As customer satisfaction dips to an all-time low, new competitors force a breaking point in American broadband.
Chief information officers in two potential Google Fiber cities, Palo Alto, Calif., and San Antonio, Texas, shared similar views on Google Fiber. Both reported that they’re excited about possibly entering a partnership with Google as they wait to hear back about their applications, but both also noted that their cities are vendor-agnostic and that anyone who’s able to offer similar opportunities for their residents would be taken just as seriously. Google just happened to be the one who came in with the resources, said Jonathan Reichental, chief information officer for the City of Palo Alto, Calif.
“Clearly, if we’re going to compete on a global scale and continue being a leading economy, we need good communication systems, so the perspective of Palo Alto is in sync with that,” Reichental said. “Google is unusual because this is not a core competency. They’ve done it in Kansas, they’re doing it in Austin and in Provo, Utah. But three cities doesn’t make you a telecommunications leader. You look at the incumbents like AT&T, this is what they’ve been doing for over 100 years and they compete in all sorts of markets and they are good at it, putting in cables and setting up communication networks.”
Google Fiber’s positive image often piggybacks on a perception by the public that the incumbent providers are not meeting market demand, but Reichental said the demand for gigabit Internet doesn’t yet exist in large numbers. Google Fiber has been successful because it’s a great product offered at a price comparable to what people were paying anyway, he said. “Even if you don’t know why you need it, nobody says ‘no’ to more bandwidth,” Reichental said. “I would argue that if communities across America were screaming out for gigabit and they were prepared to pay for it, all incumbents would provide it.”
San Antonio, Texas opened the doors for Fiber in March when its city council approved a 20-year master-lease agreement that would give Google the option to build and manage approximately 40 communications shelters on city property. In April, AT&T was approved for a similar master-lease agreement. In fact, that type of agreement is open to anyone who wants it, said San Antonio Chief Information Officer Hugh Miller.
“Texas doesn’t have franchise agreements anymore, so from the city government perspective, they’re coming in like any other video or telephony or Internet provider to the citizens,” he explained. “The value for us is in enhancing what the city is to its citizens.” Google has yet to respond to any of the applications by the 34 cities, but San Antonio will cooperate with any provider that wants to build a network that adds value to their city, Miller said.
A fiber network adds immense value to a city. In fact, there’s no faster way to become irrelevant in 2014 than to be without an Internet connection. Residents of major cities want Google Fiber because they want more choices, but if most major cities are to be left waiting 70 years for the likes of a Google, it’s no wonder that small, rural communities aren’t content to wait at all.
The topic of municipally-run broadband doesn’t relate to technology so much as it reflects a philosophy. Supporters argue that if the market does not provide the things a community needs to thrive, then it is that community’s right to take their future into their own hands and build it themselves.
In recent years, hundreds of cities, counties and utility districts, mostly rural communities with populations of 10,000 or 20,000, have built and are now managing broadband networks to bring people online. A map managed by the Institute for Local Self-Reliance shows there are more than 40 municipally-run gigabit networks, 180 networks with partial community coverage, and 163 cable and fiber networks reaching most or all of the community.
A broad, comprehensive study that seeks to determine whether municipal networks are generally a good idea or not does not exist, said Christopher Mitchell, director of the Telecommunications as Commons Initiative at The Institute for Local Self-Reliance. Views on municipal broadband typically come down to a political viewpoint supported by anecdotes. Mitchell himself has been a municipal broadband advocate and researcher for the past seven years, searching for data that can establish a meaningful framework for what it means for a community broadband network to be “successful.”
“If you look at those who try to discredit the networks, a lot of times the only thing that they’ll collect is financial information from each network,” Mitchell said, but this is the wrong way to judge success, especially with a new network, since all networks lose money at first. “The benefits should outweigh the costs. The only way these local projects can be evaluated is by people who are within the community. It’s hard for me to come in and say, ‘this is successful, that’s a failure,’ because it’s a value judgment by someone who doesn’t have to live with the consequences.”
And there are big consequences. A broadband network that can cost hundreds of thousands or even millions of dollars means a community is sacrificing other things that might have been built instead, like parks, schools or fire departments. The Utah Telecommunication Open Infrastructure Agency (UTOPIA) has spent the last 10 years trying to build a fiber network spanning 11 cities. Now finding their net worth sinking beneath negative $100 million, and with the network not even half completed, many are left wondering if broadband is not a task best left to “the worst of the worst.”
