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Retail Muni Fiber Networks Charge Less - Community Broadband Bits Podcast 289
Do municipal fiber networks offer lower prices than the their competitors? Yes, almost always, according to a study from Harvard's Berkman Klein Center called Community-Owned Fiber Networks: Value Leaders in America.
David Talbot, a Fellow at Harvard's Berkman Klein Center for Internet and Society, joins us for episode 289 of the Community Broadband Bits podcast to discuss the study, conclusions, and challenges. He was last on episode 162 to talk about a report they did on muni fiber in Massachusetts.
We talk about the challenges of doing an analysis like this, the range of results, and how pricing from munis tends to not only be lower but also more transparent.
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Thanks to Arne Huseby for the music. The song is Warm Duck Shuffle and is licensed under a Creative Commons Attribution (3.0) license.
David Talbot: Our findings are quite narrow and they are very limited and we would like to see that much more of this kind of work can be done and to do that you'd need the data to be made available.
Lisa Gonzalez: You're listening to episode 289 of the Community Broadband Bits podcast from the Institute for Local Self-Reliance. I'm Lisa Gonzalez. When it comes to Internet access rates most of us wish we could pay less and get more. A recent report from the Berkman Klein Center analyzes data from locations where municipal networks and networks in the private sector advertise services in the same areas. The report finds that in most instances a municipal network option provides annual savings to subscribers at an entry level tier. In this interview Christopher talks with one of the authors of the report David Talbot. David explains the methodology he and his coauthors used in building their database developing comparisons and how they came to their conclusions. Due to some of the marketing tools that private providers use to attract new subscribers the task was more complicated than it sounds. You can download a copy of the report at cyber.Harvard.edu and you can also access our story about their report on MuniNetworks.org where we provide a direct link. The report is titled "Community-Owned Fiber Networks: Value Leaders in America." Now here's Christopher with David Talbot from the Berkman Klein Center.
Chris Mitchell: Welcome to another edition of the Community Broadband Bits podcast. I'm Chris Mitchell having some fun up here in Minneapolis with the Institute for Local Self-Reliance talking again to David Talbot a fellow at the Berkman Klein Center for Internet and Society at Harvard University. Welcome back to the show, David.
David Talbot: Hi Chris, how are you?
Chris Mitchell: I'm doing well. I am excited to talk to you about your latest paper. I know it wasn't just you -- we can talk about that in a second but this is a research paper that was published as part of the Responsive Communities Initiative at the Berkman Klein Center there at Harvard. And you looked at pricing. David, you last joined us for episode 162 of the Community Broadband Bits podcast, in which we were talking about a different study one that was looking at some municipal broadband options in Massachusetts. I hope people go back and check that out. But today we're talking about this paper that's called: "Community-Owned Networks: Value Leaders in America." What were you studying this time?
David Talbot: Well first of all to your original comment also Danielle Kehl and Kira Hessekiel were coauthors on this. Did a lot of hard work; Kira managing a database over more than a year and it was a very difficult process to really keep track of all these numbers. But we were trying to study what broadband by which we mean service provides (at least 25 megabits downloads streaming 3 Mbps upload) actually costs in the United States and whether municipally owned providers how their pricing compares to the private competitors.
Chris Mitchell: Right. So it's worth just noting at the beginning and we'll get into very briefly very soon with the findings were. But the database was hard because a lot of pricing is based on a variety of services and kind of all mashed together. So how did you how did you develop a way of looking at municipal prices and Comcast or prices for other ISP. So you're just looking at the broadband component of the price.
David Talbot: Well there was as you would imagine there was the upfront process to decide how we would go about collecting this information in a low post-collection process to figure out how to make sense of it both of which were I must say quite challenging upfront you will know very well that this information is not comprehensively collected by the FCC. There is no database out there that the public can go consult to see what broadband cost in the United States. There are many key questions that the availability of such data would help answer such as you know what's the connection between adoption and pricing. We know a lot of people don't take service because they can't afford it. What the different pricing levels mean in terms of adoption who's doing the adopting and who's left out. How does the competition affect pricing and many other questions. Lot of those are black boxes.
David Talbot: How did we go about this. Quite simply we went to the Web sites of providers and we started with your list. The ILSR list of visible providers in the United States which as you know the White House itself used in 2015 to tell the public about the existence of these these community and municipal providers. We started with that and we said look just at the fiber to the home subset which there are about 40 inadequate according to your list from 2015 or earlier. Probably more now -- and then we said okay we're going to start with these 40 municipal fiber to the home right. And by the way it's not only municipal that some are owned by other public entities other than we have cities but that's usually the shore and we call them community-owned as a result of the fact that not all of them are strictly municipally-owned - one of many complexities.
