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Reflections on European Broadband - Community Broadband Bits Episode 127
I was recently invited to speak in Brussels on the experience of U.S. cities and fiber optic investment. Videos from the seminar are available here. I took some extra time around the seminar to visit Amsterdam and then Bruges in Belgium. On this week's Community Broadband Bits podcast, Lisa and I discuss broadband in the European context.
We talk about how much people pay in Amsterdam for better services than we commonly get and note that most European cities have much better access to the Internet than do U.S. cities, with the possible exception of Brussels, which has poor access. We also talk about how the incumbents in Europe are not so different from the incumbent providers in the U.S. and are trying to invest as little as possible while preventing meaningful competition. Some things are just universal...
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Thanks to Dickey F for the music, licensed using Creative Commons. The song is "Florida Mama."
Lisa Gonzalez: Hello everybody. It's the Community Broadband Bits Podcast, from the Institute for Local Self-Reliance. And again, it's Chris and Lisa.
Chris Mitchell: Bonjour.
Lisa: Wow! What was that, Chris? You're getting a little international! Why is that?
Chris: I picked up one word in my travels.
Lisa: Where were you, Chris?
Chris: I was over in Europe. I flew into Amsterdam, spent a little time there on vacation with my wife, and did a little reconnoitering on telecom as well. But then, I went over to Brussels for a presentation in front of some regulator-type folks from the European Commission. And then I went up to Bruges, which is a beautiful, beautiful old town in the northern part of Belgium...
Lisa: Which reminds me. We still need to see some pictures.
Chris: Pictures. Pictures. Yeah, I think, actually, my wife was hounding me about those as well. I still haven't actually shown anyone pictures from Istanbul. So, you know, we'll see what happens.
Lisa: OK. Well, that's one of the reasons why we're here. Chris is going to talk to us a little bit about his trip, and some of the things that they discussed. We do have some video from the event. It's going to be posted on muninetworks.org soon. Chris was there talking about what's going on in the United States. But while he was over there, he learned a lot about what's happening in Europe. And that's some of the things that he's going to share with us. So, you know, let's talk a little bit about that. Chris, cable in Amsterdam.
Chris: Sure. You know, I'm a married man. So when I got to Amsterdam, my first thought was, let's see what the telecom situation is.
Chris: You know, I was looking for billboards on cable prices, not for the red light district. And one of the things I found interesting was just outside the hotel. My wife and I were waiting for a tram, which is light rail. And I had to step back and take a photo of the billboard. And -- because a lot of it was actually in Dutch, I suppose. There's a lot of languages over there, and I wasn't always sure which one I was seeing, because I'm not the most multi-lingual of folks.
Lisa: Right, right.
Chris: But it was interesting, because one thing I did recognize, and that's that it said 120 megabits per second. And it was obviously a cable type of thing. It was a triple-play offering from the provider. And I had the picture of it. And then, later on, our last night in Amsterdam, my wife and I had -- we grabbed a beer with Herman Wagter, who is -- was very much involved with building CityNet, and wrote a number of articles about it, including one in 2010 in Ars Technica about the city of Amsterdam partnered with two other firms to bring fiber optic cables to a whole bunch of the city. And that has led to the cable incumbent building a much better network, offering faster services. And the advertisement that I saw was for 120 megabits per second downstream. And the introductory price for three months of -- I want to say -- with an introductory price of about 40 euros, so call that 50 U.S. dollars per month.
Lisa: Uh huh.
Chris: And that escalates to about 75 or 80 dollars per month for the triple-play, for which they would receive a ton of television channels, voice telephone, and a -- the 120 megabits per second, and probably an upstream connection on the order of 10 megabits per second.
Lisa: Uh huh.
Chris: So it's about a 10-to-1 or 12-to-1 ratio, which is not that different from what we get from Comcast here.
Chris: But, in essence, it was a triple-play package for about half the price that I pay Comcast and double the speed that I can get from Comcast for that.
Lisa: Um hum
Chris: So this about fit what I expected to get in Europe. Because, as we know, many European cities have better connections and better connectivity than you can get in the United States, particularly for the wired services. That's what we're typically focused on -- is the cable or fiber connection ...
Lisa: Um hum
Chris: ... to us in our homes. So, it was very interesting to see what was going on in Amsterdam. And just anecdotally, I also have to say that Amsterdam is one of those places that I feel like everyone should see at some point, because it's a beautiful, ancient city -- maybe not ancient, but very old, certainly 800-900 years old. But it's been built around the bicycle. And people described this to me, over the years. But until you see it, you don't really understand it. And it was something that was really worth seeing, and I'm really glad I had the opportunity to see it.
Lisa: And that's interesting, too, because here in Minneapolis and St. Paul, you know, we're known as one of the most bicycle-friendly places in the U.S., ...
