Should Congress Act on Anti-Municipal Broadband Legislation?

 

This week Congresswoman Chellie Pingree (D-Maine) signed on to cosponsor H.R 4814, a bill that would prohibit states from passing laws impeding the construction of municipal broadband networks (anti-municipal broadband laws). Such laws currently exist in 20 states, and can make it significantly harder, if not impossible, for local governments to make direct investments in broadband infrastructure.

Access to the Internet is the most significant economic enabler of our time.  Broadband access enhances access to education, healthcare, and economic opportunity. Its importance is so clear to economic development professionals that many towns are choosing to build their own broadband networks or provide TIFs and other incentives to their local carriers in order to encourage their construction.  These towns see broadband Internet access as a key competitive advantage.  They know it will be easier to bring businesses and skilled workforces to their communities if they have high speed broadband access.

anti-municipal broadband map

A state law that prevents a town from taking action to advance broadband access, likewise, puts a community at a significant economic disadvantage as compared to similarly situated communities in neighboring states. This makes municipal broadband very much an issue of digital equity – one that hits home for us, since two of our home states, Alabama and Missouri have restrictive laws.

Interestingly, the companies that make up the OTELCO family and many others around the country were founded, built, and paid for by local farmers and businessmen in the late 1800s when private industry couldn’t make a business case to build telephone infrastructure in rural areas. What would these communities look like today if the federal government made it illegal for those farmers and businessmen to build that, then state-of-the-art, communication infrastructure?

Why States Pass Anti-Municipal Broadband Laws

Proponents of anti-municipal broadband laws take the paternalistic view that the states need to protect taxpayers, and the municipalities themselves from the investment risk should the network fail to attract enough subscribers to be self-sustaining.  While this does happen from time to time, many municipal networks are profitable.  In addition, a simple “profit and loss” calculation doesn’t always paint the whole picture for a community, which is equally interested in attracting and retaining businesses and homeowners.

Community Broadband opponents also point out that municipalities don’t necessarily have prior experience building and operating telecommunications networks – an observation that, while true in most cases, completely ignores the fact that towns usually contract with an experienced provider or providers to operate the network and serve customers. Leverett MA is a great example where OTELCO serves as the ISP and handles all customer facing functions, and Holyoke Gas and Electric is the network operator and manages the physical network infrastructure maintenance and operation.

At the end of the day, it really comes down to whether or not you believe the government should make direct investments in infrastructure or leave those investments to private industry, even in cases where private industry is not actively investing in the community.

States Taking a Different Approach

Fiber TownWhile some states are moving to restrict municipal networks, others are encouraging local action to improve broadband availability in unserved and rural areas. For example Maine has a provision for the ConnectME Authority to award planning grants and infrastructure grants to communities planning to build their own broadband networks.  Massachusetts also set aside $40 million for communities to pursue broadband solutions, although it did encourage them to work with established providers on their projects.

These investments by State governments are encouraging local investment by communities and by private industry.  Massachusetts currently has several projects underway in its Western Hill Towns, and Maine has several towns conducting feasibility studies.  In many cases, networks are being built in towns that have no Cable TV and very limited DSL – networks that might not otherwise have been built.

Congress Could Level the Playing Field

The current environment has already created digital “haves” and “have-nots,” particularly in rural areas.  The divergent paths of the states will perpetuate rural “have-nots” in some states, while states that are investing close the gap more quickly. A law that removes barriers to local investment would put the power to act in the hands of those most effected by the lack of commercial investment, and put rural Alabama on a level playing field with rural Massachusetts for Internet commerce, educations and jobs.

Defining down the definition of internet ‘service’ will hurt rural economy

As was once the case with phone service, a strong standard should be enforced for internet.

