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Thoughts on 2015, Predictions for 2016 - Community Broadband Bits Episode 183
Given all the exciting events of 2015 and our hopes for 2016, we decided to do another year end / year beginning show that looks both backward and forward. Unfortunately, our timing did not allow for Lisa to join us in the recording, but Christopher Mitchell is joined by communications staff at the Institute for Local Self-Reliance -- Rebecca Toews and Nick Stumo-Langer.
We talk about what strikes us about the past year and what we expect to be happening in the near future. When I write "we" I mean that Christopher dominates the discussion. We will be back with our usual interviews starting next week.
We want your feedback and suggestions for the show-please e-mail us or leave a comment below.
Listen to other episodes here or view all episodes in our index. See other podcasts from the Institute for Local Self-Reliance here.
Thanks to Arne Huseby for the music, licensed using Creative Commons. The song is "Warm Duck Shuffle."
Chris: Welcome to another edition of the community Broadband Bits podcast's year in review/predictions for the next year. Once again from last year we brought in Rebecca. Once again, we've brought her back in. This is Rebecca Toews of our communications side of the Institute for Local Self-Reliance. Welcome back.
Rebecca: Hello everyone. I'm happy to be here.
Chris: We're glad to have you back. We have a new face on the show, a new voice on the show as well, his face is new. Nick, welcome to the show.
Nick: Thank you. I'm really happy to be here.
Chris: Nick Stumo-Langer.
Chris: Am I saying that right?
Nick: Yes, you're saying that just correct.
Chris: I've only ever had to really read it. Unfortunately Lisa cannot be here today. We miss her greatly, but we hope that she's having a great time with her family right now over the holidays. We had to record this show without her alas. That also means if it's edited a little bit more roughly it's because either Chris or Rebecca did it. We were lacking Lisa's talent.
Rebecca: It also means that if we have no voice of reason and wisdom, that's why.
Chris: Yes, that's a distinct possibility. We thought we would start by doing a little recap of last year's show. Let's talk about some of the predictions we made last year. After we do that we can talk about how 2015 actually went.
Rebecca: 2015 was a huge year. We had the merger between Comcast and AT&T that was voted down. That was ...
Chris: Something that both Lisa and I predicted.
Rebecca: Yes it was.
Chris: We were very excited when it happened and I continue to be very excited, although the FCC has just approved another merger and they approved AT&T, DirectTV and a number of other ones that I think are quite harmful. The merged industry consolidation continues despite one fairly significant setback for it.
Rebecca: That was something I wanted to ask you about too, is whether or not that's something that is still a concern. I don't know if you want to get into that at all.
Chris: Absolutely. It's absolutely a concern. There is way too much consolidation. You look at the power of these companies, not just in the marketplace, which is the first place that everyone looks. They're power to set policy at the government, their ability to lobby the federal government, state governments, local governments. If you had 10 or 15 different cable companies that were each individually lobbying, and they had the same number of lobbyists even, they would not have the same impact as if you have one coordinated company that's going out and golfing with the president of the United States and basically pushing their agenda.
This is one of the biggest problems of the consolidation is that it perverts the political process. That ultimately makes it harder for more competition to emerge. That's basically how we get monopolies.
Rebecca: It seems like the Comcast merger had a lot of people that were against it and upset about it. People commented and things like that. The Time Warner Cable merger seemed to go through fairly quickly and uneventfully. Is there a reason that that would have been better?
Chris: Time Warner Cable and Charter has not gone through yet. That remains to be seen. I think it's just harder to organize against because Comcast is so large most people have dealt with it and most people are horrified at how terrible it's been for them. The idea of Comcast getting even larger is more dangerous. The combining of Time Warner Cable and Charter will be very bad for the industry for a variety of reasons, but it will still be smaller than Comcast. It's a little bit harder to oppose. It's one of those things where it's like Comcast is terrible. Can we stop someone from being a little bit less terrible than them or are we obligated because of how terrible Comcast is to let other companies be that terrible as well in terms of their impact on the political process and their ability to set policy and distort the marketplace. I still hope we can stop that. I think it's a harder lift.
Nick: You said that corporate consolidation is continuing, but do you think it's inevitable just that they're going to keep trying or something like that?
