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Blandin Webinar on Minnesota Broadband Grants Now Archived and Available

The Blandin Foundation held an informative webinar on March 13 that is now ready for viewing. 

If you were not able to attend the webinar, this is a great opportunity to learn more about grants available through the Blandin Community Broadband Program (BCBP). There are six active programs that focus on broadband. Mary Magnuson from the Bladin Foundation and Bill Coleman with Community Technology Advisors host the webinar.

Video: 
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Bill to Boost Broadband in Minnesota Struggles in Legislature

In a revealing video about the Internet access problem in rural Minnesota, Annandale City Administrator Kelly Hinnenkamp below describes her town's struggle with connectivity. The video is the latest in a series on the Minnesota Senate DFL YouTube page intended to shed light on the critical situation in the state.

Hinnenkamp describes broadband in the areas outside of Annadale as "horrific." She goes on to discuss how the community's poor connectivity negatively impacts its economic health. She shares a story about entrepreneurs from an artisan spice business once located in Annandale. The company started with online sales but the owners anticipated opening a storefront in the downtown area of the lake community. After contending with eight outages in three weeks, the new business pulled up stakes and moved to Buffalo. 

Buffalo, located only 15 minutes away from Annandale, offers fast, reliable, affordable fiber service to local businesses.

In a February Minnesta Public Radio News article, Hinnenkamp told Dave Peters:

“Broadband is probably the single most important issue in our community right now,” she said. “Our big issue is not that we don’t have service but that we have one provider that has shown little interest in improving it. Broadband is our future."

In a Star Tribune article, Pete Kormanik, the owner of a local McDonald's, expressed his concern as a business owner:

Downloading data for a digital menu board — a task that would have taken 30 minutes at his other restaurants — dragged on for more than four hours.

After delays in processing credit cards, watching training videos and transmitting orders, Kormanik switched to an AT & T antenna. But a cloudy day can slow that service.

“If you can’t stay current with [connectivity], you’re just going to fall behind,” Kormanik said. “And businesses won’t go into those locations.”

Watch the brief interview with Hinnenkamp below or visit the series website to see more interviews. In the words of Dan Dorman, Executive Director of the Greater Minnesota Partnership: 

"It's time to stop talkin' and do something."

Broadband has been discussed for the past several years in Minnesota. Several task forces and reports have all concluded that lack of broadband in Minnesota, especially in the rural areas, will have detrimental effects on the future. Senator Matt Schmit, a DFLer from Red Wing, introduced SB 2056 [PDF] this session to inspire momentum for local broadband projects. Representative Erik Simonson, DFL Duluth, has been pushing the measure in the House.

The bill establishes a grant and loan program focused on local middle- and last-mile projects in areas like Annandale. Dubbed the Border to Border Infrastructure Program, it would bring $100,000,000 from the state's general fund to be applied to broadband projects. The bill has bipartisan support but has not been prioritized by either the Governor or Senate leadership within the Legislature. Meanwhile, Comcast and other incumbent lobbyists have been trying to minimize the fund and any impact it could have.

While it may not become a reality this legislative session, the bill has brought serious reflection on the critical need for Minnesota's rural areas. One of the attractive features of the bill is that funds can be used to supplement funding for local projects. This approach allows local communities to determine the best path for their own needs.

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To Overbuild or Underbuild? A Rural Policy Conundrum - Community Broadband Bits Podcast #91

Lisa Gonzalez and I, Christopher Mitchell, are back in studio for a short conversation about the implications of a municipal network or a coop receiving subsidies from government to engage in overbuilding, where it builds a fiber network in an area already served by slow DSL and cable networks.

This has become an important issue as Minnesota considers a fund that would encourage networks in areas currently unserved and possibly underserved.

We discuss the economics, fairness, and practial realities of both allowing "overbuilding" and disallowing it as Minnesota features two similar networks that have come to different conclusions, to the advantage and disadvantage of different local stakeholders.

We want your feedback and suggestions for the show - please e-mail us or leave a comment below. Also, feel free to suggest other guests, topics, or questions you want us to address.

This show is 13 minutes long and can be played below on this page or via iTunes or via the tool of your choice using this feed.

Listen to previous episodes here. You can can download this Mp3 file directly from here.

Thanks to Valley Lodge for the music, licensed using Creative Commons. The song is "Sweet Elizabeth."

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.

Minnesota Broadband Conference February 4 - 5

Mark your calendar to attend Boarder to Boarder Broadband: A Call to Action on February 4 - 5 in St. Paul, Minnesota. The event is sponsored by the Blandin Foundation and a long list of organizations concerned with connectivity, economic development, and education ni Minnesota.

