Two years ago, we first wrote about the Johnson City Power Board considering using its fiber-optic network to encourage economic development and create more broadband competition. Last year, we again saw them examining their options, with a recognition that DSL and cable are not enough for economic development when Chattanooga and Bristol are so close by, as well as other publicly owned FTTH networks.
The decision on the third-party vendor approach stems from a feasibility study by Kersey Consulting, a firm that offers broadband consulting to municipalities and public utilities. The study began in July, and examined three models the JCPB could use to offer the services: having the JCPB be the retailer; leasing the extra fiber capacity to another company; or bringing in a third-party operator to provide the network access electronics, customer support, billing services, etc.
Working with a third-party vendor gives the JCPB the best return on its investment, balancing low risk with possible profits, said JCPB spokesman Robert White. The Power Board would provide the “backbone,” while the vendor, working under JCPB’s brand, would provide the “last mile” services and equipment to the commercial customers.
This approach could be somewhat similiar to the Opelika, Alabama, partnership with Knology, except Knology is clearly going after both residential and commercial customers right away.
The article uses these numbers, but they don't seem to make a lot of sense to me on first glance:
Initially, according to the feasibility study, the Power Board would most likely make a capital investment of $1.5 million over five years, which could include installing more of a fiber backbone to reach businesses if needed. On the flip side, revenues from the extra service could reach $1.3 million over 10 years, depending on the agreement with the third-party vendor.
To reach its revenue and return on investment projections, the JCPB would need to capture about 20 percent of the area’s total market for data services, about 15 percent of the market in phone services, and about 5 percent of private data services over five years, based on a market of 3,000 commercial users.
I have to assume the revenue over 10 years would be more than the capital investment needed to get the project going.
Of course, CenturyLink is pretending that JCPB has no chance of competing against an entity as large as it, but CenturyLink's size may well be one of its biggest problems. It is a giant bureaucracy that provides crummy service at inflated rates. Bristol Virginia Utilities has been crushing it in the small business market because they offer local, reliable services and have the freedom to work with local businesses.
If Johnson City really commits to this, CenturyLink's poor DSL will pose little threat. But Johnson City should take care to listen to the experiences of those around them who went down this path. There are many good lessons for the communities that are willing to listen.
Bristol, Virginia, holds a unique place in the heart of community broadband advocates because it was the first muni broadband network to provide triple-play services over a full fiber-optic network (OptiNet). It is well known among NASCAR aficionados for the Bristol Motor Speedway as well. What I didn't know, prior to my visit to Bristol this week, is that it is also home to a music festival celebrating the community's important contributions to country music.
The second page of the Fall Newsletter from Bristol Virginia Utilities [pdf] discusses how BVU's OptiNet has built a Wi-Fi network downtown to offer free connectivity to festival-goers. But it doesn't end there - they also provided laptops and HDTV to those who wanted to hang out.
From the newsletter:
At the 2011 Bristol Rhythm & Roots Festival, BVU set up the “BVU Pavilion,” a temporary technology hotspot. The pavilion offered free WiFi Internet, public laptops, as well as high-definition televisions and seating to festival guests throughout the entire weekend.
In addition to the BVU Pavilion, housed in downtown Bristol VA, BVU also installed equipment to provide WiFi Internet access throughout the twin city’s downtown areas. The access was a huge plus for users of mobile devices such as smart phones. Users could download festival applications like artist schedules, stage maps and more.
“As our second year providing this service, we knew people would be looking for us again. This is simply a gift to our city,” explains Gail Childress of BVU. “We are avid supporters of making our community a great place to live and visit. This complimentary service is just one way that we can say ‘Welcome’ to our visitors and ‘Thank you’ to our full-time residents.”
“BVU has been great to work with,” says Leah Ross, Executive Director for Rhythm & Roots. “This allows our fans to check their email, log onto Facebook or Twitter, blog about the festival or just surf the Internet. It’s really a win-win for everyone.”
Rhythm & Roots guests who prefer to use their own laptops or devices found available space within the pavilion to sit and log on. If guests came without a computer, laptops were available for use within the facility.
BVU personnel staffed the facility all weekend to answer questions and keep things running smoothly.
BVU is proud to step up for this community ensuring that both locals and visitors receive the best service for the second year running.
Because BVU has wired the whole community with fiber-optics, offering Wi-Fi is much easier. A significant difficulty in blanketing areas with Wi-Fi is the backhaul that takes the wireless traffic back to the central office and then out to the greater Internet. With fiber everywhere, the backhaul problem is solved.
Remapping Debate, an organization dedicated to "the full spectrum of domestic policy issues," has turned its focus on community broadband networks in an article called "Wave of the Future?" The article notes the tremendous success of Bristol, Virginia, in creating jobs. Most are well aware of the 700 jobs created by CGI and Northrup Grumman due to the network, but there are other success stories too:
Fiber has helped Bristol and the surrounding counties hold onto existing businesses as well as attract new ones. Alpha Natural Resources, a coal giant, pointed to the BVU service as a key factor in its 2009 decision to keep the company’s corporate headquarters in Bristol after a merger with Foundation Coal, a rival based in the more cosmopolitan Baltimore-Washington corridor. BVU’s fast service (up to 30 megabits for downloads and 10 megabits for uploads) will allow Alpha management to maintain close electronic watch over a combined network of mines in West Virginia, Kentucky, Pennsylvania and Wyoming.
