Cities make end run around data network obstructions
With the desire to spur economic development and improve city operations, many municipalities around the country are planning to build their own high-speed data networks because they are fed up with what they view as the lack of or inadequate services from incumbent cable and telecommunications companies. But some local governments are facing obstacles — either from providers in their regions or state laws that create barriers to community broadband or outright ban it.
“In many ways, this is the biggest fight since electrification,” says Christopher Mitchell, director of the Telecommunications as Commons Initiative at the Institute for Local Self-Reliance, a Minneapolis-based non-profit. “It’s reminiscent of private electric companies in the 1920s and 30s when smaller cities built their own electricity networks because private utilities ignored them.”
Mitchell says 18 states have imposed some barriers to community broadband networks, such as administrative and procedural hurdles, while Texas, Arkansas, Missouri and Nebraska have instituted outright bans. In many states, the telecom incumbents have been the ones influencing policy. In other regions, where state law isn’t stopping municipalities from building networks, incumbents are filing suit, likely hoping to dissuade municipalities from moving forward.
Because businesses are attracted to highly connected regions, municipalities mainly build their own networks for economic development, often after incumbents deny their requests for higher data speeds and better coverage. After building a fiber network in 1997 and using it for city applications, Longmont, Colo., wanted to sell access to service providers. It also wanted to take over a privately built Wi-Fi network that the city was contracting services from. Last November, Longmont put this issue up to voters, as required by state law, and lost.
A 2005 Colorado law bans municipalities from providing any type of advanced telecommunications services unless more than 50 percent of the voters favor the plan. Longmont’s ballot question asked voters to allow the city to provide services either directly or in partnership with a private company, but 57 percent of voters said no.
“Comcast decided it didn’t want Longmont to go there,” says Tom Roiniotis, director of Longmont Power & Communications, the city’s community-owned electric utility. Comcast spent about $200,000, the largest contribution to any campaign in Longmont’s history, to defeat the measure, Roiniotis says. Meanwhile, once the issue became a ballot initiative, Longmont was not allowed to spend any money to campaign for the ballot initiative because that would violate campaign financing laws. “We were walking with one arm and one leg tied behind our back when it came to this campaign,” Roiniotis says.
Fortunately for Longmont, another private company bought the Wi-Fi assets and is keeping the network running. But as Roiniotis says, “We still have shackles in terms of our ability to innovate.”
Mitchell says incumbent providers are typically strong forces in the legislature and are “very good at finding sympathetic local groups or creating them to spread lies and half truths about the issue.” In particular, incumbents spread that notion that broadband networks are funded by tax dollars and typically aren’t successful in other areas.
The reality is, these networks are funded by outside investors and are doing well in many areas of the country, Mitchell says. According to a recent report from the Washington-based FTTH (Fiber to the Home) Council, the number of subscribers (take rates) nationwide for “retail municipal systems after one to four years of operation averages 54 percent. This is much higher than larger incumbent service provider take rates, and is also well above the typical FTTH business plan usually requiring a 30 to 40 percent take rate to break even with payback periods.”
Mitchell also cites examples of projects that are moving forward despite incumbent opposition. In Lafayette, La., where city officials asked its incumbents to enhance the local broadband network but were denied, the city decided to build its own. The incumbents subsequently filed suit, but after years of litigation, the city began offering a fiber network to businesses and consumers.
Mitchell says Lafayette offers a 10 Mbps symmetrical connection for $30 per month and a 50 Mbps symmetrical connection for $58, some of the cheapest rates in the nation. The cable incumbent there now has decided to upgrade its network.
Andrew Cohill, president of Blacksburg, Va.-based Design Nine Networks, says one of the more successful models for municipalities is the open services model. Under this arrangement, municipalities or a group of local governments build out a network and then sell capacity to any operator. He says the model drives competition and typically avoids incumbent opposition. “This way, local governments don’t get in the way,” Cohill says. “Why delay a project for often a couple of years and spend a lot on legal bills if you can construct a business model that is incumbent friendly?”
Wired Road in southwest Virginia was formed after local governments in the Twin Counties region created a regional broadband authority to build an integrated fiber and wireless network to sell to service providers. Cohill reports that after 18 months in operation, five service providers have signed on and the cost of Internet access has fallen by 50 percent in less than a year.
Of course, such a model is not foolproof. As Roiniotis points out, Longmont’s desire is to sell capacity to other service providers, but that plan was heavily opposed anyway.
Lynnette Luna is a contributing writer to Urgent Communications, a sister publication to Government Product News.
