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Community Broadband Media Roundup - October 24

On this week’s community broadband media roundup, we have more reverberations from Next Century Cities, a forward-thinking coalition of cities that promises real progress in establishing or restoring local authority for broadband networks. For the inside scoop on the launch, we suggest taking a look at Ann L. Kim’s Friday Q&A with Deb Socia, the executive director of the organization. 

Here’s an excerpt: 

Q: So when you say you work with cities that are either looking to get next generation broadband or already have it, what does that entail?

A: …We are working with elected officials and also employees, like CIOs and city managers and so forth, and the goal is to really help them figure out their pathway. This is pretty hard work and we recognize that there’s always a local context and so we don’t advocate any one way to do this work, but we help cities think about it.

So [are] you gonna work with an incumbent provider, are you gonna build your own, are you gonna work with a private non-profit? How are you gonna make it happen? What are the alternatives for you? And how can we best support you?

Multichannel’s Jeff Baumgartner covered the launch in Santa Monica as well. The bipartisan coalition offers members collaboration opportunities and support for those communities that face incumbent pressure when they announce plans to move forward with publicly-owned broadband programs. According to China Topix’s David Curry, neither Comcast nor Time Warner Cable have made announcements about gig networks, “with Time Warner Cable even go as far as saying "customers don't want 1Gbps Internet speeds", a statement ridiculed on the Web.”  

Rest assured, there will be much more coverage on this organization’s work in the weeks to come. 

San Francisco is catching on to the “Dig Once” strategy, an idea that is known to help build public fiber networks incrementally, and at a huge cost-savings to communities. According to Marisa Lagos with the San Francisco Chronicle, City Supervisor David Chiu is pushing an ordinance that would require public and private agencies that dig up the streets for other work allow the placement of city-owned conduits that can be used for fiber. 

[Chiu] hopes it will allow San Francisco to help bridge the “digital divide” by eventually letting residents and businesses access fast, inexpensive, city-owned broadband service…

“Quality broadband service is no longer a luxury — it’s a necessity for our economy and our education system. You need access to high-speed broadband to compete, just as you needed access to water, roads and electricity in the 20th century,” Chiu said, noting that the United States lags behind smaller countries “when it comes to speed and reliability.”

The Chamber of Commerce, Comcast and AT&T have agreed to stay neutral on the bill, which will most certainly help it move forward.

“There was a time we thought everyone would have free electricity because of nuclear power,” [Chris Mitchell] said. “I think everyone will be paying for high-quality Internet access for the foreseeable future. But the installation of city-owned fiber will allow San Francisco officials to make sure no one is left without high-speed access, if private companies only build out some areas of town, for example.

“This small step will really enable San Francisco to have more freedom in the future to be creative,” Chris Mitchell said. “It won’t be acceptable for some kids to have access to great Internet service and some not to, so this is important to have.”

Chattanooga’s Electric Power Board (EPB) has saved an estimated $50 million for local businesses due to the smart grid over just the previous 2 years. Now, they’re partnering with Oak Ridge National Laboratory to improve efficiency for renewables like solar and wind. The partnership will allow Oak Ridge to help EPB gather and analyze data to find out where abnormalities and problems might arise. 

"Mid-sized Southern cities in the U.S. are not generally thought of as being ahead of the technological curve," [Mayor] Berke said. "The Gig changed that. We are now ahead of the curve, with other cities looking to us as a leader in the Innovation Century."

Arkansas K-12 educators are asking lawmakers to help them get faster broadband connections. Ryan Saylor with The City Wire explains how the cable and telephone company networks may be cost-prohibitive for public institutions, and why the state’s education board is hoping to tap in to public networks. The Arkansas Education Association’s president, Brenda Robinson says the schools are stuck between being mandated to provide digital learning courses and not having the resources. Current law prohibits schools from using more efficient publicly owned networks.

 “[O]ur state will not be able to fulfill our constitutional obligation of providing an adequate education for our children and the next generation will find themselves on the wrong side of the ‘digital divide.'”

Net Neutrality

“If the Internet is to remain an open, accessible platform for the free flow of ideas, we need strong rules of the road in place to guarantee those protections.”

Vermont Senator Patrick Leahy, made a strong statement for Net Neutrality this week when he wrote a letter directly to Comcast Executive VP David Cohen asking him to come out much more strongly in favor of Net Neutrality. Sam Gustin of Motherboard had the story: 

Leahy’s letter could increase the pressure on the Federal Communications Commission, which is evaluating whether the proposed merger advances the public interest, to require Comcast to make a strong net neutrality commitment as part of the deal.

