The disaster in Texas resulting from an electric grid that was deliberately left exposed and likely to fail in rare cold weather events has received a lot of dramatic coverage, as well it should given the loss of life and damage to so many homes and businesses.

It also raised some questions in my mind regarding competition and designing markets that will be discussed below. Texas was a leader in allowing different electricity firms to compete in selling electricity over the same electric grid, an arrangement that has some similarities to open access broadband approaches.

In digging into that recent electricity history, I made another interesting and relevant finding that I discuss first as part of the background to understand the lessons from Texas. In 20 years of competing models between, on the one hand, municipal and cooperative structures to deliver electricity and, on the other hand, a largely deregulated and competitive market, the munis and co-ops delivered lower prices to ratepayers.

Electricity deregulation, Texas style

More than 20 years ago, Texas largely deregulated electricity markets. Residents still have a monopoly in charge of the physical wire delivering electricity to the home, but they could choose among various electricity providers that would effectively use the wire and charge different amounts, differentiating themselves via a variety of factors, including how the electricty was produced.

However, some areas continued to have monopoly electricity providers, including two of the largest public power providers in the nation, San Antonio’s CPS and Austin Energy, among others as well as several rural electric cooperatives.

For 20 years, Texas has conducted an informal test between unregulated market competition and local providers that are democratically accountable to their customers. The Wall Street Journal is the latest of many over the years to study the numbers and dispassionately annoint the munis and cooperatives the winners.

None of this was supposed to happen under deregulation. Backers of competition in the electricity-supply business promised it would lower prices for consumers who could shop around for the best deals, just as they do for cellphone service. The system would be an improvement over monopoly utilities, which have little incentive to innovate and provide better service to customers, supporters of deregulation said….

From 2004 through 2019, the annual rate for electricity from Texas’s traditional utilities was 8% lower, on average, than the nationwide average rate, while the rates of retail providers averaged 13% higher than the nationwide rate, according to the Journal’s analysis.

The findings are similar to a 2015 report from the Texas Coalition for Affordable Power, covered by the Texas Tribune:

But from 2002 to 2013, the average household in deregulated areas paid a total of about $4,800 more than residents of cities — like Austin and San Antonio — served by just one municipal utility, or those served by electric cooperatives, the analysis said.

Not just a question of price

This isn’t the first time we at ILSR’s Community Broadband Networks team have looked at electricity. Given that many of the arguments against municipal broadband are identical to arguments against public power more than 100 years ago, we like to look at the 100+ years of empirical evidence that local governments can handle these responsibilities.

Many studies looking at prices and reliability have found public power to be at least as good as the big investor-owned utilities, and often better. Back in 2011, I wrote about Connecticut Light and Power compared to Norwich, Connecticut after a storm demonstrated the benefits of community ownership.

Norwich had far fewer customers lose power, and they regained service more quickly than the investor-owned utility. It led to the New York Times digging into the two companies’ budgets to seek answers.

In contrast to Connecticut Light and Power, Norwich’s electric unit last year increased operations and maintenance spending by 11 percent, to $2.9 million. Put another way, in 2010 Norwich allocated about $132 a customer to this line item in its accounts. Connecticut Light and Power reported maintenance, unadjusted for deferred expenses, of $96.5 million, or around $78 per client.

We generally see networks that are directly accountable to their customers doing a much better job, not just in price but all-around value.

Lessons for designing markets competitively

The competitive market was supposed to deliver far lower prices to consumers. As several have stated, including ILSR’s very own energy expert, John Farrell, what it mostly did was allow electricity companies to introduce the tricky and opaque billing practices common among the national cable monopolies to what had been a fairly transparent market.

A 2019 Houston Chronicle article, “Analysis: The Murky and Confusing Texas Electricity Market” sheds some light:

But the shopping site became overwhelmed with offerings. Some companies offered more than 30 plans that were hard to distinguish from each other. Several retail electric providers began offering multi-tiered electricity plans with low teaser rates designed to catch the attention of shoppers, only to have those who signed up learn too late that using one kilowatt hour above a certain threshold would send the advertised price soaring by as much as 10 times.

Other companies offered “free nights and weekends” plans that could cost consumers more because of much higher weekday rates. One company offered a $600 bill credit for a two-year plan that would ultimately cost customers twice as much as another plan offered by the same company.

It is worth nothing that Texas was not solely seeking lower prices, but also incentives to encourage customers to shift their electricity use away from peak times, especially in the summer. Some companies have achieved those goals, but reading the investigations suggests that the bulk of energy in the market has been expended trying to fool potential customers with opaque pricing.

