USDA announces another round of rural broadband funding

USDA announces another round of rural broadband funding through its Community Connect program. Go here for the rules for this round.

In its announcement the department notes:

In addition to Community Connect grants, USDA Rural Development provides loans and loan guarantees to help finance the construction of rural broadband networks. For example, USDA Rural Development awarded a Community Connect grant to the Texas County Rural Area Informational Network (TRAIN) to install and operate a Fiber-to-the-Home network in Raymondville, Texas. The grants helped fund a Community Center called the Public Access Community Room. TRAIN also is providing broadband service to community residents and businesses.

Since its inception, the Community Connect program has funded 229 projects with USDA investments of $122 million. In 2012, USDA assistance led to improved broadband service nationwide for nearly 65,000 rural households, businesses, and community institutions – such as libraries, schools and first responders.

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via USDA announces another round of rural broadband funding.

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Muni Broadband is Still a Net Money Loser, says Reason

A shift to more interventionist government has led

…several states, mindful of the checkered financial history of such efforts, and fearing the fiscal liability they pose, have been drafting legislation to rein in these projects which, when they fail, leave taxpayers holding a multimillion dollar bill.

says, Reason Foundation – ANALYSIS: Despite Glossy Reports, Muni Broadband is Still a Net Money Loser.

In a subsection to Reason’s Annual Privatization Report 2013 Steven Titch reviews a number of continuing muni failures across the country including Chattanooga, UTOPIA, Ashland OR, and Click Network in Tacoma WA…here’s a bit on Click:

The supply chain inexperience of Tacoma’s Click Network, for example, was responsible for a big blunder. After lining up three ISPs to handle retail sales of its muni service, and selling them large blocks of wholesale bandwidth to resale Tacoma consumers, the Click Network decided enter the retail business itself. Competing with your own retailers is a mistake learned in Marketing 101; you don’t undercut your own sales channel. Tacoma’s decision to do so was all the worse because it hurt the local small businesses that it had hoped to nurture with its network, while angering and alienating marketplace allies and all but killed a major source of revenues for its operation.

 

Posted in Click Network, government competition, government-owned fiber, government-owned networks, Municipal broadband, Municipal finance, Overbuilding, Tennessee | Tagged , , , | Leave a comment

More on (non) monopoly broadband

Here’s a good smack-down from Mike Wendy of Media Freedom on claims of a broadband monopoly in the US:

Importantly, the upshot of this is that no one is dominant. No one has control. The ability to bend a market to ones liking is virtually impossible. For voice and for Internet services the incumbents are just one player among many in each market, offering their services to hungry consumers in the crowded, converged communications marketplace.

Its easy to see how one could draw this conclusion. Recent government and industry data show:

  • There are 1,681 U.S. broadband providers;
  • 99% of the U.S. can access at least one wireless broadband provider;
  • 96% of the U.S. has access to at least one wired broadband provider;
  • 88% of the U.S. has access to at least four mobile broadband providers;
  • 87% of the U.S. can choose between at least two wired providers; and
  • To access broadband, Americans can choose between an array of connection technologies, such as DSL, cable-coaxial, fiber, 3G and 4G mobile broadband, broadband over powerline, WISPs, satellite and Wi-Fi offload not to mention whats coming down the pike.

Contrary to the stagnation one would think would be evident in monopolistic markets, the U.S. broadband marketplace proliferates. It continues to bring higher average and peak broadband speeds, new ways to connect to those speeds, more broadband availability to more people, increased service options and offerings, and overall better dollar value to U.S. broadband consumers with each new year.

via RealClearTechnology – Sorry Liberals, Theres No Broadband Monopoly in America.

 

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Palo Alto Dark Fiber Brings $2.1 Million Per Year – this is more like it

The model described in this post from Community Broadband Networks is a more appropriate and sustainable government approach. Dark fiber leasing of government-owned fiber to taxpaying, private internet retailers can bring important high-speed connectivity to rural residents and businesses at the same time that it yields sustainable business revenues to the city coffers.  Read on…

The city owned dark fiber network in Palo Alto is bringing in a steady stream of revenue that may lead to better connectivity for the entire community. According to a Gennady Sheyner Palo Alto Online article, the Utilities Department recently reported to the City Finance Committee that the city Fiber Fund yields $2.1 million per year. The revenue comes from dark fiber leases to approximately 80 commercial customers. From the article:

via Palo Alto Dark Fiber Brings $2.1 Million Per Year, Expansion Plans Developing | community broadband networks.

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Five rationales for municipal broadband, deconstructed, discredited – Part V

New York Law School authors Davidson and Santorelli in their March 2013 research, Evaluating the Rationales for Government-Owned Broadband Networks, looked at five common rationales offered by municipal broadband advocates for government ownership and entry broadband service delivery. In this post we look at their fifth and final, “the local self-reliance rationale.”

This rationale goes something like this,

…municipalities should have the freedom to do what they want…[reflecting] a desire for ‘humanly scaled institutions and economies and the widest possible distribution of ownership.’ …communities ‘make better and more informed policies when those who design those policies are those who feel their impact.’