It also demonstrates how closely net neutrality is intertwined with concerns over consolidation in the broadband industry. Comcast and Time Warner Cable are the two largest cable companies in the country, and a union between them would create a broadband colossus with immense market power.

And then, Leahy went further. In The Capital’s Eric Hal Schwartz covered Leahy’s second letter, this time to the leaders of AT&T, Verizon, and Time Warner Cable as well. 

Leahy said he is worried that the FCC's upcoming rule changes to net neutrality will let ISPs arrange deals for websites to pay for faster user access. That's something Leahy said he is committed to stopping and he wants the ISPs to make a legally binding promise that they won't ever engage in that practices, regardless of what the FCC rules.

Which brings up an excellent question, says GovTech’s Brian Heaton. What does the FCC’s authority on Net Neutrality really mean? 

Fiber Referendum Fails in Siloam Springs

In an unsurprising result, voters in Siloam Springs, Arkansas, chose not to build their own FTTH network. The margin was 58% against, 42% for. According to that article, the opponents (bankrolled largely by national cable company Cox) outspent proponents by 3:1.

We previously covered this plan and were concerned that the number one reason identified for proposing the network was to diversify revenue for the local government. Quite frankly, that is a poor reason to go head to head against massive companies like Cox and CenturyLink.

The biggest benefits of community networks tend to be the hard to quantify -- aggregate savings to the community from lower prices from all providers in a competitive environment, increased economic development, better customer service from a local provider, etc. These networks are built to be financially self-sufficient, but we caution against expecting them to be a piggy bank for the local government.

Unlike the successful Longmont approach, where those advocating for the community network engaged others who had been through similar fights elsewhere, it seemed like Siloam Springs preferred not to ask for help. Meanwhile, Cox tapped its nationwide resources to oppose the network, with misinformation like this:

Siloam Springs Opposition

Download the full size flyer here.

Communities that want to build community networks should engage the wider community of community broadband supporters and be prepared for flyers like this one. And when seeking local support, make sure you find messages that resonate. Make sure you read about the grassroots movement in Lafayette in our recent report or how Chattanooga had hundreds of community meetings to explain its plan.

These networks face stiff opposition from entrenched opponents that want to be the sole gatekeepers to the Internet -- ensuring a real choice means doing real organizing.

Paragould Sets An Example for Another Arkansas Town

Recently, we let you know about the situation in Siloam Springs, Arkansas, population 15,039. The town is now investigating the possibility of building their own fiber network. They have had several community meetings and a "vote of the people" is set for May 22, 2012.

Pamela Hill is investigating the twists and turrns in a series of articles about the vote. In one of her articles, Hill looked into another Arkansas community, Paragould, home of the annual "Loose Caboose" Festival.  This community, located in the northeast corner of the state, has successfully operated their own cable network since 1991. Unlike Siloam Springs, the people of Paragould weren't focused first on generating new revenue for the local government, they just wanted to be able to watch tv for a reasonable price.

Back in 1986, Cablevision was the only provider in Paragould. Hill spoke with Rhonda Davis, CFO of Paragould Light, Water & Cable:

"The public wasn’t happy with Cablevision’s service or rates,” Davis said. “We took it to a public vote and did it.”

Prior to Paragould's decision to build their own network, the City had a nonexclusive franchise agreement with Cablevision. The town was dissatisfied by the service they received and, in 1986, Paragould voters approved an ordinance authorizing the Paragould Light and Water to construct and operate a municipal cable system. Three years later, there was a referendum that authorized the city to issue a little over $3 million in municipal bonds to finance the system.

That same month, Cablevision filed suit alleging antitrust violations, breach of contract, and infringement of first and fourteenth amendment rights. The district court dismissed the antitrust and constitutional claims and Cablevision appealed unsuccessfully. The case attracted attention from lawyers and business scholars across the country.

By 1998, the City had purchased Cablevision's remaining service and began offering Internet service. The City has continually upgraded their investment, which now consists of fiber lines that run to nodes throughout the city. Coaxial cable delivers signal and data from nodes to homes.

Paragould Welcome Sign

Paragould Light, Water, and Cable now serves approximately 11,000 retail cable television customers, and 6,550 retail Internet customers. Their fiber infrastructure is over 50 miles in the town of 26,113. From the Hill article:

Davis said the city does still run a debt for the cable and internet systems. The $3.2 million bond issue for cable in 1989 has been refinanced and increased over the years. It should be paid off in 2014, she said. But the system has been paying for itself since the sixth year of service, according to Davis.

