stimulus

Finally, a broadband stimulus project that we can get excited about. RUS has announced a grant to expand the publicly owned WindomNet in southwestern Minnesota. Windom was originally built to bring broadband to a small community that Qwest didn't think ready for DSL. They built their own fiber-to-the-home network.

In rural Minnesota, the Southwest Minnesota Broadband Group (SWMBG) has been selected to receive an almost $6.4 million loan and a $6.4 million grant to extend fiber to the Jackson, Lakefield, Windom, Round Lake, Bingham Lake, Brewster, Wilder, Heron Lake, and Okabena communities. This funding, along with an $88,000 private investment, will provide high-speed Internet, voice, and cable television to the participating communities. This will improve the quality of life by increasing the availability of health, education, and public safety services across the region.

Now that network will expand to nearby communities, a move that will strengthen it financially as it can spread the fixed costs of such a network across a wider population base. And these communities will have actually have a choice in providers soon -- rather than relying on absentee incumbents that care only about increasing their profits.

They will be beginning expansion work quite quickly according to this brief article.

This community of almost 10,000 near St. Louis has taken another step toward creating competition in broadband by investing in a publicly owned fiber network. In April of 2009, the community voted overwhelmingly (75%) yes to a question authorizing the network with revenue bonds that would be backed by electrical revenues from the city's public power company.

They have started the first phase (focusing mainly on businesses though some residences will be passed) by awarding bids for construction (the bids were below expectations - a slow economy is a good time for infrastructure investments due to the low prices). Though the project has spurred some debate, the majority remain in strong support, as demonstrated in a recent article about the project.

Guillot presented the council with more than 100 email replies from Highland Chamber of Commerce members who are in favor of the fiber project, including banks, schools, manufacturers, realtors and other businesses.

“There are currently other companies providing like services in Highland. This project will not end their relationships with the city, rather it will give consumers a choice and force competitors to provide a better product or better service to remain competitive,” Guillot said. “This will also keep more revenue in Highland.”

Highland resident Brad Korte agreed.

“The fiber-to-the-home parallels paving the streets in the 20s, starting the city’s electric system and water department. I would rather spend my money, and take a chance with my money on Highland,” he said. “If we don’t take a chance on this, I think we would regret it in a couple of years.”

The project will proceed more quickly if they are successful in an application for stimulus funds under the broadband programs. Regardless, the first phase will be completed in a year and needs a 23% take rate to break even financially (ignoring the many indirect benefits of such a network).

I have just submitted comments from the Institute for Local Self-Reliance to both the the National Telecommunications and Information Administration (NTIA) and the Rural Utilities Service (RUS) regarding suggestions for rules in round two (the last round) of the broadband stimulus programs -- the Broadband Technology Opportunities Program (BTOP - administered by NTIA) and Broadband Initiatives Program (BIP - administered by RUS).

The two agencies previously posted a joint request for information [pdf] on lessons learned from the first round:

RUS and NTIA released a joint Request for Information (RFI) seeking comment on further implementation of the Broadband Initiatives Program (BIP) and the Broadband Technology Opportunities Program (BTOP). Comments must be received by November 30, 2009. The input the agencies expect to receive from this process is intended to inform the second round of funding.

We offered five pages of comments, responding directly to the questions - I am led to believe that this is the preferred way of responding to such requests for information. Thus, the format consists of a short introduction and then questions (in italics) followed by our responses.

Unsurprisingly, we generally encourage NTIA and RUS to better serve the public interest by requiring more transparency in the second round. We also call on them to stop accepting "advertised" speeds in their broadband definition and use actual delivered speeds in order to ensure communities are not discouraged from applying because their incumbent providers exaggerate the capabilities of their network.

Most importantly, we call on NTIA and RUS to encourage public sector entities to apply by ceasing to consider all private networks to operate in the public interest. As we previously documented here, NTIA subverted the intent of Congress with the rules from round one. The rules should prefer public and nonprofit entities as they are directly accountable to the public and should therefore be the first in line to receive public money for essential infrastructure.