What this means is that rather than technical or other useful progress, the main innovation was in the form of legalized fraud or trickiness. Companies often competed in how they could fool people into signing up, though they would pay more. This is one of the biggest complaints people have today about telecommunications bundles that are hard to understand and often change price without adequate warning.

Open access broadband networks

As more municipal networks explore and iterate on open access models, proponents need to consider some of the recent lessons learned from Texas. To date, most ISPs on open access networks are earnest, small local companies with a variety of reasons to enter the business, though maximizing wealth extraction has not been one of them.

To my knowledge, I don’t see these shenanigans on UTOPIA despite it passing 120,000 premises. But what happens when open access networks pass 2 million potential users? Or 10 million?

I hope this issue won’t even arise, in part because I would expect the local ownership of the network to produce more accountability than a state or federal agency. But it wouldn’t hurt to have some rules regarding transparency of pricing or some mechanism to ensure the competition on these networks doesn’t devolve to harmful games.

These cable pricing dynamics aren’t just annoying. They are particularly pernicious for the lowest-income households that don’t have the time, and sometimes the literacy, to spend hours digging into complex pricing. Returning to the case of electricity and the Houston Chronicle’s “Murky” story:

“Too many Texans are still overpaying for power,” said Fred Anders, founder of Texas Power Guide in Houston, a website that helps consumers find the lowest cost plans. “And very likely a disproportionate share of them are people who can least afford to overpay and have less time and awareness to navigate the minefield of gimmicks in the electricity market.”

That story also has the interesting nugget that very few people are actively switching providers, which is supposedly the best way to keep prices low. A fatigue seems to set in rather than the kind of enthusiasm that might be expected from the heartiest fans of markets.

This reality is an important reminder when it comes to internet access: I believe people generally want “competition” when they are frustrated with their provider. I don’t think a survey of the subscribers to EPB in Chattanooga or NextLight in Longmont or US Internet in Minneapolis or Sonic in California would reveal much desire for more local competition because users there are happy to pay a fair rate for reliable and straightforward service.

I don’t think people want to spend their time trying to save another $2/month on internet access by checking in on the deals each week to change providers. If that would be all that open access could offer, I will be disappointed. Of course, it may be that for communities that do not want to offer retail service, offering the possibility of choice will result in better outcomes than if they chose a contract with a single ISP, so there are many factors to consider.

People want something that works transparently at a reasonable price. My enthusiasm for open access is very much tied up with the possibility of specialized niche services. Services that we have trouble imagining today because nearly all Americans are locked behind networks owned by corporate monopolies that are not open to innovation. Ammon’s genius is not merely the financial model but the courage to open so much power to users and ISPs. Time will tell if they do anything special with it.

I believe that valuable innovation will come from open platforms, but think the Texas lessons offered a chance to explore why as well as some potential hazards along the way.

Editor’s Note: This piece was authored by Christopher Mitchell, director of the Institute for Local Self Reliance’s Community Broadband Network Initiative. His work focuses on helping communities ensure that the telecommunications networks upon which they depend are accountable to the community. He was honored as one of the 2012 Top 25 in Public Sector Technology by Government Technology, which honors the top “Doers, Drivers, and Dreamers” in the nation each year. Originally published on MuniNetworks.org, this piece is part of a collaborative reporting effort between Broadband Breakfast and the Community Broadband Networks program at ILSR.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to [email protected]. The views expressed in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

Though Washington is home to one of the nation’s fastest growing tech hubs, many communities throughout the state lack adequate broadband infrastructure. The stark divide between those Washingtonians with reliable home broadband connections, and those without, became especially salient last year, when many were forced to rely on their home Internet access for work, school, health, socialization, and much more.

A year into the pandemic, it seems lawmakers in Olympia are finally waking up to the connectivity issues currently plaguing the state. In January, bills aiming to advance broadband connectivity by allowing public entities to participate in the retail broadband market were presented in the House and Senate of the Washington State Legislature. The two bills have both cleared their respective chambers, and are waiting to be heard in committees of the opposite legislative chamber.

Discussions surrounding the two bills will continue on March 11th, when Washington’s Senate Energy Committee is set to hold a hearing for House Bill 1336, one of two bills being considered (the other is Senate Bill 5383).

Both bills aim to grant public entities, such as Public Utility Districts and ports, the authority to operate as Internet Service Providers. Currently PUDs and ports can build broadband networks but must offer wholesale access to private ISPs, and are prohibited from offering direct retail services to residents and businesses. The bills being considered now would allow them to deliver Internet access to Washington residents without a charter or third-party business overseeing network management operations.

