community broadband networks

As the Georgia legislature considers HB 282, a bill that will restrict local governments from investing in telecommunications networks, we are continuing coverage of the communities that will be harmed by passage of the legislation.

Should the restrictions become law, existing networks will not be able to expand. No expansion means fewer opportunities to reap the benefits that flow naturally from community networks. While this means few residents will receive access in places like Thomasville and Moultrie, it also means fewer businesses will receive access in places where networks exclusively serve commercial customers and government offices. 

LaGrange's IT Director, Alan Slaughenhaupt, told us a little about its municipal network that began in 1996. The community decided to build its own network when no private provider would. The first goal was to get the K-12 schools connected. Bonds funded the network build out and were paid off within five years. At the time, the city partnered with ISN (Later Earthlink) to get the schools connected. LaGrange now partners with Charter Communications to bring connectivity to students.

The LaGrange network now connects hospitals, most city, county, and state government facilities, and provides connectivity for businesses.  Alan describes how a T1 connection cost local businesses $2,300 per month in 1996. Now, thanks to competition created by the community owned network, local businesses can pay just $100 for a connection with better capacity. The municipal network serves about 400 commercial customers.

Alan explained that the automaker Kia moved a manufacturing facility near LaGrange in 2009 that used Just-In-Time inventory control. It needed a high-speed connection between the main plant and suppliers that LaGrange could deliver.

The move created 2,500 new jobs at the factory, each paying between $14.90 and $23.50 per hour. Along with the positions in the factory, came 3,000 auto-related jobs with suppliers located near the facility. Today, Kia has moved its main manufacturing to a different location and a different network, but its suppliers still use the LaGrange network. The Kia story is only one of many ways the network has contributed to LaGrange's economy since 1996.

Because of the competitive rates, the personal customer service, and quick responses to network problems, businesses continue to seek out LaGrange network services. Alan says there is no advertising and the network continues to grow. It has never been in the red. This network, like many others operated on a local level, is successfully serving the community.

Like other community leaders we talk to about HB 282, Alan fears the long term result if the bill becomes law. The community of LaGrange has not fit into the bill's definition of "unserved" in years, which means expansion would end. Without the ability to grow, Alan feels it would only be a matter of time before the network would eventually end. Economic development, useful connections for the schools, libraries and hospitals, and substantial public savings would also end.

We encourage you to contact Georgia Legislators to voice your opposition. 

We have followed events in Opelika's network project for almost two years. In addition to creating a smart-grid for its municipal electric utility, the City plans to offer triple-play services. We previously covered Charter Cable's astroturf campaign to oppose the network and how the campaign failed when Opelikans passed the referendum.

This week, the 27,000 residents of Opelika saw their efforts begin to materialize at a ground breaking ceremony at the site of the new Opelika Power Services Facility. Chris Anthony, of the Opelika-Auburn News covered the story:

Site work is well under way on the $3.7 million facility, which leaders say will be an integral part of the fiber-optic network being built throughout the city. In addition to housing the administrative office and warehouse, the facility will also be the home of Opelika Power Services’ fiber hub.

Mayor Gary Fuller notes how the people of Opelika entered the business of municipal utilities over one hundred years ago, when the community purchased the then-private electric utility. He spoke about how the people of Opelika carry on that self-reliant streak with their new fiber network.

According to, Beth Ringley, Interim Director of Opelika Power, 90% of the fiber is installed underground throughout the city and should be nearly completed by the end of the summer. The $41 million project is scheduled for completion in the spring of 2013 and the first customers are expected to connect at that time.

“It’s a big, big day for the city of Opelika,” Mayor Gary Fuller said. “It’s important for our future.”

Two videos offer further coverage of this new community network.

Monticello has been all over the muni broadband news lately, in the wake of a letter it sent to bondholders [pdf] alerting them that the City would no longer make up the difference between the revenues produced by the system and the debt payments. This came shortly after the company managing the network decided to step down.

Over the next year, the reserve fund will make up the difference while the City and bondholders come to some sort of an agreement.

The Star Tribune today published a good synopsis of the situation:

City administrator Jeff O'Neill said that the city has no intention of abandoning FiberNet's 1,700 customers, including about 130 businesses.

"This system isn't going anywhere," he said. "We're not going out of business."

Despite the problems, he said the city has one of the fastest Internet systems in the country that has driven down prices and improved services by providing competition.

The article also notes that prior to the City-owned network, the telephone company (TDS) provided very poor DSL service that was harming area businesses with slow and very unreliabile phone and broadband services. Without FiberNet Monticello, we don't know how many businesses would have been forced to relocate to be competitive in the digital economy.

We decided to dig a little deeper to get a sense of what Monticello has received for its investment and difficulty. We previously examined the prices charged by Charter cable in town and found that households taking that deal were saving $1000/year.

We also noted that Charter was almost certainly engaging in predatory pricing. After talking with other networks, we would guess that Charter is losing between $30 and $50 (conservatively) per subscriber per month. Charter is literally losing hundreds of dollars each year for every subscriber that takes the offer in its bid to run the City network out of business. It can do this for years by subsidizing from other markets where they do not face real competition.

Prior to FiberNet Monticello, Charter was the lone local cable provider and served most of the market. In response to competition, cable providers rarely change listed prices but instead individually negotiate lower prices with households or run much longer promotional offers. If we assume that only 20% of Monticello households have benefited by lower prices (either by switching to FiberNet Monticello or by getting a lower rate from Charter), that is 1000 households. Some of those households took the predatory pricing deal, resulting in extraordinary high savings but most probably saved less. Let's assume the average household savings was only $20/month, or $240/year. Spread over the 1000 households, the savings to the community is conservatively $240,000/year. Of course, that doesn't put a value on the iPads or HD TVs that Charter has been giving away as promotional items for new customers.