Chris: They'll absolutely keep trying. They'd be crazy not to given the gains that they individually get. If they can do it. It's one of those things where, people often talk about this, one small party has a ton to gain in terms of being able to drive up rates and distort the marketplace and really basically establish a monopoly with this cable power. All of us have a small interest in not seeing that happen because our bills go up a little bit every year. We have few choices and we don't know what ways that innovation is set back. We don't know what devices might've come out of what new services might've come out if we had more innovation.
It's harder for us to organize and oppose it because for each of us it's a small interest. Even though there's hundreds of millions of us that have that small interest, we don't put as much time into it. Whereas, for the people who are going to make millions of dollars by combining, or even ultimately billions, when you look at all the shareholders and the CEOs and everything else. They're making billions of dollars off of these mergers. They're going to put everything they can into it.
Nick: What do we as citizens and we at ILSR do?
Chris: The first thing is I think to have a knee-jerk opposition to mergers. I don't know that we should always oppose every merger, but I think our first suspicion should be that it's a bad idea. We need to say that where we have these really big firms like Comcast we need to urge them to be broken up. Much like we broke up AT&T and then stupidly allowed it to basically come back together to form that same oppressive kind of large company. We need to break them up and we need to keep them separate. That's something that's hard because once again, they will be fighting tooth and nail to try and get big again so that they can again extort these monopoly profits from us.
Rebecca: You were talking earlier that that's one party has a lot to gain and one might not. It seems to me in 2015 that there were some parties coming together on the issue of at least municipal broadband. Do you see that as true or do see that continuing into 2016 at all?
Chris: Absolutely. We're seeing a lot more interest. The Colorado vote was incredible. The number of communities that are examining their options is definitely growing. I actually think that is a slightly different problem in terms of everyone having a small interest. I actually think that when you look at a community network everyone has a slightly larger interest. It's easier to organize in your community than it is to organize across the state or across the entire country. Finally I'll just note that when you're trying to organize to build something, you may not need to organize as much because there's typically not a coordinated opposition that's in the community to a municipal network.
There's a coordinated tens of millions of dollars have been spent on strategy for how Comcast and Time Warner Cable can get bigger. Nobody is spending tens of millions of dollars to stop a single municipal network. That's where locally you can take action that is harder for the monopolists and the consolidators to stop you.
Rebecca: Let's talk about Colorado. That was one of our predictions in 2015.
Chris: I think I actually predicted that 50 communities would vote in November. It was very farsighted of me.
Rebecca: Was it 50 or what was the actual number?
Chris: It was in the high 40s. It's hard to say. By the way for everyone who saw that, Nick did a lot of the work on that. Thank you for that because it was one of our biggest stories. I think Lisa had predicted that we would see more models. I think we've seen some of that. I think Colorado shows how much interest there is. I think we're going to see more models coming out of that. We've seen with Santa Cruz, moving forward with Cruzio, or Cruz I Oh, depending on how you say it. It's a partnership that's similar to Westminster. We're seeing the main model moving forward so rapidly. I think we are seeing these new models.
When there's new models there's a better opportunity for communities to fit their unique mix of challenges and assets or their opportunities to a better model. If there's only two models, one we might think of a Chattanooga, a Lafayette-Wilson type model of citywide utility, broadband, Internet, telephone and television or one other model which was doing dark fiber, there's a lot of communities that wouldn't want to do either of those. They might want to look at something in between. If we have a continuum of options as we continue to develop, that we'll see more communities have the ability to pick something that will work for them.
Rebecca: What about Massachusetts? Do you see that as a model or is that just a thing that's happening?
Chris: I think you mean with Wired West and that sort of thing?
Rebecca: Mm-hmm (affirmative).
Chris: Massachusetts is sort of broken into three areas I think. It's sort of the metro regions, which are still trying to figure out what they can do. Compared to the rest of the state they have decent service from Comcast. Some of them have Fiber from Verizon. East of there on the Cape, you have a bunch of communities that are organizing around their terrific, the network that they built with the stimulus dollars. On the western side you've got the Wired West folks who have organized a very locally, and had been hoping and been told by the Massachusetts Broadband Institute that they were going to get this matching funds or get a significant subsidy to help build the cost of their network in this very rural region.
