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Minnesota Local Governments Advance Super Fast Internet Networks

Publication Date: 
March 19, 2014
Author(s): 
Christopher Mitchell
Author(s): 
Lisa Gonzalez

Local governments in Minnesota have been at the forefront of expanding fast, affordable, and reliable Internet access - often in some of the most challenging areas of the state. ILSR has just released a policy brief to explore some of these approaches: Minnesota Local Governments Advance Super Fast Internet Networks.

The full report is available here.

The brief examines five communities that have taken different approaches to expanding access, from working with a trusted local partner to creating a new cooperative to building community-wide FTTH networks.

Lac qui Parle County has worked with Farmers Mutual Telephone cooperative to bring fiber networks to those who had been stuck on dial-up. Finding itself in a similar situation with no reliable partner, Sibley County is creating a new coop to work with.

Scott County built a fiber ring to connect community anchor institutsion to dramatically expand access to high capacity networks and lower telecommunications budgets. That network has helped to lure several major employers to the area by leasing fiber to them.

Windom and Monticello have built FTTH networks in extremely challenging conditions. Though Windom is far smaller than most have believed is feasible to build such a network, it has thrived and is now connecting many of the small towns surrounding it. It was essential in retaining jobs in the community that would have been lost without it and has attracted new jobs to the region. Monticello is a younger network and has remarkably benefited the community even as it has struggled financially due to dirty tricks from the telephone and cable companies.

The policy brief makes some policy recommendations while focusing on some local solutions to difficult problems in ensuring all Minnesotans have fast, affordable, and reliable Internet access.

To Improve Minnesota Broadband, Look to Lessons of Electrification

Steve Downer is the Associate Executive Director of the Minnesota Municipal Utilities Association, MMUA, and he previously served on the Blandin Foundation Strategy Board. He offered these thoughts on page 4 of the "The Resource" [pdf] from January 2013 and has allowed us to reprint them below.

According to online reports, House Commerce Chairman Joe Atkins has listed his top 10 issues for his Committee in 2013. Included on the list, at No. 4, is Telecommunications and Broadband Law Update. As municipal involvement has been a hot-button topic over the years, this should be of interest to municipal utilities.

The idea of re-writing state telecom law was a priority of the Ventura administration but, even with agreement among various parties that state law was antiquated the discussion never gained much steam, largely because the telecom companies decided the law was just fine after all. Efforts have been made over the years to remove or reduce the super-majority referendum requirement to build a municipal telephone exchange, but have withered in the face of vociferous opposition.

On the other hand, efforts to further restrict municipal provision of broadband service, a concern in recent legislative sessions, have also languished. So, what does Chairman Atkins have in mind?

Perhaps local interests, working through organizations like MMUA, could suggest the state needs to be more open to partnerships and local government projects, if it is ever to reach its broadband goals.

Cities have proven fully capable of providing a full range of telecommunications services over the years. Counties are providing cutting-edge communications services. The Southwest Minnesota Broadband Services project (a consortium of eight cities) shows how ordinary people, working through their local governments, can work together to provide high-quality voice, video and data service at reasonable prices.

Renville Sibley Fiber Project

After much work, a similar project in Renville and Sibley counties has recently been stymied due to concerns over the ability of city-county partnerships to issue bonds. The project itself has been enthusiastically supported by rural and city interests and was well on its way to construction before last-minute legal concerns were voiced.

This is just the type of project the state should be fostering.

Yet, instead of recommendations to clearly allow this type of partnership in state law, it appears there may be efforts to stack the deck against local interests heading into the session.

The Minnesota Governor’s Task Force on Broadband, for example, recently released its Annual Report and Broadband Plan, including recommendations for the 2013 legislative session. The Report, while the result of much good work, bears the traditional hallmarks of large group writing efforts, and tilts toward the input of private interests that comprised the bulk of the members.

The report notes the obvious, saying, the private sector will play the leading role in expanding broadband access (it might as well have said ‘the sky is blue’).

Two sentences later, the report promotes “public-private broadband projects” but makes no specific mention of how to foster such projects.The recommendations that are made generally provide “incentives” (read tax breaks or subsidies) to private companies and doesn’t even mention local government, which has played a leading role in broadband provision in certain locales.

A number of recommendations are made, but a clear and consistent road map is lacking.

