are higher than forecast because Lafayette was unfairly denied entry to a coop that secures lowers rates for television contracts for members. The only discernible reason for rejecting Lafayette is that Cox joined the coop after Lafayette committed to building its network. There is little doubt that Cox was influential in denying Lafayette's application, likely increasing LUS Fiber expenses for offering cable channels by more than 20%.

This is just one of the many ways that the telecommunications market is rigged to benefit incumbents at the expense of all of us -- residents and small businesses alike. We will not have real choices in competition until government policy treats telecom like the essential infrastructure it is.

Mike Stagg, a long time supporter of the network is quoted in the article, challenging LUS Fiber to improve its marketing:

Can they do better? Probably so. Part of it is the fact that, just from a mindset standpoint, LUS is a utility and utilities generally do not compete," Stagg said. "I think that has been an issue that they have had to grapple with and can get better at. I think there was just this perception inside LUS that everybody knew about the service and how good it was. But they didn't. I just don't think they have been aggressive enough as marketers in pushing their service and highlighting the advantages. They have a great price. There are no tricks in it. It's straightforward. You can't live anywhere else in the U.S. and get this kind of bandwidth."

Marketing can be very difficult, particularly for public entities that are not used to revising their approach on a regular basis to quickly fix what goes wrong and improve upon what works. Big companies like Cox will saturate the market with advertising and promotional rates - communities have to find their own ways of responding by capitalizing both on their technical advantages as well as being the local provider with better customer service and non-gimmick pricing.

The "crossroads" article is odd because the "crossroads" is somewhat a headline fabrication, as explained by John at Lafayette Pro Fiber.

The theme of the front page story, LUS Fiber at a crossroads, is that some sort of decision needs to be made soon about whether or not to commit to the project or dump it. But nothing in the story itself warrants such a theme. There's nothing in the story that should make any reasonable reader think LUS Fiber is anywhere near failure and plenty of evidence that it is over the hump and is well on its way to success in what is hugely capital intensive business that nobody ever thought would make money in the first years. But more to the point: frankly the choice of whether or not to go forward has already been made: back on July 16th, 2005 when the citizens voted in the new public utility. The community now has the system that the citizens wanted. The discussion is no longer about "whether;" the discussion is now only about how to make sure it succeeds—and having succeeded how to make sure it is run so as to most fully benefit the community. Those are not trivial questions and I don't intend to underplay them. But pretending that there might be a choice, well, it might make a better headline but it doesn't help inform the real project at hand.

We recently evaluated the LUS evaluation and our conclusion has been that while it has not fulfilled all of its high expectations, it has greatly benefited the community already.

Sometimes we have to remember why Lafayette built this network. Once again, John reminds us:

What's disappointing is the claim that the system is rudderless, that it lacks clear goals. That's just silly. Of course it has a clear purpose and one that its leaders clearly honor:LUS Fiber is a public utility and its purpose is to put an essential service under the control of the community, to provide a first rate example of the service, and to provide it as cheaply as it is possible. That is i's fundamental purpose and I submit that there is no question but that it is meeting that standard. LUS Fiber is, for every service, cheaper than the private alternative. It is available to each and every citizen of the city; something no private provider would promise. The services are high quality—the video and phone services are at least as good as the former monopolies and the internet is unarguably not only cheaper but better.

BVU Optinet Logo

And another recent article in Lafayette reminds us that Lafayette's build has come during a debilitating recession:

Rosenbalm [President of BVU, which operates a muni fiber network in southwest Virginia] said LUS Fiber's struggles as a new business venture were likely multiplied by the fact that the system launched during the worst economic time in recent memory. Although Lafayette did not feel the effects of the recession as strongly as other parts of the country, there was an impact that may have led to some potential customers opting not to change, or that affected price points.

"You've been through, arguably, the second-worst economic time in the history of this country," Rosenbalm said. "They came into the business at a tough time, and the early years are hard within themselves. They just have to keep pushing though, and I think their growth from here on will be far more than it has been already."

These networks are very hard to build -- especially in the first 3-4 years. While it is important to ask tough questions and ensure the project is on track to meet community expectations, it is also important to take a broad view of the network's impact. The network has lowered prices, created jobs, improved access to education, and many second, third, and fourth order effects.

LUS should take a hard look at its business processes to make sure it is sufficiently nimble to operate against an opponent unafraid of fighting dirty.

But it should also make sure that someone is telling the LUS story. Where are the charts showing community savings as a result of more competition? Who is shouting out the success stories? Who is calculating how much more money stays in Cajun Country because it goes to Lafayette Utilities rather than Cox Communications?

This isn't just LUS's responsibility -- after all, it is a community network.

Granbury, Texas, Deploys City Owned Wireless Network

In the place where “Texas history lives,” the City of Granbury followed a fellow Texas city in delivering a Tropos wifi system that covers all 10 square miles of the city.  Less than a decade ago, Granbury had no functional IT department and after hurdles with a private public partnership, established a functional and successful publicly-owned wireless network.  Initially created to support city functions and mobile police, the network is available to the public, elevating the rural town outside of Fort Worth to the mobile age.