As the number of applications to NTIA and RUS was far higher than expected, making the public interest requirements stronger should be a natural response. They have far greater demand than funds, thus they should make the requirements more difficult in order to ensure all the funded networks offer greater benefits.

Our focus on the broadband stimulus is almost entirely on last-mile infrastructure because it is the most challenging and expensive problem to solve before all Americans will have affordable access to the broadband networks they need in the modern era. As we are most familiar with Minnesota, we decided to take an in-depth look on who is proposing what projects in our state.

Total Infrastructure Grants Requested for Last Mile solely in MN: at least $240 million
Total Infrastructure Loans Requested for Last Mile solely in MN: at least $85 million

Groups seeking stimulus funds to deliver last-mile broadband access in Minnesota have asked for hundreds of millions of dollars. By my tally, some 17 applicants are seeking to serve Minnesota with last-mile access (I threw out applications pertaining to middle mile infrastructure, digital divide, and those last-mile projects that combine Wisconsin and North Dakota areas) have requested some $240 million in grants and $85 million in loans.

If one assumes that the total amount of money is divided evenly among the states, this is somewhere around 3x as much stimulus money that will be awarded to Minnesota applicants over the course of the multiple rounds of funding.

At some point, this list will have to be winnowed and prioritized, so let's delve into it. All applications still must survive the peer review process (ensuring they met NTIA/RUS requirements), the incumbent challenges (incumbents can veto applications by showing that targeted areas already have broadband advertised to them), and the prioritization of surviving projects by each state (no one seems sure of how this will happen in Minnesota, our Governor is too busy not running for President in 2012).

There are two applications that should be jettisoned immediately, Arvig Telephone Company and Mid-State Telephone Company, both of which are owned by TDS Telecom. [Update: I have now heard conflicting reports on whether Arvig is, in fact, a subsidiary of TDS]

When NTIA formulated the stimulus rules, it ignored Congressional intent by allowing any private company to apply despite the requirement that the company act in the public interest.

Though NTIA ignored the intent of Congress, states like Minnesota should absolutely use that criteria in deciding how to rank projects. You may recall that TDS Telecom filed a frivolous lawsuit against the city of Monticello, which was tossed out of court at the earliest opportunity, but TDS continued obstructing the community's plans until the company ran out of appeals (our coverage here. TDS Telecom abused the court system by using it to delay a network approved by 74% of voters for more than a year in an attempt to prevent competition in the community. Few companies have abused the public trust more egregiously; they should be prohibited from receiving public money.

Further, government grants should certainly not be given to such a profitable company in order to expand their slow DSL services rather than offering the higher speeds that are needed by communities in 2010 and beyond.

Minnesota should prioritize publicly owned networks when it comes to public dollars. Unlike networks run by absentee network owners, these networks are directly accountable to the citizens of the community. Thus, projects like Lake County, Cook County, and City of Windom should all be front-runners. These grants are expensive in the short term, but they are investing in a technology that will last decades, rather than already-obsolete DSL. Rural Minnesotans need broadband, but extending speeds that already lag behind needs is not a wise use of public money.

Other smart projects that will deserve a hard look are the cooperatives that have applied - they have been borrowing from the federal government for years to extend state-of-the-art fiber networks to rural communities. Unlike companies like TDS and Qwest, they find it economical to bring fast and affordable access to their subscribers because they put community needs before profits. This is a model that needs to be expanded in rural areas.

Finally, we also support the applications of Donny Smith in several areas - his Jaguar Communications company runs an open network, allowing competitors to serve the community (again, something that other private companies avoid in order to maximize profits). He is working in several Minnesota regions to build fiber-to-the-home networks.

Basic Information about some MN Broadband Grant Applications available here - apparently, this does not include all applications aimed at Minnesota, but just applicants based in Minnesota.

Photo by Jackanapes, used under creative commons license.