Some recommendations prove the point that governmental ‘pork’ is money that is going to somebody else. Current perks have apparently not been enough to ‘incent’ private providers to extend highspeed service in many areas. Yet, in some of these areas locals are more than willing to invest their own money to provide the service if they could just get the lawyers out of the way.

Minnesota Seal

On the other hand, calls for new positions in state government, to untangle the web of available programs, only seem to prove the point that if bureaucracy grows large enough, you will need more of it to make its purposes clear.

Then there is this recommendation, rich in irony: “to coordinate highway construction and broadband deployment projects,” and have the state install conduit that would presumably contain privately owned fiber optic cable.

Does anybody remember Connecting Minnesota? This was a late-90s proposal for MnDOT, in cooperation with a private partner, to lay 2,000 miles of fiber optic cable in interstate highway right-of-ways. Legal battles, largely with US West (now CenturyLink) led to the demise of this public-private initiative.

A perfect example of public-private partnerships exists in the electric utility industry. Despite animosities, largely in the formative years, municipal, investorowned and cooperative utilities jointly invest in capital-intensive projects on a regular basis.

Utilities do this because they recognize the level of capital needed to improve service to their customers, and realize an effective way to raise the needed capital is to partner with others willing to invest, regardless of philosophical differences.

Enacting guidelines to allow similar investment in our broadband infrastructure would similarly benefit citizens of Minnesota.

We are encouraged by Rep. Atkins’s inclusion of telecommunications on his 2013 session “To Do” list and encourage him to recognize the important and effective role municipals can play to help the state reach its 2015 broadband goals.

Rural Reality: Waiting One Month for Basic Telephone Service in New House

Yesterday, we released our first podcast - a short discussion with Linda Kramer of the Sibley-Renville Fiber project in rural Minnesota.

When I happened across their Facebook page this morning, I found this perfect example of why the project is necessary (and they gave us permission to reprint it):

One of my friends moved from Fairfax to Gibbon two weeks ago. Her existing provider won't hook up service to her new home until June 29. This means nearly four weeks without basic telephone service for her family (and no phone at all while her husband has his work cell phone with him during business hours).

Once she gets the service hooked up, she needs to address a billing problem, as the amount she's being billed by this company is not the same as what she was promised when she signed the contract.

Excellent local customer service is one of the things many people are looking forward to with RS Fiber. Is this important to you?

Most of us in urban areas really hate our cable providers because of the poor service they provide. But at least they are relatively timely in the terrible service they offer -- unlike in rural areas where telco technicians may be responsible for covering many hundreds of square miles.

Hesitant though I am to promote anything Facebook-related, the people in Sibley have done a tremendous job of using Facebook to organize people and share stories about why their community-owned network is so important. If you are trying to organize a community for better broadband, take some notes.

First Community Broadband Bits Podcast - Sibley County Fiber to the Farm

In our excitement to produce this podcast, we forgot to credit Fit and the Conniptions for the intro/outro music. Much thanks for releasing their music under a creative commons license that allows us to use it for this purpose. If you like their sound, buy an album!

We have decided to start a podcast- a recurring audio program that you can listen to on your smartphone, iPod, computer, this web page, etc. We are calling it Community Broadband Bits and our plan is to offer short (10-15 minute) interviews with people doing interesting things to encourage community broadband networks.

As this is our first attempt at such a show, we hope you will send feedback and suggestions. Eventually, we will get on a schedule, likely releasing every other week for the first few months.

To subscribe with iTunes, click here.

If you simply want the audio feed for the show, it is http://feeds.feedburner.com/BroadbandBits

For our first show, we interviewed Linda Kramer with the Marketing Committee of the Sibley-Renville Fiber Project in rural Minnesota's Sibley County. In this ten minute interview, we discuss the need and demand for broadband in rural areas, as well as how the marketing committee has educated residents and demonstrated support for a County-owned fiber network.

In Minnesota, Rural Fiber to the Farm Project Expands

A rural Fiber-to-the-Farm project that started in Sibley County has added three new towns to its potential territory due to the extremely high interest in fast, affordable, and reliable connections to the Internet. The current providers aren't getting the job done and few expect that to change given the cost of improving services.