During the first five years, the city increased property taxes by $100,000 a year to help make payments. The extra taxes amounted to $1 to $2 a month for most households and still allowed customers to get cable “way cheaper” than what they paid the private company, Davis said.

Paragould customers can get cable television for as low as $14.30 per month and  Internet access varies from as low as $24.95 for residential service to $62.95 for business class. 

Photo used creative commons license

Arkansas Town Targeted by Cox Prior to Community Broadband Referendum

Siloam Springs, sporting 15,000 people in the northwestern corner of Arkansas, could be the next community to build its own community fiber network. But first they have to pass a referendum in May in the face of stiff opposition from Cox Cable, which would prefer not to face real competition.

For over 100 years, the city has provided its own electricity via its electrical department. Now, it wants to join the more than 150 other communities that have done so. After last year's changes to Arkansas law, Siloam Springs has the authority to move forward if it so chooses.

Pamela Hill at the City Wire has covered the situation with a series of stories, starting with an explanation of why they are moving forward:

David Cameron, city administrator, said the proposal is not so much about dissatisfaction with current providers as it is about finding new revenue for the city. Cameron said revenue from electric services has been a key source of funding for various projects and necessities for the city. That “enterprise” fund is getting smaller, Cameron said, and an alternative funding source is needed.

“We have done a good job managing accounts, building a reserve,” Cameron said. “We want to keep building on the programs we have. It takes money and funds to do that.”

City officials discussed the issue for the last 18 months and decided to put it to a referendum. Voters will decide the issue May 22.

That is a fairly unique reason. Most communities want to build these networks to encourage economic development and other indirect benefits to the community. Given the challenge of building and operating networks, few set a primary goal of boosting city revenue.

Map of Siloam Springs

If approved by voters, the city plans to spend $8.3 million to install 100 miles of fiber optic cable directly to homes and businesses. The city should be able to repay the debt in 12 years, if things go according to a feasibility study presented to the city’s board of directors in January. Cameron said projections show the system could begin making a profit after three years.

Just as in Longmont, Colorado, the incumbent cable company has created a fly-by-night astroturf group to oppose Siloam Spring's initiative. In Longmont, the group predictably disappeared shortly after Comcast lost the referendum.

In the Longmont referendum, the opposition came out of Denver. To fight the community in Siloam Springs, Cox is funding a group out of Little Rock that calls itself Arkansans for Limited Government. (If the only threat to my monopoly were a local government, I suppose I would want to limit it also.) Though CenturyLink ostensibly competes with Cox, its DSL cannot offer the same capacity as cable networks (the problem we call a Looming Monopoly).

After the approach was announced, the usual public v. private rhetoric emerged. Among others, the head of the of Arkansas Chamber of Commerce is defending Cox, probably a significant member of that Chamber:

“Make no mistake, when government competes with private business it always has an unfair advantage, and it will stifle economic growth and competition in the Siloam Springs market,” Zook wrote.

And so we see the same false claims we have previously debunked. And right next to claims that the public sector has all the advantages and will crush the private sector, we find a paradoxical claim:

Zook said there are many instances across the country where cities have tried this and failed.

The reality is that Cox and CenturyLink have all the advantages AND that communities generally succeed in creating signficant community benefits by building their own networks. They get real competition, lower prices, more investment, and a better climate for local businesses to succeed.

Another article was dedicated entirely to arguments against the community effort (as though every other article did not devote enough time to these pro-Cox arguments).

Cox Logo

In it, a manager for CenturyLink claimed that they would be in favor of a public/private partnership but Cox quickly rejected the idea:

In a public-private partnership, a city pays a certain percentage of costs for new or upgraded services and an established private company does the work and provides the service.

...

Pitcock said Cox Communications has never taken public monies for joint ventures, and probably wouldn’t take part in a public-private venture in Siloam Springs.

If CenturyLink wants a public/private partnership, it should join UTOPIA to offer real services to Utah residents and businesses rather than its patheticly slow DSL.

Following one of several community meetings to discuss the project, reaction to the initiative seemed mixed, with many people wanting more information.

At the meeting, the assistant city director of Sallisaw, which operates a muni FTTH network in Oklahoma, spoke about their experience.

