Comcasts Invests in Theme Parks Rather than Better Broadband

While its network continues to offer last generation speeds at high prices and their customer service reps go viral harassing customers who try to leave their grasp, Comcast executives have decided it is time to invest hundreds of millions of dollars to upgrade... their theme parks. That's right, as they shift call centers to the Philippines to save money, they are reinvesting it into roller coasters.

Having acquired Universal Orlando Resorts as part of their 2011 merger with NBC Universal, Comcast has decided to step outside its core business of providing Internet access, cable TV, and phone service in noncompetitive markets. According to a March CED Magazine article, Comcast plans to invest hundreds of millions in theme parks in both Florida and California in an effort to challenge Disney’s traditional dominance of the field. Attractions in Orlando will include an 1,800 room beach resort and a new Harry Potter ride.

This investment in rides occurs against the backdrop of falling infrastructure investment in the broadband industry, despite rapidly increasing bandwidth demands and claims by ISPs that services such as Netflix are straining their networks and must pay extra for “fast lane” service.

It is possible to imagine a world in which broadband markets are sufficiently competitive to force Comcast, CenturyLink and other incumbents to invest sufficiently in building out and upgrading their networks, delivering better service to their customers. But in our world, Comcast can spend the comparatively small sum of $18.8 million on lobbying (in 2013 according to OpenSecrets.org), becoming the seventh biggest campaign contributor in the nation and pushing legislation like the recent Blackburn amendment that eliminates potential public sector competitors.

North Carolina Town Saves Public Dollars With Its Own Network

On June 18 Holly Springs, home to approximately 25,000 people, started saving money with its new fiber I-Net. Last summer, the Town Council voted to invest in fiber infrastructure as a way to take control of telecommunications costs. Just one year later, the 13-mile network is serving community anchor institutions.

After exploring options with CTC Technology and Energy, Holly Springs determined that deploying their own $1.5 million network was more cost effective than paying Time Warner Cable for data services. Annual fees were $159,000; over time those costs certainly would have escalated. According to the Cary News, Holly Springs anticipates a future need for more bandwidth:

“And we wouldn’t have been able to actually afford as much (data) as we need,” [Holly Springs IT Director Jeff Wilson] said. “Our costs were going to be getting out of control over the next couple of years.”

Because state law precludes the town from offering services to homes or businesses, Holly Springs plans to use the new infrastructure in other ways. State law allows the community to offer free Wi-Fi; the town will also lease dark fiber to third-party providers. According to the News article, the town has already entered into a 20-year contract with DukeNet, recently acquired by Time Warner Cable. DukeNet may expand the fiber to the Holly Springs Business Park for commercial clients.

The community's free Wi-Fi in public facilities is approximately 20 times faster than it was before the deployment, reports the News:

When the town activated the network on June 18, “People told us they could tell the difference immediately,” said Jeff Wilson, Holly Springs’ IT director.

According to the News, the fiber network allows the city to expand free Wi-Fi to more green spaces. Cameras at baseball fields now stream live video of games; parents and grandparents can watch activities online if they cannot attend games in person.

For more on the community and the project, check out Chris' conversation with Jeff Wilson in episode #107 of the Community Broadband Bits podcast.

Chattanooga and Wilson Petition FCC to Remove Anti-Competitive Restrictions

Chattanooga and Wilson, North Carolina, are two of the most successful municipal fiber networks by a variety of metrics, including jobs created, aggregate community savings, and more. This has led to significant demand from surrounding communities for Wilson and Chattanooga to expand. We have profiled both of them in case studies: Wilson and Chattanooga.

Expecting this outcome, the big cable and telephone companies had pressured the states to limit where municipal networks can offer service, unlike the private companies that can invest anywhere. Wilson cannot expand beyond county limits. Chattanooga already serves its entire electrical footprint, which stretches into northern Georgia and includes a few other towns but cannot serve anyone beyond that.

FCC Chairman Wheeler has been quite clear that he intends to remove barriers to competition that limit local authority to build community networks.

