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Chamber's (unanimous) endorsement documents
The Lafayette Chamber of Commerce has posted its endorsmement documents on its website. You can get a summary in the form of a press release, an eight page postion paper (with references) and a two page executive summary. You can also get a look at earlier docs that support this one—(their broadband policy, and a paper on public/private issues)
The endorsement, as rumored, was unanimous. That's great—and frankly, unexpected. An endorsement has been inevitable for some time but unanimity is a valuable extra. The downside is that, apparently to get that unanimity, the chamber chose to press for public/private partnerships in both construction and running the utility. Two sources that were at the meeting last night have made a point of assuring people that the Chamber's support is complete and in no way conditioned upon the city or LUS agreeing to put city property into private hands.
What is demonstrated here is the coming together of Lafayette. We've got Democrats sitting beside Republicans and plotting cash, phone banks and walking bands. We've got citizen's groups forming with representation deliberately drawn from every corner of the city. We've now got the Chamber of Commerce aboard—unanimously.
This is all to the best: the more we come together, the more obvious it is to BellSouth and Cox that the community is unified in its support, and the less likely the fight is to get really ugly and divisive. Only when it looks likely that a campaign of fear and distrust of our elected leaders and our local utility is likely to backfire will these corporations decide that the course they set themselves on last summer is counterproductive. As was once said: "They need to get out of our way because we are not going to stand down on this." BellSouth and Cox need to understand the truth of those words.
The development of a pro fiber PAC— Lafayette Yes!—is covered in articles in today's Independent and Advocate. Both articles cover the basics of what looks to be the major money-raising arm of the campaign to bring fiber to the home in Lafayette. Headed by Kaliste Saloom III, the newly formed PAC will focus on making the media buys advocating a yes vote that the city, restricted by state law, cannot.
The Independent article, " Release the Hounds: Dueling fiber media campaigns get rolling" focuses on providing background. It notes the slow but definite lift-off of the corporate BellSouth/Cox campaigns. Steve Creeden, former Cox employee, reveals Cox's ability to rapidly expand its ad campaign by using spots it normally reserves as promotions and gimmes for its advertising staff. The use of such advertising space would effectively mean that Cox, at least, would have to spend very little money out-of-pocket—and that anyone who'd like to track how much Cox is actually spending would have to track the in-house ad usage very closely.
Interesting quote:
An unexpected grass roots organization is also afoot to promote the fiber initiative. Don Bertrand, a local landman who also serves on the parish Republican Executive Committee, is collecting personal endorsements on his newly formed Web site Fibre911.com., and has 100 volunteers. He sees the pro-fiber stance creating strange bedfellows. “We’re going to have people from the local Democratic Party and people from the local Republican Party,” Bertrand says. “We’re going to have UL students. We’re going to have people in neighborhoods. I don’t think this is going to be your regular campaign crowd. It’s going to have its own unique characteristics. We’re not for an individual here. We’re voting for an idea, a vision.” The Advocate article, Fiber optics PAC created, covers some of the same ground. Like the Independent's article, the Advocate's emphasizes issues of local pride and a certain 'we can just do this for ourselves' spirit on the part of the pro-fiber partisans.
Interesting quote:
Opponents of the plan, like BellSouth, Cox Communications and a group called Fiber 411, have said the LUS plan is too risky, not fair to their particular businesses and better left to the private sector. Saloom said many of those same arguments have been made over the decades when private companies have tried to buy LUS from Lafayette residents. Saloom's father, retired City Judge Kaliste Saloom Jr., was city attorney in 1949 when voters rejected such an overture from private business and decided instead to borrow money to expand LUS' services. The situation is much the same today, Saloom said. In sum: You definitely come away from these articles with the sense that Lafayette will be prepared to answer the media onslaught to come, if not dollar for dollar, then at least with a lot of local spirit.
Standing Up! Chamber endorsement in hand
The Lafayette Chamber of Commerce this evening endorsed LUS building fiber to the home. Wonderful! And congratulations to all that have labored so hard to bring this about.
Lafayette is coming together.
Last week I posted on a discouragingly long list of state-level attempts to pass laws restricting municipal efforts to develop local telecommunications utilities. The list represents the fruit of a concerted effort by the large telecos to eliminate an entire category of competition. As was the case last summer in Louisiana, most of the legislation originated with teleco lobbyists.
Having lobbyists write legislation that bears the signature of elected legislators is no longer remarkable. But occasionally we get a story that highlights just how out of whack things have gotten. In the story " Internet access sparks tug of wa,r" the Charleston Daily Mail of West Viriginia reports that:
John Ruddick, a lobbyist for Verizon, left Wednesday's meeting of the Senate Transportation and Infrastructure Committee furious after the committee originated a bill that could involve state, county and municipal governments in extending broadband computer services across the state.
What upset Ruddick was not only that government would get involved in providing services already offered by Verizon, other telephone companies and cable television companies, but that the bill sprung out with just 17 days left in the Legislature's 60-day session.
"You know all of our broadband providers are interested in it, and you secretly put out a bill to do this," he said. "That is wrong."
Committee Chairman John Unger, D-Berkeley, said he and others did consult with Verizon, Adelphia and other companies, but he made no apologies for not releasing the bill to them before it came out of his committee.
"The special interest groups think they ought to see the legislation before the legislators see it," he said. "That's where everybody's got it backwards around here. They've got it backwards, because they think that the special interest group ought to draft the legislation and then show it to the Legislature, and that's not the way it should be." Amen, Brother Unger. How did things get so crazy that a state legislator has to defend actually writing law instead of leaving it to lobbyists?
A new study, Does Municipal Supply of Communications Crowd-Out Private Communications Investment? An Empirical Study, examines an issue we've heard a lot about here in Lafayette: How private investors will react.
It isn't uncommon to hear opponents of fiber say that it is "obvious" that if we choose to invest in ourselve, outside companies will be offended and choose not to invest here. But it isn't clear that this assumption is true—businesses don't generally make their decisions to invest in a community based on anything other than profit potential. It is an open question whether, on the balance, an inexpensive municipal network creates rich new markets thereby encouraging investment or whether it results in less potential for investors.
