Reason Foundation

Muni Broadband: The Idea that Won't Die

Posted on January 30, 2012, 5:17pm | Steven Titch

The state of Georgia is looking to stop further development of taxpayer funded broadband projects with a new bill that would require cities to solicit commercial service providers and hold a special election before creating a city-owned cable-phone and Internet service operation.

According to Government Technology:

This bill [SB 313], sponsored by Senate Majority Leader Chip Rogers, R-Woodstock, would also mandate that local governments not pay for a community broadband system using tax revenue or any other revenue attained through a government service. Municipalities would also be prohibited from raising taxes or fees levied on private broadband providers to cover the costs of a public network.

“This bill will allow for robust competition in the communication marketplace and encourage continued economic growth throughout our state,” said Rogers in a statement. “By extending our long-standing commitment to policies that encourage private investment and market-driven competition, we are putting the needs of our citizens above those of government.”

It's not surprising to see Georgia moving in the direction. Many states, includign Pennsylvania and North Carolina, already have. That's because state legislators have watched how cities, for which the state is ultimate loan guarantor, sink loads of borrowed funds into these projects only to have them fail to pan out. What is surprising is that it took this long. Georgia is home to the nation's biggest municipal broadband debacle, in Dalton, Ga., which lost $171 million, or $5,320 per capita, on an ill-fated plan to build it's own cable system. Newnan and Marietta, Ga., also made the top 10 list of muni failures, costing taxpayers in those cities $48.1 million and 25.9 million, respectively.

Yep, the Broadband Stimulus Funded Overbuilds

Posted on May 4, 2011, 4:16pm | Steven Titch

Cynical readers won’t be surprised, but it turns out funds from the American Recovery and Reinvestment Act (ARRA), commonly known as the $787-billion stimulus enacted in 2009, financed public broadband buildouts in areas already served by commercial service providers.

Under the original plan, the $7.2 billion of the stimulus allocated for broadband was supposed to be directed to areas with no high-speed Internet. It turns out that the Rural Utilities Service, one of the agencies charged with funds distribution, dispensed $231.7 million to three areas where broadband penetration averaged 85 percent, according to a study by Jeffrey Eisenach and Kevin Caves of Navigant Economics of Washington, D.C. Eisenach is also an adjunct professor at George Mason University School of Law. The study was funded by the National Cable Television Association and can be downloaded here.

The report examines three large RUS stimulus awards:
* $101.2 million in western Kansas
* $66.4 million for Lake and St. Louis counties in northeastern Minnesota
* $64.1 million to cover a portion of Gallatin County in southwest Montana.

From the report:

Reports by the Department of Agriculture’s Inspector General (AIG) and the Government Accountability Office (GAO) have shown that RUS’ prior broadband subsidy programs have not been cost effective, in part because they have provided duplicative service to areas that were already served by existing providers, potentially creating “an uneven playing field for providers already operating without government subsidies.”

Among the key findings are the following:

* Definitions used by the RUS to determine where grants should be awarded permitted subsidies to areas which were already served by multiple wireline and wireless providers. Of the three projects analyzed, more than 85 percent of households were already passed by existing broadband providers, and in one project area, more than 98 percent of households were already passed by at least one provider.

* Based on the cost of the direct grants and subsidizing the loans, the study estimates that the cost per incremental home passed will be $30,104 if existing coverage by mobile broadband providers is ignored, and $349,234 if mobile broadband coverage is taken into account.

* The RUS approach of funding duplicative coverage is directly at odds with the National Broadband Plan recommendations and would massively increase the cost of extending broadband to all unserved homes. The FCC's Omnibus Broadband Initiative estimated that the cost of extending broadband to every unserved household in the U.S. is approximately $23.5 billion, so long as duplicative service is not funded. But funding duplicative service (as RUS has done under BIP) increases the cost of a nationwide buildout by $63.7 billion, to $87.2 billion.

"While it may be too early for a comprehensive assessment of the ARRA’s broadband programs, it is not too early to conclude that, at least in some cases, millions of dollars in grants and loans have been made in areas where a significant majority of households already have broadband coverage, and the costs per incremental home passed are therefore far higher than existing evidence suggests should be necessary," the study says.

The report goes on to layout some cost benchmarks and identify ways broadband build-out, even if government-funded, could be accomplished at far less cost. One problem with the stimulus—noted by across party lines—was that the timetable called for all funds to be distributed before an adequate map of broadband-deficient areas could be mapped.

Also, at the time of the stimulus, there were prevailing policy winds in favor of subsidizing competition. The report examines this approach and concludes it does not generate sufficient benefits.

Finally, one the projects Navigant examined appears to be a bailout of a municipal broadband-type system.

For Lake County Fiber Network, a taxpayer-funded fiber-to-the-home project in Lake and St. Louis county, Minn., the RUS funds were both timely and ironic. Eisenach and Caves cite news reports that LCFN had to shift a $56 million RUS debt to local taxpayers. They also point to articles that in which LCFN disclosed that it had lowered its projections of average revenue per household to between $100 and $125 per month, below the minimum $133 per month it said it needs to break even.

The municipal broadband debacles of the past decade have been well-chronicled, here and by others. Under the guidelines, the RUS was supposed to examine an operation’s long-term viability before releasing funds. That rule, along with a few others, it seems was ignored.

How Long Before Someone Dies Because of an Unsecured Wireless Router?

Posted on April 26, 2011, 11:48am | Steven Titch

According to an AP story out of Buffalo, N.Y., federal agents armed with assault weapons stormed a residence in the early morning hours last month looking for child porn on a home PC. The homeowner, whom the article did not identify, was roughed up and forced to the floor at gunpoint while agents accused him of being a creep and pervert.

Three hours later, after seizing the man’s PC along with his own and his wife’s iPhones and iPads, officials discovered no child porn and conceded that the raid had been a mistake.

It turned out that the resident had an unsecured wireless network, and that a neighbor—the actual culprit arrested a week later—had been using it to avoid detection. The AP does not say whether the Fed apologized for the raid, but the law enforcement community did its best to deflect blame. An official said that the homeowner would have avoided the confrontation if he had secured his home wireless network.