Chris: Yup. Yeah, and most of us in the office even bike in on a regular basis in the summer.
Lisa: Right. Right. So it must have really been something, if you were struck.
Chris: There was multi-level parking decks for bicycles only ...
Chris: ... around the central train station. Just like we have multi-level parking decks for cars, they had them for bicycles. And they were enormous. And they were filled up.
So -- but from there, we went to Brussels. And I didn't know much about Brussels. I still, frankly, don't know very much about Brussels. But what I found interesting was that the interconnectivity there SUCKS!
Lisa: Why is that??
Chris: I don't actually know. I didn't -- Benoit Felton, who we'll talk about a little bit -- a friend, and international expert on telecom, a guy that I think is one of the most important people to read internationally on this subject ...
Lisa: And, you know, we've spoken with before.
Chris: Yes, we've had him on this show. He gave me a brief explanation, but I've since forgotten it. I'm going to blame it on jetlag, rather than my inability to listen to people.
But, you know, I started off, as I was in the hotels, and I was thinking, well, it's interesting, because our hotel in Amsterdam had decent Internet connectivity. And, you know, that's not necessarily a signifier of anything. Some of the hotels in Chattanooga -- like the Chattanoogan -- have incredible Internet connectivity. Santa Monica has some hotels -- great Internet connectivity. Because they're used the city-owned fiber. But other hotels, they just use something that -- they have a national contract with AT&T. And so they have really POOR Internet service. So you don't necessarily know much about a city's service based on its hotels. But in Brussels, the hotel was TERRIBLE.
Chris: Probably the worst hotel I've ever had that advertised Wi-Fi.
Chris: It was not clear that it actually worked. I think my wife and I, with a flashlight and doing Morse code may have been able to transmit information more rapidly.
Lisa: Oh my God!
Chris: So -- I was talking with Benoit and other people about it, who were at this event, and they said, yeah, Brussels is well known as being the worst city, and just terrible connectivity. And I asked them -- well, it's interesting, because you always hear about how great European cities are. And he said, yes. And I asked him, if you had to pick between being plopped down in a random large European city or a random large U.S. city, where would you get better Internet connectivity? And he said, European, without a doubt. But Brussels is sort of at the bottom of the pack.
Lisa: Uh huh.
Chris: So -- but, on average, these people, who really know what they're talking about, said that when you're looking at comparing city-to-city -- which I think is a good comparison, in which the folks at the Open Technology Institute have compared -- it's undoubtable that it is better to be in a European city for these high-capacity connections.
Lisa: Right. We just wrote about a report that they published not long ago. And there were a lot of comparisons. And, you know, sometimes the comparison, there was an awful lot of space between the top and the bottom. And often the top were European and Asian cities, and the bottom were the U.S. cities. Which is not a surprise to anybody who's listening to this podcast.
Chris: No. In fact, I mean, there's a number of challenges we face in U.S. broadband or Internet access policy. And one of those is, I think, our top cities, and biggest cities, and most entrepreneurial cities -- which may not be the biggest ones, of course -- all of them are trying to figure out how to try to be toward the top of those scales. But one of the things that's challenging them is the incumbent providers.
Lisa: Um hum.
Chris: This is something that we -- that was reinforced to me in Europe. Incumbents are a major problem for those who want to encourage investment, just like it is in the U.S. In the U.S., we have a history of privately-owned corporations providing telecom services. In Europe, they had a history of publicly-owned state companies. They were national companies that then were privatized. And, frankly, I don't know that things have gotten much better since they were privately run. Because, fundamentally, the difficulty is: they basically have a monopoly. And whether you have a public monopoly or a private monopoly, service tends not to be all that great, I think.
Chris: And I think it's far more desirable to have a public monopoly than a private. But, fundamentally, we want to have a system where people have a choice, and that forces whoever it is owning the network to provide better levels of service.
Lisa: Um hum. We often talk about the problems with incumbents in the U.S. So, what about the problems with incumbents in Europe?
Chris: Well, it turns out that the U.S. is not the only country in the world that has a problem with powerful corporations LOBBYING. And it seems that the European Commission and the European Union and even the state governments -- which is to say, the British government, the government of the Netherlands, the government of Belgium -- they are very influenced by their incumbents. And trying to figure out how to increase investment for fiber optic networks. And they're mostly focused on how to get the incumbents to do it. Much like former FCC Chairman Julius Genachowski, prior to Chairman Wheeler. Chairman Genachowski also was totally focused on incumbents. I thought it was a foolish policy. And it really went nowhere. The Europeans, I think, are struggling to get over this. And it's unfortunate, because the incumbents have so much power. They have very little interest in upgrading to new technologies and offering better services.
