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.

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.

Last year we noted that a bill to expand local authority to invest in publicly owned broadband networks would return in 2012. HB 1711 is in Committee and causing a bit of a stir. "A bit of a stir" is good -- such a reaction means it has a chance at passing and giving Washington's residents a greater opportunity to have fast, affordable, and reliable access to the Internet.

Washington's law presently allows Public Utility Districts to build fiber-optic networks but they cannot offer retail services. They are limited to providing wholesale services only -- working with independent service providers to bring telecom services to the public.

Unfortunately, this approach can be financially debilitating, particularly in rural areas. Building next generation networks in very low density areas is hard enough without being forced to split the revenues with third parties.

Last year, House Bill 2601 created a study to examine telecommunications reform, including the possibilty of municipality and public utility district provisioning. The University of Washington School of Law examined the issues and released a report [pdf] that recognizes the important role public sector investments can play:

Broadband infrastructure is this century’s interstate highway system: a public investment in an infrastructure that will rapidly connect Washington’s citizens statewide, nationally, and internationally; fuelling growth, competition, and innovation. Like highway access, the path to universal broadband access varies with the needs of the local community.

Our primary goal is to expand broadband access. We believe allowing municipalities and PUDs to provide broadband services addresses the most significant hurdles to broadband expansion: the high cost of infrastructure. In conjunction with a state USF, PUDs and municipalities are well placed to address the needs of their consumers.

A secondary goal is to promote a competitive marketplace. We believe that empowering PUDs and municipalities will spur competition which will drive innovation and improved service.

The analysis recognized the weakness of those arguing that only the private sector should be allowed to build this essential infrastructure:

To be successful private providers need to be able to generate profit for their shareholders. However, when an effective competitive marketplace does not exist, private providers only have a weak incentive to expand access to broadband services. In fact, the scarcity of service justifies the collection of high rates from users. In Washington’s urban areas, the barriers to entry are so high that incumbent providers have little trouble keeping new providers from entering the marketplace. Qwest (soon to be CenturyLink) and Comcast, merely vie for existing users, rather than expanding the overall number of ratepayers. In contrast Washington’s rural areas are characterized by low population density and large geographical distances between communities. The lack of concentrated business consumers in a given area translates into weak or non-existent business case for providers to build broadband infrastructure in rural areas. Arguably, rural areas are poised to reap the biggest rewards from broadband expansion, quickly integrating communities into existing networks of private and public service.

Not all public utility districts are pushing for this law to be changed. I asked the Chelan Public Utility District (one of the oldest and largest public services providers in the state, which we have previously covered here) about their position on the legislation. Chelan is not interested in offering retail services but does not oppose changes that would allow other PUDs to do so. They rightly oppose any law that would require PUDs to offer retail services -- something with which we strongly agree. State legislatures should not be telling communities what business model they have to use.

Getting back to HB 1711, it is presently in the Technology, Energy, and Communications Committee. The bill's author, Representative John McCoy has taken the arguments of opponents into account by limiting the impacted public utility districts to those in a county with 300,000 people or fewer. To build a network and offer retail services, a public utility district (or rural port district) would have to gain the approval of its governing board after a public meeting and be subject to state regulation for the services it offers.

The original bill also granted the authority to municipalities to build retail networks -- a right that munis appear to have presently but it is not clear (inviting expensive litigation from big anti-competitive providers). That provision has been removed from the present bill.

Opposition

The bill's opponents may be separated into two groups. The first is the usual gang of big, absentee corporations like CenturyLink, Frontier, and Comcast that typically oppose any legislation that could create competition to their services. They have a ton of lobbying power and very little desire or capacity to solve the rural broadband problem in Washington state.

The second group is more interesting. It is a collection of local businesses that are actually rooted in the community. Many are ISPs that operate on existing wholesale-only networks owned by public utility districts. They are afraid of either being kicked off the network or having to compete against the PUD itself in provisioning services. These are certainly legitimate fears.

Unfortunately, the small providers are also limited in the capacity to build the necessary networks needed to bring modern connections to everyone in the state. Offering service on an existing PUD network requires far less capital than building their own network. If the state wants to move toward a Washington where all residents and businesses have fast, affordable, and reliable access to the Internet, it has to risk upsetting the small ISPs. They do not have the capacity to connect rural Washington; the public utility districts and local governments have not just the capacity, but also the responsibility. It is time for the state to stop making it all but impossible for them to do so.