But even the AP article points out that the Feds could have easily determined that the network was unsecured before breaking down the door. And given that somewhat intelligent pedophiles know they can cover their tracks by finding and using someone else’s Internet connection—the AP article lists several examples where it’s been done--agents and their supervisors could have exercised some common sense before conducting a heavily-armed raid.

Here at Reason and formerly the Cato Institute, Randy Balko has been doing some terrific work detailing the cost police paramilitary tactics have had in terms of human life. A regular component of the drug war, these raids, often conducted for their theatrical value, too often end up targeting the wrong house or the wrong people with lethal results for innocent parties. To extend these militarized break-ins in a search for child porn, where the only evidence is an IP address, in a country where, as of 2007, an estimated 80 percent of home wireless networks were unsecure, is downright irresponsible. Police should not be using them; judges should not be approving them.

Besides, the whole (dubious) justification for a surprise, armed-to-the-teeth police raid is that the suspects themselves may be armed, and to prevent a drug stash from being quickly disposed of down a convenient toilet. Whatever you may say about their characters, collectors and distributors of child porn are not likely to be armed or violent, and a laptop or hard drive can’t be erased within seconds. Even if an attempt to delete a disk is made, the data is likely to be recoverable.

Yes, it is wise to secure your home wireless network, but failure to do so is not a crime and certainly not an excuse for police to use when they wrongly terrorize you in your own home. The AP article doesn’t say if the homeowner is pursuing any action against the federal government for the botched raid, but he should. Some expensive judgments today might, in the future, prevent a SWAT team from killing someone while attempting to seize a laptop, only to learn that the real culprit was a creep down the street who rigged a repeater with a potato chip can.

Report: Poorest States Rank Highest in Broadband Competition

Posted on April 27, 2010, 12:00pm | Steven Titch

Low-income states have a much higher degree of facilities-based competition than wealthier ones, according to a new report from ID Insight, a consulting firm that provides authentication, verification and fraud prevention solutions to financial services companies, credit issuers, retailers, online merchants and broadband providers. The results, which surprised even its two authors, Adam Eliot and municipal broadband advocate Craig Settles, turns on its head the notions that only consumers wealthy markets are seeing the benefits of broadband competition and that Internet service providers have abandoned low-income rural areas as too costly to serve. One policy consequence already, the report says, is that most of the $7.2 billion broadband stimulus awarded so far has been directed to states and regions where there is robust competition and no shortage of service. The report determined Arkansas as the most competitive state in terms of number of broadband ISPs, followed by North Dakota, South Carolina and Nebraska. After that, California, Alabama, Missouri, Indiana, Texas and Kentucky round out the top ten. The least competitive state in terms of broadband is Rhode Island. Yet when the government started to dole out stimulus money to foster broadband growth and competition, where did it send dollars? Here's blogger Mathew Lasar at Ars Technica:

If Arkansas is such a competition paradise, why did the government's National Telecommunications and Information Administration just award over $25 million to that state plus Texas, Kansas, and Oklahoma to build almost 700 miles of fiber-optic lines to "help bridge the technological divide" in 35 communities? But there you have it, says ID Insight. "We see that the five states with the lowest income have the most competition, while the five states with the highest income have the least competition," the report observes.

The report goes on to challenge much of the conventional wisdom about U.S. broadband deployment, and suggests that far more complex factors are at work than simply income and geography. The report also is a particularly timely addition to the debate because of the FCC"s sweeping national plan to expand the availability of broadband, on which a number of proceedings have already started. Throughout the plan, there is a given assumption that the broadband gap is largely in the states and regions that the ID Insight report finds well-served. Here's more of Lasar's reporting:

ID Insight identified a handful of conditions that correlate with competition; these include the state's median home value, median household income, percentage using broadband, average upload speed, and the share using Internet at home. But the report found that some of them have an inverse relationship with competitiveness. In particular, as income and home values increase in a respective state, the level of ISP competition goes down. These relationships may appear to be somewhat contrarian, ID Insight concedes, until you take a second look. "In more prosperous states where there are many users, and more wealth, this tended to attract the largest providers," the survey contends. "As infrastructure was enabled and larger providers began to dominate markets, it became increasingly difficult for new entrants to establish themselves." Arkansas, the study notes, has no overwhelmingly dominant Internet provider. Its biggest carrier commands a 30 percent share of consumers, followed by 19 percent for number two, then 11 percent, 11 percent, 10 percent, 10 percent, 3 percent, 3 percent, 2 percent, and 2 percent for the remaining eight providers. In contrast, in Rhode Island, one of the nation's wealthiest states, the top ISP enjoys a 78 percent market share. The next three carriers don't even come close: 17 percent, 2 percent, and 1 percent respectively. Density You may have noticed that ID Insight didn't identify population density as a clear direct or inverse factor in determining competition. That's because the study couldn't find that relationship. It found largely rural Nebraska to be very competitive, yet New York State, where 50 percent of the population is concentrated in New York City, to be far less so.

Throughout the muni broadband debate, co-author Settles has been a realist and has avoided much of the blind zeal that affects public broadband supporters. He has done much to alert cities as to the cost and technology traps that lurk that can derail muni projects. He admits surprise at the reports findings, yet nonetheless believes they make the case for more government-supported broadband, stating that large, deep-pocketed service providers are leaving small markets to be served by smaller, less capitalized ISPs. But that same point could be used to support the argument that the market is functional, that private investment goes where opportunity is. The big takeaway, however, is that the new research seriously challenges the oft-repeated claim of market failure in rural broadband.

VP Biden on Broadband "Information Overline"

Posted on July 1, 2009, 7:55pm | Steven Titch

You knew the White House was taking its chances sending out Vice President Joe Biden to talk up the broadband stimulus. And Old Joe was on form, as usual.

This afternoon outside Erie, Pa., the veep was on hand to announce the criteria the federal government will use to hand out $7.2 billion in stimulus funds aimed at developing the broadband infrastructure in underserved areas.