This isn't a theoretical or ideological question: it's one that can only be settled by going out and looking at how things turn out in the real world. That is what the authors of this study do. Here is what they found:
Conclusions
The municipal supply of communications services is on the rise. While constituents are generally delighted with the municipal services, incumbent firms that compete (or may do so at some later date) with these systems are unsurprisingly displeased with the rise of municipal communications. The incumbents levy many arguments against municipal entry, one of them being that public investment in communications networks crowds out private investment. In this paper, we subjected this hypothesis to an empirical test, and found no evidence to support the "crowding out" hypothesis. Indeed, the empirical model indicates that municipal communications actually increases private firm entry and, presumably as a consequence, private investment.
The paper is pretty mathematical in places but the conclusions are clear enough. The theory that public investment drives out private investment is not supported. Instead, investment in infrastructure provides the basis for a greater degree of private investment and competition.
(Thanks to Max Hoyt who highlighted this paper in a meeting I attended earlier today.)
The American Public Power Association (APPA) has just published a white paper that carefully documents the ways in which "research" (and I use the word advisedly) done under the sponsorship of the nation's telephone and cable companies misleads its readers about the economic facts of municipal telecom utilities.
What is indisputable, and no research, pro or con, that I have seen tries to disputes this, is that the people in towns and cities that have public telecom utilities love them and are convinced that they have better services at cheaper prices because of them.
What the teleco-dependent researchers have to accomplish is to convince people in cities that do not yet have such utilities that people in towns that do have them are wrong. It's a tough sell.
This particular paper, " Paying the Bills, Measuring the Savings" examines the granddaddy of all such papers, dissects its mistaken assumptions, points out the inadequacies of the data set selected, and finally shows that its conclusions that the utilities were secretly losing money are wrong. Even more devastating for the hopes of its corporate sponsors, the APPA study shows that dire predictions for the future of the utilities examined were wrong. The targets of the original study remain viable, valuable, and respected parts of their communities.
We in Lafayette will be only mildly surprised to discover that the lead author of the original study, Ronald J. Rizzuto, is the same Rizzuto we are familiar with from the the "Academic Broadband Forum" sponsored over at the Holiday Inn Holidome in August by BellSouth and Cox. We reported on the event and on the background of the panelists earlier. That event was a textbook case of disinformation about municipal utilities and much of the dubious "research" presented there relied heavily on the model developed in Ruzzuto and Wirth's original paper.
The APPA paper should be studied by anyone who would like to understand the current debate over public and private ownership of municipal utilities. People too often assert with perfect confidence that all (all!) municipal telecom utilities lose money (as was done at our "Academic" forum). These flawed studies are the only basis (other than raw ideological certainty) for asserting something that seems otherwise so incredible.
The chief problem with the industry-sponsored studies is their assumption that what makes a private for-profit company successful is the same thing that makes a public utility successful. But of course, that isn't true.
Private, for-profit companies exist to make money. They hope to extract the maximum return from each account and that is what motivates them to provide any services they offer the public. Success is measured by how much money they return to their owners. A private company is most successful when its profit is large.
Public utilities also exist to serve their owners well. The difference is that the owners of public utilities are the same people as their customers. Public utilities have to return value to their owners as well. But typically they are motivated to leave dollars in the pockets of their customer/owners rather than to charge them the maximum that the market can bear. That, along with ensuring local control of the quality of the product, is what motivates communities to build utilities. A utility's motivation is close to the opposite of that of a private company. It wants to leave the maximum amount of money in the pockets of its customers (because that is the way to best benefit its owners). Put dramatically: a utility is most successful when its "profit" is very small.
Rizzuto and Wirth's study simply misses this crucial distinction and the most critical of their errors are a result of misunderstanding what makes a utility successful. The APPA study works you through the fine points in excruciating detail. But I recommend doing just that. The mistakes are so obvious when explained clearly that it is hard not to feel that they are willful. And almost every study I know of that purports to show that utilities have any financial problems as a class cite the Ruzzto and Wirth study and rely on its mistaken analytical model.
The slow walk through the three very concrete cases compares the image put forward in the original paper with the reality of the utility's success and its popularity with the local community. The thoughtful analysis goes a long way toward allowing reasonable people to simply dismiss arguments based on the idea that utilities are usually or even often financially unsound.
There are three certainties in life: 1) death; 2) taxes; and 3) that the FCC under Michael Powell will favor incumbents over consumers every time out the chute.
Case in point, the latest ruling of the Powell tenure.
The Washington Post reports that, in a 3-2 vote on Friday, the Powell FCC ruled that states cannot require the Regional Bell Operating Companies (that would be BellSouth, here) to offer a broadband DSL connection without making consumers also pay for a phone line.
No doubt, we'll be hearing a great deal about "unfair competitive advantages" from Cox and BellSouth in the coming months of the community discussion about the LUS fiber to the premises project. When you do hear that, consider this summation of the impact of this ruling:
The ruling effectively gives BellSouth and other regional giants an advantage over competitors trying to sell alternative phone service. The Post reports that BellSouth first sought this ruling back in 2003.
This is another installment of the anti-competitive war that BellSouth, the other RBOCs and the cable companies have waged since passage of the Telecommunications Act of 1996. They have fought every attempt to force them to open their networks the vast majority of which were built when the companies were regulated monopolies and that resistance to competition has been aided and abetted by the Powell-led FCC.
That suppression of competition has resulted in less choice and higher costs for business and household customers of these incumbent carriers. At the same time this suppression of competition has taken place, levels of broadband usage in the United States have fallen to 15th in the world. We are being passed by other countries because providers here will not make the timely network investments necessary to deliver modern, Internet Protocol-based, networks where and when they are needed here and now!
There is a connection between the anti-competitive practices of the Bells (and the cable companies), the regulatory decisions of the FCC, and the precipitous drop of this country as a leader in the usage of broadband connectivity even by the ludicrous standard used to measure "broadband" which is somewhere in the neighborhood of 200 kilobits per second.
