Tag Archives: community networks

Gonzales, California putting broadband into every home, business

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Basic broadband in every home and fast fiber for every business: that’s the goal endorsed on Monday by Gonzales city council members. The plan, as presented by staff, is to issue two requests for proposals.

The residential RFP is ambitious. There are 1,800 homes in Gonzales, which is located in California’s Salinas Valley. The city wants to provide a basic, lifeline-level of service to each one. As the report presented to the council explains

Staff has been exploring the possibility of entering into a bulk services agreement with a qualified Internet service provider (ISP) to deliver a basic level of Internet access to every home in Gonzales. Although this is a novel approach for a City to take, it is a common method of contracting for service in private communities. There are significant differences between the legal, regulatory and market conditions in cities and private communities, but staff has concluded that distributing a Request for Proposals to qualified ISPs, will clarify those issues and should produce legitimate options that can be implemented.

The second RFP would focus on building out fiber infrastructure in the commercial and industrial areas of the city. A recently completed middle mile project, built and owned by Sunesys/Crown Castle and largely paid for by a grant from the California Advanced Services Fund, runs the length of Gonzales, connecting to a Level 3 facility in Soledad to the south and to several long haul routes in Salinas, Watsonville and Santa Cruz to the north. The city is already in the process of building its own connection to this middle mile fiber, which will be one of the assets on the table when the RFPs are issued.

AT&T is the only company currently offering broadband service on a citywide basis, and it reaches most, but not all, homes and businesses. Download speeds range from 3 Mbps to 18 Mbps. The California Public Utilities Commission ordered Charter Communications to begin providing full triple play service to all residential areas by May 2018. That’s the result of a settlement reached between Gonzales and Charter, during the regulatory review of its purchase of Time Warner and Bright House cable systems last year. Commercial and industrial areas aren’t included in the agreement, though.

Naturally, both AT&T and Charter will be invited to submit proposals, along with any other interested ISPs. The two RFPs and more details regarding the financial and technical aspects of the plan are expected to be released later this summer.

City of Gonzales Broadband Infrastructure Strategy Update, 15 May 2017

I’m assisting the City of Gonzales with its broadband initiative and helped with its negotiations with Charter. I am not a disinterested commentator. Take it for what it’s worth.

FCC’s muni broadband distraction shudders to a final stop

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It’s officially over: the Federal Communications Commission does not have the authority to preempt state authority over municipal broadband systems, even when it thinks the way in which that authority is wielded constitutions a barrier to infrastructure investment. The federal appeals court in Cincinnati made that decision in August, in a case brought against the FCC by Tennessee and North Carolina, and issued the final order yesterday. It was a formality that brings the case to an end. It means that no one on the losing side – principally, the FCC and the cities of Chattanooga, Tennessee and Wilson, North Carolina – challenged the decision, either by asking the appeals court to reconsider or by taking it to the supreme court.

It was apparent after the decision came down that there was little appetite for further litigation. FCC chair Tom Wheeler issued a statement that said, in effect, I wanted to make a point and I made it, and I’ll be happy to go on TV and make the point again. The City of Wilson’s response was to cut off fiber to the premise service in Pinetops, a small, neighboring community. North Carolina law prevents Wilson from offering broadband service outside of its city limits but it went ahead anyway with extending its system after the FCC’s preemption in 2015, without waiting for the appeals court’s decision.

Some on the losing side argue that the fight, first at the FCC and then in the appeals court, lays a legal foundation for future efforts and, therefor, was worthwhile. I disagree. Two years of praying for a federal deus ex machina could have been better spent on state level activism. If, say, Chattanooga had directed those resources toward changing Tennessee law, it might have turned a narrow loss at the state capitol earlier this year into a win. Instead, AT&T’s “platoon of lobbyists” carried the day. Grandstanding at the FCC grabs headlines and pads resumes, but it’s hard and anonymous work in the statehouse trenches that wins legislative battles.

Federal reserve urges banks to invest in broadband

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Banks should be in the business of increasing Internet access and use in their communities, according to the Dallas branch of the federal reserve bank. Its white paper, Closing the Digital Divide, is a broadband primer for local bankers and those who would like to work with them. It details how broadband development initiatives can help banks meet obligations for local investment imposed by the federal Community Reinvestment Act.

The white paper makes three useful points. First, any effort to increase broadband use has to start with infrastructure…

In communities with limited broadband infrastructure or no broadband infrastructure, investment in computer access or skills training will not be effective until investment in broadband infrastructure is developed. This is because owning a computer and knowing how to use it effectively are not relevant unless there is a sufficient connection to the internet.

