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Whitewater Weighs Options for Municipal Broadband

Whitewater, Wisconsin, a city of just under 15,000 people that sits midway between Madison and Milwaukee, is considering its options for establishing a municipal broadband utility. As reported by the local Daily Union newspaper, members of the city council, the community development authority, other local bodies, and the public met this week to hear a feasibility presentation and discussion with Anita Gallucci, a Wisconsin attorney specializing in broadband utilities.

Whitewater already has some public fiber optic infrastructure, having gone live with their gigabit-capable Whitewater Unified School District network last fall. The network joins up with a larger fiber backbone on the nearby University of Wisconsin Whitewater campus, and has allowed Whitewater schools to increase their connection speeds by 1,200 percent while holding costs steady. The city is now looking at options for how to expand the opportunity brought by such high speed access to the broader community.

Tuesday’s meeting focused on two topics: the legal landscape for municipal broadband utilities in Wisconsin, and the varying levels of success that other Wisconsin cities have had with their own networks. On the legal front, Gallucci affirmed that “municipalities can get into the broadband business if they choose to do so,” but then went on to outline the hurdles created by Wisconsin law that make the process more challenging. From the Daily Union article:

Gallucci said that first, the city must prepare a formal report or feasibility study. The report must cover a three-year outlook which addresses revenues derived from constructing, owning, or operating the utility including such things as equipment, maintenance, and personnel requirements.

Given the upfront costs associated with building out a fiber optic network, a report focusing on a three-year outlook is unlikely to cast a favorable light on the project. Like any other significant investment in public infrastructure, municipal networks may take more than three years to break even. If we used that benchmark for roads, we wouldn't have many.

Wisconsin cities must also go through a public hearing and vetting process before voting on final authorization of a municipal utility. There is a shorter route on the books in Wisconsin, but one that effectively gives incumbents a veto:

Gallucci said that cities do not have to follow these steps in very specific circumstances, such as serving an area of the city that does not otherwise have service access; but cities must notify private companies (for example, AT&T, Verizon, or Charter Communications) of that project. However, if those companies say they currently, or plan to in the future, serve those areas, then the steps need to be followed.

It doesn’t take much imagination to guess what would happen if a city like Whitewater were to approach AT&T or Verizon and ask if they have any “plans to expand in the future” that might preempt the building out of a public network.

Wisconsin law is more obliging towards open access networks, according to Gallucci:

She said the steps could be avoided if the city acts as “a wholesaler of broadband services.” By this, she said, the intention would be to build the infrastructure and private companies would use those fibers to provide service.

“That would require the city itself to not provide any service to the end-user,” she explained.

While the legal environment in Wisconsin is generally unfavorable towards municipal broadband utilities, the meeting also highlighted some recent success stories. Reedsburg, which we wrote about here, was touted as the only Wisconsin city offering a “triple play” bundle through its broadband utility. Also mentioned was Sun Prairie, as fellow city seriously considering a FTTH network.

The next step will be for the Whitewater Community Development Agency to bring the issue before the City Council, which the city manager expected to happen “in the very near future.”  

Montrose Moves Toward Muni Network -Community Broadband Bits Podcast #95

Nestled in a valley in the Colorado rockies, the city of Montrose has voted overwhelmingly to reestablish local authority over whether to build a municipal fiber network. With nearly 20,000 people, Montrose does have cable service from Charter and DSL from CenturyLink but neither service is meeting local needs.

Virgil Turner, Director of Innovation and Citizen Engagement for the City, joins us in episode 95 of the Community Broadband Bits podcast. We discuss the need for a better network and how the big cable and telephone companies have failed to meet local needs.

Montrose has all options on the table as it now plans to engage the public and determine how to move forward with possible investments to improve their access to the Internet.

View our other posts on Montrose here.

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 20 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."

Ellensburg Pursues Its Fiber Project in Washington

Ellensburg is quickly moving forward as it make plans to build a publicly owned fiber optic network. The City Council approved a contract with Canon Construction  on December 16th, reports the Daily Record.

From the article:

Canon Construction of Milton won the contract to lay 13 miles of above- and underground fiber optic cables for the city with a $961,000 bid.

Multiple public organizations, including Central Washington University and Kittitas Valley Fire and Rescue, contract with the city for cable Internet services through the city.

We recently reported on the City Council decision to establish a telecommunications utility serving municipal needs. At the December 16th meeting, they also approved an ordinance needed to move ahead with the utility.

The community network will replace the Institutional Network supplied by Charter Communications. Charter and the City have been negotiating a new franchise agreement with little success. Charter wants to charge $10,000 per month to provide the service that it previously offered at no charge beyond the incredibly valuable access to the public's right-of-way. The City determined building a network was more economical and we suspect the City will also achieve greater reliability and have access to better technology than Charter would have installed.