Today, Wilson and North Carolina have filed petitions with the FCC to remove restrictions on their ability to expand and offer services to nearby communities. These barriers were created after major lobbying campaigns by Comcast, AT&T, and Time Warner Cable, one of which we chronicled in The Empire Lobbies Back. We have also explained how the FCC can take this action and interviewed Harold Feld on the matter.

Read press statements from Chattanooga EPB and Wilson, North Carolina [pdf]. Also, Wilson's Full Petition and Exhibits [pdf], Chattanooga's Petition [pdf], and Chattanooga's Exhibits [pdf]. Jim Baller worked with them on the filing, so you know the facts are straight.

We issued a press release this afternoon,

“The move today cuts right to the heart of local authority,” says Christopher Mitchell, director of Community Broadband Networks with The Institute for Local Self-Reliance (ILSR). “The ultimate question is who decides what investments are right for each community — that community or officials far removed from it..”

If the FCC agrees with the petitions, the big cable companies will almost certainly appeal it to the DC Circuit Court, where a recent Verizon v. FCC opinion specifically noted that this type of action is well within its authority.

CLIC Logo

On behalf of the Coalition for Local Internet Choice, CEO Joanne Hovis wrote,

The net effect is to stifle competition, harm public and private sector economic development, and extinguish associated quality of life improvements in education, health care, energy use and public safety. Nearby communities that desperately want services from these networks are prevented from receiving it. Wilson and Chattanooga have asked the FCC to step in using its authority to promote advanced telecommunications capability to all Americans and preempt these state laws; to let local choice prevail.

Because the power of incumbent providers is so great in each state legislature, there is little hope for a remedy at the state level. These petitions are part of a larger discussion at the national level, whether the promise of modern Internet access will be for ALL Americans, or only for some.

And both Sam Gustin and Karl Bode were quick to post on the matter as well. Sam wrote on Motherboard at Vice:

In states throughout the country, major cable and telecom companies have battled attempts to create community broadband networks, which they claim put them at a competitive disadvantage.

Last week, Rep. Marsha Blackburn, the Tennessee Republican who has received tens of thousands of dollars in campaign contributions from the cable and telecommunications industry, introduced an amendment to a key appropriations bill that would prevent the FCC from preempting such state laws. The amendment passed in the House of Representatives by a vote of 233-200, but is unlikely to make it through the Senate.

And Karl Bode called it "Put Up or Shut Up Time for FCC on Community Broadband:"

Comcast and AT&T have quickly moved to stop the FCC's potential assault on their protectionist laws via both lawsuit threats via proxy groups, and via politicians like Martha Blackburn, who, after receiving campaign contributions from PACs tied to both companies -- has passed a bill in the House threatening to strip FCC funding if the agency dares to act. It's not a fight that would be easy, but it's a fight the FCC should win -- and it's a long-overdue fight that must be had if we're to finally start taking broadband competition problems seriously.

As with consumer advocate requests that ISPs be reclassified as utilities as a solution to neutrality concerns, this is another area where Wheeler can prove he's either thrown aside his long-history of industry lobbying and is ready to fight for consumers, or is just another in a very long line of FCC bosses too timid to meaningfully challenge deep-pocketed campaign contributors and the status quo.

And finally, we have seen an outpouring of grassroots support for this effort.

Spencer Municipal Utilities Expands Upgrade to Fiber in Iowa

Spencer Municipal Utilities (SMU) in Iowa is expanding an upgrade project to bring fiber to approximately 2,000 additional premises. A little over a year ago, we reported on the switch from coax cable to fiber for 700 municipal network customers with no rate increase. According to the Spencer Daily Reporter, the original project is almost completed; the expanded upgrade will cost approximately $4.5 million.

Amanda Gloyd, marketing and community relations manager, told the Daily Reporter:

Since SMU first began offering Internet service to customers the amount used by customers has increased and we expect to see that continue. For example, the average peak usage from customers in the fall of 2010 was 125MB and today it averages around 800MB with maximums over 1,200 MB. The project to convert the whole town of Spencer will take several years and we continue to develop plans for future projects.