In his address to 200 people at Seneca High School near Erie, The Wall Street Journal reported Biden saying, “The bottom line is, you can't function -- a nation can't compete in the 21st century -- without an immediate, high-quality access for everything from streaming video to information overline.”

Commenters are invited to speculate exactly what “information overline” is. Yeah, it’s funny, until you realize the vice president in an administration that has called for an unprecedented level of aggressive and pre-emptive Internet regulation can’t even speak articulately about basic broadband connectivity.

For more Bidenisms, see this Reason.tv clip.

Billions In Stimulus Going to Broadband Projects

Posted on March 20, 2009, 11:17am | Steven Titch

The federal government doesn’t belong in the Internet business. But, of course the stimulus bill offers up $7.2 billion for broadband projects. In a recent meeting the agencies charged with passing out the taxpayer money couldn’t even agree on which communities are unserved, areas that don’t have high-speed Internet now and aren’t likely to get it anytime soon. My new column looks at the ways the government can identify these communities and which technology is going to be best for them.

Reason Foundation's Telecom Research

It All Depends on What the Meaning of the Word "Unserved" Is

Posted on March 11, 2009, 2:03pm | Steven Titch

Yesterday’s hearing on broadband stimulus reportedly was SRO, yet after several hours, most attendees walked away shaking their heads over the lack of general detail and panel’s own reticence to define what an “unserved area” is.

You’d think it would be an easy binary yes/no answer to the question, “Is broadband service available in your city/town/region?” Such are the politics when it comes to a $7.2 bilion government giveaway.

Defining unserved seems to be a no-brainer. But to be fair, it is a little more difficult to define “underserved,” which apparently FCC Chairman-designate Julius Genachowski is going to have to do. Underserved could mean:

1. Broadband is available to one geographical segment of a broader geographical area. The question is, how do you carve up that area to measure relative penetration. Are we talking one small town, or a state the size of Utah?
2. Broadband is available to one group of users, say commercial operations such as a local factory, hospital or school, but not to the general population. This gets a little tricky because the infrastructure serving local business, thereby creating jobs and stimulating the local economy. What you don’t have is a developed consumer market. Does it warrant a stimulus?
3. Broadband speeds are 4 Mb/s or less. Which means the systems are adequate, just not state-of-the-art.
4. Any other creative definition that can be used by a lobbyist to extract broadband funds.

Still, from BusinessWeek’s report, the bureaucratic hand-wringing out-of-the-box left some attendees jaded about the process and whether, in the end, the broadband stimulus will be that productive at all.

The lack of answers proved frustrating for some participants. Charlie Mattingly, chief executive of a small Internet service provider in Texas called Broadband Rural, was taken aback that the meeting wasn't more productive. "I had no idea how full of themselves they are in Washington," he said. "If we had half the money that the government spent to put on this meeting today and half of the money that people spent to attend it, we could have put 1,000 people online," he said.

It Is Broadband Stimulus Day in D.C.

Posted on March 10, 2009, 7:36am | Steven Titch

Today we learn a little more about who might get some of the $7 billion Congress is doling out for broadband infrastructure as part of the Obama’s massive government spending plan.

A public meeting is getting underway this morning. Officials from the U.S. Department of Agriculture, Commerce Department and Federal Communications Commission are on deck to describe “in broad strokes,” according to Dow Jones, how the grant program will work. The Commerce Department is charged with distributing $4.7 billion, and the USDA will give out $2.5 billion for broadband Internet buildout in areas that have little or no connectivity.

Naturally, the big fight will be how the pot is divided among the private sector and the public sector, and how many failed municipal operations might show up looking for a bailout. (Institute for Policy Innovation reminds us of the fiscal wreckage here). Meanwhile, telephone, cable and wireless companies invested close to $115 billion in 2007 alone in infrastructure, much of it broadband upgrades, and some $350 billion in the four years preceding, according to the Bureau of Economic Analysis.

While Ben Scott, director of the progressive Free Press, gives lip service to prioritizing buildout in unserved areas, he nonetheless seems to support the use of government funds to compete with the private sector, suggesting that stimulus funds should be directed to areas “where the standard of broadband being offered is very low.” Unfortunately, we don’t know his definition. Current cable modem speeds of 15 Mb/s can be considered low next to fiber’s potential of 100 Mb/s.

Will The Stimulus Kill Smart Ideas for Rural Broadband?

Posted on March 5, 2009, 2:36pm | Steven Titch

The Wall Street Journal yesterday reported on efforts of Tim Nulty, a former World Bank and Senate economist and 35-year veteran of the telecom industry, to bring fiber-based broadband to a rural section of Vermont using an innovative business model that combines private sector dollars and a non-profit grassroots effort.

Yours truly is quoted, but my comment had more to do with concerns whether the $7.2 billion set aside for rural broadband would be poured into money-losing, non-competitive municipal broadband initiatives that have already gobbled up millions of taxpayer dollars.

Yet what’s happening in Vermont is just as disconcerting, and raises questions whether the federal government's broadband stimulus will simply short-circuit innovative, market-based financing. While Nulty’s plan could be considered a form of municipal broadband, it was among the few that sought to structure a project around private investment and avoiding taxpayer risk.

(If you lack a Journal subscription, Nulty and his rural broadband plan are also covered here.)

According to the Journal, a group of Vermont towns with a combined population of 55,000 partnered with ValleyNet Inc., a local nonprofit group, which in turn hired Nulty to manage the project. Nulty, who set up a high-speed network for Burlington, Vt., that went live in 2006, to manage the project.

Mr. Nulty's plan is to string 1,400 miles of fiber-optic lines across telephone poles and into people's homes to provide a combo of ultra high-speed Web access, phone and cable TV service. The project is to be financed through a capital lease, with the towns raising money from investors to build the network, and then leasing it back from them over 23 years. It is as “shovel-ready” as they come, Mr. Nulty says, and will create hundreds of construction and customer service jobs.

A fiscal conservative, he says he would prefer federal loan guarantees, which would reduce the risk of private investors without necessarily resulting in any cost to taxpayers in the long run. But a proposal by Sen. Patrick Leahy, a Vermont Democrat, that would have directed loan guarantees to projects like Mr. Nulty's was shot down in the congressional stimulus negotiations. Now Mr. Nulty says he will request a direct cash grant instead.