But one of the things that Benoit talked about at our event -- and we'll have a link to the video for both his presentation as well as mine -- was the benefits of structural separation. Which is ...
Lisa: And let's explain what that is, for listeners.
Chris: So, structural separation is -- Well, let's talk first about separation. "Separation" is the idea that the entity that is owning the service, that is owning the physical infrastructure -- the fiber optic cables, the copper cables, or whatever the cables are, and the electronic devices and things like that -- that's not the entity that's providing services. So the goal would be that whoever owns the wires allows multiple entities to operate over those wires, because it's not allowed to have -- give any special favors to any one operator. Right?
Now, there's two ways to get there. One is functional separation, and one is structural separation. "Functional separation" is kind of like what we did at Microsoft, which is to say, all right, you're all still one company, but you have to have a firewall between these different arms of the service. You can't people who are developing Word working to have special features in the operating system from those who are developing the operating system. Right?
"Structural separation" says no, we're breaking you up. And there's going to be two wholly different companies. One's going to provide services, one's going to manage infrastructure. Some places that have been engaging in this functional separation have found that it just doesn't work very well. That companies still find sneaky ways of benefiting themselves at the expense of competitors. And so, Benoit makes, I think, a persuasive argument for structural separation. Frankly, it's one that we should have in the U.S. Our 1996 Telecommunications Act was basically looking at a separation kind of approach, where the wires would be open to competitors. But the cable and telephone companies were able to lobby, and make sure that that policy failed, and that they were able to run off their competitors and not have to share their wires.
As long as -- and this is a question I got on a show recently that I did, you know -- I think that separation is a very smart policy. I just don't think, given the amount of political corruption we have in Washington D.C. -- the power of big cable and telephone companies -- that it's feasible. And so, I think structural separation makes a lot of sense. I don't think it has a real future in the United States. And if it did, it would be a short future, because you would just have AT&T, Verizon, and Comcast and others that were basically just buying off a change in the laws.
Lisa: So, does Benoit feel it has much of a future in Europe?
Chris: Yes, I think so. And I think he's right. I think Europe has ...
Lisa: Because they're not so far down the road as we are, maybe?
Chris: Well, because I think they don't tolerate the level of corruption that we do, in terms of the way our campaigns are financed and that sort of thing.
Lisa: Um hum.
Chris: So, I just -- I feel like there is a possibility, although it's still a hard lift in Europe. But it's a very smart policy. And it's one that will result in more investment and better connectivity for people.
Lisa: Um hum. So, were there any other things that struck you about the role of incumbents in Europe?
Chris: Well, one of the things that I really enjoyed in the panel discussion following all of our presentations was something that reminded me of a conversation that happened in the U.S., where -- I believe it was a city in Colorado, but I cannot remember now -- where they wanted to build their own dark fiber network. Where they weren't going to offer services, they were just going to -- in fact, do the separation kind of thing. The city was just going to provide dark fiber. And Comcast -- I think it was Comcast, let's just say a big incumbent -- said, that's not fair. You're competing with us, and you're a city, and that's not fair. And the city responded by saying, how much do you charge for dark fiber? And this provider said, oh, no, we don't offer dark fiber. And ...
Chris: ... the city said, then we're not competing, are we? [laughs]
Which I think is a great illustration. Now, the big providers -- in other words, in the United States or in Europe -- they don't like to do dark fiber, because it's a low-margin business. There's not much profitability in it. They want to sell you lit circuits where you pay a heck of a lot more for a gigabit than you pay for 10 megabits per second.
Lisa: And they manage it -- managed services ....
Chris: Yeah, they find all kinds of ways of raising your costs over time. Whereas, dark fiber tends to be a fixed cost and there's not a lot of margin in it. So the incumbents over there have little interesting in leasing it, much like our incumbents have little interest in leasing it.
And there's some other issues with dark fiber. But, you know -- There’s some other issues with dark fiber, as well, which is that it is inherently limited. I mean, if you want to lease out 300 pairs, then you need 600 strands of fiber, which requires very large fiber builds and that sort of thing. And it may not be the right approach for everything. But it gives you a sense of how these guys really want -- the incumbents want to have their cake and eat it too.
One of the reasons that I think this is an important story is this thing called the "state aid" rules in Europe.
Lisa: What's that?
Chris: That is a confusing set of rules that Europe has, to basically say that they want to make sure that if there's a Belgian company, that the government of Belgium is not unfairly favoring that.
Lisa: Basically, a state aid law is to prevent one country from protecting companies from within its borders? Is that how it works?
Chris: Yeah, that's basically it. And it's very convoluted. And, within telecom, it manifests itself in interesting ways. So, if a city wanted to build a telecommunications network to the entire city, it may not be able to build in areas that already have an existing provider. It may only be able to build in areas where there's NO service. Which is something we go through here in Minnesota. We talk about extensively. Where you can't build if there's crappy cable and slow DSL ...
