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Broadband is better as a public-private partnership

REUTERS/Daniel Munoz
A simple solution is to encourage municipalities to build out this so-called “last-mile” connection to individual homes and businesses by installing publicly owned fiber.

The critical infrastructure topic of broadband has once again come up for discussion at the Capitol. As with many issues in the divided political climate we’ve seen for the past several years, people seem to be either for or against broadband as a municipal service. Those who are against it state that what we have now is working — that the market for broadband is flourishing and competitive in providing most Minnesotans with access — and sometimes question its importance.

Ben Franske

Those supporting additional broadband development cite statistics about the slow connection speeds available outstate and the lack of choice and high costs everywhere. We must agree that, as a society, there are some good reasons for infrastructure such as the road network to be owned by the people it serves rather than by a private corporation. After all, we don’t hear serious calls for the privatization of all roads, water distribution systems, sidewalks, or trails.

In a truly competitive marketplace there is much innovation, pressure to keep costs low and service high, and a desire for continuous improvement because a large number of companies are competing for limited business. Unfortunately, the current market for broadband fails at these ideals. Costs seem to be continually rising, service is often poor, and there are typically only two choices: a cable monopoly or a telephone monopoly, and in some areas not even those. It would not be efficient, or even feasible, to have a large number of service providers all duplicating effort and stringing cable to each individual residence and business.

Waiting isn’t working

We have also tried to spur network improvements by giving hundreds of millions of dollars in tax credits and incentives to existing private telecommunications companies through the National Information Infrastructure program. This broken promise by incumbent carriers for ultra-high speed connections throughout the country years ago has still not been seen. Clearly waiting for the incumbent providers to do something on their own or even providing substantial incentives to motivate them is not working. There must be a better way.

A simple solution is to encourage municipalities to build out this so-called “last-mile” connection to individual homes and businesses by installing publicly owned fiber. This “dark fiber” would not necessarily have any service on it provided by the municipality. Instead, it would function as a “road” to one or more centralized publicly owned “meet-me” locations. At those locations you could have the fiber connected to a service provider of your choice, possibly even multiple service providers.

Because it is much more cost effective for private service providers to wire to a few central locations than to run cables to many individual homes and businesses, there is a lower barrier to entry. The effect of this would be to dramatically increase market competition in the space. If community members were interested they could create a nonprofit cooperative to compete and provide service as well.

This model addresses many of the concerns with municipal broadband — such as a lack of choice and poor customer service, or concerns about filtering, privacy and tracking — while retaining the true need and competitive advantage of offering very high-speed connections critical to future growth and prosperity. By separating the true infrastructure from the services that can ride on top of it we have, in effect, created something much more analogous to the road network that is provided publicly but utilized by many people and businesses in many different ways.

A crisis in Minnesota

If you don’t think we have a broadband crisis in Minnesota think again. Wholesale bandwidth costs here are already substantially more than other parts of the country and the vast majority of our bandwidth flows through Chicago, which means we also have less bandwidth redundancy than other areas of the country. When thinking about where to locate businesses, this absolutely becomes an important issue.

One commonly suggested method for increasing competition and broadband penetration is the use of cellular data connections, but this is totally unrealistic. In many outstate areas coverage remains low or nonexistent. There is also an underlying problem of limited bandwidth inherent to all wireless solutions that does not scale well to the many uses of broadband beyond simple web surfing.

If we as a state are to remain one of the premier places to live, work, learn and do business it truly is imperative that we leverage the power of the state to improve our broadband problem. If countries such as Latvia, Romania and the Netherlands can achieve average Internet connections speeds of over 40 mbps, and at a much more reasonable price, so can we. A failure to address the growing broadband gap is a critical mistake.

Ben Franske, Ph.D., is a professor of Information Technology and Security at Inver Hills Community College.

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Comments (15)

  1. Submitted by Jake Holman on 02/16/2015 - 09:32 am.

    You misstate the case

    “Those who are against it state that what we have now is working — that the market for broadband is flourishing and competitive in providing most Minnesotans with access — and sometimes question its importance.”

    That’s not our argument. Our argument is that it’s not the role of government to be in the broadband business any more than it’s their role to be in the telephone business or the ice cream business. When a legitimate private sector exists with real players and investors in the marketplace, the role of the government is to butt out.

    • Submitted by Matt Haas on 02/16/2015 - 11:32 am.

      The role of government

      You are utterly wrong. When there is a needed service, in this case high speed broadband, and the private sector is unwilling, or unable, to meet this need, the government absolutely has the right to step in and provide it for the betterment of society. Don’t like it? Go tell the private sector they need to take a loss to provide service to the outlying areas, tell us how well that goes for you. Which brings us back to the author’s statement, wouldn’t your argument against this go something like “If it’s not profitable, obviously the demand isn’t there, SO the service isn’t needed”. This of course neglects all those folks and the businesses they operate, who do in fact need the service but not in sufficient numbers to bring the needed investment from the private sector. What’s your advice to these folks, move?