Second, people need incentives to start using broadband in their daily lives, and online banking, particularly for those who have little or no access to financial services now, can be a powerful draw. Giving people computers and having them sit through a class on how to find a website are of little use without an underlying reason to do so.

Finally, the study correctly calls out middle mile infrastructure as a critical piece of the puzzle, and a worthy target for bank-grade loans or other investment. It’s the critical first step in any local broadband infrastructure development effort. Without it, investments in last mile access projects will never reach their potential, if they even survive at all.

The white paper’s major failing is that it gives banks an easy out. Despite the priority it puts on infrastructure investment, it also includes extensive boilerplate language about vague digital outreach programs that banks can slather onto the regulatory compliance reports they’re required to file, instead of getting involved in meaningful projects. Nevertheless, if there’s interest in broadband infrastructure investments, the federal reserve bank’s study is a good starting point.

Closing the Digital Divide: A Framework for Meeting CRA Obligations

Cooperative broadband is rare, but successful in California

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Rural utility cooperatives have gotten a lot of good ink recently, as a possible alternative to investor-owned broadband companies. Although it’s a business model that’s far more common in the U.S. midwest and south, it’s been successful in California too. At least as far it goes – there are only three rural utility co-ops here.

Anza Electric co-op in Riverside County is in the process of building a fiber to the home system using a grant from the California Advanced Services Fund. By FTTH standards, it’s an inexpensive build – about $1,200 per household, total – primarily due to the fact that Anza already owns the necessary poles and conduit.

Plumas-Sierra Electric co-op has subsidiary that’s a wireless Internet service provider serving parts of Plumas and Sierra counties, and a bit of Lassen County. It’s tried for CASF in the past, too, although it ultimately withdrew its application. The third rural California co-op – Surprise Valley in Modoc County – isn’t in the broadband business, but two of three isn’t bad.

Rural utility co-ops are creatures of the federal agriculture department’s Rural Utilities Service (RUS). It’s one of three basic utility business models, the other two being investor owned utilities, like PG&E, and municipal utilities.

The investor owned variety predominates here, but where there are exceptions, California tends toward muni electric utilities – either cities, like Palo Alto or Santa Clara, or special districts, like the Sacramento Municipal Utilities District. Californian muni electric utilities have been largely successful when they’ve dipped a toe in the broadband business, particularly as dark fiber providers, although there is one big exception – Alameda had to sell its cable system at a loss.

Elsewhere in the U.S., there are rural utility co-ops that are in the telephone business. In California, small rural phone companies fill that niche in the eco-system.

The co-op business model has also been used for middle mile projects. Digital 395 is owned by the California Broadband Cooperative and was funded by an ARRA stimulus grant, and there’s another – the Mid-Atlantic Broadband Cooperative – in Virginia, funded by tobacco settlement money. However, those are not the traditional, federal agriculture department sponsored utility co-ops.

The cooperative business model is very effective, when it suits local circumstances. The RUS-backed version, though, isn’t a viable way of creating a competitive service – if there’s an incumbent provider, that option is off the table for all practical purposes.

FCC preemption loss is muni broadband win

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One more vote, and you’re mine.

Waving the magic federal wand and erasing state restrictions on muni broadband seems like a wonderful idea, until the wand waves the other way and muni broadband disappears. That’s why last week’s federal appeals court decision overturning the FCC’s preemption of Tennessee and North Carolina laws limiting muni broadband systems was welcome news.

The current Federal Communications Commission majority tried to preempt the state restrictions during a burst of presidential community broadband populism a year and a half ago. But majorities and popular enthusiasm shift with the political winds. It’s not hard to imagine another president and a different majority lining up with current FCC commissioner Michael O’Rielly, who wrapped up his endorsement of the court’s decision by saying

Contrary to some beliefs, municipal networks are not panaceas to solving any lack of ubiquitous broadband, but instead unfairly distort the marketplace.

It’s no great intellectual leap to reckon a distorted marketplace to be the kind of barrier to infrastructure investment that the FCC is obligated to remove, under the interpretation of federal telecoms law that the appeals court judges rejected last week. Fortunately rejected.

Most states allow cities to operate muni broadband systems with few or no restrictions. Even Tennessee and North Carolina allow it – the beef was about cities offering broadband service beyond their borders.