ILSR's Chris Mitchell will be presenting on February 5 as part of 9:15 CST Breakout Session, Broadband Infrastructure Development. Other Breakout Sessions are Digital Inclusion, Business and Economic Development, and Applications. A detailed agenda and speakers list is available [PDF].

A description of the conference from the registration page:

The time is ripe for Minnesota legislators and residents to have a “So what? Now What?” conversation about our shared aspirations for Border to Border Broadband:

  • The Governor’s Broadband Task Force is issuing their 2013 report and recommendations soon.
  • The director of the Office of Broadband Development will be in place in January 2014
  • Minnesota state legislators have been touring rural areas to hear directly from Minnesotans about their technology needs and dreams.

Conversations have been happening but…What does it all add up to?

The event will be at the RiverCenter in downtown St. Paul. Attendee tickets are $120 ($60 per day) and Exhibitors pay $300 or $60 if your organization is a nonprofit. You can secure your ticket by registering online. See you there!

Justifying a Network with Indirect Cost Savings - Community Broadband Bits Episode 80

Today, Lisa and I are joined by Eric Lampland for a discussion of how a community could justify building a community owned network from the indirect benefits that it would create, including the savings that each household realizes from competition driving down prices. Eric Lampland is the CEO and principal consultant of Lookout Point Communications, which helps local governments that are building a network or considering an investment.

Eric and I start by discussing how quickly the cost savings per household add up to equal more than the cost of building a network and we digress from there, covering other topics related to community owned networks. This includes how big cable companies would respond to this approach.

I have to note that most community networks have not been justified on this basis - the vast majority of community networks were designed to pay their full costs and they are doing so. Here, we discuss the general benefits of these networks that are often sidelined in the policy discussion and how they alone may justify a fiber network.

Toward the end, we begin discussing open access, something we will likely return to in the future as Eric has long both advocated for open access and has some insights into the technical challenges of building such a network.

We want your feedback and suggestions for the show - please e-mail us or leave a comment below. Also, feel free to suggest other guests, topics, or questions you want us to address.

This show is 25 minutes long and can be played below on this page or via iTunes or via the tool of your choice using this feed.

Listen to previous episodes here. You can can download this Mp3 file directly from here.

Thanks to Haggard Beat for the music, licensed using Creative Commons.

Washington Post Covers Big Longmont Referendum Victory

Last week, we were excited by the results of Longmont's referendum, but we sure weren't alone. The Washington Post's Brian Fung wrote, "Big Cable may have felled Seattle's mayor, but it couldn't stop this Colo. project.

Our regular readers know that Comcast succeeded in defeating the Longmont measure in 2009 but the electoral would not be swayed by false promises and lies the second time in 2011. This year's proposal asked voters to approve a revenue bond for $45.3 million to speed up a planned expansion, which voters approved 2:1.

Contrary to past experience, Comcast and allies did not launch a full frontal assault in Longmont this year to sway the vote. Fung's article looks at the math for a possible  explanation:

There are 27,000 households in Longmont. Even if the city were to connect all of the eligible homes [close to the fiber ring] to its existing fiber network overnight, it would still reach only 1,100 residences. Cable companies therefore spent over half a million dollars [in 2011] trying to prevent four percent of city households from gaining access to municipal fiber on any reasonable timescale. That's around $600 a home, or six months' worth of Xfinity Triple Play.

Even if the cable companies decide it was not worth the fight in Longmont, they have shown repeatedly that they have cash, will travel. Feung's article describes another 2009 election in which the cable industry spent large to prevent public investment in fiber:

In North St. Paul, Minn., a 2009 ballot measure to let muni fiber move forward was defeated by a resounding 34-point margin. Opposition to the fledgling network, PolarNet, was led by the Minnesota Cable Communications Association. In the weeks leading up to the vote, it and other opposition groups spent some $40,000 campaigning against the measure. MCCA alone contributed more than $15,000 to the effort over the same period.

Comcast also exhibits its willingness to spend money to seat industry-friendly candidates. We reported on coverage in Seattle where Comcast contributed heavily to Sen. Ed Murray who won the Mayoral race. Outgoing Mayor Mike McGinn's policy initiative to bring better Internet access to the community threatened Comcast's position. Comcast denies it, but speculation abounds that McGinn's position on broadband motivated Comcast's direct and PAC contributions to Murray. 

From the Fung article:

But what Longmont's experience does show is how large the gulf is between an incumbent industry that can spend money on a massive scale to promote its interests and advocates of municipal fiber that often lack deep-pocketed allies. Those odds made the triumph of Longmont's municipal fiber backers all the more remarkable.