Note that now that Congress and the Obama administration have decided to federalize local broadband initiatives through the stimulus, it won’t let Nulty do the job his way. Nulty can say bye-bye to private investment and hello to Uncle Sam, who, as his new benefactor, is sure to have some great ideas about how Nulty should manage his network (neutrally of course!), how service should be priced and how his friends and neighbors should be served. Nulty, for his part, will be expected to take the advice and be damn grateful for it.

Those who provide the money get the control. What’s unfortunate was that Nulty and ValleyNet may have been on their way to proving the slow rollout of rural broadband was not due to market failure, just an adequate business model. I worry when projects like this, which were attracting the private sector money (and would have again once past the liquidity crisis), get picked off by the government's lumbering fiscal policy. I fear it’s another way this ill-thought pile of pork called the stimulus will do little but generate more debt and less wealth.

Congress Approves Broadband to Nowhere

Posted on February 10, 2009, 5:00pm | Adrian Moore

Via Slashdot, a Wall Street Journal editorial takes a look at the broadband portion of the stimulus bill:

...nothing in the legislation would address the key reason that the U.S. lags so far behind other countries. This is that there is an effective broadband duopoly in the U.S., with most communities able to choose only between one cable company and one telecom carrier. It's this lack of competition, blessed by national, state and local politicians, that keeps prices up and services down...In contrast, most other advanced countries have numerous providers, using many technologies, competing for consumers...We're told that we now live in an era of more regulation and more government spending, but neither approach is how problems get solved in technology. Government mandates on how networks should be operated and subsidies administered by USDA aren't going to ensure broadband access, make connections faster, or lower prices. What we need to get the U.S. back into the top ranks of wired countries is more competition, not taxpayer handouts. That would be a real stimulus.

FCC Cancels Meeting on AWS-3 Auction

Posted on December 14, 2008, 11:32am | Steven Titch

Responding to a request from Sen. Jay Rockefeller and Rep. Henry Waxman, who will lead, respectively, the Senate and House commerce committees next year, FCC Chairman Kevin Martin has canceled Thursday's meeting that was to have featured discussion and potential vote on Martin's controversial plan to set aside spectrum for a nationwide free, but filtered, Internet service.

The set-aside idea has been heavily promoted by M2Z Networks, which had hoped to win the spectrum at a substantially discounted price. The project, however, was dogged by concerns about censorship, expressed below my commentary "Kevin Martin's Kiddie Internet Plan." While the rules allow the FCC to act on the plan without public discussion, as Wireless Week reports, it is unlikely they will do so. And the plan itself may be beached by the change in administrations. Martin, a Bush appointee, is expected to resign after Barack Obama's inauguration. If his successor chooses to continue pressing the plan, it may yet be an uphill battle. Wireless Week catalogs the reasons why the plan has something to bother everyone.

Martin's proposed rules for the auction are controversial for several reasons – incumbent carriers disagree with the requirement to use such spectrum for free public service; a variety of parties claim the rules are designed to unfairly help startup M2Z Networks; incumbents also say that M2Z's plan would cause interference to existing networks; public advocacy groups disagree with the requirement to filter traffic on that service; and government budget-watchers say the spectrum would be grossly underpriced.

DTV Transition Illustrates Video Competition

Posted on March 30, 2008, 9:59am | Steven Titch

The FCC-mandated conversion to digital TV broadcasting next February is touching off a battle among cable TV and telephone companies to hook-up so-called "nevers," consumers, who for whatever reason, have been content to watch over-the-air TV and have never been interested in purchasing cable, so reports cable industry trade Multichannel News.

When the DTV conversion becomes effective Feb. 17, 2009, consumers who have older analog models will have a choice of purchasing a new TV, using a government-provided $40 voucher to purchase a digital signal converter, or sign up with a cable, telco or satellite TV provider.

Naturally, multichannel video service providers are hoping to entice consumers to embrace the last option. AT&T reportedly will offer a bundled package at $44 a month. Comcast is prepping a basic cable tier, with less frills, priced at $15 to $20 a month. Their target: people like Andrew King, a 45-year-old airplane mechanic who watches off-air television in Culpeper, Va., 70 miles from Washington, D.C.

King is satisfied with his free TV experience. He picks up broadcast stations from two markets, Charlottesville, Va., and the nation's capital. He is unenthusiastic about the prospect of paying a cable, satellite or telephone company for television.

"I'm kind of a cheapskate," he said wryly, adding he'd sign up for subscription television and then the "rates will shoot sky high."

King's objections echo responses cable researchers have long heard from TV viewers they classify as "nevers" or "formers." This audience of 14 million to 19 million households are viewers who have steadfastly refused to take, or keep, pay television programming. Winning the hearts, minds and pocketbooks of such consumers is a top priority for cable, satellite and telco TV providers during the next year.

"Frankly, this may be the last big chance to gain market share," said Cox Communications vice president of product marketing David Pugliese.

Regulators and legislators should note, that despite accusations that cable TV is a stagnant duopoly and needs competition from local government to meet all consumer needs, the article lays out four important facts, backed up by market research:

1) There is heated competition for cable customers.
2) Consumers are aware of service provider choices.
3) Video service providers are interested in attracting budget-conscious customers, even those who might pay only $15 to $30 a month.
4) That even when prices drop, there is still a segment of the population who does not desire cable service.

California Proposes ëBroadband Bondsí

Posted on February 10, 2008, 10:21am | Steven Titch

Government still tends to view the broadband usage problem in the U.S. as a paucity of infrastructure. The California Broadband Task Force (CBTF) blundered in the same policy direction in its recommendation last month that the state issue "broadband bonds" to fund infrastructure development in all parts of the state.

Writing for the Pacific Research Institute, Daniel R. Ballon immediately found the flaw:

According to the CBTF's final report, a full 96 percent of households have access to high-speed Internet services, but only 56 percent opt to subscribe. This gap indicates a lack of broadband demand, not a lack of infrastructure. This demand correlates strongly with household income. Instead of increasing the affordability of available commercial services, "broadband bonds" will displace existing services with inefficient government-run versions.

