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Responding to "Crazy Talk" Volume 4 - Community Broadband Bits Episode #72

We are back with the fourth volume of our responding to "Crazy Talk" theme on the Community Broadband Bits podcast. The source of this week's crazy talk is a public relations executive for Time Warner Cable, following an interview I did on WUNC in North Carolina.

Lisa Gonzalez, myself, and our colleague John Farrell react to some of the claims made to discuss what you should know about community owned networks and broadband policy more generally.

We talk about misleading statistics, lies about how local governments fund networks, and whether Time Warner Cable or local utilities pay more in taxes.

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 23 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 Mudhoney for the music, licensed using Creative Commons.

Comcast Sets Sights on Seattle Mayor; Payback for Encouraging Competition

In a reminder of the power embodied in massive corporations like Comcast, Seattle Mayor Mike McGinn is facing a challenger buoyed with sizeable contributions from the nation's largest cable and Internet company.

Why is Comcast so interested in defeating Seattle's mayor? Payback and a warning to others. Lest any other big city mayors think it would be wise to help create competition to Comcast's effective monopoly, know that Comcast will finance your opposition.

We have covered Seattle's various attempts at improving Internet access though we have admittedly not written much on its public-private partnership with Gigabit Squared. Gigabit Squared is a new firm that is starting to work with cities that have fiber assets to deliver services to residents and businesses.

The plan in Seattle is to create a large pilot project in at least 12 neighborhoods offering Internet service at speeds far faster than Comcast but at a lower price. Gigabit Squared is using city owned fiber to build its backbone network and working with the City to expand that network.

However, little has happened in the past 10 months since it was announced except some signs that Gigabit Squared was still trying to raise the necessary capital. We understand that some will start to get services early in 2014.

In the meantime, Comcast has donated heavily to Mayor McGinn's rival Ed Murray at a time when many expected the Mayor to already have a challenging race. From the Washington Post story:

Comcast's donations to political action committees (PACs) suggest Comcast has poured dramatically more resources into defeating McGinn. The Broadband Communications Association of Washington PAC, which received 94 percent of its 2013 contributions from Comcast, donated $5,000 to the group People for Ed Murray less than a month after Gigabit Squared's pricing announcement. That was the PAC's largest single donation. Unsurprisingly, People for Ed Murray has made significant expenditures supporting Murray's candidacy. The Web site of the Broadband Communications Association of Washington also lists [Comcast Executive] Janet Turpen as president-elect.

Comcast also donated $5,000 to the PAC called the "Civic Alliance for a Sound Economy," or CASE, whose largest expenditures were donations to People for Ed Murray, to the tune of $52,500 -- over half of the money spent by the group according to the most recent disclosures online. Their second largest expenditures was $10,000 to People for a New Seattle Mayor, a group opposing McGinn's reelection.

Neener neener neener

This is nothing new for Comcast and if anything, suggests a more modest approach than we have seen elsewhere. We have long covered the fight in Longmont where Comcast first broke records by spending $240,000 to defeat a referendum restoring local authority to build a network. Comcast then doubled down two years later for the same question, spending over $400,000 in the final tally and getting crushed in the process. That led to this great ad in the local paper. Now Longmont is building one of the most impressive fiber networks in the nation.

Seattle mayoral challenger Ed Murray's spokesperson has said he will continue to honor any agreement with Gigabit Squared though he has not made broadband policy an issue in the race and has no discussion about this important policy matter on his web site.

This issue goes well beyond Seattle, as Andrea Peterson rightly examines in her concluding words:

A loss for McGinn on Tuesday probably won't mean the end of Gigabit Squared's work in the Seattle metro area, though it could curtail Gigabit Squared's plans to expand to other parts of Seattle. More importantly, though, if Comcast's donations help Murray defeat McGinn, it will send a powerful message to mayors in other American cities considering initiatives to increase broadband competition.

For decades we have experimented by allowing a few firms to amass greater and greater market power without antimonopoly laws (often called antitrust) to protect the public interest. That experiment has failed. It is past time to recognize the danger than massive corporations pose to both our economy and republic.

Addendum: One thing is certain - those who want to claim that cities should embrace "public private partnerships" because they are less risky or somehow less controversial should pay close attention to this situation. Communities should do what is right for them, not what they think will be acceptable to a powerful giant like Comcast. Either way, Comcast will fight to preserve its monopoly.

Denver Suburb Seeks to Take Back Local Authority

Centennial is asking its voters to reclaim local authority this election. City leaders want to make better use of an existing fiber optic system but a 2005 Colorado state law pushed by a corporate telephone company precludes it. If the citizenry reclaims its local authority through referendum, the City can take the next step toward providing indirect services via its fiber network. 

We contacted City Council Member Ken Lucas to find out more about the ballot question. Centennial is a relatively young city that was incorporated in 2001 and has about 100,000 residents. Lucas told us that this ballot question is not only about using their fiber resources. The community of Centennial considers this a critical step toward maintaining a business friendly environment.