By Rob Souza, CEO of OTT Communications

Published by the Portland Press Herald, Maine Voices, Oct. 12, 2017

NEW GLOUCESTER — We are writing to further the discussion and support the opinion of the Portland Press Herald Editorial Board (Oct. 2) regarding the Federal Communications Commission and that panel’s proposal to redefine the minimum internet service level. We agree that if the FCC redefines downward “adequate” service, rural Americans will lose out and be left further behind economically, educationally and in terms of quality of life.

In the late 1800s, at the dawn of the telephone industry, the larger established telephone companies couldn’t make a viable business case to serve low-density rural areas, so they didn’t. Understanding the importance of communication to their enterprises, local farmers and businessmen leveraged their personal resources to build their own rural phone networks. All of the Otelco/OTT Communications companies originated that way.

oday is no different: Instead of phone service to rural areas, it’s internet via fiber to the premises that we struggle to deliver to those rural communities. If you listen to the FCC, you might think that other technologies like mobile wireless could serve in place of fiber optics. To a degree, they can – if the definition of “served” is reduced.

The current FCC standard is a download speed of 25 megabits per second and an upload speed of 3 Mbps. Mobile signals can theoretically reach those speeds – assuming there’s a mobile carrier that has infrastructure in these rural areas capable of delivering high-speed service – and therein lies the problem. As the Press Herald editorial noted, Verizon is abandoning thousands of rural customers around the country, including hundreds in Maine, because they claim it is too costly to provide service in rural areas.

If legacy phone companies like ours – or, for that matter, the FCC – were allowed to arbitrarily reduce the standard of service we deliver, where might those costly-to-serve rural residents be today? From our perspective, the combination of our dedication to the communities we serve, FCC oversight and the Universal Service Fund (which was created to ensure that all Americans have access to a basic phone line) has kept rural America from falling behind in communications.

Today, communication equates to internet connectivity. Where we’re concerned, the best way to provide connectivity is through fiber optics. It’s reliable, it’s scalable and it exceeds the current FCC definition of served – making it futureproof. Even if the FCC reduces the definition of “served,” we’ll continue to deploy fiber to the degree that finances permit; it’s simply the right way to do business in the best interest of our customers.

The problem is that with a reduction in internet speed requirements, others may choose to deploy technologies that will need to be replaced in the near future as the demand for internet speed increases – and it increases daily.

With a limited Universal Service Fund available to assist in the costly deployment of high-speed internet infrastructure, reducing the minimum requirements for internet delivery would allow the allocation of funds for technology that is barely serviceable now, and will sure to be outdated in the next few years.

According to the FCC website, the mission of the commission is to regulate interstate and international communications by radio, television, wire, satellite and cable in all 50 states, the District of Columbia and U.S. territories, and its work is guided by the following strategic goals:

 Promoting economic growth and national leadership.

 Protecting public interest goals.

 Making networks work for everyone.

• Promoting operational excellence.

In our opinion, by reducing the standard for adequate internet speeds, the commission would be in direct conflict with all of these guiding principles.

As the Press Herald editorial points out, “True high-speed internet is a necessity for an economy driven by the latest technology. The areas that lack it are already in trouble and are falling further behind, and that won’t stop unless the government does something more than change a definition.” Otelco couldn’t agree more.

ABOUT THE AUTHOR

Rob Souza is CEO of OTT Communications, a division of OTELCO, which provides business communication technology and high-speed internet in Maine, New Hampshire and Massachusetts and serves residential customers in six states. He can be contacted at: rob.souza@ottcommunications.com

Creating a Broadband Policy without Doughnut Holes

By Trevor Jones, OTT Communications.

People are working to get broadband access to rural areas in companies like OTT Communications and at town halls, state houses and Federal agencies across the country.  The latter two groups are focused on two different vehicles for promoting broadband.  First, they set policies to promote broadband expansion and the construction of new networks.  Second, they distribute state and Federal monies in the form of grants to subsidize construction of networks where there isn’t necessarily a business case.When setting policy and awarding grants, the focus is on the “un-served,” although there is some recognition that a second group, the “under-served,” is also important. One guideline we use to determine who belongs in these groups is a government set definition of broadband.  Currently, the Federal definition is 25/3, but it grows over time as customer demand for bandwidth increases.  If you think logically, you might think the un-served are those without at least 25/3 and Federal grants are focused on getting everyone to 25/3 – but you’d be wrong.