In the past few weeks we've seen that sort of blow up. I'm, frankly, a bit stunned, I guess, but not too surprised. I think MBI, the Massachusetts Broadband Institute, has long had rose colored glasses on in terms of what the middle mile investment would take. I don't think they've really fully understand that challenges of building in these areas. I don't know who's advising them, but I think the reason that they've given for trying to blow up Wired West are pretty pitiful. I really hope that they're able to come back together and find a solution that works where Wired West can get access to some of the money that MBI has to improve access.
The MBI strategy has been helpful to some communities, but frankly the idea of building middle mile networks continues to be oversold. Middle mile is important, but middle mile investment does not get you last mile investment. If we had great middle mile everywhere we would still have a tremendous need to have better last mile investment. That's because the barrier to last mile investment is capital costs. The cost of building those networks to everyone's home is very expensive.
If you have a great middle mile network that means that once you have built your last mile you'll have a more affordable business plan. Your business plan will work better, but that doesn't help you to actually raise the capital of building the last mile network. I'd say we need more middle mile and more last mile, but fundamentally if we built more middle mile, it really doesn't help us a whole lot in getting better last mile.
Nick: It seems like part of the concerns are on the end stage ownership of the actual network. How does that fit within those concerns?
Chris: We're very supportive of both cooperatives and municipalities. I think MBI is concerned because the cities and towns in Massachusetts have entered into a cooperative. In doing so they gain certain advantages in terms of aggregating size, but they are certainly losing some autonomy. I understand that MBI is concerned about that loss of autonomy and the idea that if wired west does not work out then those communities will have fewer options. However, we don't have a crystal ball. I think that wired west gives them the best opportunity to move forward with a business model that will work.
If you have these towns working individually, towns of a few hundred or a thousand, it's very difficult to get the economics of this to work on a one-by-one. If you get everyone to work together it will work better. Yes, you will have less local autonomy, which is something we're obviously concerned about. They're in a coop. As long as the coop continues to reflect these local interests they should be able to work it out.
Not only that, let me just say with my tongue in my cheek, these towns needs something to fight about. Small towns across America want to find reasons to argue with their neighbors in many cases. I think we should not think that there's anything we can do to stop that.
Rebecca: I'm going to stop you there, though, because you said we don't have a crystal ball, and the entire point of this conversation was to talk about predictions for 2016. I want to know what you think about the Tennessee, North Carolina, FCC?
Chris: The six circuit appeal?
Rebecca: Appeal, yeah.
Chris: The FCC ruled back these state laws in Tennessee and North Carolina, which was something that Lisa and I predicted would happen. It wasn't that hard. We predicted it in December and it happened in February. I think we had a good sense that that was what was going to happen, certainly a strong hope. Now it's being appealed. My prediction is that we won't get an answer in 2016. I'm quite afraid that this will drag on. I'm afraid that if we get an answer in the first 6 months of 2016 it'll be a bad answer. If it goes not oral arguments and then longer, I'm not sure that we'll know. If we find out toward the end of 2016 I think that's more likely than in the earlier, but it's a complicated issue.
These courts take their time with it. I'm not really sure. I think we have a really strong argument. I also think that there we're very concerned about what the federal government's powers are relative to states, and therefore relative to municipalities. We didn't enter into this because we thought the federal government should be setting policy for everyone. We believe that communities should have the authority. When a federal government is acting on behalf of promoting more local choice by stopping states from stopping their subordinates from these transparent attempts to limit local authority and competition, it's a good role for the federal government. Particularly when it comes to the FCCs requirements to expand broadband investment.
I would just say it's complicated. We haven't come into saying it's an open and shut case. I think it's a terrific discussion and it's clearly led to more discussion in Tennessee. That's where I actually think we'll see. Before this case is decided I think Tennessee will roll back it's barrier on it's own. That's my hope. I think that if people in Tennessee continue to organize around it it'll happen.
North Carolina's attorney general, democrat, running for governor, does not want to be on record trying to stop better broadband from being expanded around the state. He has appealed it, but nonetheless has said it is a really bad law and he would like to see it disappear. I hope he stands true to that.
Rebecca: I wish that I had made my prediction before you made your prediction because I'm guessing you're going to be right. I was interested because it is in North Carolina that they have moved forward, GreenLight's moved forward with expanding outside of their boundaries.
Chris: Yes. The city of Wilson has connected a small town near it, which is outside of the county, which per North Carolina law prior to February of last year was impermissible. Now they have the ability. Pine Tops invited them in and they have expanded. I've heard from one first hand, I heard it secondhand from someone who know somebody there personally, that it's wonderful. They're so excited to have a real actual Internet service that's high quality.
