Few telecom topics today can generate more heated debate than municipal fiber networks, as a report by Minnesota Public Radio last week illustrates. The story highlights municipal projects in the state, including two that are up and running (WindomNet in Windom and FiberNet in Monticello), as well as several that are still emerging, including one in Lac qui Parle county, one in Sibley county and one in Lake county.
Some say the long-term viability of these networks is uncertain. Others say they’re the only way to bring broadband to remote rural areas. But moving forward, two things are certain. We’re going to see more of these projects, now that a substantial number of them have won broadband stimulus funding. And established telcos will fight as hard as ever against them—sometimes in the marketplace (as TDS Telecom did when it built a network in Monticello to compete with FiberNet) but more often on the public relations and policy fronts.
Take this quote from a Frontier executive cited in the MPR story. “Simply pouring money into projects that overbuild and compete with networks built by private investment discourages private investment and does not help reach those highest cost households,” the exec said. “Duplication of the network is no guarantee of success, and is often simply a waste of both public and private resources.”
This argument, of course, ignores the fact that if the new facilities truly were simply a “duplication” of what was already there, there would be no need for them and local municipalities would not be taking on the task of building the new higher-speed networks.
Established telecom companies were quite successful at forcing out competitive local exchange carriers eight years or so ago. Ultimately it wasn’t too difficult for telcos to obtain support for the notion that if they built the network, they shouldn’t have to resell it at low cost to competitors, who they argued, were perfectly capable of building their own networks.
But it will be a harder sell against new competitors who ARE willing to build their own networks and who aren’t necessarily interested in making a profit. As the MPR story reminds us, municipal network operators are happy if their projects simply break even.
Unfortunately, there is much confusion about what it means when local government makes investments in broadband infrastructure. Government-owned open access projects like Utah’s Utopia have all services sold by private sector companies–Utopia has 17 providers, including three TV providers. Giving customers a choice of providers drives down the cost of telecom, especially for business and local government, where reductions in cost of 50% to 60% are common.
Andrew:
Utopia is nearly bankrupt. Great idea!
Name any successful municipal venture — wireline or wireless in the last 10 years that has not gone bankrupt, sold for pennies on the dollar to the private sector or keeps going back to the tax payer well for cost over runs.
Good Luck.
Dave:
UTOPIA had more than its share of problems but it is again expanding and the future is not as dark as it was years ago. All in all, things are looking up for a project many wrote off.
BVU in Virginia is profitable and created a ton of jobs. Reedsburg is generating net income as of a few years ago. Cedar Falls was so far ahead on its debt payments it is upgrading to FTTH.
WindomNet came without $50,000 of breaking even in the year it projected to do so – having saved many jobs locally, that $50K gap is undoubtedly worth it. The success stories outnumber the horror stories but go largely unreported. Perhaps if the pro-muni side had 1% of the resources dumped into fighting community networks by greedy wanna-be monopolists the stories would be told.