The vote on the LUS fiber project will be a vote on whether we accept the status quo or choose to invest in ourselves and our community to deliver a new vision of Lafayette in the 21st century. Who benefits from maintaining the status quo? BellSouth and Cox. With friends like these, who needs enemies?
ProFiber meet-up last night
There was a meetup of pro fiber partisans last night and good things happened--some of them largely unplanned.
The meeting was designed to put folks from a wide range of Lafayette communities, networks, and organizations in touch with each other and it succeeded in that goal. We talked with folks from the northside and the southside, techies and folks without email, moms, citizens, businessmen, creatives, party officials, campaign managers, and advertising gurus. The focus was on building, from the very beginning, a citizens' group that could wage a grassroots ground campaign that would reach into all areas of the community.
One benefit of such a gathering is that it puts folks together that need to meet. The chair of the Lafayette Republicans and members of the Democratic executive committee attended, as did folks from a forming PAC and people active in the campaign to come. The Democrats, the Republicans, and the money guys got a chance to get themselves in synch about funneling contributions to useful places. There was also some needed coordination agreed to between the political parties and PAC guys, particularly concerning the contribution of the two parties to the crucial last days of campaigning. All very good things.
But the PAC/s and media buys are what might be called “the air war.” The local citizens' group envisioned by those at the meeting are the ground campaign. Elections, especially ones that are centered on ideas, are won by word of mouth—by family, friends, and neighbors talking to each other. And that is where this citizen’s group will focus its efforts. Our advantage will be that we can be light and lithe...reaching out into each community or professional group and communicating with them on their own terms. Low-cost viral campaigning will be the forte--everything from house parties to song-writing contests to 30-second downloadable “ads” are fair game. But the solid core will be talking to our neighbors, having good information to share, and developing effective means to deliver the message.
For an effort like this to be effective we’ll need to be everywhere. The first job is to bring more people—and their networks—into the group. Folks like you. Join in! To do so, drop us a line at StandingUp@LafayetteProFiber.com or get in touch with the folks at Fibre911.
Here's one for your bookmarks list. Never know when you might need to check and see if you are in it.
It's a regularly updated list of laws currently under consideration across these United States that would restrict the entry of municipalities into telecommunications enterprises. Each listing includes a brief description of how the law would restrict cities and towns. The length alone should be instructive if you've any doubt that the telecom companies are waging a systematic campaign across the nation to eliminate an entire sector of competition. It's dry reading but if you can stand it you'll discover substantially similar laws in several states. It's a testament to the ingenuity of lawyers and the malign power of marrying ideology to financial self-interest.
It's one of those horror-story like things. It's not interesting reading. You know what is coming next. It's gonna be awful. Still, you steel yourself to read just a little more. And are generally sorry you did.
Nothing says that folks have really gotten tired of Cox and BellSouth as powerfully as when the comic strips start to sound grumpy. Sometimes it's just hard to be funny.
Go get this week's edition of Snake Oil at the Independent. Unique ideas for bumper stickers and pins.
BellSouth is asking the FCC to kill what is apparently one of the best kept secrets in the industry. That secret is the fact that in four states (and Louisiana is one of them!), BellSouth must offer what is called "naked DSL" that is, DSL without having to buy local phone service from the company.
CNET's News.com has the story.
How well kept is this secret? According to a BellSouth spokesperson quoted in the story, a total of 8,000 customers have signed up for this version of the service since 2002! As a former BellSouth DSL customer, I don't recall ever hearing about the availability of this service. It was, as far as I can recall, never mentioned as an available option during the time in which I did business with them.
Typically, BellSouth positions this anti-consumer move as being in the best interests of consumers:
Among other things, BellSouth and its supporters have warned of the possibility of slightly different naked DSL rules in all 50 states, which would slow broadband growth in the United States and undermine BellSouth's incentive to invest in the service and the underlying network. BellSouth also points out in FCC filings that some states have opposed naked DSL rules. Aside from better rates for consumers, what is really driving BellSouth's effort to kill naked DSL? Competition and innovation, according to a spokesman for the National Association of Regulatory Utility Commissions.
"Standalone broadband, one could argue, may be a necessary prerequisite for independent, non-facilities-based VoIP providers to provide any competitive pressure on landline local service prices," argues James Ramsay of the National Association of Regulatory Utility Commissioners. Stifling competition, working to prevent the deployment of new technologies, and hiding information that could be advantageous to consumers.
BellSouth is anti-consumer, anti-business, anti-anyone-but-themselves. And they work hard to prove it every day!
Here's a nifty resource that explains the concepts behind broadband and the city-owned telecom utilities in a careful and pretty readable way. The site is devoted to encouraging localism and local self-determination, so the point of view they take pretty much dictates that they are for local communities being able to decide for themselves whether or not to provide telecom services. The immediate question "Dr. Dave" responds to is whether or not states ought take away their cities' rights to provide these services. Not surprisingly, Dave indicates that the answer is no.
What is considerably more surprising is the careful and conversational way he walks through the topic and the density of documentation he provides. Take a look--I think you'll enjoy it. And it's the sort of thing you might want to show neighbors or cousins to help them get up to speed on the issue. It's a nicely organized essay that tries to anticipate questions a reader new to the topic might ask.
Implicit questions on the concepts behind broadband as a national issue that he tries to answer include:
Do we need it?
What exactly is this thing called broadband? And why is speed an issue?
What's the delay in getting it?
Are you getting all you need? On municipal broadband:
Should cities be involved?
What is the benefit of cities building telecom utilities?
So what's stopping them? (Louisiana's Act 793 gets a mention about here.) Good questions all. "Dr. Dave" gives thoughtful answers.
Today's Advertiser carries a great Associated Press story, "Internet program hooks up needy La. households," on page 8C under a small grey banner "Digital Divide." I hope that banner indicates that we'll start seeing more such stories. Unfortunately, you can't find the story through the Advertister's website. But a little googling leads to locating the same story under the name "Grambling's Internet Program Wins Award for Hooking Up Households"—just scroll down.
It is a basically a success story about a project out of Grambling that aims to crack the toughest nut in the digital divide: the low levels of participation among the rural poor and especially the rural poor who are also black. Sensibly, the program works by tapping into the community structures, in this case local churches, to help develop internet skills.
