New Minnesota Networks Face Tough Challenges

MPR News recently ran two stories on the trials and tribulations of new and prospective broadband networks. Conrad Wilson's story about the continuing Monticello drama and Jennifer Vogel's account of factors affecting the American Reinvestment and Recovery Act (ARRA) projects give us a good idea of the many hurdles in the way of building new fiber-optic networks. We have reported many times on the drama that has unfolded in Monticello. The municipally owned fiber-optic network has faced some withering challenges and yet perseveres. Monticello asked for a modern communications network but the existing service providers, the cable and phone companies, insisted the city was "sufficiently wired." Conrad's reporting suggests otherwise:
Bill Tapper, who owns a cabinet company with clients around the world, recalls a time just a few years ago when the Internet was so slow it hurt business. "The service we had in Monticello was horrible," he said. "My employees would sometimes take the data home where they had a better Internet connection than we did and do their uploads at night." Tapper said he lost out on business, but at the time the established Internet service providers like phone and cable TV companies told Tapper and other frustrated business owners in town that the city was wired sufficiently.
Fibernet Monticello

After the community voted in favor of a publicly owned fiber-optic network, the incumbent provider, TDS, filed a lawsuit. The lawsuit strategically succeeded in stalling the development of the new network but did not destroy the project. Even though the incumbent provider describes pre-network status as "just fine before the city got involved," TDS took advantage of the delay they caused to began building their own fiber network. Currently, subscribers in Monticello are benefitting from their high-speed fiber in ways beyond expanded and improved access. Because of the threat of competition, Charter is wooing the community with below rock-bottom (albeit temporary) rates. But Minnesota has recently considered some legislation from State Rep. Linda Runbeck, R-Circle Pines, that would revoke local authority to decide if a community should build a network. She was quoted in the MPR story:

"You're putting the public sector right up against the private sector," Runbeck said. "It's clearly a very competitive industry ... It's a high risk industry. Why should we put that risk on the taxpayer?"

Why?? Perhaps because local employers were sending employees home to be more productive. Businesses need better connections that the few big cable and phone companies want to provide. She states she will introduce the same bill next session and though her bill is dead this year, it continues to collect co-sponsors. Not a good sign for Minnesota's rural communities. Jennifer Vogel's story on what has slowed the completion of some ARRA funded projects is a reminder of how hard it is to work in this space. Because of the many projects funded by the ARRA, fiber is in demand and hard to obtain. Unsurprisingly, the price has increased, driving up the estimated costs of the 18 approved Minnesota projects. Contributing to the higher prices are problems with manufacturing, due to the earthquake loss of a major Japanese production plant a year ago. As we often see, the bigger providers were able to jump to the front of the line when fiber did become available:
"[T]he fiber that did show up went to the folks who order more large quantities on a regular basis," said Farmers general manager Kevin Beyer. In other words, the $10 million western Minnesota project couldn't compete with bigger players with more clout. "The first orders filled should have been ours since we ordered ahead of others," he said. "But the game got changed a bit. There was a reshuffling of who mattered."
USDA RUS Logo A bureaucratic bottleneck caused by paper work and insufficient staff at RUS adds to the disruption; the result is major delays in many projects. The situation has left communities and private builders in a tricky situation. Rather than wait for federal funds, some project leaders are striking out on their own:

Halstad [Telephone in northwestern Minnesota] was selected early and chose not to wait for stimulus dollars to be in hand, therefore securing most of the needed fiber before the shortage took hold. "We just jumped on it," said Tim Maroney, Halstad's CEO. "We didn't wait for the money to come. We started the engineering and negotiations. We took a chance."

Not all projects are in a position to take a chance, especially public projects that are under tighter scrutiny and subject to a higher level of transparency. Public networks must also contend with attacks from the private sector, which we have seen several times in Lake County. At $66 million, the project is the largest ARA approved project in Minnesota. Mediacom, which only serves a few towns in the project area, has filed a complaint with the Department of Agriculture Office of Inspector General. (See a PDF of the press release here) and the Minnesota Cable Communications Association has started a fear, uncertainty, and doubt campaign to kill the network for many rural people who Mediacom never plans to serve. Aggressive and territorial incumbents, material shortages, and bureaucracy, are all hurdles facing the new networks. Municipal networks have the added threat of state preemption which can, and does, put the skids on great ideas to bring high-speed broadband to more people. As these projects are completed and the social and economic benefits of community networks becomes realized, we hope some of those hurdles will disappear.