Get Involved

Local communities must have the freedom to build the networks they need without interference from federal or state capitals. Quoting from the Federal Communication Commissions' National Broadband Plan: "Congress should make it clear that Tribal, state, regional, and local governments can build broadband networks."

This bill will not succeed without a grassroots effort. People in Washington should contact their representatives (you can find them here), particularly those on the Committee:

Former FCC Commissioner Copps recently said, "So it is regrettable that some states are considering, and even passing, legislation that could hinder local solutions to bring the benefits of broadband to their communities. It's exactly the wrong way to go."

Washington is smart to expand local authority in this matter. Local citizens are the best judge of whether a network is necessary and desirable as well as the most responsible business model.

A new documentary from California explores the failure of the private sector and competition more generally to sufficiently invest in fast, affordable, and reliable access to the Internet.  It comes in three parts and runs about 25 minutes in total.  

This provides a good summary of the present broadband landscape and how AT&T, Comcast, and other major providers are not the answer to our increasing need for better connections to the Internet.

The nDanville network of rural southern Virginia has long been a favorite of ours (previous coverage is available here). The network has helped Danville go from being notable for having the highest unemployment rate in Virginia to being ranked as the third top digital city in the nation, according to a recent article.

Danville's City Manager was honored by the Southern Piedmont Technology Council for developing the nDanville network:

Danville City Manager Joe King received the Chairman's Award for his leadership in advancing the development of a modern telecommunications infrastructure in the region, a key factor in Danville's economic development renaissance.

King had been the director of the city-owned utility when it drew up plans for a fiber-optic network to be built incrementally until it could connect every home, business, and community anchor institution in Danville Utility's territory. At the time, Danville was suffering tremendously from the loss of tobacco and textile industries.

Today, the nDanville net-work connects hundreds of businesses, has sharply re-duced costs for local gov-ernment, health care provid-ers, and local schools, and has introduced more competition into the telecommunications marketplace.

Danville Utilities has 44,000 electric meters, half of which are located in Danville (44 sq miles). The others are scattered across over 450 sq miles surrounding the city. The Southern Piedmont Technology Council serves the technology industry in Danville as well as nearby counties and another city.

Even in 2004, many in Danville did not have broadband access to the Internet, as outlined in an early document explaining the network. Verizon barely offered DSL and Adelphia offered limited cable modem service.

Andrew Cohill, a consultant assisting the project, has offered more background in a recent article of Broadband Communities. In it, he notes that the network was a piece of a larger strategy of investment in the community to develop local expertise in technology.

Danville was the first municipality to deploy a fully automated, Layer 3 open-access network; nDanville, with more than 135 miles of fiber, passes more than 1,000 business locations, including every parcel in all five business parks. Current customers have access to 100 Mbps fiber connections capable of delivering a wide variety of services, and 1 Gbps and 10 Gbps connections are available upon request.

And as we noted back in August, the network is starting to connect residents in a pilot project starting with up to 500 homes.

The network is profitable, connects over 150 businesses, and is creating significant economic development.

An interesting resource that Andrew shares are the principles behind the network. Communities just starting to consider a community broadband network may want to adopt a similar statement of principles.

• Universal access: The long-term goal of the project is that every business and home should have the same level and quality of service. This commitment supports the open-access business model by aggregating the largest possible number of potential customers for service providers.
• Level playing field: Every service provider should be able to play by the same rules. nDanville has a single public price list available to all providers. There are no special deals or unpublished rates.
• Public-private partnerships: City investments in broadband infrastructure should create private sector business opportunities. The city sells no services to businesses or residents.
• Multiservice network: nDanville is an open-access network that supports multiple providers and a wide variety of services well beyond the traditional triple play to create true competition and lower prices.
• Symmetric bandwidth: The availability of services offering affordable symmetric bandwidth was viewed as critical to the economic revitalization of Danville. Any transport service requested by a provider can be configured with equal upstream and downstream data capacity to support business- class services and applications. This early decision is now becoming increasingly important with the rapid increase in the use of business videoconferencing, which requires symmetric bandwidth to perform adequately.
• Unlimited bandwidth: Another early design goal was that any home or business should have the capacity to use any service needed to compete in the global economy. nDanville’s active Ethernet fiber network offers 100 Mbps, 1 Gbps and 10 Gbps connections as standard, and DWDM lightpaths are available on request.

Some of the high profile economic development achievements include an Ikea plant and the expansion of CBN Technologies, which produces secure identification documents. While Ikea and CBN did not choose Danville solely for the publicly owned fiber-optic network, they rely upon it and almost certainly would not have picked Danville in its absence.