It's a good story; I'll excerpt a big chunk in case the linked-to text goes away:
In the last year, Erica Sawyer, a single mother of two living on a teacher's salary, has grown closer to her children and seen them blossom in their schoolwork.
What difference does a year make? Sawyer, a Farmerville resident, was one of 50 low-income, Black households selected to participate in a Grambling State University Internet program studying the “digital divide” that residents like Sawyer must fight to bridge in rural areas.
“The program is a great blessing to my family. I've never been able to afford a home computer on my own with kids,” she said. “On Saturday mornings, instead of my kids just watching cartoons, we're all on the Internet together learning...”
“The prevailing philosophy is there's no point in putting broadband (Internet) in rural areas because no one will use it. But our preliminary data shows we're about to blow the doors off that,” he said...
At New Hope Baptist Church in Homer, one 13-year-old student who was on the verge of dropping out of school, started regularly attending the lab. He is now an honors student, said lab moderator Gussie Young, the pastor's wife...
“The prevailing philosophy is there's no point in putting broadband (Internet) in rural areas because no one will use it. But our preliminary data shows we're about to blow the doors off that,” he said...
The Southern Growth Policies Board, a public policy think tank in North Carolina, recently granted the program its 2005 Regional Innovator Award for Louisiana.
A lot of the participants in the Louisiana Rural Internet Connection started out with no computer knowledge at all and were “afraid of the technology,” said Margaret Lowery, GSU CareerNET director, and some could not even use a mouse.
But they have all come a long way. The children's grades have improved and they are using e-mail and banking online. One woman even put her small flower shop online, she said.
Essentially, the Internet usage data collected has come to mirror the middle class, Bennie Lowery said. While lack of accesss to a wide range of modern technologies is worst in rural areas (this program had to use satellite technology), it's an issue everywhere. In urban areas poorer districts are always the "least and last" to be served by commercial providers. The lessons that programs like this teach about lowering barriers to usage, working through the community, and providing good training are well worth learning from. But what is really invaluable is that such studies should dispel that idea that some people don't want or need and somehow wouldn't benefit from access to the same advanced technology that the rest of us find increasingly necessary.
Claire Taylor of the Advertiser talks to our friend Annie Collins (see our interview with Annie) about what Lafayette can expect during a fiber referendum based on her experience during a referendum battle in the Tri-Cities area of Illinois.
Annie was outspent at least 56 to 1 (which we analyzed in a recent post); she spent $4,000 and the incumbents spent in the $300,000 dollar range at latest count. Annie tells an ugly story of the incumbents' FUD-based campaign of misinformation. The Bell/Cable campaign, its volume racheted up by its ability to spend effectively unlimited amounts of money, drowned out the voices of pro-fiber activists.
From the story:
Collins said Lafayette residents should prepare for a barrage of newspaper ads, television ads, billboards, flyers, postcards and messages on answering machines opposing the project. "They started about 60 days out. They started sending people - retirees - door to door, telling people they were going to lose their pensions. They said they would lose their jobs," she said. The incumbent telephone and cable TV providers cited alleged failures of broadband utilities across the country, paying for full-page newspaper ads - 28 in one week - Collins said. They distributed coffee mugs at train stations and brought in trailers of fiber-to-the-home equipment showing the latest products they could offer, Collins said. Comcast, the cable provider, even mailed to its customers a special greeting card created for them that read: "We're proud to be a part of life in this community." It was signed, "Your Friends at Comcast." The companies gave out yard signs, bought TV commercials, mailed flyers to homes, probably as many at 10 mailers to everyone in three towns. SBC, the telephone provider, sent two company presidents to debate Collins, a homemaker It's hard to know how to react to that litany. A little wry humor helps. That greeting card? SBC commissioned Hallmark to make it. The sugary contrast to the bitter battle to defeat local interests has to be seen as funny.
The article goes on to say:
Collins said residents who support the Lafayette Utilities System fiber project must form grassroots groups to campaign for the project because government cannot spend money to promote a yes vote.
"The deep pockets are a formidable foe," she said. "It's tough to face that kind of money. If we could have afforded some advertising and a way to get into people's mailboxes, that's the way we would have gone, too." "You need to talk to your neighbors. You need to go door to door. It needs to be a grassroots campaign and it needs to be run efficiently," Collins said.
She's right about all that. We need a citizens' group (or several) and Political Action Committtees (PACs) if we are going to be able to fight on anything like a level playing field.
Root around-- I'm sure you can find access to one of the forming PACs. But if your interest is in doing the work of talking to neighbors and friends, find a citizens' group. Emails will get you in touch with forming citizens' groups at two addresses: fiber@lus.org or StandingUp@ Lafayette ProFiber.com (The link to StandingUp in the article is bad. This one works. I'll post a note here when it is corrected.)
This story sends a valuable warning shot across the bow...it's time to strap down and get to work if we are to defend ourselves against incumbent misinformation and money.
Baller on wholesale vs. retail muni fiber
In an earlier post I said I hoped to get a few thoughts up about wholesale and retail issues in municipal fiber-optic networks, but 'stuff' (and the installation of a 240 line for a nifty new oven) has gotten in the way. Sometimes, however, life hands you a little present just when you need it. Jim Baller, a leading national telecom lawyer, has recently addressed this issue on the "Getting Illinois Online" list (see LPF's interview with Baller). Not coincidently, LUS is a client of Baller's and his reasoning on this issue may well have influenced Lafayette's decision-making process. Be that as it may, I doubt that there is anyone with more extensive or intimate understanding of the many municipal fiber builds in this country.
[Timeout for some useful background: the text below is a response in a threaded discussion. Such forums—unlike online chat rooms or casual conversation—are places for fairly slow-paced, considered, and fully explained exchanges. We don't have much in the offline world anymore that feels like a good threaded discussion list; the nearest thing I know to this is the older idea of relaying round robin "letters of correspondence," which was the basis for the first systematic exchanges of scientific findings and speculation in the 18th century—a practice the founding fathers appropriated to spread the rationale for the American Revolution. Writers expect that they are speaking to a crowd with a shared history and informed interest in the topic, so the writing tends to be denser than in other contexts.]