While the bills are similar, they possess important differences. At the heart of the dispute between the two proposed laws is a preemption clause included in Senate Bill 5383, sponsored by State Sen. Lisa Wellman.

Wellman’s bill gives incredible veto power to private, incumbent ISPs. SB 5383 would change existing state laws to allow PUDs and ports to offer broadband service directly to residents only if they do not “receive notice from the governor’s statewide broadband office that an existing broadband service provider has not submitted an objection.”

SB 5383 would give private companies authority over public entities that want to expand into territory or build in areas where incumbent ISPs claim they plan to expand service within the next six months.

House Bill 1336, sponsored by State Rep. Drew Hansen, does not include such a veto clause. Instead, HB 1336 would grant retail authority to PUDs, ports and municipalities with populations under 10,000 without requiring private third-party network managers or operators. Hansen’s legislation would initiate critical changes to state laws, under which counties and small towns operating without a charter currently lack any authority to provide telecommunications services.

Champions of SB 5383 claim the new law would focus more on rural broadband than Hansen’s legislation. The Senate Bill calls for creating maps that pinpoint underserved areas and targeting these communities with funds and incentives. Yet, SB 5383 does not allow counties or municipalities to provide telecommunications services directly, nor does it allow ports or small towns operating without a charter to provide services directly.

Public-backed vs. Private-backed

While Comcast, small telecom companies, and business lobbyists have supported Wellman’s more limited legislative proposal, PUDs, ports, rural health clinics, the Suquamish Tribe, parents, teachers, broadband activists, and over a thousand citizens who signed up to testify, have rallied behind Hansen’s bill.

Many in the public sector have voiced concerns with SB 5383 and the veto power it gives private telecommunications companies. Some have also criticized Wellman, a former Apple executive, as being a naïve champion employed by for-profit telecom lobbyists.

“The veto provision allowing an ‘existing broadband service provider’ to block a public utility district from providing Internet [access] is anti-competitive and frankly insulting,” said Devin Glaser, Executive Director of Upgrade Seattle.

There are a number of reasons for a local government to provide a utility directly, without waiting for the private sector’s permission, he said, noting how incumbent providers often do not provide service to all residents in a community, have unreasonable pricing, or offer speeds that are insufficient for individuals attempting to work from home.

Objecting to Wellman’s proposal, Glaser maintained that Washington residents deserve a competitive market in the delivery of Internet services. “If the private sector wishes to compete with a public utility district, town, port, or county, they can offer better service or lower prices,” he said.

In the absence of reliable broadband at competitive prices, many PUDs have worked within current state limitations to offer broadband on a wholesale basis, through dark fiber or open access networks. For more on this tune into Episode 316 of the Community Broadband Bits podcast, where Justin Holzgrove of Mason County PUD 3 and Isak Finer from COS Systems discuss how COS Systems is helping the public utility’s strategic deployment approach in Mason County, Washington.

Claims of Overbuilding Are Suspect

Wellman argues that the veto power provided to ISPs by SB 5383 will prevent “overbuilds” and encourage public entities only to build infrastructure where it currently does not exist.

Still, others have contended that the veto clause included in SB 5383 will allow incumbent ISPs too much leverage to convince the Washington Statewide Broadband Office that some community broadband initiatives — aimed at connecting the unserved, creating a more competitive marketplace, and improving end-user experience — classify as “overbuilding”.

The term overbuilding, often used to describe the construction of new, futureproof networks in localities where only one incumbent ISP offers service, has been widely utilized by lobbyists attempting to protect private companies’ monopolies on telecommunications services.

For an in-depth discussion of “overbuilding” and competition, watch or listen to Episode 7 of the Connect This! Show.

In conversation with the Institute for Local Self-Reliance, Laura Loe, Executive Director of Share the Cities, called lobbyists’ utilization of the term overbuilding an “excuse to not allow public entities to eat into private profits,” which echoes a point made more substantively by John Sallet in the recently published report, Broadband For America’s Future [pdf]. In that report, Sallet wrote “what some call ‘overbuilding’ should be called by a more familiar term: competition.”

ILSR’s Director of the Community Broadband Networks initiative Christopher Mitchell voiced concern that SB 5383 will allow an incumbent ISP claiming to offer 100 Mbps service for $150 per month to some residents of an area the ability to veto a PUD attempting to expand gigabit fiber to everyone in a region for a much more reasonable price to end-users. “This ‘right of first refusal’ is counter-productive and poorly constructed,” Mitchell said. “It demonstrates that some lawmakers are more worried about the concerns of deep-pocketed monopolies than the small businesses and residents that desperately need more investment in rural Washington.”

