If you were judging solely from the reaction of Comcast, you could be faulted for thinking Ramsey County and the city of Saint Paul were making a bold, if risky, investment to bring real broadband to local businesses and citizens in Minnesota's capital. But you would be wrong. Very wrong.
The City and the County are paying a company to build them a network to serve their own needs. The City and County are smart to want their own network but this particular approach is a poor one. Let's start with a little background:
Saint Paul and Ramsey presently rely on Comcast's network to transfer data files between locations and access the Internet. It is an old cable network, called the I-Net, that is failing to meet the present day needs for the City and County. Because Comcast provides the I-Net at no charge as part of the franchise, they put it up with its inadequacies. But government employees are less efficient than they could be due to this old, unreliable network. For instance, they have to wait for GIS files to crawl across the network.
St Paul's telecommunications problems aren't limited to just the I-Net. Even back in 2005, St Paul recognized that the Comcast/CenturyLink duopoly wasn't getting the job done for much of anyone. We had (and still have) the same basic connections that the rest of the country had, limiting our attractiveness for new businesses that have above average needs. So the City created a Task Force that produced this terrific report in 2007 [pdf]. But the economy crumbled and the report was largely forgotten.
No one, including myself, stepped up. I have lived in St Paul for 15 years and now own a home here. This has been a failure of leadership from elected officials, staff, and concerned citizens (in that order). Mayor Coleman has utterly failed to do anything but talk about the importance of broadband and the City Council has followed his lead since Lee Helgen lost his seat. A sign of this failure is an announcement that MISO is moving out of St Paul: One of its reasons for moving 90 jobs from St Paul to Eagan was better access to fiber optic connections. As long as St Paul continues to rely on Comcast and CenturyLink, there will be little reason for any entreprenuers or high tech firms to move here.
Nonetheless, St Paul had to take action for a new I-Net before 2013, when the Comcast franchise was set to expire. The broadband stimulus projects provided an opportunity for the City to advance an application that would build its own I-Net.
The proposal would have built a fiber-optic network connecting muncipal facilities. But because St Paul didn't want to pay even 20% of the cost of this incredible asset (with a life that would be measured in decades), they found a private partner - a new company called Minnesota Fiber Exchange (MFE) - that would put up the matching funds and coordinate the project. The project would have put two conduits in the ground -- one to be shared by the City and the other to be used however MFE chose.
After the feds didn't fund the project, Ramsey County decided it would move forward with that same model. Its needs were not being met by the few private providers (largely CenturyLink and Comcast), who wanted to charge far too much. (This is common in markets with insufficient competition, which describes most of the United States in broadband today.) Even though the County would now have to foot much of the bill, it chose to continue the MFE approach.
In 2011, St Paul created an RFP for an I-Net solution from the private sector but the bids were insufficient or too expensive. Then, after a long period of silence (during which the City mostly refused to talk or listen to anyone on matters related to broadband), the City decided to throw its lot in with Ramsey County.
This is the present plan, as far as we can tell. Rather than paying Comcast its inflated rates to lease services, the County is paying MFE to build a network that will connect public facilities and be owned by the County. St Paul will lease capacity from that network. In building the County's network, MFE will build its own network right next to the County at the same time. The County will serve community anchors (schools, police, fire, etc.) and MFE will offer dark fiber to everyone else.
Comcast, which apparently viewed itself as the sole legitimate supplier of broadband to local government, has freaked out. As noted in a Pioneer Press article on the network:
"City and county taxpayers are facing significant risk by being put in a position of competing directly with many well-established service providers," said Mary Beth Schubert, a vice president of corporate affairs with Comcast in the Twin Cities.
Comcast is in the midst of creating a tempest in a teapot. And since it basically owns the St Paul Chamber of Commerce, the Chamber is helping. In two different articles, the Pioneer Press has printed Comcast's absurd comparison of this project with UTOPIA. For those unfamilar, UTOPIA is a consortium of Utah cities that planned to build a $500,000,000 network to connect 500,000 residents and businesses with the most advanced broadband network on the planet. The Ramsey/St Paul plan will connect over one hundred municipal facilities with broadband at a cost of between $10 million and $25 million. You say tomato, I say world's largest pumpkin. No comparison.
I don't know why the Pioneer Press lets Comcast get away with these exaggerations, but I wish it would at least result in future fact checking of such comments to see just how much manure they contain.
With regard to Comcast's chief objection, neither the City nor the County will be competing with the private sector. The City and County are serving themselves. It is MFE that could be said to be competing with Comcast (though Comcast typically refuses to lease dark fiber in favor of overcharging customers for lit services). Comcast's objection should be considered the same way we would laugh at Starbucks for claiming the County's coffee pots are an affront to the free market.
The City and County have made a business decision that owning their own network will result in cost savings to taxpayers and a better level of service. This is unsurprising and in line with what we have seen elsewhere, most recently documented in Florida's Martin County, where transitioning away from Comcast is saving millions of dollars.
Martin County is not an isolated case. We previously wrote of Comcast's onerous rate hikes for Palo Alto's I-Net in 2009. We have seen the same story play out in city after city - where Comcast dramatically increases the fees for community anchor institutions, recognizing that most local governments have few alternatives. One of the most impressive such networks is DC-Net, operated by the local government. As we noted in a report years ago, DC-Net saves the community over $5 million each year (real costs compared to the costs of duplicating those services by leasing from existing carriers).
