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

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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 commentary@breakfast.media. The views expressed in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

Broadband Breakfast is a decade-old news organization based in Washington that is building a community of interest around broadband policy and internet technology, with a particular focus on better broadband infrastructure, the politics of privacy and the regulation of social media. Learn more about Broadband Breakfast.

Broadband's Impact

Sunne McPeak: Achieving True Digital Equity Requires Strong Leadership and Sincere Collaboration

Collaboration between community leaders will be essential in ensuring success of the Biden infrastructure bill in California.

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The author of this Expert Opinion is Sunne Wright McPeak

This week, President Joe Biden signed the infrastructure bill, which includes $65 billion for expanding broadband deployment and access for all Americans.

The national plan is described as the most significant infrastructure upgrade in the three decades since the Cold War. “This is an opportunity to create an Eisenhower national highway system for the information age,” says a former White House National Security Council senior director.

For California – the nation’s largest state – it means a minimum $100 million for broadband infrastructure that is designed to expand high-speed internet access for at least 545,000 residents, particularly in unserved and underserved communities, according to the White House. The federal funding will support California’s $6 billion broadband infrastructure plan.

Closing the digital divide and achieving true digital equity requires strong leadership and sincere collaboration among public agencies, internet service providers and civic leaders to seize this unique opportunity to achieve strategic priorities in education, telehealth, transportation and economic development. The 2021 USC-CETF Statewide Survey on Broadband Adoption highlighted that a significant number of Californians will be left behind because they are unable to access the internet and other digital functionality needed for vital activities.

Now, the question is how to ensure the public’s funds will be used as effectively and efficiently as possible. California must implement a thoughtful, aggressive strategy that will maximize immediate impact and optimize return on investment. Separately, for several years, CETF has been calling for broadband deployment as a green strategy for sustainability; that urgency only grows in the wake of the COP26 climate meetings. As leaders begin to make historic investments, they should embrace these key principles for action:

  • Prioritize and drive infrastructure construction to the hardest-to-reach residents — rural unserved areas, tribal lands, and poor urban neighborhoods — and then connect all locations, especially anchor institutions (schools, libraries and health care facilities), along the path of deployment.
  • Require open-access fiber middle-mile infrastructure with end-user internet speeds sufficient to support distance learning and telehealth.
  • Strive to achieve ubiquitous deployment in each region to avoid cherry picking for more lucrative areas.
  • Encourage coordination among local governments and regional agencies to streamline permitting and achieve economies of scale.
  • Develop an open competitive process to achieve the most cost-effective investment of new dollars by optimizing use of existing infrastructure that ratepayers and taxpayers already have built.

To learn more, please contact Sunne Wright McPeak at sunne.mcpeak@cetfund.org

Sunne Wright McPeak is President and CEO of California Emerging Technology Fund, a statewide non-profit foundation with 15 years of experience addressing broadband issues to close the Digital Divide in California. This piece is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views reflected in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC. 

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Broadband's Impact

Frank Gornick: Valley Leaders Join State to Bring Ubiquitous Broadband to the San Joaquin Valley

Bringing internet capability to communities throughout the San Joaquin Valley is the focus of a new effort.

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The author of this Expert Opinion is Frank Gornick.

As the pandemic begins to recede, it leaves behind warnings of weak links in our overall health as a functioning society. The signs are everywhere: health care, water, infrastructure, education, supply chains and equitable access to technology and opportunity.

Under the guidance of the San Joaquin Regional Broadband Consortium, and with support from the California Emerging Technology Fund, our goal is to bring ubiquitous broadband to the eight counties that compromise the San Joaquin Valley, among the most underserved regions of the state and underestimated in ability to lead and drive change.

And we will do it within a year — a bold but doable achievement.

As a start, we are announcing a new partnership, #SanJoaquinValleyNetwork, which will seek the necessary resources to deliver a world class internet to enhance the economic and human conditions because our leaders want no less for our citizens.

To be clear, this is a significant undertaking with many moving parts. Therefore, understanding the players and the territory is essential.