LightTUBe Financially Secure in Tennessee

Tullahoma Utilities Board's triple-play FTTH LightTUBe, began serving Tullahoma in 2009. The fiber network utility is paying off its city bond debt on schedule reports the Tullahoma News.

The network's income during the first four months of fiscal year 2014 is a positive $58,939. General Manager Brian Skelton spoke with Chris Mitchell in July 2013 and expressed confidence that that network will continue to operate in the black. The News reported on our podcast interview with Skelton and provided some recent updates:

With an estimated potential customer base of 9,000 in the TUB service area, LightTUBe services 3,201 fiber customers. That number is slightly ahead of goal (3,186) and represents nearly 36 percent market penetration against primary competitor Charter Communications.

Tullahoma deployed its network to encourage economic development. In 2011, we reported on J2 Software Solutions. The company located its headquarters in Tullahoma because LightTUBe offered fast, reliable, affordable service. 

According to the News article, expenditures on Internet service remain consistent while subscriptions grow. The Tullahoma Utilities Board (TUB) only recently approved a $7 rate increase for video service due to an increase in the cost of television content. When content rates rose in the past, TUB chose to absorb the increase but the cost of content continues to increase for all providers. Since 2009, TUB increased Internet service speeds five times without increasing prices. From the article:

”LightTUBe is in a very comfortable position from a financial perspective. Our biggest concern at this point is the unreasonable price increases that we (and others in the video business) are seeing from many of our channel providers,” said Skelton.

That comfortable financial position appears to rest largely on the shoulders of LightTUBe’s Internet service.

While video and telephone services together generate enough income to offset the system’s net maintenance and depreciation costs, Internet services generate enough income to offset its additional customer service, sales, administration and debt costs.

Unlike the private providers it competes against, Tullahoma is limited in where it can offer service. State law prevents it from serving customers outside its electrical territory - something AT&T and Comcast lobbyists have preserved year after year by killing bills that would remove this damaging law. Across Tennessee, local businesses, residents, and anchor institutions are stuck with slower, less reliable connections despite desiring expansion from the nearby utility but they are denied.

Because Tennessee law prohibits municipal utilities from providing their fiber services outside of their electric service territory, LightTUBe cannot offer its 1G Internet to – for example – the Coffee County Joint Industrial Park, which is serviced by Duck River Electrical Membership Cooperative (DREMC). The joint park, located five miles northeast of Tullahoma and outside of TUB’s service area, has cable-based Internet service.

Charter Prices Inspire Washington City to Consider its Own Network

Ellensburg, located in central Washington, is considering the pros and cons of a municipal fiber network. A big pro for the community of 18,000 is the ability to predict costs rather than depend on Charter Communications. Charter wants to begin charging $10,300 per month for municipal connectivity it previously supplied at no cost in return for access to the public rights-of-way.

The Ellensburg Daily Record recently reported that the City Council unanimously passed the first reading of an ordinance that will allow the city to establish a telecommunications utility. The city began using Charter's fiber optic network in 1997 as part of the city's franchise agreement. Educational institutions, public safety, and the county public utilities district also use the network. Ellensburg owns and operates its own electric and natural gas utilities. Energy Services Director Larry Dunbar was quoted:

“It’s clearly in the city’s best interest to just build it on its own and own it, compared to leasing it,” he said.

The community needs approximately 15 miles of fiber optic network to replace Charter's institutional network. The two parties are still negotiating and may still reach an agreement for a new contract although the article reports:

In June, Council directed the city to solicit vendor proposals for building a city network, and Dunbar said the city is close to granting the contract.

He declined to share a total cost because contract negotiations are ongoing, but said it makes more sense for the city to build the network now rather than pay in perpetuity, he said.

“A telecommunications network is like a 35-year endeavor,” he said. “If we would have done a lease, we could have bought two or three networks over 35 years.”

Local median KIMA TV recently covered the story:

We would go further and note the many more advantages of owning rather than leasing. When the city owns the fiber network, it can expand it to connect local businesses and/or residents who feel that Charter is not meeting their needs. The network can be expanded at low cost over time in conjunction with other projects, for instance as part of an effort to create a new commercial or industrial park. Owning provides much more flexibility than leasing, particularly with a massive and inflexible corporation like Charter.

Dublin, Georgia: Offering Connectivity to Businesses, Schools, Government Since 1999

Dublin, home to 16,000 people, is also home to a network that snakes through the city and parts of Laurens County. In addition to a natural gas utility that serves the region, the city provides connectivity to two area school districts and local businesses. We contacted Guy Mullis, IT Director for the City of Dublin.

The fiber optic network was installed in 1999 to provide connectivity for the two separate school systems in the community, Laurens County Schools and Dublin City Schools. The school districts needed better connectivity because dial-up was the only option at the time. The school districts could not afford the cost of installing their own fiber networks.

