Monticello, a small community of 13,000 about 40 miles northwest of Minneapolis, built one of the most advanced broadband networks in the midwest and delivers some of the fastest connections available in the state at incredibly competitive rates. The Twin Cities metro area, stuck mostly with Comcast and Qwest, cannot compare in capacity or value.
Monticello is fairly rare in the publicly owned FTTH region because it does not have a public power utility and services on the network are provided by a third party, Hiawatha Broadband Communications -- a Minnesota company with an excellent reputation and track record.
Unfortunately, Monticello's network suffered costly delays due to a frivolous lawsuit filed by the incumbent phone company in a bid to bleed the publicly owned network while it suddenly invested in its own second generation network (that it previously maintained was totally unnecessary for a small town like Monticello).
Monticello lost a full year on the project, which has hurt its finances significantly. More unexpectedly, it has become the only community in North America where all residents have a choice between FTTH networks. They also have Charter in the mix. Add to this the economic downturn that hit just after they financed the network in 2007 -- the population growth has been much lower than forecast. The predictable result? Much lower prices, lots of community savings, and a publicly owned network that is behind its projections.
The local paper recently ran a story about the project, "FiberNet struggles in a sea of red. Should you read the full piece, please be aware that the inaptly named "Freedom Foundation" has no credibility, existing solely to defend massive corporations like cable and telephone companies.
For those who wonder why incumbents filed absurd lawsuits that have a vanishingly small chance of winning, note this discussion from the story:
“It stopped us from really building the system by about a year,” said Finance Director Tom Kelly, “which put our revenue collections about a year behind. Obviously if you don’t have a system, you can’t bill people for it.”
“The delay has created a substantial impact in our ability to cash flow because money had to be spent paying for costs related to the lawsuit,” added O’Neill.
At the same time, Kelly said, they still had to make interest payments on their bonds, leaving them with expenses but no revenue source. He said if the city had pushed its business plan back about a year, they actually would be ahead of the game from a revenue standpoint. From an expenditure standpoint he said they would still be behind. This is happening, he said, because of the added cost the city incurred when it tried to build the system in 18 months versus the two to three years it had planned on before the lawsuit.
The City operates a municipally owned liquor store and is using proceeds from that fund to cover shortfalls in FiberNet currently. In time, they plan for FiberNet to get back on its feet and repay the liquor loans. Should the problems continue, Monticello will have to make a choice. It issued non-recourse revenue bonds, meaning the City has no obligation to cover shortfalls. However, there are credit implications of that decision.
In 2007, voters overwhelmingly supported the network with a 74% yes referendum vote. Unfortunately, people often have short memories when they suddenly see all the prices in the market drop and billboards advertising a free TV for those who switch away from the publicly owned network.
In response to the story, and more generally, the less enthusiastic response to the network than was demonstrated in the referendum, Mayor Clint Herbst published an op-ed in which he notes that they followed the will of the people and TDS sued the town, disrupting their plan.
He finishes strongly, with a personal example as the owner of a video rental store:
Those operating dollars were counted on to get this system past its first couple of years. Anyone that has started a business knows that the first couple of years are critical. In FiberNet’s case, many dollars have to be expended to get the system in place before revenues can be realized. Our business plan showed that it would be close to dipping into the red as our expenditure exceeded our revenue and that is why we needed the full $26 million - not the $20 plus million left after our battles in court.
The whole idea behind this system has been to bring in some competition and it has been a successful mission. Monticello has gone from paying some of the highest rates in the nation with miserably slow speeds, to some of the lowest rates in the nation with the highest speeds available. FiberNet will not be sending your dollars out of the city or even the state. We will keep those dollars local and when the bond is paid off, those dollars will go back into our parks, programs, aid in lowering the levy and so on. FiberNet cannot compete with the predatory pricing that others use. We are charging a fair price for great service and a top-of-the-line system. Others have come in to offer great deals at prices that are designed to put your company out of business. It is no different than what Netflix and Red Box did to the video stores. Now that the video stores are out of business, the prices have started and will continue to increase. You are fooling yourself if you think it will be any different in the telecommunication industry.