The restrictions that do exist should go, but the right way to eliminate them is to take the muni broadband battle to state capitols. Telephone and cable company lobbyists are as thick on the ground in Sacramento and Nashville as they are in Washington D.C., but it’s harder for them to hide, and harder for legislators to ignore constituents. Not impossible, but difficult enough to make the fight for community broadband winnable more often than not.

In the long run, last week’s verdict will be a victory.

FCC’s muni preemption attempt looks gone for good

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Wednesday’s appeals court decision that tossed out the Federal Communications Commission’s preemption of state limits on municipal broadband is looking more and more like the final word.

The reaction of those on the losing side of the judge’s decision – the FCC and the cities of Chattanooga, Tennessee and Wilson, North Carolina – can be summed up as disappointed resignation. Lots of sorrow but no fighting words, as in they got it wrong and we’re gonna take it all the way to the supreme court. FCC chairman Tom Wheeler’s press release was typical…

In the end, I believe the Commission’s decision to champion municipal efforts highlighted the benefits of competition and the need of communities to take their broadband futures in their own hands…

Should states seek to repeal their anti-competitive broadband statutes, I will be happy to testify on behalf of better broadband and consumer choice. Should states seek to limit the right of people to act for better broadband, I will be happy to testify on behalf of consumer choice.

Translation: we were out to make a point and we made it, and I’ll be happy to go on TV and make the point again.

I think the FCC will walk away from this one, for two reasons. First, the legal rationale for its attempt at preemption was far fetched – even the federal attorney general wasn’t interested in defending it.

Second, the preemption relied on an expansive interpretation of a particular clause in federal telecoms law – section 706 – that the FCC is also relying on to support its marquee decision to regulate broadband as a common carrier service. The FCC won the first round of appeals against that decision, because it’s standing on much firmer legal ground. Throwing the muni preemption case into the mix – which otherwise isn’t on any legal ground at all – would only weaken its position in the main event.

FCC can’t preempt state limits on muni broadband, appeals court rules

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Park the bulldozer.

Congress did not give the Federal Communications Commission the authority to override state government-imposed limits on expansion by municipal broadband systems. That’s the simple and – as far as it goes – unanimous opinion of three federal appeals court judges who overturned the FCC’s preemption of muni broadband restrictions in Tennessee and North Carolina.

In general, a state has complete authority to determine what cities and counties can do, within the limits of the law. Local governments “are nothing more than that state’s ‘convenient agencies,'” as this morning’s decision put it. If a federal regulatory agency, like the Federal Communications Commission, wants to interfere in that relationship, it needs a “clear statement” from congress giving it that power.

As they clearly signalled they might during oral arguments in March, the judges ruled that the FCC wasn’t exercising its regulatory powers when it threw out Tennessee’s and North Carolina’s restrictions on muni broadband system expansion. Neither the states nor Chattanooga and Wilson – the two cities involved – are required by federal law to extend broadband service beyond their boundaries. As with private broadband companies, the choice to expand or not is left up to the provider. The question was, as one judge put it, who decides?

Federal courts have said over and over: states can decide or can pass the decision along to local governments. When congress has the authority to override those decisions and it wants to delegate that power to federal agencies, it has to make its intent unmistakably clear.

The FCC claimed that a general statement in the 1996 telecommunications act – the much invoked section 706 – instructing it to “remove barriers to infrastructure investment” gave it the specific authority to preempt the state-level restrictions that Tennessee and North Carolina place on municipal broadband. The judges said made their own clear statement and said that’s wrong…

This preemption by the FCC of the allocation of power between a state and its subdivisions requires at least a clear statement in the authorizing federal legislation. The FCC relies upon [section] 706 of the Telecommunications Act of 1996 for the authority to preempt in this case, but that statute falls far short of such a clear statement. The preemption order must accordingly be reversed.

One judge disagreed with one of the conclusions in the opinion, regarding North Carolina’s muni broadband rate regulations, but her dissent re-affirmed the final ruling: the FCC doesn’t have the authority to preempt otherwise legal state decisions regarding municipal broadband.

During oral arguments, the FCC hinted that it might appeal an unfavorable result to the supreme court. It can also ask the appeals court to reconsider today’s decision. But the FCC would be on its own – it doesn’t even have the support of the U.S. attorney general’s office.

As it stands right now, state restrictions are on muni broadband systems are back in effect in Tennessee and North Carolina. There is little chance that further appeals will change that fact.