An article last year reported on present difficulties for many in Sibley:

Soeffker, who farms with her husband in rural Sibley County, said the dish receiver they must use works fine in good weather but balks during heavy rain and snowstorms.

Meantime, her husband struggles with a lagging Internet speed of .6 megabits a second that falls short of meeting his business needs when he’s selling commodities.

The committee organizing the network set a goal for demonstrating the interest of something like 50% of the population in the target area. There has been some confusion as to exactly how many they should have before committing to the project but with just two mass mailings, they have received nearly 3,000 positive responses (of the over 8000 households that could be served). This is a very strong response.

To keep the public informed, they have had numerous public meetings in each of the communities that will be involved. To be as open as possible, they would often have three meetings in a town per day -- a morning, afternoon, and evening meeting to accomodate everyone's schedule. As this project moves forward, no one can claim the group has been anything but open with the plan.

On January 19, they had a major meeting with over 100 people attending, including many elected officials from the towns. For over two and a half hours, they had five presentations and numerous questions. MPR's Jennifer Vogel was there and wrote about the project shortly afterward.

Participating communities--which include Renville County, Sibley County, Fairfax, Gibbon, Winthrop, Gaylord, Arlington, New Auburn, Green Isle, Buffalo Lake, Steward, Brownton and Lafayette--have been asked to decide by early March whether to continue with the project and release additional funds for marketing and administration.

Previously, the project included 7 potential towns. But some nearby towns in Nicollet County have expressed interest in joining and their density would make the project more viable. Most in Sibley have been dedicated to serving every household - town and farm alike. While the principle of equity is noble, it ultimately makes the project harder to finance due to the higher fixed costs required to serve the least dense areas. Bringing in a few more towns benefits everyone.

Unfortunately, the people around the those towns are frustrated that they are not slated for connections in the current plan -- see some of the discussions on their vibrant facebook page. They will have to draw the line somewhere but will undoubtedly be interested in expanding the network once they have built out in initial territory.

Minnesota law has a barrier to municipal networks and as a matter of law, it is not clear that it applies to a county-owned project. Under law, if a municipality wishes to own or operate a telephone exchance, it must have a successful 65% referendum -- an incredibly high bar given the imbalance of spending power in such contests. Incumbent providers can spend a lot to oppose a referendum whereas local governments cannot take a position and grassroots groups are limited in their financial resources.

Renville Sibley Fiber Network

However, as this network plans to neither own nor operate a telephone exchange, it should not have to pass a referendum. It seems as though the project is leaning toward a partnership with Hiawatha Broadband Communications, a well liked private firm from southeastern Minnesota. HBC already operates the muni-owned Monticello FTTH network.

While no financial plans are yet finalized, the most likely option appears to be non-recourse revenue bonds for nearly $70 million. These are bonds that are issued to private investors and will be repaid with revenues from the subscribers. If the network were to fail to produce enough revenue to make the debt payments, the towns and county would have the option of making up the difference from tax revenues but would be under no obligation to do so.

From Jennifer Vogel:

There would be some public obligation to the project, in the form of what McGinley called a "debt service reserve fund." In order to make the project appealing to investors, he said, the participating communities would be required to establish and replenish if necessary a $4.5 million rainy day fund that would cover any shortfalls. They also would have to cover the contributions of any communities that ducked out of the project down the road or couldn't pay into the fund.

If one town, Winthrop for example, decided not to ante up for the debt service reserve fund, other communities could cover the difference. As the network generates net income (perhaps 5-6 years down the road), the money comes back proportionally to those towns that created the reserve fund.

It bears noting that these people are not asking for any handouts. Whereas Frontier and other providers in the towns are incredibly unlikely to expand their networks absent taxpayer subsidies, the Sibley County Fiber Project will be locally self-reliant.

Redwood County, Minnesota, Latest to Study FTTH

Minnesota, land of 10,000 lakes, may soon also be the land of Countywide rural FTTH. Yet another County is doing a feasibility study to figure out how it can bring fast, affordable, and reliable broadband access to all of its citizens.

Redwood County’s Economic Development Authority (EDA) opted to move forward with a broadband feasibility study that would determine just what the county would need to do in order to get fiber to every premises.

The study, which is being conducted by the Blandin Foundation through what is known as the Robust Broad-band Networks Feasibility Grant Program.