Understanding the infrastructure landscape is critical

It begins by identifying what internet infrastructure currently exists and assessing the internet’s capacity in the eight counties. Where is it robust and, where is it lacking.

Why this year? There is political will and the funds to do it.

In July, the governor signed SB 156, which authorizes the state to work with counties, internet service providers, school districts, hospitals, libraries, businesses, manufacturers, farmers and municipalities. The goal is to develop a statewide open-access, middle-mile broadband network, including creating rural exchange points with last-mile access to homes, businesses and essential services.

The good news is that we are building upon the existing network, not starting over. Therefore, these expenditures will be much more efficient and effective.

In addition to the clearly stated intent of the legislation, state leaders have provided $6 billion for implementation.

Continuing into November, the San Joaquin Valley counties will be organizing and planning under the auspices of SJVRBC to obtain the maximum amount of financial assistance to implement the goals of #SanJoaquinValleyNetwork.

Applying for federal grant dollars in San Joaquin Valley

As this effort gets underway, #SanJoaquinValleyNetwork will begin applying for federal and state dollars to realize our goal, bringing ubiquitous broadband to the Valley in a year.

What outcomes can we expect? First, as we have learned from the pandemic, we must do more to expand deployment and access because it is critical for so many people to have reliable, robust connections to the services they need and to access new opportunities. However, not everyone has equal access.

The internet has provided greater access to health care, but not everyone has equal access, particularly seniors, low income households and rural residents. Students at all grades for the past 18 months have had to adjust to online learning, but not everyone has equal access or capacity required to succeed and gain the skills to join the workforce of the future.

Our economic engine, the agricultural industry, has relied on breakthrough technologies that depend on high speed internet, and dependability and access to the internet is necessary for growth and productivity.

The investment to extend broadband to the most remote and underserved communities will raise the standard of living of many — and the quality of life for everyone in the San Joaquin Valley.

Billions of dollars in California and across the country will be invested in deploying internet infrastructure to rural, tribal and urban neighborhoods in poverty. Construction of publicly subsidized, open-access middle-mile infrastructure that includes last-mile deployment achieves the best of both objectives — ensuring immediate internet access for businesses and residents. That’s why business, education and civic leaders throughout the San Joaquin Valley are applauding this effort.

We urge leaders in Kern, Tulare, Kings, Fresno, Madera, Merced, Stanislaus, and San Joaquin counties to join this effort.

For more information on the #SanJoaquinValleyPartnership, please contact Dr. Frank Gornick at frankgornick@comcast.net, 559-281-5200.

Dr. Frank Gornick is the chancellor emeritus of West Hills Community College District, where he served as chancellor for 16 years. He is the project manager of the #SanJoaquinValleyNetwork and lives in Lemoore. This piece is reprinted from The Fresno Bee with permission.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views reflected in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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Expert Opinion

Will Rinehart: Early Reports Show the Emergency Broadband Benefit is Not Reaching Its Intended Audience

A new county-level data and maps will help researchers and leaders understand impacts of the EBB program.

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The author of this Expert Opinion is Will Rinehart of the Center for Growth and Opportunity

Late last year, Congress set aside $3.14 billion to help low income households pay for broadband service and connected internet devices. In May, the Federal Communications Commission went live with the Emergency Broadband Benefit  Program, which now includes over 6.4 million enrolled households. But the program is temporary and slated to end either when funds are exhausted or six months after the end of the COVID-19 health emergency.

Since Congress is likely to extend the program through the infrastructure bill, policymakers need to understand the full extent of the program’s impact. To this end, we are releasing a county-level dataset for researchers and leaders alike that will help everyone better understand the EBB program. As many had hoped, our analysis of these enrollments suggests they are going towards low income communities.

Paradoxically, however, the program is not going towards communities where there is little uptake of broadband. Early data analysis shows that areas with low broadband uptake are less likely to enroll in the program. If leaders want to connect the unconnected, in addition to low income groups, other programs will be needed. EBB isn’t targeting these low-adoption communities.