This strategy would be akin to replacing grocery stores with a chain of state-run commissaries. Government bureaucrats cannot possibly micromanage a rapidly evolving technology such as high-speed Internet. Unlike roads and similar capital improvements, broadband networks require constant upgrades to serve the changing needs of consumers.

In the past four years, Verizon has built more than 7,000 miles of high-speed capable infrastructure in California. How does this compare to the government's record of upgrading transportation infrastructure? More than a decade after the legislature introduced plans for a high-speed train system connecting San Diego and Sacramento, lawmakers have yet to finalize the 700-mile route, much less begin the projected 15-20 year construction process. The CBTF's plan dwarfs this train proposal.

While there are spots in California where wired broadband does not exist, Ballon goes on to raise questions as to whether attempting to run expensive fiber on the taxpayer's dime is worth it when private investment is stepping up. Again, current policy's overemphasis on infrastructure tends to view fiber as the sine qua non of broadband platforms, when in truth, you can meet consumer demand and bandwidth expectations with alternatives.

Technically, universal access exists in the U.S. Satellite service is available everywhere. Admittedly, it's clunky, but terrestrial-based wireless alternatives are on the rise, that may not deliver 100 Mb/s, stand to deliver 30 to 40 Mb/s. And for the record, few U.S. households are using 100 Mb/s of bandwidth right now, even if they are among the 2 million that the Fiber-to-the-Home Council estimates are connected directly by fiber.

This may be heresy, but there is no "right" to fiber. Living in rural areas has trade-offs. Fresh air, cheap real estate and elbow room are great and I bet you can still get a good cup of coffee in town, it just may not be Starbucks or Seattle's Best (and some think that's a good idea). Companies like Zayo Bandwidth and Bend Broadband are showing that commercial carriers can reach rural customers. California should let them and others go for it rather than funnel subsidies to technologies that are costly and inefficient for the purpose.

Details of Corpus Christiís Muni Wireless Deal

Posted on September 23, 2007, 7:33am | Steven Titch

Corpus Christi is remains one of two cities to which EarthLink remains committed, the other being Philadelphia, which stands as EarthLink's highly visible entry into muni wireless. At the Public Technology Institute conference I report on below, Oscar Martinez, assistant city manager, disclosed some details of the 10-year EarthLink contract, stating that part of the success is understanding the culture of business, which can be much different from a government operation. "You must understand the goals of your partners and how they fit into the city goals."

Under the terms of the Corpus Christi-EarthLink partnership:

-- EarthLink paid Corpus Christi $5.3 million for the 147-square mile city network built and financed by the city's municipal gas and water utility for $7 million.
-- EarthLink pays the city a franchise fee of 5 percent of revenues to pay for right-of-way and other costs associated with network maintenance.
-- EarthLink pays $237,000 per year for use of the city's fiber optic backbone to backhaul wireless network traffic.
-- EarthLink provides 10 free hot spots within the city, although not at airports and convention centers.
-- EarthLink must optimize the network to provide access to 95 percent of Corpus Christi Households
-- Corpus Christi is committed to paying $450,000 this year in wireless network services from EarthLink, although if the city fails to reach that plateau in 2007, the payments will be credited toward billings next year.
-- EarthLink will provide 100 hours a month of maintenance as part of the agreement. Above that limit, maintenance is billed at $200 per hour.
-- EarthLink must provide wholesale access to its network, but is permitted to charge prevailing market rates.

The city did not antagonize the private sector, but did its best to work with it, acknowledging upfront that their vendors and suppliers–EarthLink, Tropos Networks, Northrop Grumman, National Metering Services, not to mention the dozens of hardware and software companies that the various city departments have turned to provide equipment to work with the network–are in this to make a profit. Corpus also uses Verizon Wireless' high-speed cellular data network as a back-up.

While this is only the first year of service and time will tell if Corpus Christi sees the return on investment it hopes, the city got off on the right foot by not pretending that the economics of broadband networking were somehow vastly different because it was a municipality and not a commercial company (as opposed to, say Lafayette, La.; Provo, Utah; Ashland, Ore.; and San Francisco, to name just four).

Chicago Scraps Muni WiFi

Posted on August 27, 2007, 6:00pm | Steven Titch

Chicago is the latest city to pull the plug on plans to build a citywide municipal wireless system after failing to come to terms with EarthLink, its perspective partner, the Chicago Tribune reports today.

Chicago is the largest city so far to scrap its municipal plans in the face of new demands from commercial partners to act as "anchor tenant" and commit to purchase a certain level of wireless data services each year. Earlier this summer, Anchorage, Alaska, and Corona, California, decided to drop their plans for similar reasons. MetroFi was the commercial partner in both cases.

In addition to the disagreement over the city's role as anchor tenant, a number of other factors influenced the decision, including the wider availability of affordable wired and wireless Internet connections, some provided by the city itself through other departments. For example, free wireless Internet is available in all 79 city public libraries as well as in large downtown public spaces such as the city's Millenium Park and Daley Plaza.

Chicago never intended to be a leader in municipal Wi-Fi, said a city official, preferring instead to watch what happened in other cities and learn from that. Some of what's happening isn't pretty.

In San Francisco, bickering among elected officials has stalled progress for months. In Houston, where the city council approved a contract with EarthLink last spring, work on the project has yet to start.

As municipal wireless projects have hit one snag after another, prices for wired Internet have fallen. AT&T charges $20 a month for speeds of 1.5 megabits a second in Chicago and will provide connections half that fast for $10 to new subscribers, although more than 10 percent of residences in the metropolitan area cannot get digital subscriber line service because they are located too far from AT&T's switching centers.

Muni Wireless's Not So Free Lunch

Posted on August 6, 2007, 2:09pm | Steven Titch

A doff of the chapeau to Adam Thierer at Progress & Freedom Foundation for citing for the San Jose Mercury's critical look at "free" municipal wireless in Silicon Valley. The article is only the latest in a series of skeptical reports in papers around the country about what the actual cost commitment these projects are going to require from cities.
Here's a portion of the report, available in full here (registration may be required).