Skelton talked about the success of the Sallisaw system, noting that 99 out of 100 test customers stayed with the city’s service after the trial period in 2005 and said the city should make a profit by the end of the year. Customer bills average $103, he said.

Sallisaw Logo

However, Sallisaw had fewer options for broadband when they started. By contrast, Cox has proved willing to get very dirty in its opposition to new competition, as seen in Lafayette (see the last paragraph of this story).

The most recent story from the City Wire discusses other muni broadband networks in Arkansas.

Conway in central Arkansas and Paragould in the northeast corner have had city-owned cable services since 1980 and 1990, respectively. They’ve continued to upgrade and add services as times and technologies changed. Officials for both systems say they operate at a profit.

Explaining Arkansas' Changed Barriers to Community Broadband

A little less than a year ago, the 88th Arkansas General Assembly created HB 2033, later known as Act 1050 [pdf]. The law made a few changes to the Telecommunications Regulatory Reform Act of 1997 and, while “a few changes” may not sound like much, they don’t need to be much in order to have a significant effect on the prospect of municipal broadband in Arkansas. The language gets specific about municipal broadband, related services, and alters the possibilities in Arkansas.

WHO AND WHAT...

Prior law prohibited any government entity from offering, directly or indirectly, basic exchange services. So, an Arkansas town couldn’t create its own telephone company that offered the traditional concept of telephone service, as defined in statute.

Act 1050 expands the prohibition to data, broadband, video, and wireless. With the exception of those owning municipal electric utilities or cable television systems, Arkansas towns are now prohibited from offering broadband services to nonpublic entities.

EVERYBODY EXCEPT…

Prior law allowed an exception for government entities owning municipal electric systems or television signal distribution systems to be able to make telecommunications capacities associated with the facilities available to the public. Offering basic local exchange services was still prohibited.

Act 1050 actually opens up the uses of those networks that may have been created for the use of the electric system or television signal distribution system. The new language adds permission to use those capacities to provide, directly or indirectly, voice, data, broadband, video, and wireless. There is even an insertion that allows for like use in future constructed or acquired facilities. Reasonable public notice and a hearing are required, which is the normal course of action before making new investments.

SOME SPECIAL CONSIDERATIONS…

Prior law allowed exceptions to the restrictions for some government entities’ ability to create their own networks for specific purposes. Emergency, E911, and 911 were not subject to the restrictions.

Act 1050 adds law enforcement services to that list. Medical institutions and higher ed institutions are also given an exception to the restrictions, as long as the telecommunications services are strictly for medical, academic, research, and healthcare information technology. This is different from the past law, which used the broad “educational institutional” label.

ONLY IF YOU WANT TO…

New in Act 1050 is an entire subsection that lets government entities know that they can choose to purchase voice, data, broadband, video, or wireless telecommunications services from a private carrier even if the local government is operating a network that could serve them.

The new 2011 exception creates an environment that expressly allows municipal electric and cable television systems to provide a number of telecomunnications services, including broadband. However, the law is also more clear in preempting local authority for communities that do not own electric or cable television systems.  

The law permits municipal electric and television utilities to offer "voice" services but continues to ban "local exchange services," an unclear distinction. We read it to suggest that the munis can offer basic VOIP but may face lawsuits if they do much more.  

People like the convenience of paying for internet, television, and phone all in one bill and the large telecom companies know it. Without the ability to offer basic exchange services, municipal networks may be at a strategic disadvantage relative to private competitors. Because of the continued ban on providing basic exchange services and the contradictory exception to allow "voice" services, the future is unclear. It is often this very ambiguity that prevents communities from considering creating their own networks.

While not coming out and banning municipal networks, Act 1050 continues the hostile environment for publicly owned networks. However, there is now a fairly clear path for muni electric utilities to build the networks communities need, if they so choose.

Paying the Bills, Measuring the Savings

Publication Date: 
March 9, 2005
Author(s): 
John M. Kelly, American Public Power Association

Full Title: Paying the Bills, Measuring the Savings: Assessing the Financial Viability and Community Benefits of Municipally Owned Cable Television Enterprises. This paper provides evidence that municipally owned and operated cable television enterprises are financially viable and provide large rate savings to their communities. The findings contradict allegations in Costs, Benefits, and Long-Term Sustainability of Municipal Cable Television Overbuilds, a 1998 paper authored by Ronald J. Rizzuto and Michael O. Wirth, that such enterprises are likely to be poor investments for cities.