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The Experiences of Other Fiber Networks

August 29th, 2012

 

In April, Christopher Mitchell (who recently wrote a blog post for us), published “Broadband at the Speed of Light.” In this report, he explains “how three communities built next-generation networks,” focusing on Chattanooga, Tn.; Bristol, Va.; and Lafayette, La.

We’ve been meaning to dig into that report and share some elements. By no means are we trying to say that our situation is analogous to theirs, or that we can correlate with exactitude our challenges, obstacles and opportunities. For these three examples, the local public power utility took the lead in creating the new network, which provided some definite advantages. Obviously UTOPIA is not a power utility and will never be one.

Nevertheless, we hope that by sharing some passages from Mr. Mitchell’s report we can help educate our readers on the why, how, and “what the hecks” of building a community network. There are definitely similarities, even if the situations are different.

Public vs. Private

“It is regrettable that decisions over community broadband are framed as public v. private. America has thrived because of both the public and the private. From the canals to the interstate highways, the public has played a key role in building the infrastructure used by all businesses. Presently, many businesses are less competitive and productive because they do not have sufficient access to modern networks at reasonable rates. Limiting the public’s ability to invest in essential infrastructure today is a serious mistake. The question is not whether any or every community should build a network, the question is who should make that decision.”

“In keeping with the historic American value of self reliance, communities should have the right to build their own network if they so choose. The alternative leaves thousands of towns solely dependent on a few companies that do not have to fear new competition.”

“The question is not whether any or every community should build its own network but who should make that decision. Given the impressive results from Bristol, Chattanooga, and Lafayette, states should respect the conclusion from the Federal Communications Commission in its National Broadband Plan: let communities decide for themselves.”

Profitability of Infrastructure

“Publicly owned entities also have different motivations than traditional cable and phone companies. Private sector companies invest in, govern, and set prices for their networks based on what creates the highest short-term profits. Community networks have to cover their costs and meet obligations to stakeholders while also balancing a variety of priorities that promote the public good.”

“Reports critical of community networks typically analyze them as though they were private companies: They only ask if the network is profitable. As this report shows, profitability is only a piece of the puzzle for a community network. Community networks are indeed expected to pay for themselves but BVU Authority, EPB, and LUS are not private companies. Their goals include encouraging economic development, increasing access to education, and improving  quality of life. Many of the benefits of broadband networks, an essential infrastructure in the modern economy, are indirect, or spillover effects in economic terms. These benefits must be included in any proper analysis of community broadband.”

Mitchell provides an entirely different way of looking at this question; we realize UTOPIA involves much more than $500,000:

“Arguments about what is ‘fair’ in provisioning broadband can result in a de facto monopoly for a slow, unreliable DSL provider because it would be “unfair” to allow the local government to build a next generation network that may not pay for itself entirely from the revenues of subscribers. Recall that taxes raise revenue for projects furthering the public good. Imagine a community broadband network operating at a loss of $500,000 in one year. Because of its existence, the private DSL and cable companies lower their prices such that the collective benefit is $2 million per year (even as the DSL/cable companies continue to be profitable). Though the network technically lost money that year, it may be a very wise investment from an aggregate perspective. Community networks produce a variety of indirect benefits that are often not included in the spreadsheets charting their value, from spurring economic development to decreasing telecom budgets of city departments (often while increasing capacity).”

Hampering Competition and Investment from the Private Sector

“Large cable and DSL companies argue that public competition reduces their incentive to invest, a dubious claim given that economic theory posits competition should encourage investment (e.g., why would Charter invest substantially if it were the only cable provider in Bristol?). Regardless, Bristol, Chattanooga, and Lafayette recognized that the best they could expect from the private sector was not sufficient for their needs.”

Vocal UTOPIA critic Royce Van Tassell has spoken of “tens of billions of dollars” waiting to be invested by the private sector, but there is no evidence of any willingness from the incumbents to invest more when they can just keep milking their cash cows.

“Each of these communities already had access to the Internet via DSL and cable. But in the words of Lafayette City-Parish President Joey Durel, “They wanted more.” Without investment in next-generation networks, these cities feared they would be left behind in the transition to the digital economy of the Internet era.”

“It should be understood that public entities are doing what the private entities have largely refused to do: overbuild existing networks. Most Americans have a choice between a single cable provider and a single DSL provider. The big cable companies have refused to compete with each other each other; Time Warner Cable has no interest in going head to head with Comcast. The largest telephone companies, AT&T and Verizon, have ceased their investments in next generation wired networks to focus on higher returns from wireless investments.

One of the most frequently repeated claims by incumbents is that any community network would be redundant because they already offer the connections the community needs. But a next-generation fiber optic network far outstrips a cable or DSL one. Community fiber networks are no more redundant than interstate highways being built over dirt roads. For example, in 2011 Chattanooga’s Times Free Press reported, “while AT&T doesn’t heavily advertise it, the company also offers gigabit service.”60 But AT&T charges over $10,000 per month for its gigabit service in some communities, making it totally inaccessible to all but the largest corporations.”

The Need for Fiber

The above quotes assume that a fiber network is a necessity. Some may argue that point; for Mr. Mitchell, it’s obvious.

“Broadband is not an ordinary product. It is essential infrastructure—the platform on which most commerce now depends. It has high start-up costs that take years to recover. When telecommunications prices are too expensive or speeds too slow and unreliable, all businesses and residents suffer. Much like towns bypassed by canals, rails, or highways, future prospects are bleak for communities without adequate access to the Internet. DSL is insufficient to encourage economic development and the slow upstream capacity of cable networks limits its utility, particularly for those who want to work effectively from home.”

“Unfortunately, many in the community will simply not understand what they will need as technology continues to change. When electricity was introduced, most people thought they had no need to replace their iceboxes and kerosene lamps. Similarly, many are presently satisfied with the capacity provided by cable networks, partially because they have not experienced significantly faster speeds, particularly the upstream speeds that allow them to be producers as well as consumers of content. In trying to understand the need, it is less important to see today’s requirement than to look three to five years down the road—especially considering it will take several years to get from this step to offering services. Indeed, good network architects try to get a feel for trends going 10 years out. To build a sustainable network requires this longer view.”

It’s Not “The Internet”

“It is easy to get diverted considering things like how fast is fast, and what applications will be needed. A useful parallel is that of electricity. We don’t think about the maximum amount we can draw into our homes, we just expect to plug in something new and have it work. Our broadband networks should do no less. Junior should not have to stop playing video games so Mommy can video chat with her sister and Dad can finish watching the game. Developing a sense of what is needed requires more work than merely asking people and businesses what they want.

“Often it entails extrapolating from what people say they need now, and speaking with people in the technology businesses who are not vested in maintaining the status quo. As Steve Jobs said, ‘A lot of times, people don’t know what they want until you show it to them.’”

The Lesson of Community Networks

“The most important lesson is that they can succeed, and in doing so create a powerful economic development engine. But […] it won’t be easy. Bristol, Chattanooga, and Lafayette all overbuilt massive networks owned by huge corporations with tens of billions in revenues annually. In telecommunications, being very large is a tremendous asset for a number of reasons. One is a result of volume discounts on everything from physical equipment to television content.”