Chris: Yeah. Those companies claim it's not fair for you to build a fiber network. And I regularly say, you know, this is basically saying that if the private sector has a dirt road, you're not allowed to build an interstate. And that's crazy. But Europe has some of these same sorts of rules, and they have very complicated procedures for going through them. And so, it was interesting getting a sense for the European context for a lot of this that restricts local authority to build networks, depending on where they are -- often to the benefit of the existing private companies.
One of the reasons that I was there was to give a better sense of the way that cities can get involved, and how it can help to have more investment, and how everyone can benefit by having cities involved. That may be by providing this passive dark fiber infrastructure, which is what Stockholm has done, and which some other cities have done -- to do open access services, where you have competition. But it can also be other approaches. And so I was there to provide some context on what we have seen in the United States, and how the lessons we've learned might be useful in Europe, for them to determine how they can make sure that their cities have the connectivity that they need.
Lisa: I remember watching the panel discussion after your presentation. And I remember you brought up something Joey Durel said. That ...
Chris: Right. Yeah. Joey, mayor of Lafayette. He had testified in front of the U.S. Senate -- one of the committees of the U.S. Senate. And in it, when talking about municipal broadband, he said, along the lines of, hey, you know what would be great is if all 49 other states banned municipal networks, and then we in Lafayette will welcome all of your tech companies to move down here with a big pot of gumbo.
Chris: And -- it's interesting because, as you've noted on the blog, you know, they've actually seen some 1300 new high-tech jobs ...
Chris: ... coming in, in just the past six months. So, I made that -- noted that comment, in my panel comments. And I said, this is something that Europe need to keep in mind. Because a lot of the great European cities, you know, they have decent connectivity. But they don't even compare to what you have in Stockholm, with the city-owned Stokab network, where you have this incredible fiber throughout the entire community. And I said, if you're going to have rules, on the European continent, that limit the ability of your great cities to have the connectivity that they need, you should expect that a lot of the big businesses -- and the small businesses, but any high-tech business -- they're going to be moving to Stockholm.
Lisa: Um hum.
Chris: We're already seeing that to some extent. There's going to be winners and losers ...
Lisa: Um hum.
Chris: ... you know, based on these decisions. And if you're going to put handcuffs on the ability of a city to make sure it has the connectivity it needs, there's going to be repercussions. And part of that's going to be a reordering, because the city of Stockholm has got its stuff together.
Lisa: Um hum.
Chris: Right? They have great connectivity. They've got great wired and great wireless connectivity, because of the investments they've made over the last 20 years. And if they're not going to let other European cities do that, well, then I think Stockholm's going to be doing quite well in the future.
Lisa: Great! So, anything else from your trip that you want to bring up?
Chris: Well, I think maybe there are a lot of things that are interesting when you're traveling through Europe. I mean, the trains are amazing. I got up to 190 miles per hour on one of the trains between, I believe it was Antwerp and Rotterdam, when I was heading back from Brussels to Amsterdam. You know, they have incredible infrastructure that is almost entirely below the ground in a lot of the cities ...
Lisa: Um hum.
Chris: ... where they've invested in putting it beneath the ground. And I think that makes a lot of sense. It can be harder and more expensive to deploy fiber optic networks, I grant you. But it looks a lot better ...
Lisa: Um hum.
Chris: ... when you don't have these wires cluttering up your views. But I just thought it was interesting. And it's one of those things that -- especially if you're an electric utility -- the ability to underground while -- you know, if you're undergrounding your electric lines slowly -- over a period of many decades, perhaps -- starting to get conduit in for fiber optics and things like that. It'll speed it up in some areas of town. In general, it was great to see different cultures, and to see how they do things, and also, you know, having a sense that, while most European cities are, in fact, better than what we have here for telecommunications, you know, there's definitely a pecking order among those cities.
Chris: And, you know, U.S. cities that want to have some smart investment -- I think they have a very good chance to get back up to the top of the order, because incumbents are lobbying in Europe to try and limit their ability to have competition, just like we're seeing it here in the U.S. You know, we're falling a little bit toward the middle of the pack right now. But we can change that with some smart investments.
Lisa: Remember to check back at muninetworks.org for a video of Chris' presentation at the Maximizing Fiber Infrastructure in Europe event. We also want to encourage you to revisit episode 21 of the Community Broadband Bits Podcast, in which Benoit Felton and Chris discuss Stokab, Stockholm's municipal fiber access network.
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Send us your ideas for the show. E-mail us at firstname.lastname@example.org . Follow us on Twitter. Our handle is @communitynets . Thank you again to Dickey F for his song, "Florida Mama," licensed through Creative Commons. And thanks again for listening.