The grant, which includes up to $40,000 for the county as it addresses the needs of every community and farm site from one end of the county to the other, requires matching funds, which are available through the county EDA.

Redwood County

Redwood County is in an interesting area, just north of the Windom area muni FTTH networks and west of the proposed project in Sibley and Renville counties. This study comes not long after Todd County started a feasibility study as well (the the latest on that). And though we haven't discussed it much on MuniNetworks.org, Lac qui Parle County to the northwest is working with a rural telephone cooperative to bring FTTH to many in their border as well.

And then beyond them, we have Cook County going FTTH with their electric coop and Lake County going its own way, both with the assistance of the broadband stimulus awards.

Minnesota could very well become the state with the most impressive rural connections. Unfortunately, thus far we have seen no assistance from the state in this matter, but perhaps the Dayton Administration will chart a new course. He has decided to appoint a new Governor's Task Force on Broadband as well as a Broadband Development Office within the Department of Commerce. Those interested can learn more from Blandin on Broadband.

Blandin on Broadband also has more information about Redwood Falls.

WindomNet Saves Jobs, Provides Stellar Customer Service

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.

FiberNet Monticello

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.

Answers for Questions in Sibley's Fiber-to-the-Farm Potential Network

As decision time approaches, the discussions in Sibley County (and Fairfax in Renville) are winding down. The county and local governments have to decide whether to commit to the Joint Powers Board. Mark Erickson, the coordinator of the project currently, recently responded to a good set of questions about the project and gave me permission to reprint them here.

Questions from a Sibley County Commissioner:

  1. Regarding parity of costs to build the fiber network into the townships (rural area) compared to cities.  It’s nearly twice as expensive to build out the rural areas and some cities feel they are subsidizing cost of putting fiber in country.
  2. How was the initial money spent for the feasibility study?  No one has seen the breakdown as to what that money went for.  We would like to see an itemized list of how the county's contribution and the Blandin dollars were spent.  How much of that money is left?
  3. There are concerns about how the budget of $150,000 was arrived at for the next phase.  Who established the budget and how was it decided how much money to spend for the different categories?  We haven't seen any details of this either, only general categories.
  4. Who is making the decisions on how money is spent and for what?
  5. Some people feel decisions are being made without elected officials - boards or council members - being part of the decision making process.

Response from Mark Erickson:

Parity of costs between City/County

Last summer when the county requested the rural area be included in the feasibility study, the issue of parity came up because of the higher cost of construction in the rural area.

The topic was discussed at all of the public meetings and the following are the reasons for blending the construction costs:

  1. This is a one time 100-year investment in the entire county (and Fairfax and Renville County) and since the city folks rely on the rural folks and visa versa it is viewed as an opportunity for everyone to invest in one another. The fiber network will benefit city and rural businesses, schools, city and county government, townships, ag producers, senior citizens, etc. If everyone benefits equally then everyone should be treated equally.
  2. When the electrical distribution system was constructed, those on the edge of the network (farthest out) didn’t have to pay more to have lines brought to their homes/farms. Everyone was treated equally. And the customer who live at the edge of the network doesn’t pay a higher per kilowatt rate. Everyone is treated equally. With a comprehensive one-time investment in infrastructure like this we should treat everyone equally.
  3. It’s a little disingenuous for the city folks to bring up parity because if it wasn’t for the farms there wouldn’t be any cities. And while the grain elevators located in our communities are an important source of property tax revenue for both the county and cities, no one in the city has a crop and actually uses the elevator. The farmers are the reason the elevator exists yet the cities benefit. On a personal note I hope we can get beyond the perception that one group benefits more than another. The important point is everyone benefits together.

How was the initial money spent for the feasibility study?