Moving Towards Digital Equity

Discussions surrounding the two bills will continue on March 11th, when Washington’s Senate Energy Committee is set to hold a hearing for HB 1336. Loe considers the hearing scheduled for Thursday an organizational victory for the public sector. According to Loe, who heads a Seattle-based special interest group focused on housing and other tenant rights, it took a month of campaigning before Sen. Reuven Carlyle, a recipient of telecom PAC money, announced he would allow the bill to be heard in the state Senate.

Loe maintained that while HB 1336 will not resolve all of the factors that perpetuate digital inequity, it is critical in overturning Washington’s restrictions on public broadband and a step in the direction towards more universal access to broadband infrastructure.

“This bill isn’t doing anything for digital equity,” reminded Loe. “I don’t want people afterwards to feel tricked when Hansen’s House Bill goes through, and … Washington residents are essentially getting Comcast services again.” This is a big, but important, conflict over access for a comparatively small number of rural residents.

“This bill won’t help an elder access telemedicine; this bill won’t help a student who doesn’t have a laptop,” Loe said, adding a sobering dynamic to the conversation surrounding the legislation.

Loe believes there is confusion on both sides about what HB 1336 will actually do, if enacted.  “HB 1336 is not mandating public broadband,” said Loe. “We would still need to fight on a municipal level” after the law passes, in order to get reliable, affordable broadband to all Washington residents.

Read full text of bills below.

Washington HB 1336

Washington SB 5383

Editor’s Note: This piece was authored by Jericho Casper with the Institute for Local Self Reliance’s Community Broadband Network Initiative. Originally published on MuniNetworks.org, the piece is part of a collaborative reporting effort between Broadband Breakfast and the Community Broadband Networks program at ILSR.

December 17, 2020 – UTOPIA Fiber announced Tuesday that it had fully built its fiber-to-the-home broadband network in the City of West Point, Utah.

The $7.2 million project, announced after a unanimous city council vote, gives every residence and business in West Point access to the fastest internet speeds in America. Remarkably, the buildout was completed in a mere 15 months. West Point is one of 15 cities in Utah that have UTOPIA Fiber’s residential fiber service, and 50 with its business service.

“Sign-ups have been astonishingly fast, which means the project is on track for covering its bond payments with subscriber revenue in the next few months,” said Kimberly McKinley, UTOPIA Fiber’s Chief Marketing Officer. “Strong demand from West Point residents who are working and learning remotely has fueled the high take rates which are months ahead of projections,” she added.

Located just north of Salt Lake City, West Point has a population nearing 11,000 and is adjacent to Clearfield City, which in August announced its own $13.8 million fiber-to-the-home, open access project with UTOPIA Fiber.

Unlike typical internet companies that cherrypick more-upscale neighborhoods, UTOPIA Fiber builds out the entire community with fiber infrastructure, so every address has the option to use the service. West Point residents can now access UTOPIA Fiber’s internet services starting at $65/month for 250/250 Megabits per second (Mbps) and will have the option to choose speeds up to 10 Gigabits per second (up to 100 Gbps for business) from 13 local providers—the fastest internet speeds in the nation.

The pandemic has fueled significant interest in UTOPIA Fiber’s publicly-owned fiber service. The network now has a pipeline of 20 cities expressing interest in partnering with UTOPIA, and the agency is laying over 45 miles of fiber cable each month, across its portfolio, to meet surging demand.

“City leaders throughout the state are hearing from their constituents who are demanding better connectivity,” noted Roger Timmerman, Executive Director, UTOPIA Fiber. High-speed broadband is not just for entertainment purposes like gaming and streaming. It has become a critical need for working, learning, communicating, and accessing other critical online services like telehealth.“

With over $220 million of successful fiber projects, UTOPIA Fiber is the nation’s largest and most-successful open access network. As an open access network, UTOPIA Fiber builds and finances the infrastructure and allows multiple private-sector internet service providers (ISPs) to compete on its network, offering internet, video, and voice services.

About UTOPIA Fiber

The Utah Telecommunication Open Infrastructure Agency (UTOPIA) is a community-owned fiber optic network utilizing light to transfer information, making it the fastest communication and data transfer technology in use today. Created by a group of Utah cities, UTOPIA Fiber supports open-access and promotes competition in all telecommunication services. For more information, contact Kim McKinley, Chief Marketing Officer, UTOPIA Fiber.