      • Submitted by Dennis Tester on 02/16/2015 - 02:53 pm.

        No, you’re wrong

        It’s not the role of government to run cables to private addresses when the customers can always subscribe to a satellite-based internet service.

        It’s not like we’re talking water or sewer services here. You can buy broadband services via non-cable providers. What’s next? Government-provided cable TV?

        • Submitted by jason myron on 02/16/2015 - 04:00 pm.

          Actually, in the year 2015

          it IS like sewer and water. That’s the trouble with conservatives…they’re so tied to the past that they can’t grasp the nuances of how important technology is to today’s citizen. The GOP is nothing more than the Radio Shack of political ideologies.

          • Submitted by Jake Holman on 02/16/2015 - 09:06 pm.

            Hey, you people are the ones

            who want to install cable … the antiquated technology. It took the city of Mpls millions and ten years to get a wi-fi service off the ground and when they did the technology was already obsolete.

            Government should stick to what they know … issuing licenses and collecting fees.

        • Submitted by Dan Landherr on 02/17/2015 - 10:06 am.

          Laugh

          As if there is no government subsidy involved for satellite television. I’m sure DirectTV created the space program on their own.

    • Submitted by Steve Titterud on 02/16/2015 - 11:52 am.

      To call it “legitimate” is to test the limits of that word…

      …since the article points out this industry has taken huge public subsidies to carry out promises that they not only have never fulfilled, but never intended to fulfill. Practicing all manner of chicanery opposed to the public interest is “legitimate” ?? I suppose in a jaded way, these kind of practices are as American as apple pie !!

      The very worst business ethics in our counrty is practiced by these communications providers. We need relief.

    • Submitted by Todd Hintz on 02/16/2015 - 08:14 pm.

      Business Case

      Jake, thanks for the clarification on your case. I don’t see how it alters the premise of the article though for the simple reason that there isn’t a legitimate private sector. We don’t even have decent high speed internet service in the Twin Cities, with the exception of a few places that US Internet has wired up to their fiber backbone. Rural Minnesota is completely left out in the dark as far as decent broadband is concerned because broadband companies don’t find it profitable enough to go out there and wire up these place. And if they won’t do it, who does that leave?

      The government.

      We had the exact same issue back in the ’30s with rural electrification. It wasn’t profitable for electric companies to run thousands of miles of line to every town and farm, so the government stepped in to get the job done.

      That’s what we have here today with broadband. It makes perfect sense for the government to do today what it did eighty years ago and get the job done. If you want people to live in small towns then you have to make it possible for them to earn a buck there. Forget the push for new roads and highways–give them broadband! These days it’s darn near impossible to run any kind of a business without a decent internet connection. Farmers need to check on commodity prices and weather forecasts, manufacturers need to download CAD files, and everyone wants to reach markets in Europe and Asia. You’re not going to get that with a phone line and 14.4 dial-up.

  2. Submitted by Connie Sullivan on 02/16/2015 - 11:48 am.

    In Minneapolis, we have a monopoly internet carrier, Comcast (soon to spin off a small segment of its business here so it can persuade the federal government to let it dominate broadband nationally by merging with Time Warner), and some dinky satellite/phone line carriers, plus an undercapitalized and inefficient outfit in Wayzata or Minnetonka that has a Minneapolis wi-fi license that only serves a part of the city.

    In Minneapolis, no company provides fiber optic high speed–and I mean Japan-high or Sweden-high speed–broadband to the entire city. It’s not an option for most of us. We can only get slow connections (the base standard for “high speed broadband was just upped to what Comcast and U.S. Internet can’t or won’t provide to the whole city of Minneapolis).

    Outstate, however, is getting governmental grants to provide fiber-optic broadband at huge speeds. Google is providing really high speed fiber optic to a growing number of U.S. cities, but not Minneapolis where U.S. Internet and Comcast pretty much control and overcharge a slow-speed internet world.

    It’s obvious that “private businesses” are grossly underserving our state’s biggest city and government isn’t out there protecting the Minneapolis consumer. I therefore like the compromise this blog proposes: get government to provide the equivalent of sewer and water lines to the house (last-mile fiber optic cable), and then let “private businesses” compete, as they do not now compete, for customers.

    • Submitted by Travis Carter on 03/09/2015 - 08:30 pm.