While initially the project was lauded as a way to give the masses affordable Internet, key organizers have gently shifted the focus of the network from serving residents, for free, to giving businesses and city governments wireless access, for a price.

"The idea that we've always had is that this is not just a WiFi network for people to get their e-mail," said Seth Fearey, project leader for the Joint Venture Wireless Project. "Right from the start we said, `We know the operator has to make money; it's very, very important there be a sustainable business model."'

As system costs rise, there's a certain degree of retconning going on about these systems–namely that the plan from the start was to serve city agencies first and the public second. Minneapolis wasted no time in getting word out about how its municipal wireless system aided first responders during last week's bridge disaster. That's all well and good, but that's not how most of these projects were sold to taxpayers (the ComputerWorld article cited above mentions but ignores the significance of the fact that on the day of the disaster there were just 1000 people using the system. If it's really outdoor wireless coverage for emergencies the city wants, it then begs the question if the city actually needs to create exclusive franchised municipal WiFi monopolies for the purpose. Why not open right of way to all would-be players, just like Anaheim did? As business models evolve, it's simply a false dichotomy to assert it's muni or it's dead air.

A Lesson Plan for Public Colleges

Posted on July 7, 2007, 8:04pm | Shikha Dalmia

While researching a story on the admissions practices of elite American universities for Reason magazine recently, I stumbled across a comparison of public and private technical colleges by Kent A. Farnsworth in the October 27, 2006 issue of The Chronicle of Higher Education, that was remarkable for two reasons: One, it was favorable to the point of glowing toward private colleges, even advising public colleges to follow their example. And two, it was written not by some free market enthusiast, but a professor and director of the Center for International Community College Education -- who describes himself as a long-standing "community college devotee."

Fransworth said he had his epiphany about private colleges when he attended a conference in Beijing organized by the World Bank's International Corporation in 2005. He said that as president of a community college, he had always been troubled by why so many students chose to pay 10 times more to private or proprietary schools over public community colleges.

The participants from emerging economies at this conference provided him the answer: Much to his amazement, he found, that, unlike the academic establishment in this country, these folks viewed the private sector in First World countries as the being far more effective in responding to the technical education needs of an economy than public colleges. "Most educators in the United States have chosen to believe that proprietary technical institutions cannot compete in quality and respectability with the public sector," he wrote. "Yet educators in many other countries view them as setting the standard."

Why?

Fransworth identifies four reasons:

One, private colleges firmly keep the needs of employers in mind when developing their curricula. This allows them to build relationships with local businesses so that sometimes they guarantee jobs to graduates years in advance.

Two, in order to prepare students for the workplace, these colleges place great emphasis on inculcating an ethic of professionalism, including insisting on proper attire in the classroom both by teachers and students. No strolling into class in torn jeans and an unwashed T-shirt.

Three, private colleges impose on themselves strict competency-based performance standards. They don't just indicate to employers what skills their students have been taught as public colleges do, they offer an assurance that their students have actually mastered these skills.

And finally, they don't force all students to waste time and money on courses in abstract liberal arts disciplines that have little relevance for employers. Rather, they emphasize applied courses in communications and mathematics.

By the way, a lot of private colleges in India too are embracing the applied over the theoretical approach to education as I reported in a piece for Reason magazine last year called: Where did India's skilled force come from?
http://www.reason.com/news/show/36681.html
This is one big reason for India's IT boom.

Academics who feed at the public trough might not understand this: But the bottom-line, so to speak, is that profits are a far more effective way of enforcing accountability on the higher education industry than either the good intentions of professors or heavy-handed state regulations.

Forget college, what you need is free WiFi

Posted on May 13, 2007, 3:27pm | Steven Titch

In a textbook case of how a politician can get caught up in the sizzle and hype of the Internet, Melissa Noriega, a city council candidate in Houston, declared Internet access was more important than a college degree.

"I think every family in Houston needs a computer. That's really what the difference is now. It's not a college degree. It's not any of that. It's whether you are wired, and whether you can get online and figure out your way," Noriega told KRIV, the local Fox TV affiliate.

Noriega, who garnered 47 percent of the vote in Saturday's municipal elections, qualified for a run-off against Roy Morales, who won 19 percent. The two are running for the council seat vacated by Shelley Sekula-Gibbs, who stepped down last fall to make an unsuccessful Congressional bid.

Noriega was speaking in support of a public-private municipal wireless project underway in Houston–which stands to rank second largest after LA. While it does not stand to be as big a risk to taxpayers as some other projects, the political motive here, as well as in other cities, tends to stem from misplaced panic that without a government-mandated program for cheap broadband, cities will be left behind. Admittedly, Noriega's "chuck-school-and-get-online" is the most extreme example of the breathless hyperbole that has surrounded municipal broadband, but it shows how civic leaders have a tendency to mislay perspective the moment someone says "broadband."

Civitium Breaks with the Muni Left

Posted on February 18, 2007, 12:14pm | Steven Titch

The founder and managing director of the biggest national consultancy for municipal wireless systems has ripped left-wing activists in San Francisco for their attempts to get the city dump its deal with EarthLink and Google and pursue a multi-million dollar, taxpayer-financed city-owned wireless network.

In what amounts to a repudiation of San Francisco's chapters of the Institute of Self-Reliance, Media Alliance and the American Civil Liberties Union, Greg Richardson, head of Civitium, which provides consulting services for cities that are pursuing and evaluating municipal wireless systems, accused both groups of promoting a political agenda at the expense of a sound business plan that would create a metropolitan wireless system that could provide free service to low-income residents.

Last week, the San Francisco Board of Supervisors voted to put the EarthLink-Google contract on hold in order to study the feasibility of a government-owned system. As a result, many feel that EarthLink and Google will ultimately pull out.

Civitium was hired by San Francisco to evaluate the bids for its citywide wireless plan. The company also is working with Chicago, Corpus Christi, Tex., Houston, Philadelphia and Phoenix. A list of client cities is available here.