The article goes on to discuss Chattanooga. Once again, we knew that its muni fiber network had already led to many more jobs from Amazon and Homeserve, but we learn more about exactly how the network has improved health care:
Chattanooga’s fiber network has been a foundation for high-tech business startups. One new company, Specialty Networks, allows doctors spread across many area hospitals and offices to get quick image analysis from radiologists specializing in the cancers of various regions of the body. In the past, according to Dr. Jim Busch, the radiologist behind the venture, eye, nose, and throat doctors would get initial readings from radiologists who did not necessary understand the particular subtleties of cancers affecting those areas. Now a single head-and-neck expert reads the images for just about all of greater Chattanooga’s ENT doctors. “The relatively inexpensive nature of all this bandwidth has been great for patient care,” Dr. Busch told Remapping Debate.
The rest of the article discusses other benefits of community networks and policy options for moving forward. Recommended reading.
“We’re going through the VRA pool which helps fund 88 cities and service authorities. Because of that – and because of the market – we’re potentially looking at very low interest rates of 3.3 percent,” Rose told the board during his presentation.
The debt currently has an interest rate approaching 5%. After refinancing, the utility expects to save some $500,000 to $750,000 a year - for a period of 20 years. The cost of refinancing is $900,000.
This story is worth noting for two reasons:
Restructuring debt is not necessarily a sign of weakness -- BVU's OptiNet is quite successful.
A reminder that small communities can benefit significantly by pooling bonding through programs like Virginia's VRA. States should help communities to work together in this way.
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.
Bristol Virginia is again expanding broadband access in rural Virginia. Following a $22.7 million BTOP (broadband stimulus) grant and matching $5.7 million grant from the Virginia Tobacco Commission, in combination with in-kind contributions from the Virginia Department of Transportation, BVU will greatly expand middle-mile broadband throughout 8 counties in Southwest Virginia. The project is expected to take 2.5 years to complete.
“With this broadband network, Bristol Virginia Utilities will enable service to more than 120 of what we refer to as anchor institutions,” [US Senator] Boucher said. “That includes schools, libraries, hospitals, clinics, major government facilities and other large public facilities. The new network will also come within two miles of 18,000 homes and 500 businesses. That makes it feasible for what we refer to as last mile service to be provided to these 18,000 homes and 500 businesses. Some of these have broadband today, but not all of them do.”
This project will add onto the economic development successes resulting from previous networks built by the publicly owned utility:
Boucher said the original broadband line deployed across the region several years ago has already helped to create a number of new jobs, including 137 new virtual call center jobs that have been created in the region by DirectTV, and another 700 plus jobs that have been created by the Northrop Grumman and CGI technology centers in Lebanon.
Though BVU is expanding middle mile access, it cannot offer last-mile services in most of these communities. Virginia law prevents BVU from offering some services outside its existing footprint - a policy that is great for telco profits but terrible for people that actually want modern telecom services.
For its existing broadband subscribers where it is allowed to offer services, the utility has boosted downstream and upstream speeds [pdf]. The new tiers remain asymmetrical, as with a number of the earlier muni broadband networks. Tiers are now 16/2, 30/10, and 50/20.
For its electrical customers, BVU has announced a smart-grid investment, as have many other utilities in the forward-looking Tennessee Valley - a hotbed of publicly owned utilities following the private sector failure to wire their communities 100 years ago.
In a recent issue, the Economistprofiled BVU - the first municipally-owned triple-play fiber-to-the-home network in the U.S. Evidently, the Economist thinks Bristol an unlikely spot to find a full fiber-to-the-home network, but some of the best networks in the U.S. are in these unlikely spots because they are built by communities who have realized the private sector will not build the needed infrastructure.
And this infrastructure has brought many jobs to the region:
And the fibre brought jobs. In 2007 both Northrop Grumman, a big American defence contractor, and CGI, an international IT consultancy, said they would hire between them 700 technicians, consultants and call-operators at offices in nearby Lebanon, Virginia, part of BVU’s fibre backbone. Both cited the area’s universities and low cost of living, but neither would have come without BVU’s investment, which Northrop calls absolutely critical.
The article asks a common question but answers it exceedingly well:
Should cities be in the business of providing fast internet access? It depends on whether the internet is an investment or a product. BVU could not afford to maintain its fibre backbone without selling the internet to consumers. And it could not build a subscriber base without offering cable television and a telephone line as well; households these days expect a single price for all three services.
Most communities would rather not have to get involved with selling services like cable television, but such services are generally a necessity to cash-flow the network. So, as they did before with electricity, they do what they must to keep the community strong and competitive.
The project adds redundancy in a rural area where telecommunications infrastructure tends to be ignored by the private sector.
“The broadband expansion fortifies the existing fiber route between BVU and Citizens as well as giving our area a redundant fiber-optic line to Northern Virginia, where bandwidth needs are increasing all the time. It is necessary to our region’s future and the survivability of our existing telecom network,” he [Virginia Delegate Terry Kilgore] noted.
BVU was the first municipal network in the U.S. providing the triple-play over a full fiber-to-the-home network.
Conducted by Brown Edwards & Co., certified public accountants, the audit revealed increased revenues and no surprises, partner and accountant Richard Linnen told the BVU board of directors at its Monday meeting.
“It was a clean opinion and an unqualified audit, as it is every year,” Linnen said.
Such independent audits are a useful exercise to ensure these essential networks are operating efficiently and accountably. Additionally, these audits are useful to refute false claims of impropriety from private sector companies looking to discredit publicly owned networks.
The December 2008, issue of Broadband Properties features an article that offers advice to incoming President Obama regarding broadband policy. Some of the comments center around community networks.
Do not be fooled — this debate is not between “purely” private companies and municipal governments; it is between heavily-subsidized beneficiaries of governmental handouts on one side and locally-elected and openly accountable public servants on the other.
