Public Broadband Hits Speed Bumps

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Imagine if your town decided to provide low-cost, high-speed Internet access much as it does other public services. Now picture your regional cable and DSL providers suing to stop your town from doing so.

That's what happened to North Kansas City, Missouri, when it announced plans to build a fiber-optic network that would compete with local DSL provider SBC.

Before North Kansas City could break ground on the project, cable giant Time Warner Cable asked a Missouri federal court to block the city's efforts.

That came as bad news to local business owners like attorney Brian Hall, who was disappointed because current broadband offerings from Verizon were unreliable and not widely available in North Kansas City.

Time Warner Cable stopped the city by arguing that Missouri state law requires a vote of the city residence before a municipality can offer its residents cable TV service. North Kansas City doesn't deny it eventually wants to deliver cable TV to residents. But first, it just wants to deliver Internet and phone service, which requires no vote by the community.

Time Warner's initial case was dismissed, but the company appealed the ruling and vows to stop North Kansas City from offering services that Time Warner plans to offer residential customers later this year.

Internet Battle Lines Drawn

Municipal broadband Internet access is becoming a hot-button issue. In many cases, communities are pitted against local cable and telecommunications companies for the right to provide Internet access to their citizens.

Cities like Philadelphia and San Francisco, as well as rural towns in Florida, Louisiana, and Utah, are pushing forward with low-cost Internet access, via either wireless networks or high-speed fiber wired networks. These communities want to treat broadband just as they do other public services.

As the argument goes, if a municipality can offer Internet access at lower prices than most telephone and cable TV companies, why shouldn't they? Opponents, who include broadband providers and some politicians, counter that cities would have an unfair competitive advantage and that service and support would not be as good as that offered by private companies.

U.S. Congressman Pete Sessions, R-Texas, recently introduced H.R. 2726, a bill that would ban cities from running communications networks that compete against private-sector telecom companies. Sessions, a former SBC executive, argued local governments should not compete with private companies.

He and other opponents of municipal broadband argue that almost half of Internet households have broadband that is getting faster and cheaper over time. Building more networks, opponents say, not only threatens private enterprise but wastes taxpayer dollars.

Cities Make Their Case

Cities see wireless broadband as an affordable solution to building large networks at very low prices.

Wireless Internet access has been available to the 18,000 citizens of Chaska, Minnesota since 2004. Residents there pay only $16 monthly for 1.2-mbps access, about half the average broadband bill from providers like Comcast and Time Warner. The wireless network has been inexpensive to deploy, says Bradley Mayor, Chaska's information systems manager. He says it cost the city about $850,000 to roll out.

Affordable high-speed offerings via fiber networks are good for the local economy, helping to attract and retain businesses, as well as making the community a more desirable place to live, says Jim Baller, a lawyer who represents municipalities.

Joey Durel, mayor of Lafayette, Louisiana, population 116,000, says his town "begged" its telephone and cable companies for years to wire his city with fiber optic access--to no avail. The city has unveiled its own plans to build a fiber network delivering Internet, cable TV, and telephone service. He says residents will save more than 20 percent on their monthly communications bills. The new network will also allow the city to wire its schools with fast access.

However, Bell South and Cox Communications have filed motions with the courts to stop Lafayette from going forward.

In January 2005, BellSouth threw a wrench in Lafayette's plans to issue a $110 million bond to build its fiber network. Bell South filed a legal challenge in state court arguing that the way the city was issuing the bond didn't follow state law. Louisiana requires a vote by the city first before a bond of this nature could be approved. In February Cox, through a separate legal filing, joined Bell South's suit.

The State Court in Lafayette Parish agreed with Bell South and Cox. Instead of fighting the court's decision Lafayette proposed a second bond which city residents will vote on July 16, according to attorney Pat Ottinger, who represented the city of Lafayette.

For the City of Philadelphia, with approximately 135 square miles of land area, wireless access could be provided to the entire city for $10 million, says Dianah Neff, Philadelphia's chief information officer.

This is a fraction of what it would cost to wire the entire city for cable or DSL, Neff says. The cost of operating the system is expected to be $1.5 million annually.

Neff says it would be years before incumbent cable and DSL providers offered broadband to 100 percent of Philadelphia, and he doubts they ever would.

Large Providers Object

Verizon Communications, Bell South, Comcast, Time Warner Cable, and SBC Communications, which all provide broadband Internet access to consumers, say it's unfair for city-owned networks to compete against private companies.

SBC spokesman Marty Richter explains there are fundamental policy and conflict-of-interest issues when government enters a business where it has the ability to tax and regulate its private-sector competitors.

However, individual cities and towns cannot regulate telecommunications providers or ISPs--that's the province of state and federal governments. What cities do regulate are cable franchises, though in instances where cities offer such services, says Jim Baller, a lawyer who represents municipalities, they are also subject to federal regulations.

Regulatory support for public broadband may help towns like Lafayette. U.S. Senators John McCain, R-Arizona, and Frank Lautenberg, D-New Jersey, have introduced S.B. 1294, a bill that would guarantee cities the right to build municipal communications networks. The McCain-Lautenberg bill would allow municipalities to build and run digital communications infrastructures.

Meanwhile, cable and DSL providers say even if cities muscle into their business, they are prepared to compete with municipalities. Verizon says it can do a better job at network management and customer care. "Cities need to go into these projects with their eyes wide open," says Eric Rabe, spokesperson for Verizon.

High Cost of Cheap Broadband

Rabe points to Whatcom County, Washington as an example of how things can go wrong. The county sold its fiber system in April 2005 for only $126,000, after spending about $2.3 million on building it.

"We started the project to help bring Whatcom County broadband access," says Tom Anderson, general manager of local public utility. Anderson says by the time the network was half finished, cable provider Comcast and Black Rock Cable, a fiber optics provider, saturated the market with competing services, which muted the need the public utility to deliver services

Sometimes public Wi-Fi dies because of lack of interest. For the past 17 months, the city of Orlando, Florida, has been spending $1,800 a month to keep a pilot municipal Wi-Fi network running. However, the network saw only 27 users per day. That was not enough to justify the cost of keeping the network running, says Frank Billingsley, director of the Orlando's Downtown Development Board and Community Redevelopment Agency.

The city announced on June 21 that it plans to pull the plug on the network.

Not only do some of these networks have high up-front costs--the Lafayette plan will cost $125 million, which the city hopes to raise through bonds--there are also online customer-service and maintenance costs to consider.

In Chaska, resident Gino Businaro isn't so happy about his city's Wi-Fi network, which he has been using for the past year. "For some people, I know it's been working just great. We haven't had the same luck," Businaro says. He complains of periodic blackouts and sluggish uploads when trying to send even small e-mail attachments. Businaro says he's looking into getting access from Time Warner Cable, which services his neighborhood.

"Do you really want to call City Hall when your Internet access goes down?" Rabe asks.

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