  • Blandin provided a $40,000 matching grant. (Check received)
  • Sibley County provided a $40,000 match. (Check not received)
  • The Fairfax EDA put in $3,094. (Check received)
  • Renville County put in $1,190 (Check received)
  • In December the Blandin Foundation awarded another $1,000 to help with expenses as part of a federal technology grant they received.
  • The City of Winthrop, via the Blandin Grant, is the grant administrator. Winthrop has been tracking expenses and paying the bills.
  •  

Total Received $45, 284
Paid to Date:
CCG Consulting $64,000.00 ($2,000 remaining on contract)
Printing and advertising:      $4.558.96
Web page creation/updates/:         $1,000.00
Legal:                   $3,113.24
Mileage, meals, incidentals:     $1,298.57
TOTAL SPENT:                $73,970.00
WINTHROP HAS PAID         $28,686.00
DUE FROM SIBLEY CO:       $40,000.00
AMOUNT REMAINING TO BE SPENT:      $11,314.00

We should have a little less than $10,000 remaining when all is said and done. What remains will be transferred to the Joint Powers Board. If the JPB is not created, remaining funds will be returned to Sibley County, Renville County and the City of Fairfax. The Blandin Foundation has indicated they do not want any unspent money returned to them. Disposition of those funds should be decided by the Winthrop City Council as grant administrator.
 
Our annual city audit begins in a few weeks and all of the funds received and disbursed to date for this project will be audited and accounted for. This is the first time we have been asked to produce information on the grant. We knew someone would ask and we’re happy to provide an accounting. The City of Winthrop was required to sign a contract with the Blandin Foundation to receive the grant money and we take our fiduciary responsibilities seriously.

Budget for next Phase?
The budget for the Joint Powers Board came from our consultant Doug Dawson. He came up with the categories and the amounts. Remember, the budget is only an estimate at this point. We don’t know for sure what each category will cost. Engineering fees could be less and the legal fees could be more. Doug feels that $150,000 is more than enough to get us through to bonding. When the Joint Powers Board is formed the process will have formal structure, complete with chairman, vice chair, secretary and treasurer. All monies spent will need to be approved by the board and a monthly financial accounting will be provided. The JPB books will audited annually.
 
Who is making the decisions to date?
The city administrators involved in the project (plus Denny Schultz from Arlington as Matt Jaunich chose not to be involved) have met as a group several times and held several conference calls to discuss the project in general and in detail. Decisions to spend the larger amounts of grant dollars (consultant, printing, mailing) were discussed and agreed upon by the group. The process was informal. It is important to note that Winthrop applied for the grant and was named the grant administrator so Winthrop actually has the authority to spend grant dollars. We discussed our plans openly with the various councils and with anyone who would listen

I have been the unofficial project director to date. Because of my background in the telecommunications industry prior to coming to Winthrop, I have the necessary contacts and knowledge to move the project forward. I have worked hard to include as many people as I can in the decision making process. I have been completely open with our plans and have welcomed new ideas. BTW, the idea of bringing the rural parts of the counties into study (your idea) is the best idea to date. Going county-wide makes this a very compelling and comprehensive project.
 
Involvement of Elected Officials:
From my perspective, elected officials have been involved as much as they have wanted to be involved. I have met more than once with the councils from Fairfax, Gibbon, Winthrop, Gaylord, New Auburn, Green Isle and Henderson. This project has been a standing agenda item at SEDCO meetings since last summer. The councils have asked a lot of questions and were given full answers. The City of Arlington is probably not as informed as the rest of the towns because (again from my perspective) they have chosen not to be as involved as the rest of the towns. There’s nothing wrong with that. My assumption was they were up to date on what was happening and in basic agreement with the process. Apparently they have concerns and that’s fine. I’m happy to address their concerns because it’s an important and necessary part of the process.
 
This is not an easy project for people to get their arms around because of the technology involved. The feeling of council members I have talked to from Fairfax, Gibbon, Winthrop, Green Isle and New Auburn is that the questions and concerns recently brought up by the City of Arlington (Letter dated January 24th) should be taken up by the Joint Powers Board. I guess I agree with that.
 
What I hope does not happen as we move forward is our attention is diverted from looking for ways to make the project work and we get mired down on side issues about past process and who’s making the decisions.
 
As far as Sibley County’s participation is concerned I hope that will be answered at the commission meeting Feb. 22nd. There is a lot of support for this project in the rural parts of the county. The two most common points I hear from rural folks with regard to whether Sibley County should participate are: 1) Why would they take the first step (feasibility study) and be unwilling to take the second step (Joint Powers Board) if the study shows the project was feasible; and 2) The people of Sibley County should be given the chance to decide if they will support the project.
 
If I was asked today to vote to build a fiber to the home/farm/business network as proposed, I would vote no because I don’t have enough information. But if I was asked to vote today to take the next step to get the information would answer vote yes. If we don’t take the next step, all of the money, time and effort spent to date will have been wasted.

