What’s Going on With the Internet? (Episode 57)

We tend to think of both of them as community networks. Both of them were seeing tremendous drives. In coops, it’s a bit more rapid, I’d say, but in the municipal space, we’ve seen a lot of interest and a fair amount of more investment. We’ve seen a lot more cities considering these investments, but we haven’t seen the same level of rise of them building them, although we have continued to see an increase of new cities building networks.

Now, another business model which has very low risk, and an approach, is what the City of Ammon, Idaho has done. We’ve covered that very closely. That’s very exciting, because it demonstrates how the cities can move forward on an incremental and somewhat slower basis than if they were to bond and borrow a lot of money, but you can get your toes in the water, and get a sense of what the community reaction really is by financing it with assessments on the homes where you have homeowners that are excited to take part in this.

There’s a number of different financial models that are still growing. I think we should be thinking of this as municipal networks are still relatively young as an idea, municipal fiber networks in particular. I think we’re going to see continued growth and maturing in this area.

Whenever you say something like that, if you’re in this field, you might think of Chattanooga, which has brought billions of dollars of investment to the community. Well, more than a billion, I should say. I don’t want to exaggerate it. They were the first city in the nation, and I actually think possibly the first city on the planet, in which anywhere in the city, and in a lot of the county that is surrounding the city, you can get 10 gigabits per second, and you can get that at a price that’s cheaper than you can get even 100 megabits a second in a number of other areas. That’s a different of 100-fold in terms of capacity.

To give people an idea, there’s a couple of ways that we can measure this. One is just raw speed, and we certainly see very non-biased measures showing that cities are building networks that have very powerful speed. We also know that Consumer Reports has said that Chattanooga is the best ISP as ranked by the customers of ISPs. Now, Consumer Reports is a wonderful organization, a consumers’ union, but they tend to focus on larger networks. Many of the municipal networks aren’t even studied. In fact, the vast majority of them aren’t a part of those studies. I’ve visited almost all 50 states now in my lifetime. I get around quite a bit. I’ve visited more than 30 to talk to people about municipal networks, and so I’ve met a lot of people and talked to them about their experiences. They’re very positive on it.

Then a final piece of information. There’s certainly more out there, but one that I’ll just bring up is Harvard. Harvard has a center on technology and society called the Berkman Klein Center. They did a study looking at pricing and found that the citywide municipal fiber networks do tend to price their services lower. We certainly see multiple lines of evidence showing that cities build networks faster and at lower cost, higher reliability, and greater customer satisfaction, which frankly makes sense because if people don’t like the service they’re getting, it’s not just a matter of calling up and complaining. They actually vote. They vote on their city council members. They vote on the mayor. If they’re served by a cooperative that’s doing a broadband network, then they can vote on the board there. These things are accountable in ways that Comcast and Charter Spectrum just are not. We would expect them to be better, frankly.

At the state level, we actually see more partisanship, and then at the federal level, we see extreme partisanship. In many ways, that’s sort of what we see in many fields right now, but it’s quite remarkable, the difference between Republican attitudes when it comes down to a pragmatic, local issue of solving this problem of Internet access versus the federal issue, where Republicans tend to be the ones that don’t want cities to be able to build the networks that people who vote Republican are building across the country. So it’s frustrating, but I often don’t know if I’m working in Ammon, I don’t know if I’m dealing with a conservative or one of the admittedly relatively few more progressive type folks there. Because it doesn’t come up. You know it’s not like people say my ideology tells me to do this. You know this is just more of a pragmatic decision of we understand that very large companies don’t put our interest first, so we are going to solve this problem locally. And there’s that. And it’s not a matter of saying, “Therefore I love Elizabeth Warren,” or something like that.

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Thanks so much, Chris, for joining us today. So let’s start off with this next section about how broadband issues are happening in current events today. The midterms are coming up in just a few short weeks and I’ve noticed it seems like every election cycle, Colorado seems to have a ballot initiative about community networks, for folks to vote on. Why is this a theme for them and are there other states using ballot initiatives in the same way as Colorado is?