The immediate context in which this post appears is an ongoing discussion of whether municipal broadband initiatives (which are assumed to be a good idea) ought to be restricted to wholesale-only models or whether the sale of retail services should also be allowed. One participant on the list, Don, had seen Baller make an argument in favor of "choice" at a conference in Peoria and, knowing Baller was a participant on the list, asked him to repeat the argument for the benefit of the group.
This is the way Baller responded:
OK, Don, here goes.
As I stated at the Peoria conference, my religion is "informed local choice," and I support any feasible involvement model that a community may wish to implement. That includes the wholesale-only model. In fact, several of our clients are currently engaged in wholesale-only projects, primarily because that's all they can do under the laws of their states, and I sincerely hope that these projects succeed. My main objection is to the notion of imposing a wholesale-only model on communities as a matter of legislative fiat, particularly in the absence of hard evidence from the field that a wholesale-only model can actually work over the long term under the conditions present in most municipalities in the US.
Let me give you a simple example that illustrates how a municipal retail model may work in a community in which a wholesale-own model may not. For purposes of this example, I'll focus on video services and ignore most of the other factors that one would typically evaluate in determining the feasibility of a municipal broadband project. I should also note that retail service is not rocket science, at least for municipalities that operate their own utilities. The cable industry's whining to the contrary is just bull-twaddle. More than 100 municipalities have been doing this successfully for years. In fact, Frankfort, Kentucky, has been doing it since the 1950s. An important reason why municipal retail service is relatively easy in the US is that, to stimulate competition in the cable industry, the Cable Act Amendments of 1992 authorized and encouraged the formation of video programming buying cooperatives. Now, virtually every public and private cable operator, except for the giant cable incumbents, gets the vast majority of its programming through a large buying cooperative known as the National Cable Television Cooperative (NCTC).
Now, let's suppose that a municipality wants to build a state-of-the-art fiber system, to give its government agencies, businesses, schools, medical institutions, residents, and others affordable access to symmetrical bandwidth capacity of 100 Mb/s or more. To pay for such a system, the municipality must receive substantial revenues on each major service, including voice, data (including broadband), and video. More specifically for our purposes, in a typical fiber project, financial feasibility will depend heavily on the amount of revenue that the municipality can reasonably expect to receive on video services, either from providing retail service to subscribers, from providing wholesale service to one or more third-party retailers, or from providing a combination of retail and wholesale services.
Next, let's assume that the municipality wishes to push cable rates down as low as possible, effectively giving the community a dividend on its investment in the fiber system and keeping the savings in the local economy, where they will circulate many times over. The municipality, unburdened shareholder demands for high short-term profits, can set retail rates just high enough to recover its costs, including capital costs, NCTC's video programming charges, other operating costs, and amounts sufficient to fund future upgrades. At these rates, the municipal system might well be able to attract enough subscribers to make the project feasible. (One would determine this through surveys, focus groups, interviews, experiences in other projects, etc.) If the municipality set its rates much higher, it may or may not be able to overcome the existing cable operator's advantages of incumbency -- i.e, an existem system built and largely paid for with monopoly profits, earned before there was any competition, a starting position of dominance in the market, ongoing revenues from a substantial subscriber base, subscriber inertia, the ability to use its cable system to flood subscribers with disparaging statements or disinformation about the municipal system, and a host of other advantages.
Finally, let's assume that the municipality is limited by state law to providing wholesale service and can proceed only by injecting a private-sector retailer into the mix. The retailer will have to set rates high enough to cover the municipality's wholesale rates (through which the municipality must pay for the fiber system), NCTC's video programming charges, the retailer's other capital and operating costs, and a sizable markup to generate the profits that the retailer's shareholders demand. Especially in small markets, in which there are relatively few potential customers to spread the costs of a fiber system, this may push rates high enough to leave subscribers little incentive to switch away from the incumbent. Furthermore, many subscribers may view the private-sector retailer as just another profit-driven outsider that will siphon revenues out of the local economy. In these circumstances, lower anticipated take rates might well render the project financially infeasible, as well as much less attractive to the community.
With regard to Jeff Sterling's suggestion that the Nordic countries are proving that "open access" works, that is not inconsistent with my point that we have "no long-term evidence from the field demonstrating that wholesale-only actually does work." For one thing, "open access" and wholesale-only are not the same thing. A municipality can offer "open access" to its system and at the same time provide one or more retail services. In fact, most municipal fiber systems are doing this, and the FCC has found that concerns about potential bias can easily be addressed by non-discrimination and competitive-neutrality requirements. Furthermore, I wish Europe's experiences translated well here, but I don't believe that they do. When I was recently in Amsterdam to speak at the European FTTH Conference, I listened very carefully to the European presenters and talked at length with many of them about their projects. In particular, I had several long talks with the founder and initial head of Skokab. I'm afraid that I just don't see Skokab or any of the other other European model working in America, at least as long as we require our systems to be fully self-supporting and our incumbents are intransigent about working cooperatively with municipalities.
In the end, even if the evidence showed that the wholesale-only model does indeed work -- which simply cannot be true in all situations -- I still wouldn't force it upon communities. Undoubtedly, many communities would choose the wholesale-only model, particularly if they lacked the experience to provide retail services themselves, but others would not. I strongly believe that communities are the best judges of what's best for them and should be free to decide these matters for themselves.
Jim Baller Baller is speaking in a discussion among friends of municipal broadband. In another context, the most powerful argument might be very simple: if you want to know what the most powerful and secure business model for this sort of enterprise is, look around and find out which model the most successful participants in the market use. In our context--ask what BellSouth and Cox do. What you will find, of course, is that BellSouth and Cox would laugh you out of the house if you suggested that they'd be better off deciding to go to a wholesale model and let other companies take a share of the profits made possible off their investment in their networks—companies without the gumption to build the necessary infrastructure for themselves. In fact, they don't allow anyone on their networks unless the FCC demands it. LUS should be allowed to adopt the same powerful business models that its competitors use.