"For the record, Civitium supports private-ownership of Wi-Fi for San Francisco, and we support the recommendations for public-ownership of fiber (with an open, wholesale model) presented by our partner, CTC," Richardson wrote Feb. 14 on Civitium's blog.

You Donít Need Municipal Broadband To do Telemedicine

Posted on December 6, 2006, 2:40pm | Steven Titch

It's darn near a clichČ: one of the big justifications municipalities make for finding their own broadband systems is for telemedicine applications.

But much more can be accomplished for much less. Discussing the Arizona Telemedicine Program at the American Legislative Exchange Council (ALEC) States and Nation Policy Summit in Phoenix, Dr. Ronald Weinstein, program director said uses a high-speed leased network backbone to connect 171 hospitals, medical centers and other health care organizations throughout the state. Applications include 24/7 teleradiology, patient consultation and observation and telepsychiatry. The network reaches rural hospitals, prisons and Indian reservations and just marked its tenth anniversary (it's not has if telemedicine is that new).

A program of the University of Arizona Health Science Center, the project received finding from the Arizona state legislature, but largely subsists on grants from diverse federal funds, which totaled $20 million in 2005.

Although municipal projects make much of the need for high-speed local networking, the Arizona network, while making use of a high-speed backbone, uses managed bandwidth allocation to balance loads. Much of the manpower and investment goes for equipment and the hospital end, and even then the accent is on economy.

The network even supports IP telecommunications. Weinstein told me that one of the Navajo tribes funded and extension of the network throughout the reservation.

I'll concede that government funding is involved here, but the program's grants come through a competitive process. Needless to say, no one felt that a municipality had to ask its taxpayers to take up the cost burden. Arizona certainly didn't go out and build the infrastructure itself. The project also recognized that a sound business plan, training and standardization were more critical elements.

All of these alternatives are important to remember, especially as Reason releases its report on the difficulties in Provo, Utah, a municipal system that started with high hopes and ends up in mounting debt.

Westchester Candidate Sees Cellular as a Public Utility

Posted on November 5, 2006, 7:59am | Steven Titch

It was only a matter of time before it happened, but a candidate for office in the upscale Westchester County, N.Y., community of Lewisboro has called for the creation of a municipal utility to offer residents cellular phone service.

Local conservative columnist J.D. Piro, writing in the local weekly, The Lewisboro Ledger, reported statements by Tom Herzog, the nominal Republican candidate for town supervisor, during a debate last week, and took them to their logical conclusion.

"Saying that cell phone service is now a 'necessity,' Mr. Herzog suggested, in all apparent seriousness, that cell phone service should be a public utility, reasoning that people would then treat cell towers like telephone poles.

"Now there are really only two ways to make cell phone service into a public utility. One is for the government to seize the local assets of the commercial wireless service providers in the area. Perhaps Mr. Herzog, who claims to be a fiscal conservative, can consult with Venezuelan President Hugo Chavez on the cheapest way to do that. The second way is to spend several million dollars developing a local operation to compete with companies that have a national service footprint and 20 years of experience.

"Since Lewisboro is not Venezuela, it's doubtful the first option will get out of the box. The second option represents a significant budget expenditure, since Lewisboro – a town that can't even expand its library – would have to build a functional digital cellular system from scratch. Not even the fiscally questionable wireless initiatives being considered by a number of U.S. municipalities attempt to do that."

It's a classic example of how even at the lowest levels, governments never shy away from finding more ways to increase size and interference. Herzog's proposal came as a suggestion as a way to solve a dispute over placement of a cell tower that would greatly improve coverage of the area. The irony, of course, is that tower dispute stems from restrictive zoning laws that regulate where companies can build place towers to begin with.

Herzog also raises all sorts of issues when he equates cell phone towers with telephone poles. Telephone poles can be easily erected on town right-of-way, i.e., alongside public roadways. Cell towers have to be placed more strategically and comprise a lot more than just a stick in the ground. Radio cabinets and controlled environment vaults are usually part of the package--hence the zoning battles in Lewisboro and elsewhere. Is Herzog implying he would declare cell service a utility in order to use eminent domain to force cellular tower placement on private property? He never goes as far to say so, but that's a real concern whenever a government official uses terms "utility" and "necessity" close together. While the idea is doubtful to ever come to fruition, Lewisboro recent past shows an affinity for regulatory takings, namely in the form of an overreaching wetlands law that allows the town to block modification or development of any piece of property where any standing water is found. .

If I lived there, I'd be a little discomfited.

Moyers makes a poor case

Posted on October 18, 2006, 2:32pm | Steven Titch

We're watching PBS so that you don't have to...

My dedication to sound telecom policy knows no bounds. But since "The Net at Risk," the third and final installment of PBS series Moyers on America, aired at 9 p.m. in Houston last night, I was able to mellow out beforehand with a glass of wine. Good thing, too. For those who wish to devote their valuable time to this 90-minute peon to the virtues of government control, it can be viewed here.

What is wrong with this report? Where do I begin?

In an effort to make the case for a number of controversial policy initiatives, "The Net at Risk," distorts and omits many of the facts about America's diverse, vibrant and competitive telecommunications industry. Instead, the paints a dark and inaccurate picture of a handful of big corporations poised to strip our Internet and online freedoms in an effort to seize control of this ever dynamic medium.

Bill Moyers Takes on the Net

Posted on October 16, 2006, 1:03pm | Steven Titch

Here's a show that looks like it has everything a good work of fiction needs: laughs, chills and, above all, verisimilitude, the art of sounding true while blending fact and fiction to suit the purposes of a good story.

"The Net @ Risk" (complete with that oh-so-90s @), part of the Moyers on America series, airs Wednesday night on PBS to make the case for big government's interference in all things Internet and Web. While I have not seen the whole show, a look at the clips available at the Moyers on America page gives the impression that Moyers and his team will assert that without network neutrality, municipal broadband, and other government intervention in the market, our First Amendment rights are toast.

We will be treated to one of those soft-spoken narrators who never met and audience he couldn't talk down to, who will let loose with such whoppers as the data over copper is limited to 1Mb/s (it's more like 13 Mbs) and that 100 Mb/s fiber connections are required for any sort of interactive audio and video, such as participation in a town meeting. So much for the laughs.