Alex Marshall Coming to Humphrey School at U of Minnesota

Six months ago, I wrote about a book by Alex Marshall, the Surprising Design of Market Economies. In a few weeks, he will be presenting to a small group at the Humphrey School of Public Affairs at the University of Minnesota. You can learn more about the event and register here.

I am looking forward to this - Thursday, October 24, at Freeman Commons in the Humphrey School on the West Bank campus. 11:30 - 1:00.

In a thesis that has implications for policy wonks, economists and planners of all types, Marshall shows how government creates the essential institutions necessary for economic life, and how the typical debate between those who value the market and those who value government regulation is a false one. Marshall, a Senior Fellow at the Regional Plan Association in New York, is the author of two other books on urban planning, and is a former newspaper reporter. He was also a Loeb Fellow at Harvard University. His work has been published in many places, including The New York Times Magazine, Bloomberg View and The Washington Post.

Small Minnesota Town, Annandale, Fed up With Slow DSL

Yet another Minnesota town is fed up with slow, unreliable Internet access and is examining what it can do to make sure it has the network it needs to succeed in the modern economy. Annandale is 50 miles northwest of Minneapolis with a population of 3,200 and has Windstream as the telephone company.

Windstream, as with other large firms that primarily serve rural America, offers a DSL more suited to the late 1990's than 2013. It has little capacity to invest in better networks, even if it had the willingness. We've covered Windstream several times in previous stories.

After a flood of complaints from residents to City Hall about slow speeds and frequent outages, the City issued a request for proposals for a feasibility study that will explore alternatives to the present reliance on Windstream.

Local leaders understand that the private sector is not likely to invest significantly in its community due to its density and rural location. But the town needs modern Internet access to retain and attract good jobs. The Annandale Advocate newspaper ran a story on September 17 but it is not available for non-subscribers.

At a chamber of commerce meeting later in the week Gunnarson added that strong broadband is a basic, essential feature of modern commerce.

"New businesses expect good Internet. When you buy a car you expect tires on it. Unfortunately, our car has wooden tires," he said.

logo-annandale-advocate.jpg

The same paper published a guest editorial by City Council members to explain how little power the City has over private providers. Many people falsely believe that towns are actively keeping competition out:

We even had some people angrily ask our staff why are we keeping the competition out. So to set the record straight, the city can't do much about it because it is all private wires, equipment, operations and corporate customer service.

Also, a recent call to the PUC, the Public Utilities Commission, confirms that not much can be done since broadband is not regulated. Sorry folks. As far as letting in competition, we have zero say in that. Any other provider can come in any time. In fact, many of us citizens would throw the welcome party.

If any provider believes it is being denying the right to offer service in Annandale, there is a legal process to rectify the situation. Since 1992, no local government has had the power to offer a cable monopoly and the same is true for telephone or Internet access since the 1996 Telecommunications Act.

The problem is not local governments, it is the extremely high cost of building networks and the difficulty of competing with entrenched incumbents that can lower costs temporarily to deny subscribers to new networks.

Annandale has not committed to any specific course of action; it is gauging what opportunities are available and how a business model might work. And like most towns, they are leaving the door open to working with the incumbent:

Does our current provider still have an opportunity to be rock star in Annandale? They sure do. They just need to upgrade and make the city hall phone stop ringing.

A CBS Atlanta investigation has previously found that Windstream blatantly lies to consumers about their services.

CBS Atlanta News

Given Annandale's size, it is impractical to build a standalone triple-play FTTH network but it may find that an incremental fiber approach could work. Start with municipal facilities and businesses and expand to residents as necessary. Without a strong cable provider, most households probably already have a satellite TV service. This would leave open the possibility of doing an Internet and telephone double-play as Longmont, Colorado is doing. They could also partner with another network that wants to expand.

Regardless, you can expect the same big companies that refuse to invest in Annandale will publicly argue that the town should do nothing. But doing nothing is the best way to ensure nothing changes.

Monticello Fiber Price War Offers Key Lessons for Broadband Competition

Monticello Minnesota may be located 40 miles outside Minneapolis, but it is the center of the planet when it comes to FTTH competition. We have tried and cannot identify another community localed on planet earth with two separate FTTH networks going head to head across the entire community.

We have long written about Monticello, most recently to look at hypocritical criticism of the project (which gives me an opportunity to note a similar dynamic in Lafayette, Louisiana). And we have covered the disappointing news that the network has not produced enough revenue to make full bond payments.