The New York Times reports that (GASP!) all but one of the RBOC phone companies won't let you access what they call high-speed Internet unless you pay for a basic phone line.
That is, in those places where Regional Bell Operating Company (RBOC) customers can manage to get Digital Subscriber Line (DSL) access, you're also required to pay for a basic phone line even if you don't use that phone!
A spokesman for SBC says no one is forcing people to buy their broadband access from his company; but, in a number of cases it's the RBOC way or the highway.
Recall, now, how hard the RBOCs have worked and how much money they've spent in the mostly successful attempt to deny competitors access to the networks that they built during the decades when they (or their predecessor AT&T) were regulated monopolies. To use the lack of competition as leverage to force consumers to pay for a service that they don't want in order to get one they do was called "tying" in the Microsoft anti-trust case (which the Feds actually won).
It's such tone deafness to the needs and interests of consumers that have made RBOCs so unpopular. I for one am counting on BellSouth not being able to learn a new trick in the coming months as Lafayette moves to vote in support of the LUS fiber initiative.
This Associated Press background article datelined Kutztown provides a readable overview of current efforts by telecom companies to squash municipal competition. Louisiana gets a brief mention as one of the states where the push to use state laws to outlaw local competition was less than completely successful for the telecoms.
Kutztown is pretty little town in Pennsylvania's Amish region—I've got a soft spot for this region of rolling hills and narrow roads clogged with Amish horse-drawn buggies, since Sunday drives in that area were one of the pleasures of my position at the University of Delaware. Kutztown was one of the first towns to build its own fiber-optic system and has been regularly and unfairly presented in telecom company-sponsored propaganda as an example of how such builds have failed. (For Kutztown's reaction to this treatment, see the section on Kutztown in the TriCities " Broadband Failures" page.) Presumably the local reporter who wrote the story has the background to help cut through the incumbents' fog machine.
Well, the cost of taking a company private is, apparently, nothing to be sneezed at! Cox Communications lost a whopping $2.5 Billion during its last quarter of existence (before being consumed by privately held Cox Enterprises). This story says a fair bit of that loss was connected to the cost of taking the company private. This one says it, too.
The second story says that, if you take away the accounting charges, Cox's cable operations (the third largest in the country) generated over $600 million in profits. Cox says that it has 6.6 million customers nationwide.
The more interesting part of the Cox story (at least for me) is found in the numbers relating to its phone customers.
For starters, 44 percent of Cox customers are bundle customers; that is, they subscribe to more than one Cox service cable, internet and/or phone service. That seems like an awfully strong number. Using their national customer base figure of 6.6 million, that means that something on the order of 2.6 million or so of those customers are paying Cox in the vicinity of $100 per month. I base that guestimate on the local cost of a digital cable package plus high-speed Internet.
But, the really interesting part of the Cox story is the growth of its digital telephone service Voice over Internet Protocol (VoIP). Cox reported signing up just under 90,000 new digital phone customers ("the biggest quarterly gain ever," according to Cable Digital News), due in large measure to the fact that this new service was rolled out in five new markets in the last quarter of 2004 including Lafayette. Cox has a total of 1.3 million telephone customers, most of whom are not on the new digital network.
What does this have to do with BellSouth?
Well, Cox is not creating new telephone customers; they are, in fact, taking them from someone. In Louisiana, Cox is taking phone customers away from BellSouth.
Cox recently announced its intention to try to sell some of its assets in Louisiana and other places which are not poised for the kind of growth that Cox prefers. Cox wants to hold on to its New Orleans, Baton Rouge and Lafayette area markets.
Cox is signaling that it views those markets as having better than average overall growth rates and that it believes it can grown its market share in those growing markets. Just about all the market share that's there to be grabbed in those markets will come at the expense of BellSouth.
The 'Odd Couple' nature of the Cox/BellSouth alliance against LUS is even odder when viewed in this light. Cox is aggressively moving to take market share away from BellSouth at a time when BellSouth Louisiana execs can't convince their bosses in Atlanta to upgrade infrastructure investments in those markets to anything above regular maintenance levels. That is, BellSouth Louisiana can't convince BellSouth HQ to respond to the market challenge presented by Cox. The logic at BellSouth HQ being something like, 'how can we justify a big infrastructure investment there when we're going to be losing market share there for the foreseeable future?'
This could rapidly become a self-feeding downward spiral for BellSouth Louisiana. The markets Cox wants to contest BellSouth in are the fastest growing markets in the state. Cox has invested and will likely continue to invest significant dollars in their network infrastructure which will enhance their ability to win still more market share from BellSouth. That will leave BellSouth with slow growth markets here. It would be bad news for those communities, because they would continue to serve primarily as cash cows to fund BellSouth's more technologically advanced projects in other parts of the company's nine-state operating footprint.
The question for BellSouth will soon become at what point do we want to stop the bleeding if at all? There have been rumors circulating within the telecom industry that BellSouth will move to close its BellSouth Louisiana office in New Orleans within the next 18 months. This makes sense from a corporate organizational model because it would help eliminate layers of bureaucracy in the company. But, could it signal a more significant retreat from Louisiana?
With its only rapid growth markets in the state under competitive siege and with no significant infrastructure dollars coming down the pike to facilitate a response to the challenge, BellSouth Louisiana does not currently look like a company with a long-term strategy here.
Yet, they continue to partner with their fiercest adversary in a ham-handed effort to prevent Lafayette from gaining access to the kind of infrastructure that it will not provide here.
The word 'spiteful' comes to mind.
Danny Izzo makes the straightforward points that demonstrate that he at some time had a good civics teacher (in school or out):
Nearly everyone agrees we are better served having LUS in our community and there is a long history of local governments doing certain types of infrastructure business in the interest of the people. That is exactly what LUS is doing now.
We voted in precisely the way our founding fathers meant our representative democratic republic to work. We are not a "democracy." We elect representatives to handle our governmental business. Let them do their jobs! If we don't like the job they do, we can "UN-elect" them next time around or, if we believe they really screwed up, we can always start a recall. Providing utilities is basic good government and our representatives are supposed to represent us...not kick it back to us every time the going gets rough. It's good to see that people still recall these basic principles.