The National Transportation Safety Board (NTSB) provided grants to install the existing network for traffic control, security cameras, and public works monitoring. The City contributed only approximately $100,000 to the network, valued at $5 million. Traffic and public safety now use only two strands of the network that runs through the center of town. City leaders want to use the remaining 94 strands to improve access in the community. To see a map of the fiber and open conduit in Centennial, check out the City's PDF.

Approximately 94% of Centennial businesses and 85% of households are within one mile of the fiber backbone. Residents and business owners can now choose between Comcast or CenturyLink and rates are high. Lucas tells of one business owner who asked Comcast to provide 1 Gbps service to his building. Comcast offered to lease a line to the business at a high rate, but the customer would still have to pay $20,000 for installation.

Community leaders want to encourage more competition and, if they eventually develop the fiber, will explore open access models. Centennial knows their authority to invest in fiber infrastructure will influence economic development. City leaders want to attract high tech jobs to the Denver suburb.

The incumbents have not yet launched an expensive astroturf campaign or lobbied heavily against the ballot question as we saw previously in Longmont. This is the ballot question language:

SHALL THE CITY OF CENTENNIAL, WITHOUT INCREASING TAXES, AND TO RESTORE LOCAL AUTHORITY THAT WAS DENIED TO ALL LOCAL GOVERNMENTS BY THE STATE LEGISLATURE, AND TO FOSTER A MORE COMPETITIVE MARKETPLACE, BE AUTHORIZED TO INDIRECTLY PROVIDE HIGH-SPEED INTERNET (ADVANCED SERVICES), TELECOMMUNICATIONS SERVICES, AND/OR CABLE TELEVISION SERVICES TO RESIDENTS, BUSINESSES, SCHOOLS, LIBRARIES, NON-PROFIT ENTITIES AND OTHER USERS OF SUCH SERVICES, THROUGH COMPETITIVE AND NON-EXCLUSIVE PARTNERSHIPS WITH PRIVATE BUSINESSES, AS EXPRESSLY PERMITTED BY ARTICLE 29, TITLE 27 OF THE COLORADO REVISED STATUTES? 

Centennial does not want to compete with Comcast or CenturyLink - it wants to encourage other providers to compete with each other. Many communites express the same desire to improve telecommunications for their citizens without delivering the services themselves. However, many have found that they have to take an active role in order to ensure a real choice between slow DSL and modestly faster cable, each owned and operated by distant corporations.

Lucas told us that plans to use the fiber are far down the road. For now, the community wants to recapture the power the state preempted in 2005.

WUNC Radio Show Explores Muni Network Restrictions in North Carolina

WUNC, a public radio station out of Chapel Hill in North Carolina, covered community owned networks and broadband availability on its recent "State of Things" midday program. I was a guest along with a local resident and a public relations executive from Time Warner Cable to discuss North Carolina's broadband compared to other states and its law that effectively bans local governments from building networks.

The discussion is good, though I certaily could have done a better job. Ultimately I thought the host did a good job of bringing in each guest to make their points, though Time Warner Cable was totally unprepared to talk about how North Carolina can expand access. Instead, they talked about the cable giant's requirements to invest in networks in rural areas.

We are going to follow up on these points but for now wanted to make sure you have a chance to listen to the show. Our coverage of the bill discussed in the radio show is available here.

New Comic: Longmont Fiber Crushes Comcast's Cable Outhouse

Longmont Power and Communications, a city-owned utility north of Denver in Colorado, is slowly rolling out a FTTH network to local businesses and residents that are in close proximity to its existing fiber loop. They are offering a symmetrical gigabit of Internet access for just $50/month.

Longmont Fiber Comic Strip

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The local newspaper notes that some local businesses have already signed on, including a clinic:

Jurey said the city's network is three times faster than the speeds the clinic got before at a cost savings of $1,600 a month.

On November 5, citizens will decide a referendum on whether to expedite the building by issuing revenue bonds without increasing local taxes. A brochure explaining pro and con is available here [pdf]. Approving the bonds means building the network to everyone in a few years while not approving it will mean building the network over several decades.

We recently did a podcast with Longmont Power and Communications Broadband Services Manager Vince Jordan and a local citizen campaigning for the referendum. Listen to that show here.

Read the rest of our coverage about Longmont here.

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.

Rise of Comcast Linked to Slower US Internet Speeds

This is an older column, but the introduction is so dead-on, I wanted to draw more attention to it:

If Dwight Eisenhower had General Motors and George W. Bush had Halliburton, Barack Obama arguably has Comcast. US presidents are often linked to one or two corporations that donate a lot of money to them and then benefit from their actions. Comcast, which is America’s largest cable television and internet provider and is a near monopoly in most of its largest cities, is no exception.

The company’s meteoric rise in the past decade parallels the relative decline of internet service in the US.

It comes from an Edward Luce column in the Financial Times from February. He goes on to note the strong ties between the FCC and Comcast and between Comcast and President Obama. Remember that President Obama has golfed with Comcast CEO Brian Roberts and the CEO is on the President's Council on Jobs and Competitiveness.