In April, the SMU Board of trustees approved a modest rate increase for video and Internet access to help defray increased costs for video content and increased demand on the system. The last time rates went up for video service was early 2013; residential Internet access rates have remained the same since November 2011.

New rates went into effect on June 1. Internet access rates range from $20 per month for 1 Mbps/256 Kbps to $225 per month for 100 Mbps/10 Mbps. Basic level video service begins at $14 per month; "Basic Plus" is $50.75 per month. Digital service and a range of channel choices are available as add-ons.

SMU also provides voice and partners with T-Mobile to provide wireless phone service in the community. The network began serving customers in 2000.

Spencer, population 11,300, is located in the northwest section of the state. In the Community Broadband Bits podcast episode #13, Chris spoke with Curtis Dean of the Iowa Association of Municipal Utilities (IAMU). Dean shared a story about Hansen's Clothing, a local upscale clothier in Spencer. Thanks to the presence of the SMU network, Hansen's was able to expand its sales to the online marketplace. Hansen's was struggling until it obtained the ability to reach clientele in New York and Los Angeles. The fresh business allowed Hansen's to flourish.

Utopia at a Crossroads: Part 3

This is the final installment of a three part series, in which we examine the current state of the UTOPIA network, how it got there, and the choices it faces going forward. Part I can be read here and Part II here

In Part I of this story, we laid out the difficult situation the open access UTOPIA network finds itself in and how it got there. Part II gave the broad outlines of Macquarie’s preliminary proposal for a public-private partnership to complete and operate the network. The numbers we deal with here are mostly from the Milestone One report, and assumed the participation of all 11 cities. It should be noted that since five of eleven UTOPIA cities opted out of proceeding to Milestone Two negotiations, the scope and scale of the project is subject to change. The basic structure of the potential deal is mostly set, however, allowing us to draw some reasonable conclusions about whether or not this deal is good for the citizens of the UTOPIA cities.

Let’s first turn to why Macquarie wants to make this investment.  This would be the firm’s first large scale broadband network investment in the U.S., allowing it to get a foothold in a massive market that has a relatively underdeveloped fiber infrastructure. To offset network build and operation costs, it will also be guaranteed the revenue from the monthly utility fee, which my very rough calculations put between $18 and $20 million for the six cities opting in to Milestone Two (or between $30 and $33 million per year for all 11 cities) depending on whether the final fee ends up closer to $18 or $20 per month.

Jesse Harris of FreeUTOPIA puts Macquarie’s base rate of return between 3.7% and 4.7%, which is slim enough that they should have the incentive to make the network successful and truly universal, boosting their share of the revenue from transport fees in the process.

The monthly utility fee is a difficult pill for UTOPIA cities to swallow politically, and has allowed opponents to paint it as a massive new tax.  But this claim ignores the costs of the existing $500 million debt (including interest), which will have to be paid regardless of whether the network is ever completed or any more revenue is generated.

The existing debt adds up to about $8.50 per month per address over 30 years, without accounting for ongoing operating losses (or bond prepayment penalties if the network goes dark) or necessary network maintenance and upgrades. Without completing the network, there is no hope that it could return to self-sufficiency, meaning it would likely require operating subsidies in perpetuity.

Again, Jesse Harris has paved the way by doing an analysis of what is in the best interest of taxpayers from a purely self-interested perspective (ignoring indirect benefits of the network) here and here. As he sees it, it all depends on the take rate: if Macquarie can reach a 38% take rate in the newly expanded network coverage area, the entire deal will cost the same for taxpayers as simply selling off the network. A higher take rate would mean the cities actually spend less to get a completed network than they would to sell it off. But that’s only a narrow look at the balance sheet.

Even at the point where the deal is a wash financially, cities still get a completed network with an included basic level of service for every resident. Comcast and CenturyLink will slash their prices substantially in response to the competition (at least 50% in Provo) so that every citizen benefits regardless of if they use the network. Even for someone with a very basic Internet connection that wouldn’t use the network, they would be paying no more than $11.48 to potentially save at least $15, a net gain. The cities also get a $100M annual revenue stream at the end of the 30-year contract, effectively making the worst case scenario break even after less than seven years of ownership.