David Talbot: And then with the Web site we collected that data the data plans what people are charged according to the Web site. And then we went to the providers in the same communities that are private such as Comcast, Charter, and others to see what they charge and to do that you have to enter a residential address which then raises another set of challenges. Well do we enter residential addresses that we don't. Normally you're supposed to say "this is where I live." So we went into the terms of service and we try to be respectful of what the terms of service say in terms of do they expressly prohibit you from entering an address if you don't live there. And so on and so forth all of which is discussed in the study.
Chris Mitchell: And I think we'd like to get back to that question of the terms of service. You are limited in some ways being part of a law school people take the law and these sorts of terms of service very seriously. We are going to come back to talk about that toward the end. But what was the -- what was the key finding then you did all of this methodology.
David Talbot: But the basic findings were that we were able to compare providers in 27 of these 40 communities because the other 13 they fell away for various reasons. There wasn't a competitor to the muni or the competitors terms of service provision prevented data collection, and 23 of the 27 we found that the municipal provider was offering basic broadband service that was less expensive areas over four years than the private competitor. And by basic profits again we are referring to the service that minimally gets the consumer 25 megabits down 3 megabits upload that is the first service that gave you that was 40 Mbps/10 Mbps that was a service for you. It was 26 Mbps/4 Mbps that with the service fees. Some of those plans are exactly the same but they're all the same in terms of being the cheapest plan that you can get that gets you broadband which former Chairman Tom Wheeler described as table stakes for 21st century communications.
David Talbot: So to sum all of this up in 23 out of 27 municipalities where comparisons were possible the municipal ISP was offering less expensive service averaged over four years than the private competitor. The amounts were sizable in some cases Lafayette, [Louisiana]; Sebewaing, Michigan; Morristown, [Tennessee]. These are hundreds of dollars a year savings you know could be two, three, up to to six hundred dollars per year in savings in Lafayette. You know private competitors are using teaser or promotional rates for the first four months or sometimes longer than the rates go go up. So you need to average what people are paying over a period of years to really get a sense of whether people are getting better or worse value. And we use the four year average. We tried it three or averaged in one case and it only changed the outcome by one municipality.
David Talbot: So obviously if people are keeping service for longer than four, five, six, even longer years the numbers would get even larger in terms of how much more they're spending on the private competitor versus the politics who tend to have fixed prices from from day one.
Chris Mitchell: All right so just to reiterate the municipalities tended to have the lowest prices. There were some situations in which they didn't. And generally I think the margin was still pretty close. And then there was a number of other places in which you weren't able to collect enough data to really make a strong case due in some cases to the ISPs from which you were trying to collect data denying that data to you.
David Talbot: Correct. Not denying so much as we did not collect from from a couple of providers notably AT&T, Verizon, and I think Time Warner Cable because the terms of service in our opinion made it [hard] for us to not collect data by entering residential address.
Chris Mitchell: Right which I mean there may be some other reason that I cannot think of but the only reason that if I can imagine a big provider putting that language in there is to try and prevent anyone from being able to do broad price comparisons. Now I'm not going to ask you to speculate on that but I do want to raise issue for some people who are thinking "wow, you know only 40 municipal networks." Now you were focused on the networks that were providing retail services themselves right?
David Talbot: Correct. That is right.
Chris Mitchell: And so it's just for people who are thinking. I thought there was so many more networks. There are more networks than 40. You know sometimes people do get lost in all the different options available but this study does look at the networks that are using the same model that Chattanooga uses which I say, not because they're the greatest network ever, but because most people are familiar with them and the fact that they provide service directly and they provide television and TV service as well.
Chris Mitchell: Those are the networks that we're talking about and some pretty impressive results. You know one of the things that I think people really appreciate was your finding that in general you could understand and predict municipal pricing better. Am I characterizing that correctly?
David Talbot: By predict you mean when you go to the website you can see what you'll actually be paying. I think yes they're definitely clear. It just has the monthly prices and that's the price there's no. Hey it's 39.99 for the first month and then you have to click a button and see you what the price is going to be 12 months from now when it's substantially higher then that will stay that high for many years to come until you bother changing it.
Chris Mitchell: Right, you mentioned one particular form of what we might call trickery or obfuscation. But there's also others such as the modem rental fee as the Internet recovery fee. The FCC regulatory fee I'm bigger than you fee. I think you try to calculate all of those sorts of fees into your pricing model as well. Right.
David Talbot: Yes. And the database is posted online and you can look at the study and take the link and go visit dataverse and look at all the data if you care to. Yes we did our best to see all the fees and average them out over the four years so that's what we put down as the price per year is all in average over four years. So that took some doing to get there.
Chris Mitchell: Now I want to ask you if there are any surprises along the way. But let me tell you what my surprise was. I've been a part of a few groups that have tried to do this sort of thing and have all walked away and just thrown their hands up in the air and said it's just it's too complicated and mind numbing to try and sort all this out we give up. So my surprise and my congratulations is to you for getting it done and published. It looks very reputable and credible to me when I look at it. Very reasonable methodology in a very difficult area. So thank you for that. But let me ask you in the course of doing this did you have any surprises?
