The battle over broadband

Carthage Water & Electric, the municipally owned utility for Carthage, Mo., understands what high-speed Internet connectivity means to businesses and families considering a move to the rural community. “We have people call us to make sure we can get a signal to their property before they even buy it,” explains Chuck Bryant, director of marketing and technical services for Carthage Water & Electric. “One family called to say they had an Internet business — an Ebay store — and if they can’t get a high-speed connection, they don’t want to move to the area. So, it really matters now.”

Long considered the domain of private-sector enterprise and the Federal Communications Commission (FCC), broadband access has emerged as an essential concern for America’s local governments, according to John Eger, professor of communications and public policy at San Diego State University. “Cities of the past were built along waterways, then highways, but today, with information highways, you can live anywhere — as long as you’re connected,” says Eger, who advises local governments on communications technology policy. “The Internet has become vital to making the transition to the global knowledge economy. Cities that don’t have these broadband infrastructures of our time will atrophy and die. They will be cut off from the mainstream.”

Across America, both urban and rural local governments are doing whatever it takes to make telecommunications and broadband services — including high-speed Internet connections, telephone service, computer networks, even cable TV — available to government agencies, residents and businesses. For some, that means providing the services without help from private telecommunications companies. Carthage, Mo.; Glasgow, Ky.; and Glenwood Springs, Colo.; for example, are three of more than 500 communities where publicly owned utilities are offering broadband services directly or indirectly to government agencies, businesses and residents, according to a survey conducted last year by the Washington, D.C.-based American Public Power Association.

Many other local governments are investing directly in broadband technologies that benefit both public and private sectors. Expenditures run the gamut. For example, suburban Oakland County, Mich., spends tens of millions of dollars on technology initiatives and owns a 400-mile fiber-optic network. Dickenson County, Va. — where the nearest four-lane highway is an hour-and-a-half drive away — has spent less than $100,000 to make broadband Internet available to the Appalachian mountain community’s 16,400 residents.

Public vs. private providers

Despite widespread consensus about the importance of broadband, telecommunications companies and local governments disagree about how communities should achieve the goal of high-speed Internet access. Local governments that opt to become broadband service providers often spark intense backlash from the telecommunications industry, with cable and phone companies battling municipalities through lobbying, lawsuits, and local and national marketing campaigns to sway the court of public opinion. Results have been mixed. For instance:

• Eleven state legislatures have banned or sharply restricted local utilities from providing broadband services, and those laws have been upheld by the FCC and in several state and federal court decisions.

• A federal district court in Virginia, the Nebraska Supreme Court and the 8th U.S. Circuit Court of Appeals in Missouri have ruled in favor of municipal utilities’ efforts to offer telecommunications services. However, on Feb. 18, Missouri’s attorney general asked the U.S. Supreme Court to review the 8th Circuit’s decision, and the outcome could have widespread ramifications for local government initiatives.

• Arguments against local government as a broadband service provider tend to focus on two fundamental issues: competition and competence. Cable, phone and Internet companies claim the competitive playing field is tilted against them when local governments enter the telecommunications marketplace — for example, governments enjoy free right-of-way access and do not need to make a profit.

  Others claim local governments do not have the competence to provide telecommunications services. “Government has such a poor track record [as a telecommunications provider],” says John Kost, vice president for worldwide government research at Stamford, Conn.-based Gartner, an information technology research and advisory group. Government accounting standards are lax, accountability is limited, and municipal utilities’ pricing is artificially low because they often fail to account for long-term costs such as infrastructure maintenance, Kost says.

  Moreover, Kost adds, “With broadband and telecom, local government is getting into businesses in which it has no background.” Instead, Kost urges local governments to foster private-sector initiatives whenever possible.

  No longer waiting on the private sector

  Unfortunately, engaging the private sector has not proven viable for many local governments. The 1996 Telecommunications Act, which was intended to strike down any barriers to competition and spawn growth of digital technologies across America, has not worked for many communities.

  The growth of services and competition among telecommunications companies thus far primarily has served larger — and wealthier — urban markets, Eger says, so from the local government standpoint, “the 1996 Act has been a total failure.” As Dickenson County, Va., Administrator Keith Viers puts it, “If we waited for the private sector, we’d probably be better off waiting for four-lane roads.”

  Glenwood Springs, Colo., had similar problems attracting private broadband providers. Located between Aspen and Vail, the community of 8,000 has a strong economy boosted by tourism. Yet, “we were losing companies here because we didn’t have high-speed bandwidth,” says Electric Department Superintendent John Hines.

  The city decided to take action. “We talked to the phone and cable company incumbents, but they had no plans” to deploy broadband services, Hines says. Even when Glenwood Springs forged ahead with plans to install a local fiber-optic network — a relatively inexpensive project because the utility pulled the fiber through the city’s existing underground electric conduits — there were no takers.

  The fiber network, which linked local government and schools to Colorado’s statewide government communications “backbone,” still needed so-called “last-mile” technology to connect to homes and businesses. “We asked if they wanted to partner, and no one did,” Hines says.

  Finally, Glenwood Springs deployed a wireless broadband system and offered to pay for the antennas needed by businesses and consumers to tap into the network. Since then, four Internet service providers have stepped up as retailers for the city’s wholesale broadband services, eliminating any objections to the Electric Department competing with the private sector. The utility spent $3 million for the broadband project, an investment it expects to recoup over the next 10 years.