Short explanation for how Monticello came to be unique in having two FTTH networks: Monticello had poor Internet access from Charter and telephone company TDS. Each refused to invest after local businesses and elected officials implored for better networks. Monticello started building its own FTTH network (Monticello FiberNet) and TDS sued to stop the project while suddenly decided to upgrade its slow DSL to fiber. Lawsuit was tossed out and Monticello finished its network.

In most community fiber networks, the DSL provider seems to fade away because it cannot offer the fast speeds of fiber or cable, so the market basically remains a duopoly with the community network replacing the telephone company (which continues to offer cheap, slow DSL to a small number of customers). But in Monticello, Charter and TDS engaged in a price war, which has really hurt the City's ability to generate enough revenue to pay its debt.

Price wars are very hard on new market entrants because they have to amoritze the cost of their investment whereas the incumbents often have already done so. This means incumbents can almost always offer lower prices if they are determined to do so.

In many communities, we have lacked clear evidence of predatory pricing - that is pricing below the actual cost of service to run competitors out of business. This would violate federal law (if any agency bothered to enforce it). Charter gave us that evidence in Monticello.

Since then, the deals have remained amazing in Monticello, far surpassing what cable-funded crazy people in DC pretend is competition between DSL and cable in the majority of the country.

TDS is now offering a deal that far surpasses anything available in the Minneapolis/Saint Paul metro - over 190 channels (including DVR and HD), 50 Mbps Internet (50 down, 20 up I believe), and telephone for $70/month for one year with no contract. The price goes up after year one, but doesn't go back to full price until after year 2 ... at which point you will likely get another deal if there are still more than 2 high speed choices in the market.

TDS Advertisement

TDS is also regularly running full page advertisements regularly in the local newspaper. How many local newspapers would love to see regular big-ad buys like this one? If enough communities build networks, perhaps the resulting advertising bumps will help local newspapers stay in print!

Charter has gone beyond newsprint and static billboards with a big truck advertising Monticello residents a free DVR that will save them $650/year (which is phrased in a way that makes you think they are charging WAYYYY too much for DVRs!).

Charter Advertising Truck

These advertising strategies are in addition to many door-to-door sales people from both TDS and Charter. Both are boosting local employment opportunities for these sales people far beyond what they would do absent Monticello FiberNet.

Existing Charter customers outside of Monticello might be interested in how cable promos in Monticello compare to in their communities where there is no real competition for the cable giant. Here is an 8 page glossy advertisement they have been using [pdf].

Charter is also going after small businesses with a 30 Mbps asymmetrical package for $55/month when bundled with business phone. I can only imagine how many businesses in areas without a real choice would like that deal.

Monticello FiberNet Biz Services

Charter Small Biz Advertisement

However, the Monticello FiberNet business service is far superior, particularly as it is symmetrical and fast upstream makes a huge difference for local businesses. Business services from the city owned FiberNet starts 10 Mbps symmetrical at $41.95 and the list sheet tops out at 100 Mbps for $350/month.

Update: Fibernet Business Services prices have decreased on the faster Internet connections. 30 Mbps symmetrical is $99/month and 100 Mbps symmetrical is $199/month.

We don't have enough information to compare what it would cost a business to connect multiple sites with point to point gigabit links, but we would guess there could be more than $1,000 savings each month from such a service based on FiberNet pricing vs Charter or TDS.

Going through all these deals, a few things have become apparent.

First, DSL and cable are not engaged in real competition. Adding a third player really changes the market in ways that satellite and 4G wireless Internet do not.

Second, most of the competition from the big corporations is aimed at taking subscribers from rivals by temporarily lowering prices rather than attempting to keep their own subscribers happy with their services. Most of the deals are only available to new customers, incentivizing households to regularly switch providers, which is costly to all competitors (churn). Community owned networks by contrast tend not to offer these short term promo deals and invest in keeping existing subscribers happy.

Third, the strategy of TDS and Charter would not be possible if they were not cross-subsidizing from distant, non-competitive markets. They may not be losing money on all the customers that take these deals, but the increased marketing costs and extremely low priced deals are aimed at driving a competitor from the market, not at merely preserving market share. Their ability to cross-subsidize (and the initial frivolous lawsuit) have damaged Monticello's business plan to the point where it has had to transfer public funds from the liquor store and negotiate with bond holders over a significant haircut.

And finally, whatever this network may end up costing city taxpayers, it will likely be less than the savings from all of these lower prices and indirect benefits such as not losing employers that could not be competitive when only having last-generation Internet access from unreliable DSL. That doesn't help the City to make its debt payments, but it sure makes Monticello a better place to live.