Fiber opportunity is worth the risk in North St. Paul
By Christopher Mitchell, originally published in St. Paul Pioneer Press, February 20, 2009
Come Tuesday, North St. Paul residents have the opportunity to become the first metro-area community with a nextgeneration network connecting every home and business. This network will offer a unique experience in the Twin Cities, an advanced broadband network similar to what tens of millions use on a daily basis across the rest of the developed world.
North St. Paul has asked its citizens to approve $18.5 million in bonds to build a fiber-to-the-home network called PolarNet. Bonds will be repaid by the revenue from citizens subscribing to phone, television, and its blazing fast Internet connection provided by an established company based in Minnesota.
Detractors, including incumbent phone and cable companies, have claimed the new network is unnecessary because North St. Paul already has these services. Comparing existing services to PolarNet is like comparing a hang glider to a Boeing 777: Sure, they are both forms of air travel, but one is far more more robust.
In a recent commentary, Pat Anderson of the Minnesota Free Market Institute defended the existing duopoly in North St. Paul, suggesting that city-owned networks usually fail. They don’t.
The Fiber-to-the-Home Council maintains studies of fiber networks deployed by private and public providers across the country.
“Nationwide, the take rates (number of subscribers) for retail municipal systems after one to four years of operation averages 54 percent. This is much higher than larger incumbent service provider take rates…”
Anderson called WindomNet a “financial failure” in 2008. This was an odd statement, because the business plan expected to lose money in that year. Building a fiber-to-the-home network requires millions of dollars in upfront capital and several years of losses before an operating profit. This is true of private networks as well.
Despite being labeled a “failure,” WindomNet has saved local jobs, encouraged additional economic investment and offers responsive local technical support. This was illustrated starkly when the DSL connection failed for a local business. The incumbent provider said they would send a tech in four days. That business then dialed the city and had a tech connecting them to WindomNet in two hours.
Several cities in Utah built a fiber-to-the-home network called UTOPIA (using a different business model from PolarNet) that has been called a failure. Nonetheless, it has greatly benefited area businesses, one of which testified in the Utah Legislature that even if their taxes increase modestly, they will still save money compared to what they would have to pay an incumbent provider for similar services.
The worst-case scenario is hardly what the vote-no people suggest.
The few examples they cite as failures use different business models, different technologies or are so outdated as to be irrelevant.
North St. Paul has a choice most of us do not. It can build an ultra-fast network that will offer the fastest and most affordable Internet connections in the metro area. City residents can choose increased local television content, increased competition and have their technical support phone calls answered by a Minnesotan.
Certainly the project does not come without some risk. But the vote-no group has received more than $40,000 from incumbent providers to greatly exaggerate the risk to taxpayers.
More than 100 years ago, North St. Paul took a risk in purchasing the electric and water utilities in an era when many argued municipal governments could not handle the technology. Citizens on Tuesday have the opportunity to guarantee future generations unfettered access to modern technology. Again.
Christopher Mitchell is the director of the Telecommunications as Commons Initiative at the Institute for Local Self-Reliance in Minneapolis.
About ILSR: The Institute for Local Self-Reliance is a nonprofit organization founded in 1974 to advance sustainable, equitable, and community-centered economic development through research and educational activities and technical assistance. More at http://www.ilsr.org