      Minneapolis – True Fiber

      Might want to check your facts, there is a “true” fiber offering in the City of Minneapolis. Residents of Lowry Hill, East Isles, Lowry Hill East, Whittier, East Calhoun, CARAG, Lyndale, and East Harriet neighborhoods all have access to low cost highest speed internet today.

      Loring Park, Steven Square/Loring Heights, King Field, Lynnhurst, Tangletown, Bryant, Bancroft, Regina, Northrop, and Field neighborhoods will have access summer of 2015.

      USI runs a fiber to each property in it’s service area and provides up to 10gig internet access.

      Check out fiber.usinternet.com for the proper facts on what is happening in Minneapolis.

      -Travis

  3. Submitted by Richard Molby on 02/16/2015 - 05:58 pm.

    Yeah…

    In Cedar Falls, IA the broadband service is treated like a public utility and their service is faster and cheaper than the service in Cedar Rapids.

    In Uptown, we have US Internet. Our building owner paid to have the “last mile” run (actually from the street to the building). US Internet is a private company that is in the process of laying fiber into every Minneapolis neghborhood thus allowing actual competition to Comcast (Quest, or whatever they’re called this week, is a joke and anyone who thinks satellite internet is “broadband” has no idea what broadband is capable of). But, US Internet wouldn’t be attempting to provide this service if they hadn’t gotten a huge buy-in and push from the city of Minneapolis.

    The proof is in the pudding: a public/private partnership provides the best possible Internet service. Period. But, I guess those who don’t believe in math will be hard to convince.

  4. Submitted by Paul Udstrand on 02/17/2015 - 08:59 am.

    The lesson is simple and anavoidable

    As Mr. Hintz points out, the public utility model is superior to pure market based fantasy. For one thing, there’s no such thing as a “free market” so you end up spending public money anyways in the form of subsidies or tax incentives. Our failure to deploy a basic public utility model with our internet and cable service has left us decades behind our competitors. The “Markets” haven’t saved us any money, they haven’t delivered the best service, and they haven’t deployed the technology more efficiently. They haven’t developed competition which is the ONE thing markets are supposed to do.

  5. Submitted by Karen Sandness on 02/17/2015 - 09:37 am.

    In real life, as opposed to Libertarian ideology, public is the

    way to go for essential services.

    Why?

    Because a private business will always prioritize profit. If it has to cut services and raise prices to please the shareholders and provide huge bonuses to top executives, it will, and private business do adopt this tactic, as everyone who follows business news knows. Look at the airlines or the cable companies.

    A government-based entity does not have to make a profit, but it does have to break even. The people who run the service do not personally profit from its operations, so there is no incentive to price gouge, to cut service unnecessarily, or to please outside investors.

    I spent seven years in a small town in Oregon that was otherwise very conservative but for some reason had a municipal power plant. The service was cheap (with an all-electric two-bedroom apartment, I was paying about half of what people in Portland were paying for smaller apartments) and reliable (one blackout in seven years). When I moved to Portland, with its Enron-owned power company, I went through five blackouts the first year.

    During the notorious brown-outs and blackouts of the summer of 2001, when, as we later found out, Enron was trying to manipulate Californians into supporting the construction of new power plants, one major California city suffered no blackouts or brownouts.

    It was Los Angeles, which has a municipal power company. In a summer in which the private sector was claiming lack of capacity to provide reliable service, the current in California’s largest city kept on flowing as usual.

    I’ve seen a number of proposals to privatize government services in my life, and if you scratch the surface, whether we’re talking about no-bid contracts for companies who are supposed to feed combat troops or local proposals for jitney buses to replace public transit, all the proposals have one thing in common: cronyism. That is, the contract for privatization is inevitably destined for a friend or major contributor of some influential politician.

  6. Submitted by Todd Hintz on 02/17/2015 - 11:57 am.

    Networking

    Personally, if I were a municipality I would build an entire network and not just the last mile. A government owned system wouldn’t have to worry about price gouging, executive perks, or even making a basic profit margin. They just need enough to pay employee salaries, maintain the network, and a little cushion so the network can be upgraded periodically.

    No corporate jets, no wood paneled offices, and no billion dollar golden parachute clauses to cover.

    The whole thing can be paid for in part with municipal bonds, user fees, and LGA (Local Government Aid) from the state. Take all the money that would have been wasted on new highways around the state and the whole thing will be built and paid for in no time.

  7. Submitted by steve larson on 04/01/2017 - 07:06 am.

    All business needs broadband and everyone is looking for the fastest internet provider for their business purpose. The use of cellular data connections is one of the best ways to increase broadband penetration and speed. Many internet service providers are coming with great deals for their customers. Recently I have read an article http://www.consumertripleplay.com/comparison/comparing-internet-deals-offered-by-att-u-verse-and-comcast-xfinity/ which shared some deals and offers running in the market.

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