Upcoming Minnesota Events

As Minnesota's rural county-wide FTTH projects move forward, we have the opportunity to learn more about them in upcoming events.  Thanks to Blandin's broadband blog for covering these issues!

On February 10, Cook County is welcoming Dan Olsen from WindomNet to discuss their experiences with a community-owned fiber network. You can listen to a previous interview on the North Shore with Dan Olsen.  In the interview, Dan Olsen mentions that a number of residents use WindomNet to work remotely, commuting only once a week to their jobs in South Dakota.  

For the rest of us, mostly located in the metro area of Minneapolis and Saint Paul, we can learn about the projects in Cook, Lake, and Sibley Counties at a Telecommuniations and Information Society Policy Forum at the HHH School of Public Affairs at the University of Minnesota.

Frontier Forces FUD on Cities in Sibley: Sibley Responds

The fiber-to-the-farm initiative in Sibley County, Minnesota, has completed the feasibility study and the towns involved are discussing a Joint Powers Agreement. One of the impacted incumbent providers -- Frontier Communications, a rural telco famous for slow DSL) -- has started to spread the usual FUD (fear, uncertainty, and doubt) that is common whenever a massive company is about to face competition.

Though I am tempted to comment directly on Frontier's letter, I'll let the community's response stand on its own. The way they misrepresent the record of Windom should be instructive - this same misinformation strategy is used around the country.  We believe publishing these scare tactics and responses to them is helpful to everyone -- so if your project has received one, please let us know.

Frontier's Letter:

Dear Commissioners:

As a provider of telephone, internet, and video services to our customers in the Green Isle, Arlington, and Henderson areas, Frontier Communications is obviously interested in the "fiber to the home" proposal that has been presented. As a nationwide provider, Frontier is aware of other efforts by municipalities of various types to build and operate their own telecommunications network. While these proposals are always painted in rosy tones, it is important for officials to carefully review the underlying assumptions and projections that consultants make when presenting these projects. Unfortunately, history tells us that the actual performance of most of these projects is significantly less positive than the promises. Often times, these projects end up costing municipalities huge amounts of money, and negatively impact their financial status and credit ratings.

A nearby example would be WindomNet, the city-owned network in Windom, Minnesota. That network, which provides telephone, internet, and video service, began in 2005. The financial results to date have been poor; operating losses of $662,000 in 2006, $1,257,000 in 2007, $326,000 in 2008, and $93,000 in 2009. Additional borrowing by the city was required to make up those losses.

Another example is the city-owned network in Burlington, Vermont. Burlington Telecom was begun with high hopes in 2003, to offer telephone, internet, and video services. By the fall of 2010, the network was in trouble. A Vermont Public Service Board investigation found that it had violated its license to serve. The network cannot pay its debt, which has resulted in a downgrading of the city of Burlington's credit rating. This essentially makes borrowing more expensive for the city for all its operations. Indeed, a blue ribbon panel charged with investigating the situation concluded that the network is not viable at this time.

Reviewing the presentations on the "fiber to the home" proposal available on the County's website raises several questions regarding the reliability of the cost study and projections. The Sibley Renville Fiber Project Executive Summary says that to make the project work, it "requires a 70% penetration rate of customers buying two services (or more)". The November 15, 2010 Consultant Report assumes monthly prices of $19 for telephone service, $42 per month for Expanded Basic video, and $42 per month for 20 Mbps internet service, A customer taking all three services (phone, video, and internet) would pay about $100 per month; a customer taking only two services would pay something less.

However, the November 15, 2010 Consultant Report seems to tell a different story as far as the assumed penetration rates.

In the Consultant Report, the cost study results for City-Rural plan show $9.6M in revenue in Year 5. A customer taking all three services would generate revenue of about $100 per month, or $1200 per year. Thus, the $9.6M of projected revenues equates to 8,000 customers taking all three services (phone, video, internet) or more than 8,000 customers taking two services. According to the County's webpage, the 2010 population of Sibley County is 16,000, Apparently, the cost study assumes that every other citizen of the County will subscribe to all three services, at $100 per month. Not every other household; every other citizen, Since the average household size is approximately 2, the cost study implies that every Sibley County household will subscribe to this network (at $100 per month) for the projections to be accurate.