Actually, The Federal government sets the bar for investment much lower than that.

The Catch 22 Created by an “Un-served First” Broadband Policy

The Federal standard for “un-served” for funding under the Connect America Fund is 4 Megabits per second down by one megabit per second up – meaning that if you have more than 4 megs today, your community cannot get Federal funds to improve coverage, even though the Federal definition of broadband is 25 megs.

Impacts of Broadband policy on GreenbushLogically, it makes sense that the areas with the worst connections should get funding first, but here’s the rub: this policy all but forces rural service providers to by-pass the town centers, which get decent DSL coverage, in favor of the outskirts of town.  Some people call this the “doughnut hole effect.” Although we want to build broadband for economic development, money is not available to build broadband in town centers, where you generally find the most economic activity.  Take this example from Rural Greenbush, Maine:

If you don’t know Greenbush, it’s all very Rural.  There is no cable broadband, but OTT Communications does have DSL in town.  Federal funds are available to support broadband through the Alternative Connect America Model (“ACAM”) in the orange areas on the other side of the river, and in the lighter green areas in the northeast of town.  The rest of Greenbush, including the majority of the Route 2 corridor, is in the doughnut hole.  Not only are there no Federal funds to support deployment there, but most of OTT’s capital budget over the next several years will go to the ACAM blocks as well, resulting in faster service around the outside of the “doughnut” leaving the center of town underserved.

This is an example of a Federal program, but Maine’s own grant programs offered through ConnectME have similar drawbacks. They focus very strongly on the un-served, at the expense of the under-served.

Filling in the Doughnut Hole

Doughnut HolesI don’t know about you, but I like munchkins (not talking about the Wizard of Oz here).  The doughnut holes are just as worthy of investment as the outside of the doughnut, and we need to find ways to fill them in. Some of this can be done by private industry, but if we want it done quickly, some adjustments to broadband policy would be a big help.

Where Private Industry Can Help

Our parent company, Otelco, spends millions of dollars each year on expanding and enhancing service.  Over the next several years, much of those funds will go to ensuring that the ACAM service areas are built out. However, there are some things we are doing to enhance service in areas that aren’t getting funding.

For starters, when we’re building out to an area that qualifies for funding, we pass several homes that aren’t funded. We use our own capital budget to connect them, increasing the size of fiber cables and installing the necessary drops and equipment. For example, when we built a recent ConnectME funded project to 30 homes in an unserved area in Gray, Maine, we brought fiber to another 50 homes we passed on the way there.

We’re also doing stand-alone projects in un-funded areas where we can, but these projects are small in comparison to the size of the area we are working to serve.  We’re currently working on deploying fiber in parts of Whiting, Vermont as part of this effort.

How Funding Practices Might Change to Speed Deployment in the Doughnut Hole

Modifying the funding model would also help fill in the doughnut hole.  Rather than have two standards, a definition of broadband and a lower definition of un-served, imagine having a single definition of broadband, and funding broadband deployment on the net improvement in bandwidth.  For example, if we define broadband as 25/10 and used a tiered structure like the one displayed below, we could establish tiered funding based upon the net improvement in broadband speed.

Tier Service Level Service Designation
5 50/50+ Served
4 25/10 and 50/50 Served
3 25/3 and 25/10 Unserved
2 15/2 and 25/3 Unserved
1 10/1 and 15/2 Unserved
0 Below 10/1 Unserved
One Tier Improvement 10% Funded
Two Tier Improvement 20% Funded
Three Tier Improvement 30% Funded
Four Tier Improvement 50% Funded
Five Tier Improvement 60% Funded

In this way, there is funding to improve performance for the under-served, and more funding to bring broadband to the un-served.