People have to make adult choices. They city chose to build a publicly owned network that significantly lowered prices by all competitors in the market (if not list prices, the competition has increased the use of promotional discounts). If people choose to then turn their backs on the network, that is their decision. But they should not fault elected officials if the network fails to break even. The community will likely have gained on net -- the lower prices everyone pays keep real money in the community that almost certainly adds up to more than the unpaid debt of the network. But complaining about government is a far easier exercise than a full evaluation of the fiber-optic network.
The Twin Cities has slower and more expensive broadband Internet than the nearby town of Monticello.
The Twin Cities metro area has a population of 2.8 million and the highest density of people and businesses in the state. So why is our broadband Internet slower and more expensive than that enjoyed by Monticello, population 12,000?
Several years ago, the city of Monticello (45 miles northwest of Minneapolis) recognized the increasing importance of reliable, high speed, low cost broadband. After the incumbent telephone and cable companies declined to build the network city leaders had in mind, the community decided to build one itself. Now, FiberNet Monticello offers some of the best broadband packages available in the country, while the Twin Cities is lagging.
A new analysis by the Institute for Local Self-Reliance compares the available broadband speeds in Monticello to those available in the Twin Cities metro.
In the metro, as in most of the United States, broadband subscribers choose between DSL from the incumbent telephone company (Qwest) and cable broadband from the incumbent cable company (Comcast).
Monticello's offerings are faster at every price point, but Comcast appears to offer comparable downstream speeds in the highest tier of service. This apparent equivalence, however, is like comparing dirt roads with interstates. Both are roads that allow you to travel from point A to B, but they have fundamentally different characteristics in carrying capacity and reliability. For a variety of reasons, DSL and cable almost always fall short (and often, well short) of the advertised "up to" speeds, whereas full fiber networks regularly achieve the speeds they promise.
In the metro, cable offers most residents the fastest option for broadband, but only one choice of provider. The Monticello network not only created a new choice for its residents, it induced the incumbent telephone company to greatly upgrade its network to remain competitive. Now, Monticello residents can choose between two extremely fast broadband providers, as well as a cable internet connection. The community-owned network may have only been the third broadband option, but it fundamentally changed the market.
Prior to Monticello's investment, residents and small businesses had access only to asymmetrical broadband, as we do in the Twin Cities. This means the upstream capacity (when one sends a file to another) is much slower than the downstream capacity (when one receives a file). Monticello's network offers symmetrical speeds -- identical up and down speeds. For residents, this means high quality video chats, greater opportunities to share family videos, and better gaming.
For businesses, it means a whole new world. They are better able to interact with clients and customers. Businesses can take advantage of new cloud-based services to become much more efficient, garnering a tremendous competitive advantage during this economic downturn. And when downtime means lost dollars, local businesses can count on much higher reliability from a modern, locally operated network. Despite the many advantages Monticello's businesses gain from their network, they pay significantly less for their Internet access than businesses in the metro.
Buoyed by the success of Monticello and similar projects across the country, more communities are recognizing the need to build their own broadband infrastructure.
Tonka Connect, a project that may include 17 communities situated around Lake Minnetonka, is exploring approaches to build the network those communities need to thrive in the digital future. Rural Sibley County just completed a feasibility study for its fiber-to-the-farm project. Lake and Cook Counties are moving forward with projects boosted by the federal stimulus program.
They all recognize that big companies have little incentive to improve a system. Full fiber networks are expensive to build, and the return on investment takes years.
This is the major reason that the United States has dropped from being the No. 1 broadband country to between No. 14 and 32, depending on the study. The nation's fastest citywide network? Not New York. Not San Francisco, Silicon Valley, nor Seattle.
Chattanooga, Tenn.
That city built the nation's fastest network as part of a decades-long program to revitalize the community. As in Monticello, leaders recognized that the interests of their incumbent providers (AT&T and Comcast) were markedly different from the community's needs.
Monticello seized the broadband initiative in Minnesota. Communities in the metro have the same choice: Either bet their economic future on an out-of-state company or build economic self-reliance with a community network.
The quick answer is that it appears as if generally rural access is more expensive – but that doesn’t need to be the case – as demonstrated by Monticello. Communities who are interested in pursuing municipally-directed network might make talking to Monticello one of their first steps. Monticello has been very generous with information on their strategy and deployment.
Today, we at MuniNetworks.org have released the first of a series of regional broadband comparisons examining the benefits of community networks. We decided to start with the Minneapolis / St Paul area, where we live and work.