  Carthage Water & Electric entered the Internet service business four years ago after the surprising results of a customer survey, according to Bryant. The utility’s customers indicated they were pleased with their water and electric services but said they wanted an alternative to the community’s only Internet service at the time, which was a low-quality, dial-up connection provided by an out-of-town firm for $23 a month. “We launched a regular dial-up service in November 2000 and priced it at $15.95, enough to cover our costs,” Bryant says. The service actually sparked more competition. “Right now you can get dial-up Internet service at a lower cost from several providers,” he says.

  Soon, however, “we had those same customers calling us for high-speed options,” Bryant says. “For example, a small manufacturing facility outside the city needed high-speed data transmission. In addition, we were in the middle of upgrading our water system with a SCADA [supervisory control and data acquisition] system that allows us to remotely control wells, water towers, etc. So we saw an opportunity to kill two birds with one stone.”

  A broadband wireless system — using antennas installed on north and south water towers — now controls the water system and provides high-speed Internet service to more than 70 customers located within 10 miles of the city. With a $50 setup fee and $39.95 a month for the wireless broadband service, “We’ve gotten about 70 percent business customers, 30 percent residential at this point,” he says.

  Carthage’s wireless service meets the needs of most businesses with fewer than 20 computers. For larger companies, “we also have a fiber-optic network around the city — about 18 miles of 48-count fiber-optic loop — which we constructed for communications to our electric system,” Bryant explains. “The minute people found out about it, we had large industrial customers come to us to utilize the bandwidth. That led to us building a full gigabit Ethernet network in the city that’s available to businesses — banks and cellular providers especially — that need that much bandwidth.”

  Doing more with less

  Not every local government needs to play catch-up to the Internet revolution. Some, like rural Glasgow, Ky., and Oakland County, Mich., are the revolution’s leaders.

  With the help of “the father of the Internet,” Vint Cerf, Glasgow’s Electric Power Board (EPB) launched low-cost cable Internet service in 1995 — years ahead of the commercial introduction of consumer broadband services to major metropolitan markets. “Find another community of 12,000 people where 3,000 homes have high-speed Internet service,” says William Ray, CEO of EPB. “There are only 6,500 homes and businesses in our community.”

  Oakland County, Mich., does not sell broadband to the private sector, but it uses a broadband infrastructure to serve local government needs while selling a variety of technology-based government services to businesses. The county’s 400-mile fiber-optic network delivers “high-speed Internet to our local cities, villages and townships for government use at no charge to them,” says Phil Bertolini, the county’s director of information technology (IT). Moreover, with an efficient multi-million-dollar operation, “we provide every facet of local government — health, law enforcement, fire, the county clerk’s office, the courts, prosecutors, schools — [with] the technical resources needed for good government.”

  Glasgow and Oakland County are vastly different. Oakland County, just north of Detroit, boasts the nation’s third-largest high-tech workforce and a tremendous tax base; Glasgow’s citizenry, in contrast, is largely non-technical, and its publicly owned technology services are self-funding. Yet both are guided by the recognition of technology’s value in serving residents. “When revenues are tight, governments need technology more than ever because they have to provide more services for less,” Bertolini says.

  Both communities also are undaunted by criticism of government taking a prominent role in providing technology services to the private sector. Oakland County, for example, used its broadband infrastructure to launch its Access-Oakland initiative in 1998. The initiative uses technology to bundle, for a fee, a wide range of government data commonly used by businesses such as property surveys, digital aerial photographs and other real estate records. (Oakland County government also delivers extensive Internet-based services to residents for free.)

  “We dealt with this issue back when we started. People said, ‘Wait, there’s private industry that gathers data and sells it to the marketplace, so why does government need to do that?’” Bertolini recalls. “Now, it’s part of how companies are doing business with us because they don’t have to send someone down to our offices to sift through records. We’re not only providing a service, but we’re providing a way for taxpayers to recoup their investment in IT by mitigating future costs.”

  Ray, a fierce advocate of local government’s right to compete in a fair marketplace, argues that his utility is more accountable for its performance than most private companies. “I call it ‘fear of death,’” he says. “What more cruel regulation can you have than a city council that meets every two weeks? Not only do you have market forces in the private sector, but also political forces in the public sector.”

  A broadband interstate highway

  Whether local governments provide telecommunications services themselves or provide incentives to private companies to do it, they must have a role, Eger says. “We’ve reached that critical juncture where the broadband infrastructure is so important, that [relying solely on private-sector] competition could be disruptive,” Eger explains. “So it is vitally important for cities — rural or large — to inject themselves into the marketplace. The [free market] simply isn’t serving communities everywhere.”

  Nowhere is that more apparent than in Dickenson County, an isolated community determined not to miss the digital revolution. With a modest investment of less than $100,000, the county is piggybacking on a statewide E-911 initiative, using wireless transmitters to complete the “last mile” between Virginia’s fiber-optic backbone and the local community. The wireless network is rolling out in three phases — to government now, then business and, finally, residents. Businesses and residents will pay a monthly fee to the county to access the network.

  The community is starting to enjoy advanced high-tech benefits such as efficient online forms to apply for housing assistance and distance-learning teleconference courses for local schoolchildren. “One of the major issues we have in this rural community is transportation,” Viers says. “We’re nestled against the Appalachian Mountains, we have no four-lane highways, and we’re reliant on a natural resource-based economy — coal mining and timber.

  “Now we’re creating our own interstate transportation system via wireless networks,” Viers continues. “Our intent is to foster growth and development. We’re confident that this affordable service will make us more competitive locally, regionally and on a world market basis.”

  John DeWitt is New York-based freelance writer and business consultant.