Susan Crawford's Captive Audience offers a good examination of Comcast, the threat it (and other massive cable corporations) poses to our communities, and just how savvy it is in lobbying.

Don't be shocked as this Adminstration continues to push wireless and other telecommunications "solutions" that don't threaten Comcast's market domination of cable. Between a dysfunctional Congress and an inevitably interest-group-compromised Executive Branch, communities are on their own.

Crap Cable Threatens Cloud Services

For my money, the best headline of last week was "The U.S.'s crap infrastructure threatens the cloud." The rant goes on to explain just how crummy our access to the Internet is.

As a patriotic American, I find the current political atmosphere where telecom lobbyists set the agenda to be a nightmare. All over the world, high-end fiber is being deployed while powerful monopolies in the United States work to prevent it from coming here. Some of those monopolies are even drafting "model legislation" to protect themselves from both community broadband and commercial competition.

He nails a number of important points, including the absurdity of allowing de facto monopolies to write the legislation that governs them. However, Andew Oliver's article is a bit muddled on the issue of "monopoly." I have argued with several people that the term "monopoly" has historically meant firms with large market power, not the more stringent definition of "the only seller" of a good. It is not clear how Oliver is using the term.

Because of this confusion, you can come away from his piece with the firm idea that it is primarily government's fault we have a duopoly of crap DSL and less crappy cable. He repeatedly says "state-sponsored monopolies." However, no local or state government may offer exclusive franchises for cable or telecom services and the federal government hasn't officially backed monopolies for decades.

This is a key point that many still fail to understand - a majority seem to believe that local governments bless monopolies when local governments actually are desperate for more choices. This is why they fall all over themselves to beg Google to invest in their community or they build they own networks (over 400 communities have wired telecom networks that offer services to some local businesses and/or residents).

Poor laws and regulations have helped the massive cable and telephone companies to maintain their status - that is why they spend so much on lobbying and political contributions at all levels of government. They want to and have successfully corrupted the process, neutralizing the power of government to protect consumer interests and prevent a few firms from dominating the market.

wall-street.jpg

What is missing from the conversation is Wall Street's role. Wall Street abhors competition, particularly for something as essential as Internet access because rigorous competition drives down profit margins. Wall Street puts a massive premium on consolidation and preventing competition. It wants a few firms to control this market so they can regularly increase fees and increase shareholder value (at the expense of the rest of our economy).

It isn't JUST federal and state government policy that is rewarding the duopoly, there are a host of reinforcing factors. And while government did indeed establish monopoly for the phone system 100 years ago, it resulted in a fantastic universal service network - so those who might argue a government sanctioned monopoly was never a good idea have a high burden to prove it.

As to how we have moved from a monopoly service model to having choices... well, lobbyists have been paid a lot specifically to mangle that process to benefit a few corporations. Our government has been corrupted and we have to live with the effects every day. But even without government, we would almost certainly we stuck with a monopoly, perhaps even worse as we would lack the few consumer protections we still have.

I was heartened to see the Obama Administration block the AT&T - T-Mobile merger as it suggests that there is a spark of hope for antitrust rules to prevent further consolidation. Stopping consolidation is the first step to having real choices because massive corporations amass not just economy of scale advantages over rivals, but find it much easier to influence the rules in their favor and to disadvantage competitors.

Returning to a fact from Oliver's article, he pays $1500/month for 30 Mbps symmetrical fiber. If he lived in Monticello, he would pay $100/month for that business connection. Community owned fiber is not merely about the technology, it includes numerous other benefits including radically lower prices that help local businesses to succeed.

Photo courtesy of JSquish via Wikipedia Commons

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.

Chattanooga Cements Status as Best Network in the Nation

Chattanooga's EPB Fiber, a municipal FTTH system owned by the city's electric power board, has dramatically lowered its prices for the gigabit connection and increased all Internet speed tiers.

The slowest connection you can get from EPB Fiber is 100 Mbps symmetrical - and it comes at the same price that most cable tiers start at for much slower connections - $58/month. Want a gig? That is now $70/month. Here is the announcement:



Video streaming by Ustream

The Washington Post covered the story, including several quotes from me.

DePriest tells me that EPB's fiber network is "a great profit center." In the four years the service has been active, the utility company has increased its mid-tier speeds three times — from 15 Mbps to 30 Mbps, from 30 Mbps to 50 Mbps and now from 50 Mbps to 100 Mbps. About 2,500 elite users will enjoy 1-gig speeds by the beginning of October.

Phil Dampier has more coverage at StoptheCap.com, including an analysis of AT&T and Comcast competition.

AT&T charges $65 a month for 24/3Mbps service — its fastest — with a 250GB monthly usage cap, currently not enforced. For $5 more, EPB customers get 1,000/1,000Mbps with no usage limits or overlimit fees.

A recent article in the Chattanoogan noted that Chattanooga had surpassed 50,000 subscribers and was on path to surpass Comcast in subscriber base locally.

Mr. DePriest said Comcast had some 122,000 customers on the EPB grid when EPB launched its rival program. He said Comcast is down to around 75,000 and will likely drop to around 60,000 next year.