But Colorado’s pretty unique in this broadband world because they passed a state law in 2005 I wanna say which basically took local decision-making on broadband issues away from local communities. And that was very strongly pushed by the company that’s now CenturyLink, but it was then U.S. West, which got gobbled up by Quest, which go gobbled up by CenturyLink so, sort of the same lineage with that reminder of the consolidation that we see.

If a city or a county or even other kinds of political jurisdictions in Colorado, if they wanna do a partnership, if they wanna build their own network, if they even just wanna really explore the issue, they basically have to pass a referendum to reclaim local authority. Very few other states have that. Iowa does have something similar to that if you wanna set up a telecom utility, but other states, we have not see that. Now in some of the western states, where they have a stronger tradition of ballot initiatives, those people who’ve wanted to put a pro-active kind of ballot initiative on the ballot and, it may not even carry the day in terms of, if it passes the city would be obligated to do something, but it would give cover or really give energy to those on the city council that would wanna do something.

So that’s some of the ways that we see some ballot politics happening. But in Colorado we’ve seen more than 120 now local jurisdictions opt out of that state law and still, even with that obvious, just incredible level of support for regaining local authority, the state legislature has not been willing to really go so strongly against CenturyLink to get rid of it. I think the cable and telephone companies are very good at making sure that there’s nothing that goes through the state legislature that will significantly change the market or result in a better choice for a lot of people.

If AT&T, which famously hosts this magic, major golf tournament as a major lobbying thing that every legislature member seems to, general assembly member, seems to love. We’re waiting, Governor Brown kept us waiting and made his decision at the end of September and signed the bill. California has basically re-instituted the rules of that the Obama administration created to preserve the open internet, but they also went a little bit further than the FCC had gone and it’ll be interesting to see where that leads. I don’t think anyone really has a sense of that. We know that there will be lawsuits, in fact there already have been lawsuits to try to stop California.

I don’t know how many other state legislatures will follow along. I’m sure that there will be campaigns to have other state legislatures pass other kinds of bills. I think that we may see a lot of places adopt a ‘wait and see’ attitude. I would love to see this lead to more effort of people to really change the state laws. I don’t know that I would make it my campaign around the neutrality right now, if we had a certain amount of political energy I think I’d be looking more, given ILSR’s point of view that the way we wanna solve this is by creating alternatives that are accountable to the community. I think regulation is certainly better than nothing, but in the end, at the Institute for Local Self-Reliance, we strongly believe that market structure is a far better solution, one that encourages local businesses and locally accountable entities to be competing against each other and remove that incentive for a monopolist control so much, the ability of a monopolist to control so much.

I don’t want to say that local municipal networks are inevitably, forever going to be good on net neutrality. I think they have been. The evidence suggests that they have been. We’ve never come across a city that is violating that neutrality, and we don’t expect cities to do that generally, particularly with they have fiber networks. The older infrastructure was cities built cable networks, there might be, depending on who’s running it, at least consideration of violating net neutrality in order to prevent one or two people from using so much data that it impacts others.

So I would say that this is an area, and it’s a bit gray. But there’s two reasons that we don’t expect cities to significantly violate that neutrality. Maybe even three or 10.

Smaller networks, the power dynamic is just totally different. And then the second piece of it is, again, people want an open internet. They don’t want their network to tell them how to use it, and if their network owner starts telling them how to use it, and they can vote that person out, they’ll do that, that’s my strong suspicion. But there’s a final piece also that’s worth saying and that’s that cities are generally building the best infrastructure possible because they’re trying to maintain a business climate that is welcoming to new businesses and is really allowing existing businesses to thrive. So they have very big pipes. There is no reason that they would want to constrain that. They generally see their big pipes as an advantage. And so they have a different incentive than a provider like Comcast, which sees an ability to sell more and to try to have an economy of scarcity whereas these cities want an economy of abundance, so, there’s just different incentives for smaller providers and in particular for small municipal providers. Let me just say that this is one of the reasons that we’re very supportive of publicly owned networks. I would be pretty skeptical of large state owned or multi-state publicly owned networks because I’m afraid that the dynamic could be different and we like municipal networks at the scale that they’re at generally now.