Federal appeals court opinion reversing FCC municipal broadband preemption

Federal appeals court rejects FCC’s muni broadband preemption

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The FCC cannot preempt state law in Tennessee and North Carolina, and give local governments permission to extend the reach of municipal broadband systems if state legislatures say otherwise. That’s the bottom line from an appeals court decision issued this morning by a three judge federal appeals court panel in Cincinnati. I’ll have more when I’ve finished reading the decision, or you can read it for yourself here:

Federal appeals court opinion reversing FCC municipal broadband preemption

Is Atherton Fiber living in the real world? Part 2

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Urban living, Atherton style.

An appallingly high take rate – 70% – and a vague reliance on third party ISPs to do the heavy lifting of achieving it are two reasons to be skeptical about Atherton Fiber’s plan to build a fiber to the home system that would reach all 2,500 households (there are no commercial properties as such) within the city limits, as discussed more fully in Part 1. It would not work in a typical Californian community.

Open access models, such as this one, that assume a steady wholesale revenue stream from competing retail providers have failed. UTOPIA and Provo in Utah and Grant County in Washington are just three examples. On an FTTH system, Internet bandwidth is a commodity and competitive pressure squeezes margins to the breaking point.

It would be also foolish to expect AT&T or Comcast to buy wholesale capacity. Both companies will use every competitive tactic at their disposal to try to prevent the venture from succeeding. As CTC’s Lee Afflerbach, a true veteran of this industry, succinctly put it, “they are very proficient at changing their rates and such. Predatory is the word, I think…it’s sorta like infinity versus zero. Your odds aren’t very good on that”.

A third questionable assumption in Atherton Fiber’s business model is that 25% of subscribers will pay between $7,500 and $12,000 for dedicated dark fiber strands between their homes and the fiber hut, and then continue to pay a monthly fee for the privilege of using it, in addition to whatever it costs to light it up and provision bandwidth. You can make a good argument that the cost of a dedicated connection is in the same ballpark as the value it adds.

But then there are the weasel words I used: typical Californian community. A leafy town in the urban heart of Silicon Valley that eschews sidewalks and commerce, averages one acre lots and often ranks as the most expensive zip code in the U.S. is not typical. It has more in common with high end gated communities than it does with neighboring cities. Twelve percent of residents work from home, and that’s not counting the ones – like, most of the remaining 88% – who have business addresses elsewhere but work where ever they happen to be, including, and particularly, at home.

At this point, Atherton Fiber is a small, boutique business that could easily be kept afloat by the enlightened self interest of a handful of well heeled patrons, not to mention a customer base that’s not as price sensitive as most. There’s good reason to believe it can succeed because Atherton Fiber is living in Atherton, and that’s not the real world.

The final, and truly interesting, question – whether the business model can be transplanted to the real world – will have to wait until later.

Is Atherton Fiber living in the real world? Part 1

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A deeper dive into the Atherton Fiber business model raises questions about its sustainability, given the assumptions that appear to have gone into it. The proposed fiber-to-the-home project would pass all 2,500 residences in Atherton. It seems there are no brick and mortar business customers there – the whole town is residential. Yes, it’s that exclusive.

The first red flag is an assumed take rate of 70% within four years. In a typical Californian community that assumption would be delusional. Full city fiber-to-the-premise builds that go up against two big, full service incumbents struggle to reach 30%. The Santa Cruz FTTP project is benchmarking a 35% take rate, but that includes an independent private partner that already has a 15% market share. The City of Alameda’s overbuild cable system reached 30% at its peak, before Comcast bought out the incumbent cable company, turned up the competitive heat and forced a fire sale at 50 cents on the dollar. Provo, which sold its system to Google for virtually nothing, never even got that far.

The second cause for concern is that, as it stands, it would be an incomplete system that relies on third parties to finish construction and sign up subscribers. The basic business model that Atherton Fiber filed with the California Public Utilities Commission doesn’t include the cost of connecting most homes to the fiber out on the street or installing any customer premise equipment. There might be room in the budget to pay for minimal electronics at the central fiber hut, but not much. Atherton Fiber’s assumptions include a $900 connection cost, partially offset by a $300 installation charge, but neither figure is rolled into the model. It seems that paying those costs and charging those fees is the responsibility of third party ISPs (including, apparently, an affiliated in-house provider that’s not on the books yet) which would pay an average of $40 per month per subscriber on a wholesale basis. The retail cost to the customer would, of course, be more than that.

In other to make its business case, Atherton Fiber has to find customers with a greater willingness to pay than most. That question is for Part 2, tomorrow.