Keeping our eyes on the ball

While we’re working on the worthy goal of bringing broadband to the un-served, let’s remember that our goal is better broadband for everyone.  Eliminating doughnut holes that leave town centers un-served requires a joint effort on the part of industry and policy makers, and smart policies that put funding where it can do the most good.

Regional Broadband Approaches: Achieving Scale with Community Networks.

By Trevor Jones, OTT Communications

Fiber TownMore and more, communities are considering the possibility of building publicly-owned broadband infrastructure.  In the process, some are finding that regional broadband approaches offer economies of scale and other benefits. It can be difficult for multiple communities to work together while competing for resources and economic opportunity, but a handful of groups are making the attempt to build regional broadband networks in New England.

The Benefits of Regionalization in Broadband

Regional broadband approaches provide many benefits over go-it-alone municipal broadband.  As you might expect, the benefits fit broadly into the term “economies of scale,” but they go beyond mere cost savings. A regional network can be both more cost effective and more reliable than a smaller localized network.  Here are some examples of how regional broadband approaches can deliver better results:

  • Extending the middle-mile. In Maine, the Three Ring Binder is an outstanding middle mile asset, but it doesn’t touch every underserved community. As a result, many towns that aren’t located along the 1100-mile route must consider building across neighboring towns for access. By working together, towns can share costs and build networks that interconnect across town boundaries.
  • Route diversity and redundancy in the middle mile. In Massachusetts, MassBroadband 123 connects a more underserved towns than the Three Ring Binder, but many of those connections lack diversity. A regional approach can make the network more reliable by making highly reliable “rings” where MassBroadband123 does not.
  • Operating efficiency. Trucks, technicians and call centers to support customers all come with fixed costs, or “overhead.” Those fixed costs either don’t increase, or don’t increase proportionally as the number of customers grows. This is a key cost-saving element of “economies of scale.”
  • Buying power. Bigger buyers have bargaining power and pay less than smaller buyers. A consortium of towns buying many gigabits of Internet bandwidth and tens of thousands of email accounts will pay less per megabit and less per email account than a single town that needs only one gigabit of Internet and a few hundred email accounts.

With benefits like these, it’s a wonder more communities aren’t following this path, but we do have a few notable examples in New England that we look to for results as they explore regional broadband.

Three Examples of Regional Broadband Approaches in New England

  • EC FiberEC Fiber: This coalition of 24 towns in East-Central Vermont, provides 10, 25, 100 and 500Mbps service options to residents. EC Fiber’s funding approach is unique, because when the government bond market collapsed in 2008, it funded its growth from the contributions of local investors that wanted to connect their towns. This approach has been so successful that the coop was able to attract $9 million in outside financing last year. Its goal is to connect all residents in its territory and expects to have completed construction to every home in 21 of its 24 towns by 2019.
  • Wired West - an example or regional broadband approachesWired West: This cooperative of 26 communities in Western Massachusetts is striving to leverage economies of scale to bring true broadband service to its members. Thwarted at times by changes in broadband policy at the state level, Wired West is now working to pool its members’ resources to create efficiency in the operation of networks that will be constructed and owned by its member communities, but designed to work together.
  • Our KatahdinOur Katahdin: This volunteer-driven non-profit organization is working to promote community and economic development in the Katahdin region of Maine. It has identified the digital economy as a key industry in which the region has key advantages, including access to the Three Ring Binder, quality of life advantages, cooler weather and unused industrial space suitable for data center development. The group recently received a Broadband Planning Grant from the ConnectME Authority, and is in the early stages of developing a plan to expand broadband access in the region.

Will more towns follow suit with their own regional broadband approaches? It may be too soon to tell. We’ll be watching these attempts at regionalization to see how they balance the competing interests of their members and stakeholders against the benefits of working together.

This post originally appeared in the OTT Communications Blog.