The Consultant Report assumes a "Total Investment per Passing" of $5600. The projected investment for the City-Rural plan is $44.6M by Year 3. This equates to roughly 8000 units passed. According to the US Census, with a 2000 population of 15,356, there were there were fewer than 6000 households in the county. Since the 2010 population of Sibley County is 16,000, there may be a few more households now. Evidently, the cost study is assuming that every household in the county (and then some) will be passed by Year 3, and that every household will subscribe to the network.

Frontier offers these thoughts not as a full review of the proposal, but simply as an initial caution to the county, to carefully examine the particulars of this project before proceeding. Frontier looks forward to participating in future discussions on this proposal.

Mark Erickson, the Winthrop City Administrator who has spear-headed this project, responded with the following letter (which is not in a blockquote style due to its length).

A response to Frontier Communications letter to Sibley County Commissioners on Dec. 14, 2010 regarding the proposed county-wide fiber network

Sibley logoAs residents, businessmen and elected officials study and learn more about the possibilities of constructing a county-wide fiber to the home/farm/business network in Sibley County, Fairfax and the rural exchange around Fairfax, it is important that everyone is presented with facts.

On December 14th of last year Frontier Communications presented a letter to the Sibley County Board of Commissioners expressing their concerns and opposition to the proposed network.

The letter is an example of how the telecommunications industry has typically responded to the threat of competition; confuse everyone with half truths and lies, point to a bleak future and remind everyone their taxes are going to increase if the project goes forward.

Nothing could be further from the truth.

In their letter, Frontier says that “these proposals (for community fiber networks) are always painted in rosy tones.” That is not true in our case. Our consultant, Doug Dawson, and the city staff involved in the project have gone out of their way to remind elected officials and the several hundred people who attended the two rounds of presentations regarding the project there are inherent risks in the project and a significant amount of hard work required to make the project successful.

Frontier goes on to say that “history tells us that the actual performance of most of these projects is significantly less positive than promises.” That also is not true. There are approximately 75 municipally based fiber projects currently operating in the country. A case can be made that perhaps three or four of those projects have under performed. Four out of 75 projects is a far cry from “most of these projects.”

The letter further goes on to point to WindomNet in Windom, Minnesota as an example of a municipally based program that is not doing well. Again, the accusation is absolutely false. WindomNet was built by the city of Windom about five years ago and stumbled out of the block because of overwhelming support for the project. Their original business plan estimated that 20% of the residents would subscribe to digital television service which requires a set top box that back then cost about $400 each. Instead, 80% of residents signed up for digital service and Windom was required to borrow more money to meet the demand. Since then Windom has been a model of success. They have met their financial projections and continue to add customers. In a conversation with their general manager a few weeks ago he admitted they could do better financially if they charged more money. Instead they choose to provide outstanding service to their customers as a price that allows them to pay their bills and put a little in the bank.

This past year the WindomNet Board voted to work with eight area communities (Jackson, Lakefield, Round Lake, Brewster, Heron Lake, Okabena, Wilder and Bingham Lake) to build fiber to the home networks in each of those communities. Does that sound like an operation that is not doing well?

Minnesota phone companies, under the direction of the Minnesota Telecommunications Alliance, have been telling “The Windom Lie” for the past five years. In a way it is good that Frontier’s letter mentioned Windom as an example of a municipal venture that is failing, because it gives us the opportunity to tell the truth. WindomNet is doing just fine. A municipal venture measures success by generating more cash than is needed to pay for expenses, pay for assets and pay for debt. Windomnet is cash positive and the City considers the project a total success.

The letter also mentioned the community of Burlington, Vermont as an example of a municipal network that is not doing well. Frontier is accurate in that description. Burlington made several big mistakes. Burlington stands as an example of what not to do for municipal networks and the lessons learned from Burlington have been heard in many city halls and county courthouses across the country.

The Frontier letter then goes on to raise “several questions regarding the reliability of the cost study and projections” of the feasibility study authored by CCG Consulting. I must admit that reading their concerns certainly seems to point to problems. Fortunately, they have taken simple financial assumptions and twisted them in a way that points to failure instead of success. The numbers presented in the feasibility study are sound. CCG Consulting has authored hundreds of similar studies for cities, counties and phone companies and has never had a failure. In fact, CCG is recognized as one of the top fiber-to-the-home consulting firms in the nation. We are ready to defend the projections in the study with anyone at any time.

