The interview is embedded below and runs approximately one hour and is sandwiched between a one hour interview with Chattanooga about smart grid economics and an hour interview with Todd Marriot about UTOPIA -- so if you want to hear the portion on Kutztown, skip 60 minutes into the show.
In the interview, Craig and Frank discuss how the municipal network, Home Net, started out of necessity. The community wanted to link their utilities with a telecommunications network and government facilities needed a cohesive option. FTTH became part of the equation later, but was not the main impetus. Kutztown issued RFPs for a new network, but the response was silence. The community investigated the next option - building it themselves.
After several conflicting feasibility studies, the Burough decided to go ahead and build the network with the hope that "if we build it, they (ISPs) will come." Kutztown issued taxable bonds and built their own fiber network. The goal was to provide the infrastructure for government purposes and in the future create real choice for consumers. Again, no ISPs answered the call.
According to Caruso, large providers were not able to accept a business model which created a "middle man" between them and their customers. The only interest from the private market was from a small local telecommunications company that eventually leased a line from the city to expand their footprint for telephone service.
Caruso goes on to describe how, even though no companies were interested in an RFP bid, curiosity grew as the launch date approached. The Public Utilities Commission and the FCC met with Kutztown leaders to inquire but expressed no objections. Large telcos came to meetings and even spoke up about the design of the network, but none signed on to offer services over this incredible asset.
At the State Capitol, legislative changes changed the future for Pennsylvania communities who might follow Kutztown's lead. Interestingly, the Governor actually gave Kutztown an award (news article at right) just under a year before signing a bill to ensure no other community could duplicate their success. Pennsylvania was one of the first states to begin passage of crippling legislation (at the behest of Verizon) that has moved across the country. While Kutztown was grandfathered in and can continue to provide services, laws prevent any expansion. Caruso even fears new legislation may one day bring an end to Home Net.
As long as they are able to operate, says Caruso, they will continue to offer high quality service and find new ways to offer more options and better technology. Home Net provides fiber-ro-the-home at a take rate of 51%. Caruso credits much of the network success to the fact that customers receive service on a local level. They know the people who run the network and make the decisions. We previously ran a photo of one marketing campaign.
Settles and Caruso also discuss lessons learned. One of Caruso's key recommendations is separating government from business. He sees numerous possibilities in the nonprofit or coop model, especially now that state law prevents more municipal investment. In Kutztown, the network is administered by a Telecommunications Advisory Commission made up of residents. The entity is legally able to operate in a more competitive manner but is still answerable to community voices.
Operating under the purview of open meeting laws and the public sector's high level of transparency create competitive disadvantages for Home Net. Caruso comments on how business plans, prices, products, and other information closely guarded by the private sector must be disclosed early in the process by Hometown Utilitcom. Marketing efforts can be thwarted and promotions are often one-upped by the private sector before they even take effect.
Nevertheless, competition has been good for the community. The presence of another network has lowered rates for every consumer in Kutztown. Caruso calls it a win-win. He notes that over the course of 10 years, more than $8 million has stayed local because rates have reflected the competitive environment. The savings per household is about $375.
Caruso sees economic devlopment from the network as immeasureable. He sees better roads, fewer empty houses, more businesses operating on main street. He believes there are more home businesses, more online commerce for local businesses, and more data driven possibilities for extant large companies than there were before the network. Caruso returns again and again to what he considers a priceless benefit - an improved quality of life in Kutztown.
We encourage you to listen to the rest of the interview for a great discussion on the policy and practicalities of Home Net, municipal networks in Pennsylvania, and predictions for the future.
When I visited Hometown Utilicom in Kutztown, Pennsylvania, I snapped this photo of a sign they have posted in their office to remind people how supporting the local network helps the local economy. Not a very good photo, I'm afraid, but it conveys the message.
Kutztown, a small community in Pennsylvania, built a fiber-to-the-home network in 2002. The small town network was taken very seriously by major networks, like Verizon, that pushed to create laws in Pennsylvania that would make it difficult for other communities to build the networks they needed.
This snapshot from Broadband Properties offers some history and technical specifications of the network.
The telecom and cable kings of the broadband industry have failed to bridge the digital divide and opted to serve the most lucrative markets at the expense of universal, affordable access. As a result, local governments and community groups across the country have started building their own broadband networks, sometimes in a purely public service and more often through public-private partnerships. The incumbents have responded with an aggressive lobbying and misinformation campaign. Advocates of cable and DSL providers have been activated in several state capitols to push new laws prohibiting or severely restricting municipalities from serving their communities. Earlier this year, Verizon circulated a “fact sheet” to lawmakers, journalists and opinion leaders proclaiming the so-called “failures” of public broadband. Many of the statistics come from a widely discredited study of municipal cable TV networks published in 1998. This paper debunks these lies case by case, juxtaposing information direct from the city networks with quotations from the telco propaganda. The results are unequivocal and damning.
In studying the role of municipalities in broadband infrastructure deployment, it is important to remember that municipalities act with a public motive and not a profit motive. Municipalities invest in schools, roads, hospitals, senior centers, marinas, airports, and convention centers, all assets that positively differentiate one community from another. In those areas, direct investment by municipalities is accepted and indeed often encouraged, even though private firms can (and do) build private schools, hospitals, health clubs, marinas, and conference centers that coexist with municipal infrastructure.