The City used its own funds to construct a network that is 85% aerial. Mullis was not an employee of the City at the time, but he estimates the network cost approximately $1.5 - $2 million. He also believes the funds were a combination of capital improvement funds and economic development funds. From the start, the plan has been to serve the schools but also to provide connectivity to spur economic development.

Eight city school facilities and six county school facilities use the network today for connections between buildings. Dublin City Schools have 10 Gbps speeds between facilities; Laurens County Schools have equipment in place for 1 Gbps connections between schools. Both school districts use the Georgia Technology Authority for Internet access.

Once the network was in place, AT&T and Charter Communications began building in Dublin. Mullis says he does not believe AT&T and Charter would have invested in Dublin in 2000 if not for the presence of the community network. He notes that AT&T begin installing DSL in areas of town within a year of the fiber network deployment. 

During the first few years, the City connected its network to the Internet with a 45 Mbps AT&T connection but needs quickly outgrew capacity. The City looked for alternate ways to connect to the Internet. City staff discovered that a major dark fiber backbone ran through Dublin from Atlanta to Jacksonville, Florida. The company that owned the line (the company has since been purchsed by Level 3) allowed Dublin to splice into the dark fiber to connect to Atlanta. The opportunity allowed Dublin to buy bandwidth at Atlanta prices rather than being stuck with massive markups by the few firms that can provide access. The City has since spliced another line to the backbone to achieve redundancy.

In 2006, the City received a grant through the Georgia Telecommunications Authority to expand wi-fi in the community. With matching funds, the community installed over forty wireless access points and now provide wi-fi hotspots within the City. The presence of the fiber network for backhaul helped secure the grant.

Dublin Wi-Fi Logo

Twelve Laurens County and Dublin City facilities connect to the network. The City also uses the network for voice between city facilities, saving significantly by avoiding dedicated phone lines to each building. When new companies consider moving to the community, the ability to work beyond agency silos is a positive factor, says Mullis. Businesses recognize that cooperative government helps them achieve their goals.

There are forty-five business customers including YKK fastening and architectural products and  Farmer's Home Furniture. The network serves a variety of businesses, including banks, CPA firms, law firms, and hospitals. Prior to the deployment, incumbents could not offer the high-speed connections businesses needed. Since the deployment, cable and DSL have come to Dublin, but the City's commercial customers stick with their City service. Mullis believes local businesses appreciate working with a local provider. When a customer calls with an issue, they know exactly who will address the problem. "They are going to talk to me," says Mullis.

The City currently supplies 200 Mbps for Internet traffic; business and government customers share the bandwidth. Businesses with multiple offices in the area like being able to use the network for local traffic rather than sending sensitive data across the open Internet.

We have reported on many Georgia communities in the past (e.g. MonroeLaGrange, and Thomasville). Unlike the states that surround it, the Peach State does not presently impose barriers on local communities that consider publicly owned networks.  In 2013, ALEC affiliated legislators sponsored sponsored HB 282 but failed to revoke local authority. We anticipate the fight will continue into 2014 and beyond.

AT&T and Charter did not get the job done in Dublin so the community took care of themselves. If large incumbents do not find value in a community like Dublin, it is of course their choice to limit investment. But they should not be able to prevent a community from investing in itself.

Rates Approved for Opelika Community Fiber Network

We have followed happenings in Opelika, Alabama, for three years as the community investigated the benefits of a fiber network. They contended with a Charter misinformation campaign and voted yes on a referendum. Construction began in 2012, Opelika Power Services (OPS) tested the network, and recently the Opelika City Council approved proposed rates. 

OANow.com now reports that the FTTH network and smart grid project is ever-so-close to offering triple play services to the city's 28,000 residents and local businesses. 

OPS offers three standard bundled plans, but customers can also customize. All three include voice:

  • Essential - $99.95 - 75 channels, 10/5 Mbps data
  • Choice - $139.95 - 132 HD & SD channels, 30/30 Mbps data
  • Ultra - $154.95 - 207 HD & SD channels, 30/30 Mbps data

Data offerings for customized plans range from 10/5 Mbps for $34.95 to 1 Gbps symmetrical for $499.95.

Voters approved the plan for the $41 million network in 2010. The project included a $3.7 million network hub that houses all OPS offices. The smart grid will help approximately 12,000 OPS electric customers save with efficient electric usage.June Owens, manager of marketing at OPS said it well in an August OANow.com article:

“Fiber is going to put Opelika on the map like never before,” Owens said. “Opelika should be very proud. Nobody in the state is doing a project like this. And there is not much outside the state of Alabama like this. This is 100 percent fiber to the home. Fiber to the house doesn’t require the electronics in the field – this eliminates problems in the field that you might have with other types of systems. It is truly state-of-the-art equipment at its best.”