But when done correctly, the benefits are impossible to deny, Mitchell said. Municipal networks create competition that drives down cost in the market, there’s value for governments in increased reliability, and there’s black and white financial savings gained simply by not giving money to an external provider. Santa Monica, Calif., saves about a half a million dollars annually by running its own network, Mitchell said. The chief information officer of Davenport, Iowa, reported that the city’s fiber network, not yet shared with the public, saves the city about $400,000 annually. But like Mitchell said, it’s not all about money. There’s qualitative value just in being online.
“If you don’t have a local government that makes smart decisions, then you have bigger problems than just the network and you probably want to figure out how to reform government before you start encouraging it to build a network,” Mitchell said. “I don’t think that every local government should go out and start doing this, but I do think that they should evaluate it.”
Lafayette, La., home to 120,000, is one of the larger municipally-run networks and frequently cited as a success story. “It’s cash positive, it’s paying for all its expenses, it’s making its debt payments, but not putting much away for the future,” Mitchell explained. Looking at those details alone might not make it a success, he said, but the bigger picture is that the network generates peripheral benefits like new jobs, institutions like schools save money, and the city is now flourishing as one of the fastest growing economies in the nation.
Even places that don't like the idea of government getting involved in the broadband market recognize a need for some kind of action. The state of Kansas is this year wrapping up a four-year, $4 million research program to evaluate the broadband market as a means to encourage investment in unserved or underserved areas. The predominant ideology in Kansas generally precludes local communities from attempting their own networks, and there are very few there. But programs like the Kansas Statewide Broadband Initiative typically don't have much impact, because they have limited authority and encouraging investment means stepping on the toes of powerful incumbent providers, Mitchell said.
When the market doesn’t deliver broadband service to a community, it’s for good reason, said Royce Van Tassell, vice president of the Utah Taxpayers Association. “The market has proven remarkably adept at providing the Internet access that people demand,” Van Tassell said. “If people are willing to pay for it, there is someone who is willing to bill it to them, and that is as true of bread as it is of telecommunications services.”
Whenever a community begins a municipal network project, Van Tassell explained, they say they’re going to build so everyone can have access. “When that fails, they say, ‘maybe we should invest where there is an ROI and only go to those areas where we think there’s a high likelihood that people will buy.’ That’s adopting the strategy, albeit imperfectly, that they were criticizing in the first place,” Van Tassell said. “And even having adopted that strategy, their ability to succeed in the market has proven almost non-existent.”
The network in Groton, Connecticut, which was sold earlier this year after just under 10 years of development, is a typical municipal network, Van Tassell said. The project put the city tens of millions of dollars in debt and they were forced to sell the network at a loss, he said – that’s what communities should expect for their efforts.
In Utah, Van Tassell has spent years trying to convince others that a government-operated broadband network is a terrible idea. “In the case of UTOPIA, their financial failures are so well documented, it hardly merits beating that dead horse,” he said. “All good people, but in every case they seem to believe they know better what the market demands than people who have spent their careers and invested their own dollars to evaluate the risk and say ‘this will work or this won’t work.’”
Nearly all municipal broadband networks are failures, Van Tassell said, and the fact that successful networks like the one in Chattanooga get so much attention is proof of that fact. “Those successes are notable precisely because they prove the rule,” he said. “I think it’s a little disingenuous to say that you can’t rely on a financial measure to gauge their success, because the purpose of a municipal telecom network is to get someone else to pay for my service. The idea behind a municipal telecom network is always financial. That is the entire purpose – to get someone else to buy down that cost.”
Mitchell and Van Tassell represent the diametrically opposite outlooks that surface in communities when a municipal broadband network is proposed. Like all ideological debates, this one seems unending. It’s not just that the two sides are proposing different solutions to a shared problem — it’s that their expectations of what society ought to provide is rooted in two irreconcilable philosophies.
It would be nice if people who lived in rural areas could access all the conveniences of urban life without any of the costs, but life doesn’t work that way, Van Tassell said. “If I’ve decided I want to live out there where there’s a lot of people, I get some wonderful benefits,” Van Tassell explained, “and I have some other costs, and that’s the choice that I, as a consumer, make. Who wouldn’t love to have all of the benefits and none of the costs? But that’s not the world that anyone lives in.”
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