David Talbot: I think to me a big surprise that this data is simply not available to the public. It's not tracked by any regulator notably the FCC but others could conceivably do it. You think of many other types of industries and products and services. And there is a standard on quantity that you're buying and there is somebody who knows sort of what it costs and who's watching out for that. But it's really anything goes in terms of defining what service you get. These are all over the map bundles all over the map. The pricing is all over the map the ways that the pricing is imposed and the fees and the way the rates change after 12 months is all over the map and nobody's keeping track of it. And actually this was a surprise to me.
Chris Mitchell: Yeah I think that's right. I mean you know as someone who takes markets seriously and as someone who cares a lot about markets working. I think it's important for the overall health of the of the economy and then therefore that impacts our quality of life. You know markets don't work without good information. And considering that so much of this information is hidden. One wonders, you know, just how seriously to take any claim from any elected official or career appointed staff at the FCC and whatnot that this is incredibly important for the economy because they sure don't seem to treat it like they think that it is.
David Talbot: Well not from the perspective of wanting basic data that you would need to study. A to study what something actually costs and know what it costs and know what's being obtained for the -- for what's been paid and then being able to say costs or service levels are X that we see this happening in terms of adoption or in terms of any number of other metrics. You just can't do that. You don't have the data and the data really is not available. That's why this took us forever to do. I mean we are almost joining the folks that gave up that you mentioned earlier, you know, really around two years stopping started in trying to draft and figure out how to write this. It was very challenging and I really hope that you know our findings are quite narrow and they're very limited and we would like to see that much more of this kind of work can be done and to do that you need the data that we made available and that's going to be my response if anybody says Oh your methods were bad or your findings are wrong. You know my response to that going to be well then let's have the data so we can do better in the future.
Chris Mitchell: Exactly yeah. You did the best you could with what's available. I think it is worth just drawing out what we've mentioned earlier and that's that there are some claims that are made for some of the providers AT&T and Verizon that you'll be violating their terms of service which under some of the crazier laws that we have in the United States may or may not be violating the computer fraud and abuse act I believe in so you decided out of an abundance of caution not to report on the charges of those ISP that asserted those rights.
David Talbot: Yes that's right Chris. We decided in a couple of cases that the terms of service made it prudent for us to not collect data. For example, AT&T says your actions on the site can't quote "contain an impersonation of any person or entity or misrepresentation of an affiliation with a person or entity" Well does that mean we misrepresented ourselves as owning this house. So we didn't collect it. Similar for Verizon and Time Warner Cable. Yes some people are going to say we should just ignore that and go on to we did what we did. We wanted to be careful and not violate terms of service.
Chris Mitchell: Right. And that information is still out there for anyone who seeks the truth. They can go to those sites and build on your database that they can. Yes I hope they do too. We have some ideas of ways that we'd like to see it. I mean one of the things that I'd like to do is to track back the municipal networks to the prices that they launched with. So for some of them that might be 15 years ago and to see how they've changed over time. I suspect you'd find that very few of them have changed at all when we did this for just a subset in Tennessee and think we found that half of the municipal fiber-to-the-home networks in Tennessee had kept the same rates during that period of time. Some of them for more than 10 years.
Chris Mitchell: It's just it's worth noting that you know you picked four years. I think if you were to create an actual model of what people are paying I think you'd find that that over longer periods of time that municipal networks would do even better because you're not factoring in the fact that the fees are often going up over those periods from the private providers.
David Talbot: You might, I mean again this is a very interesting question you're proposing and we don't have the data and we don't have the answers. And that's a very important question to have the answer to to understand broadband adoption and use in the United States and how it affects a number of things they say is out of across demographic groups and how it relates to economic development, workforce development, education. These are very important questions to the study.
Chris Mitchell: Well thank you David for coming on to share another study with us. We think Berkman Klein center does great work and I always appreciate your time.
David Talbot: Thanks very much Chris. Thanks again to my co-authors Kira Hessekiel and Danielle Kehl. A pleasure working with them. We're glad we could get the study out because it was a challenge. Thank you.
Lisa Gonzalez: That was Christopher with David Talbot from the Berkman Klein center discussing his recent report comparing rates between publicly-owned networks and private companies. We have transcripts from this and other podcasts available at MuniNetworks.org/BroadbandBits. Email us at podcast@MuniNetworks.org with your ideas for the show. Follow Chris on Twitter. His handle is @CommunityNets. Follow MuniNetworks.org stories on Twitter where the handle is @MuniNetworks. Subscribe to this podcast on the other ILSR podcasts -- Building Local Power and the Local Energy Rules podcast. You can access them on Apple podcasts, Stitcher, or wherever else you get your podcasts. Never miss out on our original research. You can subscribe to our monthly newsletter at ILSR.org. Thank you to Arnie Huseby for the song "Warm Duck Shuffle" licensed through Creative Commons and thanks for listening to episode 289 of the Community Broadband Bits podcast.