Update: Trolling back through my archives I see that the Independent published substantially the same letter on 3/2. Get yours from your local newspaper of choice.
Today's Advocate has an article which at first blush seems similar to yesterday's Advertiser story in that it lays out the sequence of events that have to happen on the way to a referendum. It's spiced up with a constructed debate between Tim Supple of fiber411 and Terry Huval of LUS on wholesale vs. retail models.
But what's really interesting in this Blanchard article is the concession that Tim Supple makes for fiber411 on the question of whether or not a fiber network is desirable at all. He says it is. He's right, of course. But the admission is still surprising—and noteworthy.
The arguments against fiber as a technology (by fiber411 and their allies) have to date been based on nothing more than suppositions, fear, uncertainty, and doubt about the technology of fiber-optic transport. Suppositions about "possible" new technologies, inducing unsubstantiated fears of "maybe" changes in basic transport technology, intoning that all technolgical change is uncertain, and suggesting doubt about the value of fiber have been the basic, even if clearly basically mistaken, tactic of the opposition.
The truth is that everyone with a dollar to bet is banking it on fiber-optic technologies--both the incumbents who are so against Lafayette building its own fiber-optic system are in the midst of slowly replacing their ageing infrastructures with fiber. The Federal Communications Commission has been so desperate to find ways to convince the carriers to build fiber to the home that they've been willing to trade what managed competition there was for a few years in the hopes of finally inducing the Bells to build their long-promised fiber to the home. (Let us all take a moment to mourn the loss of ATT and EATEL's money-saving service in Lafayette.) Tim is right to concede the basic point: Lafayette needs a fiber to the home system.
Getting rid of the the whole Fear, Uncertainty, and Doubt (FUD) tactic in relationship to the technology of fiber would be an enormous step forward in the public debate. It hints that someone in the debate might actually be willing to lay down weapons they know to be dishonest.
And that is the best sign about the battle to come that I've seen in a long time.
The story goes on to oppose too briefly the judgments of Supple and Huval as stand-ins for the pros and cons of wholesale and retail business models. It's a start, but the basic issue is critical enough to deserve a much fuller treatment. I'll try to toss in my two cents worth later today if I can manage the time.
EWeek carries a story— Municipal Broadband Bills Come Under Fire—that illuminates another of those odd alliances in the battles that are taking place in statehouses across the country over whether or not states should restrict the rights of municipalities to provide their citizens with telecom utility services. It is certainly an index of just how successful the incumbents feel LUS is likely to be that BellSouth and Cox, who certainly recognize that the day that they become mortal enemies is coming very soon, are joining forces to defeat it. Not quite as strange, but still remarkable, is the tale this story tells of a fiber-to-the-home supplier and a supplier of wireless mesh networks, who would normally see their technologies as competing for client dollars, drawing together to oppose strangling municipal broadband.
Now you might think that neither company would much care who its clients are, as long as someone is building. But they do care. And therein lies the tale. They care because they are (relatively) small, innovative companies working at the edge of their respective technologies. Without municipalities, they are looking at a universe with no room for innovation and hence no room for their hopes. If the incumbents across the country get their way, there will be nobody to challenge the local duopolies of Bell and Cable. It's looking more and more like there will be no more than 5 or 6 geographically distinct companies in each grand category. These huge monoliths will play it safe. They buy in huge amounts and they are looking, not for long-range utility or breakout innovation, but for the near-term profit that buoys up stock prices (and executive bonuses). They will buy (and have been buying--look at the glacial upgrade path for DSL if you doubt it) only the tried and true, and certainly nothing new or risky. Bigness, short-sightedness, and safety are the enemies of innovation.
Innovation needs a scrappy group of small competitors to break up the stodginess of the big guys. It's the new little guys who see the value of new approaches and are unburdened by legacy architectures. But the giants are in the process of squashing some of the most significant of those small competitors by law...or rather by lobbyists, campaign contributions, and a system of good ole boy favors. (Which is precisely how BellSouth came within a hair's breadth of getting a law passed outlawing LUS' fiber last summer. Had the governor not been a home-town girl they likely would have succeeded in assuring that neither the people nor the city-parish council had any right to vote at all.)
Here is the way the article describes these suppliers' concerns about dwindling competition:
Obviously, companies like Tropos Networks and DynamicCity have good reason to denounce such legislation. It robs them of the ability to do business with municipalities and, instead, forces them to negotiate with competing providers (with their own aging infrastructures to protect) if they hope to do business there at all.
Understandably, they're not happy. The anti-muni bills present a scenario where their companies aren't submitting bids to win the business. They're forced into negotiations with a competitor, the incumbent carrier, which understandably will want to protect the market and keep its competition out. We hear a lot of noise that municipal utilities like LUS are somehow disqualified from being competitors because they are publicly owned. If you won't believe the data from the feds that shows that public utilities drive down prices on the customer side wherever they enter the market, then maybe it would be worthwhile to notice that businesses on the supply side of the equation also think that municipals supply much-needed competition, and are crucial to an ecology in which innovation is possible.
We lag far behind behind nations like Korea in broadband deployment as much because we've allowed a few dinosaurs riding antiquated technologies to use their inheriting our telemcommunications infrastructure to wring every cent of residual profit out of their outdated technologies as for any other reason. Stifling competition isn't only bad for consumers, it's also bad for innovation—and that's bad for our country.
Stifling competition by outlawing municipal fiber builds like LUS' is one reason the country that designed and built the guts of the internet is falling behind second-world nations in true broadband deployment and consequently in the hardware and software that true broadband makes possible.
The Legislature That Tom DeLay Bought (aka "the Texas State Legislature") is considering legislation that would ban municipalities from offering bandwidth to ordinary citizens.
The Austin Business Journal reports that this has got folks in Austin (the capitol of Texas!) in a bit of a lather since the city has been offering Internet access for years through public access spots and offers free Wi-Fi service in places like the Austin airport.