The Frontier letter went on to talk about the “Total investment per passing of $5,660” in Sibley County, using the 2000 census figure. We worked directly with all of the cities and the two counties to estimate the total number of passings (homes, farms and businesses). Frontier’s assumptions are incorrect because they don’t include the passings in Fairfax and Renville County. They admit there “may be a few more households now” in Sibley County but conveniently left out the folks in Renville County. Again, we feel very confident of our numbers in the study.

According to a December 16th, 2010 article in the Arlington Enterprise about Frontier’s presentation of their letter to the Sibley County Commissioners, Frontier Regional Manager Todd Van Epps made the following statement” “What we can do is provide the same speed of service as fiber can provide.” We are fairly confident that people recognize the absurdity of that statement. If the Sibley/Renville fiber optic network is eventually constructed it will provide at least 20 megabits of symmetrical Internet service (same download and upload speed) to every home, farm and business for less than $50 a month. It will be capable of providing up to a 100 megabit of symmetrical Internet connection to everyone using standard hardware and can be upgraded relatively easily to provide one gigabit of bandwidth if a customer needs that much.

Frontier’s copper network simply cannot match those speeds. If they could, large companies would still be building copper networks, which none of them are doing. The superior bandwidth of fiber optics not only allows for ultra high speed Internet connections, it also means that video over fiber is absolutely crystal clear and high definition television (HDTV) is far superior in quality that some cable networks and all satellite networks.

The bottom line is that Frontier Communications does not want this network to be built because they don’t want the competition. We understand that. That’s why we have said from the beginning of this project that if the phone or cable companies want to build this network we will stand back and welcome them with open arms.

Sibley County MapWe have even gone as far to say that if the phone or cable companies are interested in building a fiber to the home network in Sibley and Renville Counties we will help them find a way to finance the project, allowing them to operate the network and eventually own the network for little or nothing when the bonds are paid off. Unfortunately the phone and cable companies we have talked to are not interested in such a partnership.

Almost everyone in Sibley and Renville counties we have talked about this project in the last eight months recognize the benefits that a fiber optics network would bring to their lives, businesses, schools and communities. A lot of people have offered their support to try to figure out a way to make this happen. The construction of a fiber to the home/farm/business network in Sibley and Renville Counties would bring us into the 21st Century and put us far ahead of our big city cousins with respect to access to technology.

Again, we understand why the phone and cable companies take such a dim view of this project. But instead of spreading lies and half truths wouldn’t it be more constructive if they sat down with us and tried to figure out a way to make this happen that benefits them as well of the residents of Sibley and Renville counties.

On January 13th, representatives from the eight communities and two counties involved in the planning stages for this fiber network got together to learn more about the project and possibly agree on a way forward. Cities and counties will have until the end of February to decide whether to form the joint powers board and move ahead or end the project now.

If enough communities decide to form a joint powers board to manage the project to a point where we have all of the questions asked and answered to everyone’s satisfaction, the process could easily include discussions with not only Frontier Communications but any phone or cable company willing to sit down and talk logically and constructively about how we can bring benefit to everyone in Sibley and Renville County for generations to come instead of settling for copper and coaxial technology that has already become outdated.

As we have said many times in presentations and meetings regarding this project, this is not an anti-phone or cable company project. This is a pro Sibley and Renville County project.

In the “Telegraph and Telephone” section of the Gaylord History book, the following information appears: “Before the telephone was introduced in Gaylord in 1897, there were some who thought it was just a fad and would prove impractical. They thought the telegraph, which originated at the same time as the railroad, had served the community adequately for many years.”

It is an ironic twist of fate today that phone companies like Frontier who oppose these kinds of project represent the naysayers of 100 years ago who didn’t think it was necessary to upgrade telegraphs to the new telephone.

This fiber project represents those folks 100 years ago would knew that Sibley County would be better served by investing in technology.

If the folks in Sibley and Renville counties can find a way to build a fiber to the home/farm/business network it will become an invaluable and necessary tool future generations can use to meet the challenges that will most certainly confront them.

Respectfully submitted,
Mark Erickson
Winthrop City Administrator
EDA Director