TDS had a de facto monopoly on telephone until the city began offering services (Charter still does not offer telephone). When presented with another choice, TDS cut its telephone rates almost in half - from around $40 for local service to $25. The City offers telephone service for less though it has more features. If TDS had not cut its price in response to the community network, the community would have paid more than $1 million in extra telephone charges by now (assuming Monticello still subscribes to landline telephone at the same level as the rest of the nation). And again, that puts no value on the additional services or the much larger "local" calling area used by FiberNet Monticello.

Now we come to broadband. TDS offers faster broadband services in Monticello than any other Minnesota community, nearly all of whom are stuck with slow and unreliable DSL. In Monticello, TDS invested in a much better network capable of FTTH in direct response to FiberNet Monticello. Not only did this create new jobs for technicians and salespeople in Monticello, the multiplier effect benefited area businesses as well.

Let's look at what broadband packages TDS offers other communities (packages displayed are those without a phone line to keep it simple). These are packages in Spicer, Minnesota.

Here are the packages in Buffalo, Minnesota.

And here is what Monticello residents get from TDS:

Notice a little difference? Monticello residents pay less and get faster connections. Compared to Spicer, Monticello residents are paying $35/month less for 25Mbps. The packages from TDS in Monticello are even superior to what I can get in Minnesota's capital city, St. Paul. A Comcast connection with 50Mbps download speeds is $99 and comes with far slower upstream speeds (and the download speeds from Comcast are rarely achieved in practice due to the shared neture of a cable network). If we assume that only 20% of Monticello households have benefited from this competition, at an average of $15/month, the cumulative cash savings are at least $180,000 each year. The many benefits from having much faster connections undoubtedly add to that value.

But if I lived in Monticello, I would be definitely taking one of the packages from FiberNet. These are globally competitive speeds and prices:

In the business world, where price comparisons are even harder to make due to the many options and individually negotiated deals for many circuits, FiberNet Monticello may be making the biggest difference.

We could not find evidence that TDS or Charter have come anywhere close to the incredible business pricing from FiberNet Monticello. As soon as FiberNet Monticello bonded, TDS began offering long term, lower cost deals to businesses.

There are more benefits that could be noted, but this post is already pushing length limits. FiberNet Monticello is at a crossroads. Bondholders should work with the City to refinance the network and allow it to make up for the time lost from the frivolous lawsuit filed by TDS -- an action TDS undertook specifically to cause the outcome currently concerning Monticello's elected officials and residents.

It is still early in the lifetime of an investment that will last multiple decades. One promising option is to expand the network. The head end can serve tens of thousands of more customers, spreading the fixed cost across a wider area. We hope FiberNet Monticello finds a new partner to manage the network and expand it, providing greater choices and new competition to communities surrounding Monticello.

When a tornado rips your town apart and destroys your home, should you have to pay extra fees to your cable provider? Of course not. But we continue to see these news stories about massive cable companies ripping off people who are just trying to find the energy to get by day to day.

Last year, we saw reports about Charter Cable telling Alabama tornado victims they had to "find" their cable boxes or pay for them.

According to the friend, Glenda Dillashaw, a Charter representative told her that Spain would need to find his cable box or be charged $212 for its loss.

Fortunately, when Spain followed up with Charter after receiving another bill, the representative told him not to worry about it, suggesting that either Charter has an ambiguous policy to deal with it or Spain found a customer support person who's heart had not yet been crushed by soul-numbing job of being a customer support representative for a massive cable company.

At least one other company has a formal policy in place for these situations:

Bright House Networks, whose service area includes hard-hit Pratt City, also expects its customers to file claims under homeowners' or renters' insurance to pay for lost or destroyed cable boxes. "That's how we normally handle it," spokesman Robert L. Smith said.

Fascinatingly, an article in Michigan claims Comcast does not have a policy in place for these situations. Following recent tornados in Michigan, Comcast customers who lost their homes were given the option of paying a cancellation fee or paying a reduced "vacation" rate for a service they could not use.

Katherine Pfeiffer and Kathy Crawford soon found that residents were being told that they would be responsible for damaged or lost cable boxes and modems.

Initially residents were told their accounts with Comcast would be put on “vacation” status, where a monthly fee of between $15 and $20 would be charged.

Comcast is supposedly "working on a solution" for these people.

The hubris of this massive companies is unreal. People who are waiting to hear if their home is repairable or has to be destroyed should not be confronted by the cable company with exorbitant fees. The subject should, quite literally, be the last thing on their minds. Local businesses understand this, big absentee cable companies do not.

The big cable providers exist because they have market power, which limits competition, leaving people with few options. Comcast does not compete on the basis of good customer service, it competes on the basis of being the only local alternative to satellite video, which is plagued by its own problems.

Disasters are one of the many times when the difference between local companies and absentee companies becomes most visible. Ironically, it is the big cable companies who are best poised to simply write off the damage of natural disasters -- but they refuse to do so, choosing instead to make the lives of storm victims that much worse.

Community networks provide an alternative. They are a cooperative part of the community, not a leech upon it.

Update: I spoke to a local private company I hold in high esteem that saw a number of its customers hit by horrible floods a few years back and they confirmed that they do not charge customers who are devastated by events out of their control. Like us, they have a low opinion of those who would charge. Also interesting: they have insurance to deal with such situations rather than expecting the victims to cover it with homeowner policies. Score another point for local ownership.