Our case studies detailing how three communities built the fastest and most affordable networks in the nation notes that one saved more than $1 million by transitioning from leased lines to its own. Another dramatically increased capacity to schools and libraries while holding the price constant or decreasing it.
Smart local governments have recognized that they will need these networks for generations. The need for fast, affordable, and reliable telecommunications connections will only increase. And towns like Greenacres, Florida, are saving taxpayer dollars by moving from overpriced cable and telephone company connections to their own networks. Some local governments, like Arlington, Virginia, are finding the benefits go far beyond just cost savings and faster networks. Ownership provides more opportunities for schools and other community anchors to take full advantage of modern technology.
What we have a problem with is the extremely limited public benefit results from this particular arrangement. Though the City's own Task Force recommend that the City move in the direction of investing in a network that would both meet the needs of the local governments and encourage additional broadband competition, this plan is the most timid approach possible in that direction.
MFE says it will lay dark fiber throughout the city and make it available to everyone, but this is hardly a new idea. Several cities have done this and it has had the tiniest of impacts on broadband services for residents and local businesses. Most of us just want to pay for Internet access; we don't know how to lease dark fiber. And the cost of anyone connecting my house to dark fiber to sell me Internet access is prohibitively high.
What dark fiber is good for is cherry picking -- finding the highest revenue customers and serving them, which has the sad effect of making it harder for any network to serve everyone. This is why we have urged elected officials not to use this particularly approach. Our concerns are even greater as we do not even know if the County will fully own the network our taxes will build.
Consider Longmont, Colorado (which is also Comcast territory). As our podcast today discusses, Longmont built a fiber ring a decade ago and is now beginning to connect homes and businesses without borrowing additional funds. Santa Monica took awhile but with smart planning, has connected local businesses with 10Gbps connections - among the fastest connections available in any city. In both cases, having total ownership of the fiber enabled smarter investments in the future to benefit local businesses and residents.
Local governments and communities have an interest in building networks to spur economic development, create more choices for consumers, and otherwise improve the quality of life. Private companies have one mission - to profit. And while the profit motive is an incredibly important force, it is the wrong one to drive decisions about essential infrastructure.
These networks are increasingly the basis for much of the economy. We don't let GM and Ford make the rules for what cars are allowed on the roads and we shouldn't encourage a few companies to rule our access to the Internet.
So What Should We Do? First of all - we need more information. We need to see this contract and have a chance to comment on it before the City and County have made their final decisions. Some of those giving technical advice to St Paul were involved in the wretched Minneapolis Wi-Fi contract. Promises were made, particularly in regard to a digital divide fund -- but the contract was poorly written and that fund has all but disappeared. Our plan should be vetted by actual experts.
Our local governments should revisit the 2007 St Paul plan and the goal of building infrastructure that really enables more choices for local businesses and residents. In the telecommunications regulatory environment, local governments have few tools to ensure competition. The strongest one is their own procurement decisions -- they should be building one network and they should control it. If leasing dark fiber fails to create sufficient competition, they can change course. But if MFE's plan fails to encourage competition, local governments can do nothing but watch and hope for the best because MFE calls the shots on its network.
The City and County should have developed a telecommunications plan (at less cost than they have paid to develop this ho-hum approach) that would enable them to put conduit and fiber in the ground for essentially no cost over the past 5 years during other projects (when a road is already open for other construction, putting fiber and conduit in is trivial). Better late than never - get this process started.
And finally, if MFE moves forward with this plan, other carriers should be invited to get in the trench. We want more choices for our businesses and residents, so let's make sure other companies (including Comcast and CenturyLink) can put fiber and conduit in the ground at the same time our public money opens it up. Just having MFE offering dark fiber won't change the market much. But if other providers also have an opportunity, we might at least see a few benefits from competition.
In working with local governments, we are regularly frustrated to see a total misunderstanding of what it takes to create real choices for residents and businesses between Internet Service Providers. Just having more dark fiber rarely does it. Partnering with a company to build a ring doesn't do it. The cost of connecting homes and businesses is high, which is why the private sector has overwhelmingly failed to create competition.
But local governments can make these investments because they don't need to profit immediately. They can take 5-7 years to break even financially. In the meantime, they are creating new opportunities for jobs, better education and health care opportunities, and keeping far more money in the local economy than massive distant corporations like Comcast and CenturyLink.
I honestly don't like being controversial and don't want to categorically condemn MFE's plan, but we think the County (and indirectly the City) can do better than this plan. We certainly would not recommend any other local governments starting down this path until we see some actual results. MFE has reached out to me in the past regarding their plan and is welcome to respond in comments below.
For all of our frustration with its verbatim reprinting of Comcast's talking points, we want to give kudos to the Pioneer Press for calling on this decision to receive more scrutiny. This is a major decision -- it may be our best hope of actually encouraging competition in our community. We need to get it right. A good place to start learning about options is a recent article from The Line, "the broadband challenege."
Oh, and one for the road - Comcast is readying some upgrades to its network. Let's see who gets it first -- markets with real competition, or those where Comcast only has to worry about slow DSL from CenturyLink.