While this project is certainly a landmark in Alabama, it is curious to see a community owned fiber network offering assymetrical services on the standard tier - with 10 Mbps download and 5 Mbps uploads. Though many community owned networks offer assymetrical packages, the vast majority were built more than 5 years ago. Most modern fiber networks have launched with the same upstream capacity as downstream.

Additionally, we have been accustomed to seeing community fiber networks launching with a faster standard tier in order to clearly differentiate themselves from competitors using older technologies like cable and DSL. Cable, and DSL to a lesser extent, can compete with 10/5 packages.

But we don't know the situation on the ground - it is not hard to believe that Charter's services are so bad that a reliable and affordable 10/5 will be warmly received by many households. We are curious to see how the marketing war plays out in Opelika and wish them the best as they roll out the network.

For more about Opelika's project, listen to Christopher interview Mayor Gary Fuller and Jennifer McCain from the Motive Group in Episode #40 of the Broadband Bits podcast. In addition to the story of the network, the two discuss the political challenges that inevitably accompany any large publicly funded project.

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.

Central Coast Californians Choose Cost Savings Over Charter

California's Watsonville, population 51,200, joins the ranks of municipalities considering the benefits of a publicly owned fiber optic network to connect key facilities. At a September 10 the City Council passed a resolution approving plans and calling for an RFP for a next generation fiber network. Bids will be accepted until October 8, 2013.

According to a Register Pajaronian article, the City Council expects the network to cost $480,000. An August 27 memorandum [PDF] provides more detail on the project.

Charter Communications currently provides fiber optic I-Net service to Watsonville local government. The network provides data connections, Internet, gate controls, and security systems throughout the City. The fiber I-Net also provides backhaul for wireless systems for the police department and various remote city locations.

As has happened many in states that have revoked local franchise authority, Watsonville's favorable long term cable franchise agreement with Charter is ending. Charter will no longer provide the I-Net services for no cost as part of its agreement to place its equipment in the public rights-of-way. Instead, it has proposed expensive lease options.

Charter has offered two quotes: $43,115 per year for a reduced level of service and $149,153 per year for the same level of service the city now receives. The memorandum goes on to note that a reduced level of service would require reduction of some uses for the current network, such as eliminating a number of security cameras.

City staff estimates that installation of a next generation network would cost approximately $480,000. They would connect the high school, the City Information Technology office, the Veterans Building, the local reservoir, the library, the airport and the fire station. Watsonville has a significant amount of fiber already in place for use in the citywide transportation system which will reduce the cost of installation. The project will be financed primarily with library and water enterprise funds and other city departments that connect will contribute to the project costs.

When compared to Charter's quote for services comparable to Watsonville's current level of service, the network will pay for itself in a little over three years. Even compared to the reduced services rate from Charter, the network will pay for itself in 11 years (likely even sooner as Charter would certainly raise the rate over the period). The memo also states that other entities have expressed an interest in leasing excess capacity from Watsonville when the network is up and running. The excess revenue would shorten the payback period still more.

Finally, just by owning its own infrastructure, the community will have security in knowing that moving bits will be cheaper over time due to technological innovation and they can budget more securely as they will plan the upgrade cycle rather than having to negotiate with other providers.

Opelika, Alabama On the Verge of Municipal FTTH

We last checked in with Opelika, Alabama, as they began testing their FTTH network in a pilot project. The community previously overcame Charter Cable's campaign of lies and passed a referendum. Voters approved the plan for a $41 million fiber optic communications and smart grid network. The community has been constructing the network, expanding testing, and building a network hub facility.

OANow.com reporter Tamiko Lowery reports "lightning in a bottle" will soon be serving the public. Customer service operations at City Hall will end on August 2nd when all Opelika Power Services (OPS) offices move to the new facility. June Owens, manager of marketing and communications spoke with Lowery about the anticipated launch:

“Fiber is going to put Opelika on the map like never before,” Owens said. “Opelika should be very proud. Nobody in the state is doing a project like this. And there is not much outside the state of Alabama like this. This is 100 percent fiber to the home. Fiber to the house doesn’t require the electronics in the field – this eliminates problems in the field that you might have with other types of systems. It is truly state-of-the-art equipment at its best.”

...

Still in “Testing Mode,” there is not a pin-pointed launch date for the fiber-optic network services.

“But we’re getting close,” Owens said.

She says that once operational, OPS will be able to offer lower rates than surrounding areas to the approximately 12,000 electric customers in Opelika. Once up and running full-speed, OPS will be competing with Charter, Dish and Direct-TV for Opelika customers. In the future, OPS will offer back-up data services to Opelika businesses.

Mayor Gary Fuller spoke with Christopher for Episode #40 of the Broadband Bits podcast. They discussed the community's decision to take connectvity in their own hands after years of dissatisfaction with Charter Cable.

Clearly, the community is excited to get the new triple-play network up and running. The local television, KTVM, also covered the story.