I think before they only had a very low quality DSL option. Wilson has moved forward even with the appeal. If the FCC's order is denied by the courts, and the supreme court either affirms that or does not take the case, if the FCC basically is as though they never did anything, I suspect that North Carolina will just grandfather in that as well. I can't see Time Warner Cable having so much power in North Carolina that they force Wilson to sell it or to do something like that.
Rebecca: I was wondering about that, whether or not you think they're banking on being grandfathered in or if you think they're just so overconfident that they're going to move forward?
Chris: It's a very good question. It's one of those things where I think they're taking a risk, but the people nearby in Pine Tops, they need something. This isn't just something where it's like oh it'd be nice if we had it. I'm sure their economy is suffering from their lack of Internet access. I have to think that Wilson, which is long. Wilson was one of the first cities in the country to build an electric utility. These guys are forward thinking people in the community.
I don't know if it's something in the water or what. They have a history of serving their neighbors and helping them out. Wilson built its own electric utility and now it serves communities across 6 counties. I think that they would like to do that again. They have a great relationship with those people. I think it was probably a decision that they made saying there is a risk, but we care enough about our neighbors, for us the risk is worth it.
Nick: It is a ringing endorsement for local concerns versus what's happening in the halls of the 6th court of appeals or possibly the supreme court. There's actual reality here where people can't access the Internet and can't do their daily business.
Chris: Yeah, that's exactly right. Sometimes when you're reading these court cases you sort of just feel like it's about the state's position relative to the federal government's position. It's not. It's actually about people's ability to educate their children. It's about people's ability to access healthcare. It's tremendous in terms of the importance. If we just wait extra years that's harm that's being done.
Rebecca: I'm going to do a quick fire round. More multi-city cooperatives in 2016?
Chris: Yeah, I think so. I don't know that we'll see a lot of them established in building networks, but I think we're going to see a movement in that direction and we'll see a few established. We'll see the groundwork for more that are going to be done in 2017.
Rebecca: Colorado law rescinded or stays put?
Chris: That's a good question. I think this Colorado law stays put. I think there's a strong movement to rescind it. I think the cable and telephone companies work really hard to try and attach conditions to it. The Colorado law is basically a referendum, a requirement. I think the cable and telephone companies will say we'll get rid of the referendum requirement, but you'll have to jump through these other hoops. Frankly, it's not worth changing the law if that's the situation. We know how to deal with the referendum requirement. The new hoops would create new barriers and would be probably more onerous.
I think there will be an effort to remove the referendum. I think there will be conditions and the bill will die. We'll be kept in the same position.
Rebecca: More large cities getting municipal broadband networks?
Chris: When you say getting municipal broadband networks, it's a hard question because it depends on where you draw that line. I think we're going to continue to see New York City doing really smart things in terms of moving in that direction to improve service. Whether that means the city itself is doing dark fiber? Maybe. Is the city going to be providing services? Unlikely. The city's doing WiFi already. I think we're going to see moving in that direction more. I think we're going to see Seattle continuing to try and figure out how they can deal with improving digital inclusion with municipal investments. I'm hoping that we an steer that into a most positive direction possible. I think we're going to be seeing that in Baltimore.
In other cities we're going to be seeing more effort in this direction. It continues to be a hard fight. What I'd really like to see, and I hope we see, is Boston using some of it's massive fiber to lease that out to existing providers like Net Blazer that have done a wonderful job, and maybe look to serving some of them themselves.
A question for me is also not just the big cities, but cities like Cambridge that are part of Boston. That's where I really hope ...
Rebecca: bedroom communities? That sort of thing?
Chris: Yeah. Cambridge is sort of a pretty interesting bedroom community. It's a dorm community maybe. They have such tremendous potential. I think that for a long time they've been subject to the same sorts of constraints as big cities. I'm hoping to see more of them as well. I think we're going to see ... I'm afraid we're going to see Google Fiber continue to grow and the announcements continue to grow at a rapid rate. I'm thrilled to see Google going into places like Los Angeles and Chicago. I do not expect to see a path to municipal type networks.