Opponents, especially those from the CenturyLink-funded Utah Taxpayer Association (UTA), have focused on the extra cost from the new utility fee to the small segment of the population that neither has nor wants a telecommunications connection. However, some studies have also shown that a fiber connection increases the value of a property, so there really may be some gain for everyone under this deal.

As it stands today, 2,100 miles of fiber have already been built, 70% of it underground. 40% of UTOPIA addresses are passed by the network (meaning they are able to purchase a connection upfront or on a payment plan), but only 10% are actually connected. Some cities are almost completely covered, others less than 20%. Some neighborhoods have one side of a street where connections are offered and the other where services are unavailable. The result of constant funding constraints, frivolous incumbent lawsuits, and poor planning, these pieces of stranded infrastructure can still be reclaimed and capitalized on with additional investment. 

Essentially, UTOPIA city taxpayers are on the hook either way. They can either get something for their troubles with the Macquarie deal (and maybe even end up paying less), or they can call it quits and pay to shut it down. They‘ve taken out a mortgage and built most of the house, but run out of money before they put a roof on. They can either restructure the debt and get on a payment plan to finish the roof, or they can watch the house rot and pay the mortgage for 30 years anyway. 

It is important to note that UTOPIA has a unique dynamic because the network has struggled financially (unlike the vast majority of community networks, most of which use a different business model and learned from the early mistakes of UTOPIA). We have not yet seen any communities proposing to establish a utility fee from the start, but it is an interesting proposition and we will explore it at length in a paper later this summer.

The Past and Future of Muni Fiber in Boulder - Community Broadband Bits Episode 108

Boulder is the latest Colorado community to recognize the benefits of using city-owned fiber to spur job growth and improve quality of life. Boulder Director of Information Technology Don Ingle joins us for episode 108 of the Community Broadband Bits podcast.

We discuss the many ways in which Boulder has benefited from community owned fiber over the past 15 years and the smart policies they have used to expand conduit throughout the community.

We finish with a discussion about the upcoming referendum that Boulder will likely place on the November ballot to regain local authority to use and expand its fiber assets to encourage job growth and increase residential options.

We want your feedback and suggestions for the show - please e-mail us or leave a comment below. Also, feel free to suggest other guests, topics, or questions you want us to address.

This show is 17 minutes long and can be played below on this page or via iTunes or via the tool of your choice using this feed.

Listen to previous episodes here. You can can download this Mp3 file directly from here.

Thanks to Waylon Thornton for the music, licensed using Creative Commons. The song is "Bronco Romp."

Gigabit Network Expansion Moves Forward in Longmont, Colorado

Construction on Longmont's fiber expansion will begin by August 13th, reports the Times-Call. TCS Communications of Englewood, Colorado recently signed an agreement with Longmont Power & Communications (LPC) to deploy the gigabit network for $20,095,022. Completion is scheduled for 2017.

A July 14th article on the project noted that LPC and TCS will complete construction in six phases. A substantial number of potential subscribers will have access early in the process:

The first phase will be done in south-central Longmont, the area nearest to LPC itself. The work will then proceed into central Longmont by early 2015. At that pace, 11,147 of the utility's 39,061 customers would be able to get fiber service within a year of the start of construction.

Readers will recall that last November the people of Longmont voted to approve a $45.3 million bond issue to bring the network to every premise in the city. Chris spoke with Vince Jordan, one of LPC's champions, in episode #106 of the Community Broadband Bits podcast.

Clearly, LPC is carrying on the customer service priority established by Jordan and the LPC crew:

"We set a high bar with regards to quality of work, customer service and timeline," LPC general manager Tom Roiniotis said in a release Monday evening. "We want to make sure it is done efficiently; we want to make sure it is done right."

LPC provides updates and a map of the project at its website

Hudson Issues RFP for Broadband Needs Assessment, Business Plan

Hudson, Ohio, located in the Akron area, recently released a Request For Proposals (RFP) for a Broadband Needs Assessment and Broadband Business Plan. The community of 22,000 hopes to connect all municipal facilities, connect business parks, and eventually implement an FTTH network.