Local self-reliance advocates both abhor and ignore their own arguments for local control. On the one hand they argue against what they perceive to be a monopoly hold on their communities by private providers (let’s overlook for a moment that few communities go unserved by multiple private providers — in Washington State Comcast, Wave, Charter, CenturyLink, Frontier, Dish, ATT Wireless, Verizon Wireless, Sprint, T-Mobile, Clearwire, for example) over an often redundant array of technology platforms (coaxial cable, fiber, DSL/wireline, wireless, cellular, satellite).

At the same time advocates — harking back almost a century to the height of the New Deal —  hold out their nearly sacred symbol of rural electrification, presumably believing that listeners will suspend judgment and forget that rural electrification required monopoly provision in order to succeed.

So, what self-reliance advocates really want is for local communities to exchange private firms — shareholder-financed, heavily taxed, highly regulated, staffed by proven and highly paid technology experts…firms with built-in incentives to succeed and grow  — for local political organizations run by elected officials, whose analysis, decision-making and agency administration must ultimately be overseen by local residents  — and this last, accomplished by said residents by attending meetings and reviewing proposals after they get home from work, get dinner on the table, and get their kids settled into their homework.

The authors point out that this argument also dismisses that fact that local government — cities, counties, public utilities districts and the like — are “ultimately the responsibility of the state.”

The nature and depth of this relationship came into sharp focus during the recent recession when a number of towns and cities went into or teetered on the brink of bankruptcy. To remove any sort of state oversight from the GONs [government-owned network] equation is to advocate for a fundamental recalibration of government in the United States.

The federal act that put much of this current movement into action — the Telecommunications Act of 1996 — anticipated this issue:

In addition the Act specifically empowers the states to ‘preempt’ municipalities from engaging in the deployment of communications networks.

Nineteen states, including Washington, have so far acted to limit local government broadband provision. The authors conclude that despite advocacy arguments for another way,

…in light of the borderless nature of the broadband ecosystem and the increasing need for national regulatory approaches to IP-enabled services, the self-reliance rationale in favor of GONs is ill-suited for modern America.

Posted in Duplicate Facilities, government competition, government-owned networks, Legal Authority, Municipal broadband, Municipal finance, Rural broadband | Tagged , | Leave a comment

Five rationales for municipal broadband deconstructed, discredited – Part IV

New York Law School authors Davidson and Santorelli in their March 2013 research, Evaluating the Rationales for Government-Owned Broadband Networks, looked at five common rationales offered by municipal broadband advocates for government ownership and entry broadband service delivery. In this post we look at their “smart community-economic development rationale.”

This argument for more government says that communities need broadband networks in order to be “smart” communities and therefore attractive to investment and job creating economic development. Their “fundamental flaw”, say the authors,

is the assumption that the public sector is better positioned than the private sector to provide the sort of Internet connectivity that is needed to continue driving investment and innovation in the broadband ecosystem. The notion that broadband is the foundation for the 21st century economy is widely accepted, as is the fact that high-speed Internet connectivity is disrupting important sectors of the economy like education, energy, and healthcare. But the argument that cities are better equipped to spearhead such a fundamental economic and social shift in the United States simply fails.

They footnoted their earlier discussion about the growth of private sector-provided broadband — both its availability and its capacity — over the last decade in the U.S. The incumbent providers haven’t been sitting idle:

…the tremendous growth in broadband availability and variety has been fueled by significant investment in networks on the part of service providers. Broadband ISPs invested over $1 trillion in their networks [that’s $1,000,000 million] between 1996 and 2010. In 2011 alone, service providers invested $66 billion — $13 billion by cable, $25 billion by wireless, and the remainder by telecommunications companies.

And this extraordinary level of investment has resulted in:

96.5 percent of housing units in the U.S. [having] access to at least one wireline broadband provider in June 2012, while less than one percent of the population lacked access to a wireless broadband provider [that’s the same as more than 99 percent of the population having access to wireless]…Nationally, over 1,600 different companies currently provide broadband Internet access service, up from just 130 in 2000.

The authors then outline the opportunities for all levels of government to support better broadband access. The federal government can provide seed funding or regulatory support, states can remove legal, regulatory and policy barriers, and local governments can leverage economic incentives that promote private sector entry and competition, they say. But, they caution,

these roles should be limited lest they skew or undermine the market forces that are shaping and reshaping the broadband ecosystem daily.

Most of the communities that have invested in broadband have only afforded to do so on the strength of outside funding. Their study offers the Chattanooga experience as an example, which received $111 million federal grants.

In my experience the initial capital to pay for a government fiber build can come from only one of three sources:

    • a community’s utility ratepayers;
    • a community’s taxpayers and their children (through loans and bonded indebtedness);
    • state or federal grants.

So, we essentially have governments taking money from their taxpayers, their utility ratepayers, or their children to subsidize an attempt to compete against the already highly competitive, highly capitalized, extremely volatile, and rapidly evolving telecommunications-broadband sector. Marvelous.