The basics of the the Emergency Broadband Benefit

The Emergency Broadband Benefit program provides households up to $50 per month for broadband service. Those living on tribal lands could receive enhanced support of up to $75 per month toward broadband services. The program also provides a one time device discount of up to $100 for a laptop, desktop computer or tablet purchased through a participating provider.

The EBB was funded through the Consolidated Appropriations Act, which was signed on December 27, 2020. Two months later, on February 26, the FCC released a report and order, which established the EBB, laid out the rules of the program and then delegated the authority to the Universal Service Administrative Company, which the FCC created to administer the programs. In May, the new program went live and since then, USAC has released data on the number of households in a claims tracker.

Eligibility comes through one of four ways. First and most important, a household might already meet the qualifications for participation in the Lifeline program. The Lifeline program began in 1984 under Ronald Reagan‘s administration to support telecommunication services for low income households. Through the years, the FCC issued a set of orders extending the scope of the Lifeline program from its origins in plain old telephone service to mobile phones and then mobile internet. Wisely, the FCC has extended the National Verification system to accept new households. The vast majority of EBB enrollments have come through this method, at just under 79 percent.

Otherwise, a household can get the support if they have been approved for free or reduced school lunch or breakfast, experienced a substantial loss of income due to the pandemic, or received a Federal Pell Grant.

The expansion of the EBB program

As of October 10, 2021, around 6.4 million households have enrolled to be a part of the EBB. The first few weeks of the program saw the largest growth period, but that has since decreased. In the first full week of the program, nearly 1 million households signed up, and in the second week half a million followed. Since those first weeks in May, the rate of new signups each week has dropped to about 200,000 new non-tribal homes and about 2,000 tribal homes. The graph below charts the number of new enrollments each week, combining both tribal and non-tribal households.

Getting support to 6.4 million households has cost $600 million so far, $546 million of which went to service support and $53.9 million went to devices. But not every household is taking the full amount of support. The current utilization rate is about 75 percent of the maximum allowed. Most people aren’t taking the full $50 support.

Assuming that this growth rate continues, the number of households enrolled might grow to 10 million in January. If the infrastructure bill is not signed, the program might run out as early as April 2022. Less aggressive estimates of growth only push out the termination date just a month longer to May. Finally, assuming that no more people are added to the program, the $3 billion mark will be reached in July. This last assumption provides a baseline for comparison. Congress, however, seems poised to pass the infrastructure bill, which would extend the program with another $14 billion.

The reach of the EBB

To make the data more approachable, October's release has been converted from ZIP code data provided by USAC to county-level data using Housing and Urban Development crosswalks. It is available in the graph below.

Early analysis of the EBB data from Scott Wallsten at the Technology Policy Institute “suggests that areas with higher shares of low income households with broadband are signing up at lower rates than elsewhere.” In the Appendix attached to this post, the results of a new study that I conducted are detailed. It aims to chart the relationship among EBB enrollments, the percent of low income homes in a region, and the number of homes without Internet access. In contrast to Wallsten, it found that enrollments maintain a positive relationship with poverty, which makes sense. More poverty in a region should mean that the area is receiving more assistance through EBB.

But it also found that enrollments were negatively connected to the number of households without broadband in a region. Although there are many possible reasons for this finding, it should give leaders pause that areas with more people offline have fewer EBB enrollments. The relationship should be positive. While none of this is the final word on the EBB program, it is clear that the FCC needs to conduct further analysis.

While they are at it, the FCC should also properly study the effectiveness of the Lifeline program, which the Government Accountability Office has recommended since 2015. As I noted previously, “The lesson from policymakers is clear. Cost might be a barrier for some, but lowering cost doesn’t get a lot of people newly connected.” The EBB has been a lifesaver for many, but getting the unconnected onto the internet will require something more.

Will Rinehart is a Senior Research Fellow at the Center for Growth and Opportunity, where he specializes in telecommunication, internet and data policy, with a focus on emerging technologies and innovation. He was formerly the Director of Technology and Innovation Policy at the American Action Forum and before that a research fellow at TechFreedom and the director of operations at the International Center for Law & Economics. This piece is reprinted from Utah State University with permission.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views reflected in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC. 

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