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At Broadband Communities Summit, Rural Communities Discuss Many Ways to Finance Fiber Networks

Liana Sowa

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Photo of Michigan Broadband Cooperative President Ben Fineman by Doug Coombe courtesy Second Wave Media

September 30, 2020 – Municipalities are well suited to investment in broadband networks, particularly those in rural areas, said Ben Fineman, president and co-founder of Michigan Broadband Cooperative, at the Broadband Communities Virtual Summit on Thursday.

He said that many for-profit broadband providers shy away from investing rural areas because of the lengthy return on investment.

Fineman recounted how his organization was able to finance a $7 million fiber project in a rural Michigan town just outside of Ann Arbor. Leading up to the project, the town held frequent meetings and decided to move forward on the project after two-thirds of the citizens voted in its favor of proceeding.

Leslie Nulty, chief financial officer of Mansfield Community Fiber, Inc., used this strategy to pay for a broadband project in Vermont, with a few tweaks.

In Vermont, the law does not permit the tax base to be encumbered to create a broadband network, said Nulty. So Mansfield created a series of subordinated bonds with a minimum unit of $2,500, encouraged neighbors to pool funds as long as there was only one name on the bond.

In subsequent projects, Nulty advocated for the use of loans instead of grants, because she said Vermont has a history of supplying grants to projects that fail to deliver on their promises.

Nulty said that she reached out to the Vermont Economic Development Authority, which declined to fund the broadband project. Nevertheless, in 2019 Vermont created a broadband program funded through VEDA.

Nulty believes it’s economical to build fiber to the home using loan programs even though they often require payment holidays for the first few years: Her own project had holidays for the first two years, and interest-only for the third.

Chris Townsend, CEO of DTC Communications, a member-owned telephone cooperative established in 1951, also took about two years to get his broadband program running.

He employed a different strategy.

Townsend created Trilight, a non-profit telecom company, and partnered with electric co-ops in Tennessee to create a business model for broadband that worked for both parties. Trilight owns the back office and the tech support and the co-ops build and finance all the fiber themselves.

“They take it all the way to the house and we take it from there,” said Townsend.

Townsend advised newcomers to the business to look at the specific towns in an area instead of looking at the blanket rates because it’s the only way to see everything.

Correction: An earlier version of this article incorrectly reported that the fiber project was valued at $7 billion: It is in fact a $7 million project. Further, that version reported that it was in a town outside of Ann Harbor: The town is outside of Ann Arbor, Michigan.

Reporter Liana Sowa grew up in Simsbury, Connecticut. She studied editing and publishing as a writing fellow at Brigham Young University, where she mentored upperclassmen on neuroscience research papers. She enjoys reading and journaling, and marathon-runnning and stilt-walking.

Expert Opinion

Christopher Mitchell: Electric Grid Disaster in Texas Leads to Broadband Open Access Soul Searching

Broadband Breakfast Staff

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The author of this Expert Opinion is Chris Mitchell, director of the Community Broadband Networks Initiative at Institute for Local Self-Reliance

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.

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Bills In Washington State Legislature Would Allow Public Utility Districts into Retail Broadband

Jericho Casper

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Photo of Washington State Sen. Lisa Wellman from her website

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.

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.

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Interview: Biarri Network’s Paul Sulisz on Broadband Opportunities and Challenges

Derek Shumway

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Photo of CEO Paul Sulisz from Biarri Networks

March 4, 2021 – The broadband industry is better off getting ahead of network builds instead of waiting for government subsidies, CEO of Biarri Networks Paul Sulisz said in an interview with Broadband Breakfast.

That would involve focusing on getting the right people connected with the right leaders to coordinate a response to broadband needs, he said.

Sulisz’s Biarri Networks is coming off a banner year despite a tumultuous pandemic-filled 2020. The company had a stronger-than-expected 2020 with growth and profitability.

The company grew its team over 20 percent to 100 people globally as it had huge increases in broadband projects in the United States, Mexico, and Canada, where inadequate broadband has become a major issue.

The company now has its sights set on bringing fiber to 761,407 more homes across the U.S., which will  provide access to education, healthcare, and jobs, Sulisz said.

Looking forward, Biarri is anticipating another busy year in 2021 as the company is opening an office in Vietnam, in addition to its offices in Australia and the Philippines. Biarri, which is based in Denver, Colorado, and Melbourne, Australia, where Sulisz said his company can take advantage of multiple time zones so customers can connect in real-time with the team.

Things, however, weren’t always rosy, Sulisz said. He said the most difficult challenge facing Biarri during the previous year was maintaining momentum during its record growth while still focusing on keeping his employees happy.

Like virtually every company that had to adapt during the pandemic, Biarri, too, had team members who experienced anxiety about their productivity as some regions of the world were on lockdown.

Power outages, working at night, and other pandemic-related distractions presented noteworthy hurdles to the company, but everyone has been able to adapt quickly, Sulisz said, adding employees were steadfast on their mission for better broadband.

Biarri has an opportunity this year to connect over half a million more homes. More than 30 percent of students still have not returned to school, about a year after the pandemic was declared on March 12, 2020.

If 30 percent of children are not in school, that’s a big problem for the future of America, he said. Parents are struggling getting their children connected online and staying online for school as different home situations can help or hinder the experience of online school.

Even getting his own children connected online for school was a challenge Sulisz needed to tackle, which lit a fire under him to ensure other parents don’t suffer the homework gap, in which students are falling behind schools because of a lack of adequate broadband at home, he said.

The House of Representatives on Saturday morning passed a bill that would fund the expansion of the E-Rate internet subsidy program to households, in addition to libraries and schools. It’s up to a Senate vote now.

Closing the digital divide needs more than the government’s hand, and requires everyone to address current funding models and improve broadband initiatives, Sulisz said. He recognized that school districts hold key information that can produce data-driven decisions in closing the homework gap as they continue to work with broadband players in the market.

Many businesses have been started in garages and homes with high-speed internet, Sulisz said. If industry isn’t creating those opportunities for people, Sulisz said we may not find that hidden talent.

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