Naturally, the incumbent providers are behind the legislation. In this particular case, the offending parties are SBC, Time Warner, Inc. (via it's cable subsidiary), and Texas-based Grande Communications.
The article points out that Austin is preparing to host the 2006 World Congress on Information Technology and that some citizens of Austin view the proposed legislation as a turning away from the city's leadership as a tech-savvy community.
I know of no one who disputes the fact that technology has played a essential role in Austin's growth over the past three decades, so the comments included in the article on the impact of restricting the ability of city governments from delivering bandwidth are particularly relevant to the discussions we're having here in Lafayette.
Consider this passage quoting David Deans, founder of the nonprofit Economic TeleDevelopment Forum which is based in Austin:
Deans agrees that stifling Internet access -- either at public buildings or through "hot spots" around a city where free or inexpensive wireless services can be accessed by laptop users -- doesn't bode well for economic development.
"We might find, at some point, that a company would rather relocate to another city or town where the environment is conducive to facilitating a global network economy," Deans says.
"In other words, a forward-looking community -- not the telecom backwaters." Imagine the disadvantage Austin would find itself when competing against a "forward-looking community" that had done more than merely deployed free Internet access. Imagine if Austin had to compete against a community with fiber run to every home an business like will can have in Lafayette.
This is exactly what technology leaders in Austin fear: that tech-savvy communities with great lifestyles and great quality of life will make the kind of technology infrastructure investments in their own economic future that, if they incumbents have their way in the Texas Legislature, cities there will no longer be able to make.
The LUS project offers Lafayette the opportunity to step out of the telecom backwater and onto the global networked economy. That will be our choice. Status quo, as determined by a couple of Atlanta-based corporations with no allegiance to this city; or, an investment in ourselves and our future?
This short article is pretty much a clean-up and mark-your-calendars story. The author carefully lays out the important upcoming dates for the advancing referendum and in the process impresses us all (or at least impresses me) with what a methodical process it will be. Council chair Randy Mouton expects the council to grind through those checkpoints with the same votes with which the project was originally approved. Apparently some councilmen, sensibly in my judgment, were disappointed that the city wasn't also going forward with an appeal of Hebert's ruling and such dissension as there was centered around that rather than the issue of a vote.
If you need to fill up your dayplanner or PDA, it's a good article to visit.
The Advertiser today carries the first in what is sure to be a series about the money side of Lafayette's fight for fiber. While the story wanders, the basic plotline is clear. The outside telecorps have the money and the demonstrated will to spend amazing amounts of money in campaigns of disinformation that they've already tested across the country. The local boys have the fact that they're local and trusted. It will be a classic case of big money versus word-of-mouth, neighbor-to-neighbor politicking. I hope some of the academics at ULL are gearing up to study the fight. It should be one for books.
A snippet:
"'The telecom companies will spend unlimited dollars in advertising to try to convince you to vote against this project. They will attempt to confuse you with misstatements, scare tactics and outright false information about the project,' said City-Parish President Joey Durel in a letter to Lafayette residents announcing the referendum.
LUS and the city can do information advertising but cannot ask for a vote using public dollars. Durel said he believes a private fund will be set up in so residents who support the fiber project can make donations.
'We believe we can energize an army of people from Lafayette who will be up in arms against outside interests trying to push their greed on Lafayette,' he said.
Although BellSouth and Cox Communications would not comment Tuesday on possible advertising efforts, a local marketing expert said high-dollar advertising efforts were likely." The word is that several pro-fiber PACs are starting and that an issue there will be coordination. Similarly, and not necessarily connected, more than one citizens' group is ginning up. For our money here at LPF, if the fight for fiber is to be a "viral," word-of-mouth campaign, then we ought to encourage multiple ways for citizens to engage and interact. Loose coordination would be a good thing but it will be more important to make sure that all segments of the community have a way to act and a congenial vehicle to act through. It's not likely that a single organization could or should do it all.
The PACs are not going public yet though activity is intense in the background. But you can turn in your name in support of forming a pro-fiber citizen's group in two places so far (no one has yet to actually hold an organizational meeting). The email addresses: fiber@lus.org and StandingUp@LafayetteProFiber.com
If you'd like us to post a way to contact your PAC or citizen's group, please drop us a note. We're all in this together.
After a string of snidely strange commentaries on the fiber issue using Lester U Smiley the snake oil salesman (LUS--get it? tee-hee) and culminating in a pretty incoherent homage piece to Hunter Thompson that seemed like it might have something to do with the fiber issue, Benjamin has turned in a piece that seems, well, reportorial. Sane, even.
He steps out of the way and lets Joey Durel speak. It's a good tactic and makes for effective reporting. This is one of the most expressive pieces I've seen on the issue and lets the reader get inside Durel's head and follow the reasoning and gauge the emotional timbre of the man.
Durel does a great job of laying it out and Benjamin, to his credit, mostly restrains himself from making snide asides.
A sample:
Durel’s secret weapons? Two things. One is the bully pulpit of elected office. When he speaks, he makes news. His words are quoted on the front page of the daily newspaper and lead the TV news. He can’t buy access to the media the same way as the private sector, but they can’t buy the level of news coverage he commands. The second of his weapons can only be termed as leadership. He’s proud of the effort he’s made to visit people’s homes and civic organizations and discussions he’s had on radio talk shows, all of which, he claims, end with converted skeptics asking what they can do to help. “I do believe that our hard work can beat their money,” he says. Right now he’s searching for the solution that will help him realize his dream. Somewhere in the pantheon of political solutions is the right deal that will bring Cox and BellSouth onboard in a cooperative effort — or totally freeze them out of the municipal infrastructure. It’s all up to Joey Durel right now. It’s his ability to lead that is to be measured here, and with his success or failure follows a large chapter in the development of 21st century Lafayette. Aside from that small bit of nonsense that puts the burden on Durel for finding a way to "cooperate" with BellSouth and Cox, it's good reporting. (We'd all do well to recall that the last time Durel sat down to negotiate with those two he woke up the next morning with a lawsuit staring him in the face.)
Go take a look. If you want to understand what moves a major player, this is the best article yet. Kudos to Benjamin.
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