Our analysis, "Twin Cities Broadband No Match For Community Network," compares the available broadband plans in Minneapolis and St. Paul to small town Monticello, located 45 miles NW of Minneapolis. Monticello, as we have frequently discussed, has built a publicly owned FTTH network (which then pushed its telco incumbent to invest in much faster connections as well).
Despite Comcast's much touted DOCSIS 3 upgrades and Qwest's "Heavy Duty" DSL, neither comes close to the value of Monticello's services. These companies have continued to use last-generation DSL and cable technologies with significant downfalls, including much slower upstream speeds than downstream -- a limitation particularly damaging to small businesses and people attempting to work from home.
Qwest advertises "fiber-optic fast" but its speeds come nowhere near Monticello's actual fiber-optic network. Further, Qwest's actual speeds are often far below their claims due to limitations with DSL technologies. Comcast offers faster speeds than Qwest, even advertising a 50 Mbps downstream speed that appears to rival Monticello's until you consider the Comcast cable architecture rarely delivers promised speeds because entire neighborhoods have to share bandwidth. Both providers struggle to deliver fast upstream speeds, whereas Monticello's network services all include upstream speeds just as fast as the downstream speeds.
When it comes to prices, Monticello's are lower, despite the faster speeds they offer. Minneapolis residents have access to a low-cost Wi-Fi network, but in that case, the low cost reflects the slower available speeds and significantly lower reliability.
Our analysis also includes Clear, a new Wi-Max provider, to discredit any claims that 4G wireless will somehow change the fundamental dynamic at work in the Twin Cities: Comcast and Qwest are content to deliver 2nd rate speeds at inflated prices. Wireless provider have not challenged their dominance and will not for the foreseeable future.
The analysis features a number of graphs to illustrate the differences -- below we have excerpted the first that compares available speeds for different dollar ranges.
On August 19, 2010, I was one of hundreds of people telling the Federal Communications Commission to do its job and regulate in the public interest. My comments focused on the benefits of publicly owned broadband networks and the need for the FCC to ensure states cannot preempt local governments from building networks.
My comments:
I’ll start with the obvious.
Private companies are self-interested. They act on behalf of their shareholders and they have a responsibility to put profits ahead of the public interest.
A recent post from the Economist magazine’s technology blog picks up from there:
WHY, exactly, does America have regulators? … Regulators, in theory, are more expert than politicians, and less passionate. …They are imperfect; but that we have any regulators at all is a testament … to the idea that companies left to their own devices don't always act in the best interests of the market.
They go on to say
If companies always agreed with regulators' rules, there would be no need for regulators. The very point of a regulator is to do things that companies don't like, out of concern for the welfare of the market or the consumer.
When we talk about broadband, there is a definite gap between what is best for communities and what is best for private companies. Next generation networks are expensive investments that take many years to break even.
With that preface, I challenge the FCC to start regulating in the public interest.
The FCC does not need a consensus from big companies on network neutrality. It needs to respect the consensus of Americans that do not want our access to the Internet to look like our access to cable television.
But while Network Neutrality is necessary, it is not sufficient. The entire issue of Network Neutrality arises out of the failed de-regulation approach of the past decade. Such policies have allowed a few private companies to dominate broadband access, giving communities neither a true choice in providers nor any ability to influence the networks on which they depend.
The FCC must ensure all communities have the authority to build the networks they need.
Outside of DC, community networks are not a partisan issue. Last week, Opelika, Alabama, voted by a 62% margin to build one. The City Council President noted: “As a council we have never been more unified on a single matter than we have been on this.”
One of the most conservative cities in America - Lafayette Louisiana now operates the best broadband network in the US as measured by value. For less than $30/month, anyone can get a 10Mbps symmetrical connection - I have to pay more than 3 times as much in Saint Paul for a similar upload speed.
Lafayette is not alone. The single fastest widely available broadband tier in this country is offered by Chattanooga- at 150Mbps symmetrical, few even come close to it.
Long before Verizon's FiOS network, Bristol, Virginia built a fiber-to-the-home network for its rural community, which attracted new investment and hundreds of high-paying jobs.
Here in MN, Monticello is unique, being the only community in the country with two citywide fiber-to-the-home networks competing head to head. The incumbent phone company previously maintained DSL was sufficient for their needs.
