What if FiberNet Monticello Had Been Canned in 2008?

Date: 29 Jun 2012 | posted in: MuniNetworks | 0 Facebooktwitterredditmail

Monticello faced a number of key decision moments throughout the history of its FiberNet. Given the recent changes in management and decision not to make up the different between debt service and revenues, some may be wondering if proceeding with FiberNet was the smart decision.

It was 2008 and the economy hadn't entered its death spiral. Monticello had overwhelmingly voted by a 3:1 margin for the local government to bond for and build the network.

When Monticello was beginning to sell its bonds, the incumbent telephone company (TDS) filed a lawsuit against the City, with the extremely dubious claim that Monticello did not have the authority to do what other cities in Minnesota had done. Courts later tossed it, finding that the TDS suit had no merit and making TDS reimburse Monticello for some of its costs due to the frivolous suit.

But the goal was never to win the lawsuit, it was to delay and harass. Monticello had to wait a year to begin building its network. Though TDS had previously maintained that its DSL was just fine for the needs of residents and busineses, it began pulling permits to significantly upgrade its DSL to a FTTH product. (TDS has steadfastly maintained, while investing more in Monticello than any other Minnesota community, that community networks result in less investment from incumbents.)

At any rate, Monticello had a decision. It faced an expensive court case and the City's action was apparently driving TDS to improve its poor network. Monticello could have backed down in the face of TDS' bullying.

And if it had? From what we have seen elsewhere, this is our best guess:

TDS Telecom Logo

TDS could have delayed its upgrades or changed its mind entirely when the economy tanked. If it continued with upgrades, it would likely have made some token investments but not lowered its prices because the threat of actual competition was removed. It certainly wouldn't have unveiled broadband tiers that were superior on speed and price to those in Minneapolis / St Paul metro area.

If they had unveiled a high-speed option like the 50/20 Mbps package, they likely would have priced it sufficiently high that few took it and then would have used that as evidence that their old, slow, unreliable DSL had been just fine.

People would have no choice of phone providers because Charter still does not offer telephone in that area. Prices for telephone, television, and broadband would all be much higher in Monticello - the same as we see in the majority of other communities where people can only choose between one DSL company and one cable company. Savings for many households from Charter's discounts range in the several hundreds to perhaps $1000 each year -- real money that would be at Charter HQ right now rather than in Monticello.

Local businesses that depend on reliable telecommunications would have been much less competitive - paying more than competitors in other communities (regionally or nationally) while receiving far less. Some of those businesses may have decided to move or expand to areas with modern infrastructure, recognizing that companies like Charter and TDS would never view Monticello as a priority for investment absent a community network.

People who have been hired by Charter and TDS in their respective marketing blitz (particularly the door to door sales people) would not be working for those companies. All the multiplier effects from the saved money, the people hired to build or upgrade the networks, and such, would not have happened. Media outlets would have fewer advertisements and event organizers would have had fewer sponsors.

Charter ad

TDS suddenly decided to provide free broadband to the Monticello area schools around the time that the City decided to build its own network so the schools could be spending more money on telecom charges if the City had backed down.

Because Monticello had the courage to stand up to TDS and is now home to some of the best broadband access in the entire nation, it has been featured in several press stories and received a lot of positive attention. Whether this has paid off with people choosing Monticello or businesses considering it, we do not know -- but we do know that many cities would be thrilled to have that attention.

We do know that due to the lawsuit, predatory pricing from Charter, and the upgrades from TDS, FiberNet Monticello was not able to generate sufficient revenue to cover its costs and debt service in the time frame predicted. To cover the gap, the City loaned the network between $3 and $4 million from the liquor store reserves. Now, the City is trying to negotiate with the bondholders to find a solution that works for everyone.

We continue to believe that Monticello made the smart choice in proceeding with its network, even in the face of all the adversity they have had. If it were possible to total up the many varied benefits to the community from the additional investment, choices, discounts, and multiplier effects, we believe it would significantly outweigh the negatives.

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Christopher Mitchell

Christopher Mitchell is the Director of the Community Broadband Networks Initiative with ILSR. He is a leading national expert on community networks, Internet access, and local broadband policies. Christopher built MuniNetworks.org, the comprehensive online clearinghouse of information about local government policies to improve Internet access. Its interactive community broadband network map tracks more than 600 such networks. He also hosts audio and video shows online, including Community Broadband Bits and Connect This!