As you’re saying Verizon is rolling out in several different communities, several different neighborhoods of the communities to be specific, not the entire city of Sacramento immediately but to some areas from in there for instance and a few other places. They’re testing this out to see what it’s gonna be like. This is something that’s exciting in terms of an iteration of wireless. It’s gonna make wireless better. Much like 4G has gotten better over the past five or six years or whatever it’s been available on the market. 5G will continue to be better.

In fact, wireless is constantly getting better. It’s just arbitrarily they say, “Alright, we’re gonna call this next thing 5G”, rather than 4G.3 or whatever. It’s exciting but we’re concerned about it because it’s being over hyped and it’s being used by some to suggest that because 5G will be better, it will provide better wireless that maybe we don’t need more wired choices in our homes. Maybe cities shouldn’t be building networks. Maybe we shouldn’t be developing government programs to expand into rural areas because wireless is going to be better in the future. I don’t find that very persuasive.

In general 5G uses frequencies that are gonna be poorer in rural areas to use which is to say right now 4G uses towers that are high up off the ground and they go for miles. The signal goes for miles. 5G is gonna be much faster but the signal does not travel as far effectively. We’re gonna see more smaller radios more close to us in urban areas. In rural areas if you wanted to do that you’d have to take fiber really deep into the rural areas and if you’re gonna do that you might as well connect people with the fiber optic connection.

One of the things I remember seeing is a study from a company called Vantage Point which works with a lot of small ISPs and telephone companies, independent telephone companies, and they did a big study and said that 5G effectively delivers 20% of the benefits of fiber optic connections at 80% of the cost. This is something that even AT&T is responding to and we see from their CFO’s statements that suggests that AT&T is recognizing that this is not a very good bet for the use of their money. As people see all this stuff about 5G I think you should not get very excited because even though it is very exciting it’s still pretty far off in the future before most of us will see the benefits of it.

What’s concerning is that the Trump Administration is really taking a lot of local authority away from cities as to how cities can negotiate with companies like Verizon in striking these deals. Right now schools often gets tens of thousands or hundreds of thousands of dollars per year from leasing out space to the wireless companies on top of their buildings. They will soon not be able to do that. Instead, basically the federal government is mandating that local governments give that away at a much lower cost. That means the rest of us will pay more for our schools and Verizon’s shareholders will make more money. I guess my retirement savings might get a little bit of a boost from that but I’d frankly prefer that the schools get the money now than that shareholders of Verizon end up making out better. This is the sort of dynamic we’re seeing right now in the telecom space where all this excitement around 5G, unwarranted excitement given the timeline in which it will be really deployed, is being used as an agenda by some to steam roll local authority.

One is, We the Corporations: How American Business Won Their Civil Rights by Adam Winkler. It’s a story that many of us think we know about the fight between American constitutional law and corporations but frankly the number of areas in which I had it totally backwards I’m stunned. It was book that was very eye opening. I can’t recommend that enough. Don’t just read reviews of it, read the book.

The other book that, again I think I may have mentioned this in the past, but Nassim Nicholas Taleb who frankly is a person that I really hate recommending his books because I think he is a person that is incredibly difficult to follow on Twitter to see what he’s doing. He’s mean but he is very sharp and his book Fooled By Randomness: The Hidden Role of Chance of Life and in the Markets is stunning and should be frankly forced down the throat of high schoolers probably. I’m strongly recommending that as well even though I’m nervous about giving him any more power given his meanness I’ve seen demonstrated.