But when Monticello moved ahead with their superior network, the incumbent used a lawsuit to delay the community network while it invested in faster services. Monticello won the lawsuit, but lost a year. Nonetheless, Monticello now has the best broadband deals in the Midwest.
In Utah, the UTOPIA network offers more than 10 service providers to every subscriber. This is a real choice between service providers offering some of the fastest speeds in the country at affordable prices. Yet they have struggled financially -- in part due to constant attacks from massive incumbent companies and crippling laws passed by a state Legislature seemingly controlled by cable and telco lobbyists.
Eighteen states have barriers to discourage community networks, including Minnesota. Cook County, our most rural county, has long depended on a sole fiber line from Qwest for all connectivity. They begged for a redundant connection over many years to no avail.
This past January, a single accident left them without telecom services for 12 hours. No business could process credit cards. 9-11 did not work. US border security had to use Canadian communications. ATMs ceased to function. Police officers could not run plates.
The previous November, a majority of their citizens had actually approved building a community fiber network to create middle mile redundancy and last mile services. They even agreed to a small tax on themselves to help fund it. But MN law requires a super-majority of 65% for a community to build this kind of network. This is 5% more than the impossible 60% threshold in the US Senate.
Such a restrictive law is great for incumbent companies who are protected from competition. Offering a single fiber line to Cook is a profitable decision for Qwest's shareholders. It is a disastrous decision for the community.
This is why the FCC must stand up for all of us. States must not be allowed to cripple communities, forcing them to watch history pass them by.
We demand both Network Neutrality and the right to build our own networks when we choose. The FCC has authority on these issues and must start to use it.
Today's Star Tribuneeditorializes about the importance of broadband and calls on the state to reduce the 65% referendum barrier that prevents a number of communities from building the network infrastructure they need.
The editorial recognizes the successes of Monticello, Minnesota, as well as Bristol Virginia Utilities at spurring broadband growth and lowering prices.
An antiquated state law also stands in the way of communities that want to pursue their own version of FiberNet Monticello. With research increasingly demonstrating that high-speed service boosts rural economic development, communities underserved by current providers should not be held back by the unfair 65 percent threshold for popular support the law requires to go forward. A simple majority would suffice.
Finally, they corrected noted that broadband has been a total sleeper issue. If the next governor pays as little attention to broadband as current Governor Pawlenty, the state will be in dire straits.
Our Santa Monica City Net and City WiFi (News - Alert) project will provide the equipment and connections required to expand the City’s free WiFi service that delivers Internet access to the public at our libraries, open space areas, community centers, homeless shelter, senior centers and animal shelters. In addition, our project will provide a connection to over 200 ISPs to obtain affordable broadband options to local businesses and increase the competitiveness of our country’s preeminent post-production companies and intellectual exports located in Santa Monica, Calif.
South Hadley, a small town in Massachusetts, may expand its modest fiber network (currently connecting schools, police, and town hall to others in town. Its municipal power company is evaluating options.
Baltimore City Paperran a column discussing the Monticello, MN, city-owned network and the attacks against it by TDS Telecom. This accounting of the history has some errant details, but I found it fascinating how far the Monticello story has spread.
Tropos is a California-based company that sells wireless networking gear, frequently to municipalities. They filed comments with the FCC regarding the National Broadband Plan in response to the request: "Comment Sought on the Contribution of Federal, State, Tribal, and Local Government to Broadband."
We fully support their framing of the issue:
Municipalities that own and control their wireless broadband networks, operate public services more efficiently, prioritize broadband traffic for emergencies, and put unused bandwidth to use to attract new businesses, afford educational opportunities to students and in many cases, provide free broadband access to unserved or underserved residents.
As the FCC continues to formulate a National Broadband Plan, the Institute for Local Self-Reliance has submitted comments [pdf] about publicly owned networks in response to the Request for Comments #7: "Comment Sought on the Contribution of Federal, State, Tribal, and Local Government to Broadband."
In our comments, we highlight the importance of publicly owned broadband networks by noting many success stories and offering details on networks from Chattanooga, Burlington, Monticello, and Powell, Wyoming. We also offer some comments about middle-mile networks and networks that connect core anchor institutions, like libraries and schools.
We looked at moving, but because of the cost savings, as has been recently mentioned, because of the cost savings of UTOPIA, consolidated T-1 lines, stuff like that, we’re not moving. We’re here to stay.