When Granbury hired IT Director Tony Tull in 2003, the technology capabilities of the city were dire: no staff, a budget of $6,000, and only two buildings with access.   Tull quickly brought city and council officials on-board to his ambitious technology plan to deploy wireless WAN to all city buildings in partnership with their existing ISP, Texas-based Frontier Broadband (now acquired by KeyOn).  The initial needs were to equip city personnel with mobile access which focused on police officers, firefighters, and city inspectors.

Other goals included general public and tourist broadband access, reading utility meters, perform live web casts, and connect to nearby governmental networks.   After the City received a Homeland Security grant, $70,000 was earmarked to outfit over 10 police vehicles with wireless laptops.  In 2004 Tull attended the Public Technology Institute’s National Summit for Local Governments in Corpus Christi where he reviewed the city’s 147 square mile wireless network by Tropos.  Convinced the technology was right, Granbury deployed a test run of 40 routers across half the city and eventually 100 more to cover the roughly 10 square miles.

The initial returns on investment came eight months after launch when the police department returned $78,000 in budgeted police salary overtime.  The department later reduced its 2005 budget by $100,000.  The City has also saved time and money with the network reading digital meters, assisting building inspectors and providing cheaper connections to municipal buildings.  The total start-up costs were $325,000 which included acquisition costs, infrastructure, and the Tropos price of $68,000 for each square mile of the network.  City departments continue to streamline with the system and since 2007 public users have been accessing the network for $5.95 daily or $19.95 monthly.  Signal repeaters are available to boost signals in homes.

Though the project began as a public private partnership, Granbury found it’s private partner, Frontier Broadband, not living up to their bargain.  

Unfortunately, Granbury’s private partner did not respond to network performance problems as quickly as the city would have liked. In March 2007, the city bought the 10-square-mile network for $225,000 to maintain more control over its performance. The Granbury wireless network is now live with the city managing it and selling service to the public. “Be careful how you pick your partners,” Tull said. “Things that are a problem for you may not be a problem for the provider.”

Like officials of many cities who invest in infrastructure, Tull sees the network additionally for its important impact on every citizen and the social or indirect benefits that come back to the city and to the citizens.

“Is subscription sales the only way our municipality is going to see a return on our $500,000? Not really. We see other benefits. Police on the street longer because they can do their reports from the cars rather than the squad room. More information to our firefighters before they make scene on a possible structure fire. AMR project. Tourist access to city wide internet. These are all hard dollar and soft dollar returns that are real.”

Chattanooga Creates Subscriber Testimonials for City Owned Broadband

Chattanooga, with the nation's fastest citywide broadband network, offers lessons to many other communities who have built or are building their own networks. Chattanooga is regarded as one of the most successful muni networks in terms of a smooth operation with good advertising and a great back office approach.

They are documenting (with video) the stories of both residents and businesses that have switched to their services from incumbents like AT&T and Comcast (two of the most powerful companies in the US). Below, we include two of our favorites in the series.

This should be an extremely effective form of advertising for community networks -- harnessing the enthusiasm and local attributes of the network. Making these videos available on sharing sites like Vimeo or YouTube allows supporters to embed them in their blogs and share with friends and family.

Quite frankly, these testimonials are not hard to do (hire a local videographer that has experience with lighting and recording good sound) and should be one of the first approaches used by community networks to spread the word. If local thought leaders and small business owners can participate, so much the better.

Wired West has also created a video composed of interviews with people discussing the need for better broadband. These videos are compelling - I hope we see more of them from more communities.

Video: 

Citibank Finally Files Suit Against Burlington Telecom

After more than a year of expecting Citibank to file suit against Burlington, they finally did. Burlington Telecom, a muni FTTH network, now illustrates the worst case scenario for muni broadband. After the founder of the network left following disagreements with the Mayor, the Mayor's Administration ran the network into the ground (leading us to recently publish the report "Learning from Burlington Telecom: Some Lessons for Community Networks."

Burlington had financed its network with a municipal capital lease, rather than the more commonly used revenue bonds, meaning that the actual network secures the loan. In this arrangement, the network is technically owned by the lender (Citi) and Burlington leased it. So when Burlington decided to stop paying the lease for the network, it became Citi's problem.

And Citi had a lot of problems due to the games massive banks were playing having killed the economy. BT became just one more non-performing asset. They did nothing while the City continued to run the network without making lease payments. Now Citi is suing for the world (this is how these things work) but it isn't clear that Citi can actually get what it demands (the State has a say in whether the network simply gets shut down, which Citi is presently asking for). And if the network did get shut down, Citi would be in a worse position to recover any of its losses because the value of the network is far greater than the sum of its parts.