A May 4 Hub Times article covered an April city council discussion to expand existing fiber resources throughout the city. Internet Service Manager Bill Hillbish described a plan to connect traffic, security cameras, and possibly provide Internet access to other entities in Hudson. The original plan was to spend approximately $47,000 for fiber and hardware to connect remaining municipal facilities with Hudson Public Power managing the expansion.

At that meeting, the City Council also discussed using the network to connect local businesses and, eventually, residents. Apparently, local businesses are not happy with the incumbent provider: 

Some Council members wanted the work completed sooner than the five-year forecast by Hilbish. Hanink suggested 2016 instead of 2019.

"The business community is screaming for Internet connectivity and speed," said Council President Hal DeSaussure. "We can use it as an economic development and business retention tool."

Economic Development Director Chuck Wiedie said businesses were frustrated with Windstar, which was slow and lacked customer service.

"Our businesses need the Internet," Wiedie said.

At a later City Council meeting, Members delved deeper into the possibility of using fiber for more than an I-Net. From a June 22nd Hub Times article:

Interim City Manager Scott Schroyer June 10 asked for direction for the broadband infrastructure work. The city wants to circle the city with fiber to provide communications for all its city facilities. Council members suggested offering the broadband service to businesses and residents.

Broadband would provide a competitive advantage for economic development for attracting businesses, said Council member Dennis Hanink.

"I'd like to see us try to get to the business parks within a couple years," Hanink said.

At that meeting, Schroyer said the City would seek assistance from a consultant to create a financial and business plan. On July 9th, Hudson released its RFP.

For the past decade, Hudson has incrementally expanded a fiber network to connect major buildings and facilities (see page 3 of the RFP for a map of existing fiber). Some of the facilities include public safety buildings, town hall, schools, and utility buildings. The proposed project will connect remaining electric substations and the City Cemetery.

Through the RFP, Hudson hopes to determine the best way to complete its network for municipal purposes and explore a possible open access network. Hudson expects infrastructure recommendations, business plan possibilities, and needs assessment review. Proposals are due August 15.

Media Roundup: Blackburn Amendment Lights Up Newswires

Rep Marsha Blackburn (R-TN) and her love for large corporate ISPs was all over the telecommunications media this week. She attempted to kneecap the FCC as it explores options to restore local telecommunications authority to communities. Blackburn introduced an amendment attacking local options as the House took up general appropriations bill H.R. 5016.

The amendment passed 223-200, primarily along party lines, with most Republican Reps voting with Blackburn and all but two Democrats opposing the amendment.

Democrats voting to support the amendment included Georgia's 12th District's John Barrow and Jim Matheson from Utah's 4th District. If either of these gentlemen represent you, take a moment to call their offices and point out their voting mistake.

Republicans that voted No were Mike Rogers and Mo Brooks from Alabama's 3rd and 5th Districts. Charles Boustany from the 3rd District in Louisiana and Chuck Fleischmann from the 3rd District in Tennessee (includes Chattanooga) also opposed the restriction. If these elected officials represent you, please take a moment to contact them and thank them for breaking ranks to support local authority.

Coverage this week was fast and furious.

Sam Gustin from Motherboard reported on Blackburn's efforts. Gustin checked in with Chris:

"Blackburn's positions line up very well with the cable and telephone companies that give a lot of money to her campaigns," said Mitchell. "In this case, Blackburn is doing what it takes to benefit the cable and telephone companies rather than the United States, which needs more choices, faster speeds, and lower prices."

Mitchell says that he's sympathetic to the arguments against "preemption"—after all, he works for an organization called the Institute for Local Self-Reliance—but points out that while Blackburn opposes the federal government inserting itself into state law, she apparently has no problem with the states telling cities and municipalities what they can and cannot do.

"The argument that Blackburn puts forth is not coherent," Mitchell said. "It's just politics."

Gustin and the International Business Times were only a few of the many reporters that connected the dots between Blackburn's campaign balance sheet and her concern for big ISPs. From IBT:

Blackburn’s top campaign donors include private telecommunications firms that do not want to have to compete with publicly owned ISPs. Her state is home to EPB, a taxpayer-owned power company in Chattanooga that also provides local residents some of the fastest Internet speeds in the world at market-competitive rates. EPB is now aiming to expand its services beyond Chattanooga.