Here in Washington one local PUD spent more than $100 million of its electric ratepayers’ cash reserves to build a fiber system. A neighboring PUD spent nearly double that amount — all from their respective ratepayers. They both promised that future fiber revenues would eventually grow and be used to repay electric ratepayers. But that’s not possible when fiber revenues are insufficient (even 10 years hence) to cover operations, much less to repay their initial capital investment. Both of these utilities have walked away from any thought of repayment.

I’ve written in several places about the source of funding for these systems and how to follow the money. Go here and here for a closer look at two examples in Washington State.

Similar news blanketed the country just this week from Provo, UT. The city spent $39 million for its fiber system, money it got from construction loans for which city residents are still on the hook for another 12 years. The city now announces it will sell the system to Google Fiber…for a $1…with essentially no strings. [There appears to be confusion on this point. Go here for a later article on the iProvo sale and watch for more reporting to clarify the terms of the sale.]

Set aside for the moment that this is probably one of the better outcomes for Provo residents in the long run, given the mistake that got them into this mess in the first place.   Let’s ponder for now these questions:

  • Where is the public accountability for spending decisions in the hundreds of millions of dollars?
  • When asked why they vote to approve spending the public’s money this way, is it good enough for lawmakers to say essentially, ‘because we can?’
  • In Provo’s case, did the incumbent providers have an opportunity to negotiate a similar deal for city’s bargain-priced fiber system?
  • What signal is sent to potential investors and job creators when a community demonstrates to everyone that it is willing to place the heavy foot of government preference on the scales of competition? What is smart or reasonable about that?
  • And, why should any private firm be able to enter an existing private marketplace and essentially be given $39 million worth of taxpayer-subsidized capital facilities with which to jump-start their effort?

The authors conclude,

the claims that the mere presence of a government-owned broadband network will automatically spur business formation and somehow conjure a Silicon Valley-type environment is naive at best and deceptive at worst.

Well, I get their point, but I can easily conjure worse when considering the hundreds of millions of dollars of other people’s money that are being squandered across the country by some of our public officials.

Tomorrow we discuss the fifth and final rationale evaluated by our authors, “the local self-reliance rationale.”

Posted in Chelan PUD, Duplicate Facilities, government competition, government-owned networks, Municipal broadband, Municipal finance, Overbuilding, Rural broadband | Tagged , , , , | Leave a comment

Five rationales for municipal broadband deconstructed, discredited-Part III

New York Law School authors Davidson and Santorelli in their March 2013 research, Evaluating the Rationales for Government-Owned Broadband Networks, looked at five common rationales offered by municipal broadband advocates for government ownership and entry broadband service delivery. In this post we look at their “overbuild rationale.”

This argument is used by governments that build broadband networks for their own internal uses, and then extend these networks, making them available to residents as a way “to generate a better return on the investments,” say the authors.

They are more generous than I am about this particular issue. Too often the justifications used by government agencies are little more than  smokescreens to gain support for their entry into broadband delivery, with the full intention always of using their taxpayer or ratepayer subsidized systems to compete against incumbent providers.

They offer Burlington, VT as an example, saying there are numerous places where this rationale is playing out.

Here in Washington state, public utility districts (PUDs, local municipal corporations authorized by individual county commissions throughout the state) offered the early justification of needing to build their own fiber systems in order to manage their power systems more effectively and eventually offer smart metering.

They may get around to smart metering one day. Their early overbuild of incumbent facilities in rural (but nonetheless more densely populated) towns, however, and their subsequent attempts to then cherry pick local schools, hospitals, and government offices — the largest broadband customers in most rural communities — signal their real intentions all along.

These same governmental entities also used high-speed internet service to the unserved, most remote reaches of their counties as justification for their entry. It’s been a decade since they began their projects and these remote areas have yet to receive fiber service. In Chelan County remote residents learned last year that they will likely never receive service across PUD fiber.

Most of these attempts around the country are struggling to cover operational costs. If they are able to walk away from repayment of the original capital costs of these systems, they have done so. Those who used debt financing, encumbering their taxpayers’ or ratepayers’ children in the process, are looking at possible bond defaults or sale of their facilities for cents on the dollar.

The authors conclude saying, “The common thread across many of these failures is the total assumption of risk by the municipality and the inability to develop a sustainable business model.”

Referencing Seattle’s recent announcement of its partnership with Gigabit Squared, it’s in this section that the authors also offer a hint of their upcoming recommendations:

In cases where there is a compelling case for a municipality to lease excess capacity of proprietary broadband networks, the better approach is to forge public private partnerships in an effort to share the risk with and tap into the expertise of firms and organizations operating in the private and nonprofit sectors.

While we think the jury is still out on Gigabit Squared’s proposals and that there are likely a whole host of competitiveness issues that need yet to be sorted, we nonetheless are optimistic and open to learning more as these partnerships evolve.

Tomorrow in Part IV we discuss the “smart community/economic development rationale.”

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