I think they could do some interesting stuff, but I don't think they were on a path to do it. If Google wants to build out there and provide competition, that's great. I'd rather see Google building there than in places that could build their own. By that I'd include places like Portland and Palo Alto. They've been lacking in the will to actually pull the trigger and get this done.
Rebecca: Do you see tech towns like Palo Alto sort of igniting a movement and maybe recognizing that they have a real need for doing this?
Chris: I don't think so. When I say that I don't see that they're going to be the leaders in this. I don't think Palo Also, for instance, is not a leader in this. Palo Alto has hired consultants have told it in the past, not as current consultant but in the past, that AT&T and Comcast are doing a fine job. If I was in the city of Palo Alto and I was told that by a consultant I'm not sure if I would laugh or kick the guy out of the room. I'll tell you I'd do one or the other. I think who's leading the pack are the communities that have a stronger desire. The communities that want to be the next Palo Alto and recognize they have to change the rules of the game.
Rebecca: How about all purpose fiber network smart grids, like Chattanooga? They have the smart grid and then the broadband also?
Chris: I absolutely think we'll continue to see that, especially in places like Tennessee where we see the Tennessee Valley Authority, one of the best government investments in the history of mankind I think, in terms of building infrastructure and doing it in an effective way. I think that we will see them continue to do that because they have Chattanooga there. They have a lot of other cities that have been very innovative and working and thinking about this. They have that culture where they can share those sort of best practices.
I don't know if we're going to see the west coast as much. When it comes down to the weather and the climate on the west coast, I don't know that they've seen as much benefits from the smart grid and that sort of thing.
Rebecca: They can get outside more.
Chris: I mean there's a lot of things they could be doing, but I just hear from the utilities that they don't have the same driving motivation, say, as utilities that experienced hurricanes and ice storms and other kinds of things that disrupt industry.
Rebecca: What about statewide networks like Main Illinois, a middle mile?
Chris: I think we're going to see some more of that. Kentucky was a big one this year. Kentucky built their middle mile network I think in a very sensible way in the sense of all that money that the state was pouring into telecommunications contracts around the state. They're now going to be having their own network, which will be open access. They worked with the firm Macquarie to do it. I think that from what I can tell Macquarie is so difficult to deal with in terms of all the different contract variables and negotiations and the fact that they're so big and powerful. I'm not sure that we're going to see many that are able to negotiate with Macquarie. States could. I think some states will. We'll see more of those sorts of approaches, I think. That's way better than a state like Wisconsin which just throws money at AT&T hand over fist.
For me it's really frustrating to see a state that's just basically subsidizing monopoly rather than trying to find ways of driving competition out into the communities, which is what states should be doing with their telecom policies. I think we'll see some more growth of that. I don't think states have yet figured it out. I think we're going to continue to see a lot of states doing dumb things like Iowa. Iowa, which basically looks at Cedar Falls, the fastest most well-connected community in the state, and says we're going to ignore them and we're going to figure out how to just throw money at maybe Century Link or Media Com or someone. They're the ones that are lobbying me in my office as governor.
Just embarrassingly dumb policy. We'll see places like Minnesota where they have continued to have a decent policy that's totally underfunded. I think states still need another year or two before they get serious about smart policy and putting money behind it. Until then we'll be treated to all kinds of elected officials that say at the state level, the federal level, broadband's really important. We've got to connect people to the Internet. As long as it doesn't mean upsetting people like Comcast who are writing me big checks.
I don't expect to see a lot of changes at the state level in 2016. I think this will be the last year I hope where we see states talking one way and walking a different way. I'm hoping to see that a few states will get ahead and they'll teach lessons to the other states over the course of this next year.
Rebecca: It wasn't as rapid of a rapid fire as I had thought it was going to be.
Chris: It started off rapid fire but then I just kept talking. You didn't cut me off.
Rebecca: Surprisingly enough.
Chris: I think this has been a different kind of show in terms of predictions. I think we got some good predictions in. I think frankly it's a little more useful than just saying in what month I think something's going to happen. It would've been better with Lisa.
Rebecca: That's true. We miss you.
Chris: Lisa, we miss you in the office. We look forward to having you back with us. To everyone else, we say we hope you had a happy Christmas if you were celebrating it, a happy Hanukkah. Both of them are behind us as you're listening to this. Have a great New Year. We'll see you again in January.
Nick: Thank you very much.
Rebecca: See you later.