However, to go forward with its expansion plan, EPB needs the FCC to enter the fray, applying its authority to preempt a Tennessee law backed by the private telecom industry that restricts the utility’s ability to move into new regions.

According to campaign finance data compiled by the Center for Responsive Politics, two of Blackburn’s largest career donors are employees and PACs affiliated with AT&T (NYSE:T)  ($66,750) and Comcast (NASDAQ:CMCSA) ($36,600). Those are two of EPB’s private-sector competitors in Chattanooga. Blackburn has also taken $56,000 from the National Cable & Telecommunications Association, the lobby for the big telecoms.

Ars Technica's Jon Brodkin also notes that EPB has turned away local communities that repeatedly request help in areas where broadband is not available. Tennessee law prevents EPB from serving beyond its electric service area. As Brodkin reports, Blackburn is not willing to look beyond the State Capitols.

EFF Logo

Brian Fung, who offered our community networks map for his Washington Post article, delved into the history of the issue. He noted growing support in D.C. for local telecommunications authority. Multichannel News also reported on the opposition to the amendment voiced on the House Floor by New York Representative Jose Serrano. Serrano said:
Whatever happened to localism or local control? This amendment means the Federal Government will tell every local citizen, mayor, and county council member that they may not act in their own best interests. Any such amendment is an attack on the rights of individual citizens speaking through their local leaders to determine if their broadband needs are being met.

The Electronic Frontier Foundation wrote about consumer concerns - the lack of competition and state policy that maintains large corporate monopolies and duopolies:
Projects like community mesh networks and mayors’ attempts to bring fiber to their cities should never be illegal or stifled by misguided state laws. On the contrary, they should be encouraged. That’s because community and municipal high-speed Internet projects provide users more options.
Municipal and community broadband projects offer alternatives, so when companies like Comcast and Verizon are behaving badly, users have somewhere else to go. But right now there are 20 states that have laws that make it make it hard or impossible for communities to take their Internet into their own hands.
The National Journal also published a brief account.
Karl Bode at DSLReports.com summed up the legislative formula that brings us to this point in political time:
The underlying argument from Blackburn and friends continues to be that municipal broadband is the devil -- but letting local massive corporations write state telecom laws (laws that often completely eliminate your right to choose for yourself what your town does or doesn't do, while also resulting in less competition, higher prices, and worse customer service) is perfectly ok.
And my snarky favorite came from Brad Reed, who offered a little sarcasm at BGR.com with "Congresswoman bravely stands up for ISPs’ rights to deliver inferior service with no competition":
Either way, we’re still glad to see that some patriots in this day and age are still standing up to protect our freedoms from the municipal broadband menace. As certain historical figure might have said were she alive today, “Let them eat dial-up!”

Fibrant Signs Up 3,000th Customer, Increases Top Speed to Gig With No Rate Hike

Salisbury's Fibrant network recently signed on its 3,000th customer, reports WCNC from Charlotte. The publicly owned network also recently increased speeds for residential customers with no price hikes, reports BBP Mag. Households that were signed up for symmetrical 100 Mbps service for $105 per month will now have gigabit service for the same rate.

BBP Mag spoke with Dale Gibson, one of Fibrant's first gigabit customers:

“Generally when an Internet service provider gives a speed, it represents bandwidth, or a theoretical 'best effort' speed, not the 'throughput' or actual speed. My speed tests are consistently above 900 Mbps.” A network professional for over 20 years, Gibson added that typically even in the best test conditions, it is more common to see numbers in the 800s and, “Fibrant should be very proud of that 900 number.”

Other speed hikes include:

20/20 Mbps for $45 per month raised to 50/50 Mbps

30/30 Mbps for $65 per month raised to 75/75 Mbps

50/50 Mbps for $85 per month raised to 100/100 Mbps

The network has also revamped its video packages to include more channels, new HD options, and remote DVR. For a complete overview of Fibrant's new packages, visit their pricing page.