State law says that losses from a public telecom venture cannot be carried by taxpayers, which is where we return to an interesting document prepared by the Mayor's Administration. As reported by Blurt:

In its lawsuit, Citibank notes that a letter written by attorney Joe McNeil on behalf of Burlington "expressly warranted to Citibank that at least 40 percent of Burlington's revenues were derived from sources other than taxpayers' funds and would be available to fund payments to Citibank, and further, that Burlington had the financial resources and ability to make all payments to Citibank for the full term of the agreement."

I read that document last year and remember being fairly surprised as it appeared to be incorrect from my non-lawyer reading of the law. This is just another case in which the Mayor's Administration played too fast and loose with essential infrastructure.

We have watched in dismay as Burlington Telecom transitioned over the past four years from a model community network to the worst case scenario. This situation proves only that community networks can suffer from bad management in some of the many ways private telecom companies can suffer from bad management (resulting in anything from bankruptcy to prison).

Communities can learn lessons from Burlington's situation -- chief among them that transparency is important. As with other public enterprise funds, the operation should be regularly audited and oversight must be in place to catch errors early, when corrections are easier and less costly.

Unfortunately, Burlington Telecom is in a very bad position presently. The actions of the Mayor's Administration made that position worse than it could have been. Time will tell if it can be saved. Given its important positive contributions to the city (millions of dollars in community savings, increased economic development), the City would benefit from its continued operation.

Learning from Burlington Telecom: Some Lessons for Community Networks

Publication Date: 
August 18, 2011
Author(s): 
Christopher Mitchell - Institute for Local Self-Reliance

In little more than a year, Burlington Telecom went from being a hopeful star of the community fiber network movement to an albatross around its neck. The controversies surrounding it have encouraged cable and telephone companies to use it as Exhibit A in their case against communities going into the telecommunications business. However, most of those criticizing Burlington Telecom have very little understanding of what went wrong and how it happened. Examining what actually happened helps to explain how these problems may be avoided, as the vast majority of existing community networks have already done.

[Download the full report]

In 2007, ILSR issued a case study on Burlington Telecom. The report argued that Burlington Telecom was a model for how communities could build their own next‐generation fiber‐to-the‐home broadband networks.

This report revisits and updates that report, analyzes Burlington Telecom’s situation (for better and for worse), and extracts useful lessons for other communities pursuing community fiber networks.

In preparation for this report, ILSR examined many documents, including those available due to the investigation of Vermont’s Department of Public Service. We interviewed many people from Burlington, including former BT employees, citizens active around the project, and City Council members. We discussed Burlington’s situation with a number of others intimately involved in community broadband networks around the country and posed questions directly to a representative of BT.

Louisiana Leg uses Porn Excuse to Target LUS Community Network

We occasionally see big cable and phone companies getting creative in their efforts to shut down community networks. In socially conservative communities, restrictions on providing adult content is a common approach.

This technique came up several times in North Carolina, where TWC-sponsored elected officials proposed disallowing public providers from offering the same adult content channels that private providers offer. The reason has nothing to do with morals, but rather with the substantial revenue adult content generates. Incumbent providers know that if community networks cannot offer adult content to those who wish to purchase it, they will be deprived a significant source of revenue needed to pay the debt from building a modern network.

Bear in mind that no one is forced to see this content or even a scrambled channel (as was common in the "old" days). Community networks allow each family to decide for themselves what content is appropriate -- to the extent community networks differ from private providers in this regard, they provide more tools to filter out content that some may find inappropriate.

Last week, the Louisiana House briefly considered a bill to limit Lafayette's authority to make adult content available to subscribers that request it. House Bill 142 exists solely to put LUS Fiber, an impressive muni FTTH network, at a disadvantage.

John at Lafayette Pro Fiber has excellent coverage of the situation, with both an initial post featuring eyes-a-rollin' as well as an in depth followup "Lafayette delegation kills anti-LUS bill."

LUS Fiber Logo

The latter is essential reading for those new to understanding how any legislature works. And anyone building a network that will compete with big companies like AT&T, Cox, Time Warner Cable, et al. had better know how legislatures work because those companies live in the Leg. Their competitive advantage lies in lobbyists, not providing superior telecom services.

Apparently, the Legislators pushing this bill (on behalf of Cox - there is no other rational explanation) first claimed it was about banning the use of state credit cards from buying adult content (or services) when officials were traveling… but John notes that is already prohibited.

Legislators defending Lafayette (and all the citizens of Louisiana who have suffered enough at the hands of AT&T and Cox) sought a compromise that would have ensured a "level playing field" for adult content by applying the law to all providers equally. This killed the bill. But John wonders if there was something more at play:

Extra Credit: Decide whether the real point of this exercise was purely PR — was it never intended to pass, only to try and lay on LUS (again--this ploy fizzled badly during the fiber fight) the onus of selling "porn?" Or was the hope to impose another long, embarrassing and distracting lawsuit on Lafayette? (This worked pretty well during the fiber fight.)

Community networks and defenders, be prepared for similar fights at a legislature near you.