The chills, at least in a South Park sort of way, are supplied in a scene where Joan Blades of Moveon.org and Michele Combs of the Christian Coalition appear on camera together to endorse network neutrality, providing a juxtaposition of radical stereotypes--the aging, wirey-haired ex-hippie and the big-haired, cherub-cheeked, heavily-lipsticked southern evangelical.

As if that isn't enough, Moyers is going to profile the municipal broadband effort in Lafayette, La., which has been stalled for more than a year because the city hasn't been able to craft a financing plan compliant with a state law that prohibits municipalities from using revenues from utility monopolies (e.g., electricity) to pay off bonds issued for competitive operations (e.g., broadband). However, it is my suspicion that the producers chose Lafayette because it exists only on paper. They can sidestep the real-world financial problems faced by cities that went ahead with these disastrous plans. Something tells me we won't hear about Ashland, Ore.; Marietta, Ga.; Lebanon, Ohio; Bristol, Va.; or Provo, Utah, during this program.

But it's the distortion that will be most troubling. In the preview of the Lafayette segment, Joey Durel, city parish president of Lafayette, tells the camera that without the municipal broadband, Lafayette would have to wait 20 to 30 years for commercial fiber deployment, when, in truth, Cox Cable has been deploying fiber in Lafayette since last year. In the full program, will it be noted that Louisiana Gov. Kathleen Blanco effectively blocked cable competition by vetoing a cable franchise reform bill that would have allowed BellSouth to apply for a statewide franchise to offer video?

In the net neutrality preview, the narrator talks about efforts "to restore" net neutrality, even though net neutrality was never encoded as law to begin with. Today, they exist as FCC guidelines, which the commission has shown a willingness to enforce.

I will tune in Wednesday, but with reservations. From the tone of the preview and the press releases that accompany it, it's clear that the report will come down heavily in favor of government regulation of the Internet. I hope it will at least address some of the potential consequences, mostly unintended, that would likely occur if the government prohibited quality-tiering and packet prioritization of Web applications, or allowed cities and towns to pour millions of dollars into broadband systems that, time after time, have proved neither competitive nor cheap.

More Municipal Wi-Fi Pie in the Sky

Posted on September 25, 2006, 3:01pm | Steven Titch

San Francisco taxpayers might end up being the biggest losers after all now that Bay Area muni-loonies have succeeding in getting the city to second-guess its planned deal with Google and Earthlink.

The Institute for Local Self Reliance (ILSR) and Media Alliance, which for months have been protesting the San Francisco plan to allow Google and EarthLink to provide free wireless access across the City by the Bay for the sole reason that the two companies might actually profit from it, instead want the city to fund and operate the network. Never mind that the formula that has proved fiscally and operationally disastrous in just about every market it's been tried.

Here ILSR promises that a municipal network will cost San Francisco just $10 million, and revenues will be enough to pay back that investment in 4.2 years. For starters, $10 million is a dubious figure. Google itself estimates it's a $12 million job. Back in 2005, when it was considering a municipally-financed network, Philadelphia, a smaller and far less challenging city from a radio engineering point-of-view, estimated the cost of a citywide system to be $10 to $15 million (see CNET story here). Overall, ISLR says, San Francisco's municipal system would generate $6.1 million in revenue over the first five years. How ISLR derived these costs and projections is not really explained. But then again, the group is just following the old muni playbook, throw out numbers that look good, let the taxpayers deal with the consequences later. Remember Chaska, Minn., hailed as a muni wireless success, until TechDirt reported that the town went 50 percent over its $600,000 budget just to get the system to work right--and that was before they decided to upgrade to a new generation of equipment.

Followers of this blog will recognize ILSR as the group that tried to derail the Minneapolis private-public partnership with the same anti-business whining. Fortunately, its diatribes fell on deaf ears–and its wasn't as if Minneapolis, with police, roads and schools to fund, had the extra millions sitting around to fund a service that would primarily be used by university students and middle-class professionals.

Nonetheless, the San Francisco Board of Supervisors has agreed to revisit the idea of a municipal network, with a report due in December. Meanwhile, Google and EarthLink are growing impatient with the pace of negotiations as cities all around the Bay Area find success in choosing private enterprise over the public purse. Google itself has launched free wireless service in Mountain View. Then there's the massive IBM-Cisco-Azulstar-SeaKay project that will feature 1 Mbps free service and span 1,500 square miles in Silicon Valley. Even as this occurs all around, Media Alliance and ILSR have somehow sold San Francisco's government that there is market failure in public broadband and the only solution is government ownership.

What do China and Culver City Have in Common?

Posted on August 29, 2006, 7:42am | Steven Titch

They both censor the Internet.

Culver City, Calif., is the first operator of a municipal wireless network to filter legal content and applications that the city finds objectionable.

The city has installed filtering software that blocks access to legal adult sites and, more significantly, prevents peer-to-peer file sharing. Ironically, municipal networks are often touted by activists who say commercial service providers are more likely to interfere with free access to Web content. Let the record show that the first U.S. ISP to censor Internet access was a muni network.

Plus, the guidelines for filtering are purely arbitrary. It is not as if they are blocking illegal sites. Instead, the city says it seeks to block "problematic content." That could just as well as include sites like www.reason.org, which routinely criticize municipal broadband.

The decision to block porn sites might score a few points with the "family values" set, but Culver City's decision to blcok P2P sites, which include Bitorrent, LimeWire and KaZaa, just to name three, is indefensible and more than likely, politically motivated. We can't help but notice that Culver City is home to three major movie studios, who, in typical Hollywood fashion, have been railing against P2P while seeking ways to commercially exploit it. The Motion Picture Association of America and Culver City even collaborated on a press release praising the filtering decision.

As the studios no doubt draw a lot of water in Culver City, it's easy to see why the local officials would easily yield to the slightest pressure to censor P2P, at least until the studios start buying up the sites. Of course, for the other 40,000 taxpaying residents who are footing the bill for the municipal operation, the town has made the service that much less competitive or desirable. This is another reason why muni networks are a bad idea.