The Chelan Public Utility District in Washington state is upgrading network capacity as it starts expanding the network following its broadband stimulus award. We previously covered their consideration of whether to expand from passing 80% of the territory to 98%. Chelan is one of the most rural publicly owned fiber networks as well as one of the oldest ones. In a rarity, it looks likely to run in the red permanently (the pains of rural, mountain terrain) with the support of most ratepayers. These ratepayers recognize the many benefits of having the network outweigh its inability to entirely pay for itself. The utility also runs a sewer project that is subsidized by wholesale electricity sales. Though some areas in Chelan are served by Charter and Frontier, the more remote folks would have no broadband access if not for the PUD. With the planned upgrades in 2011, Chelan's open access services will offer far faster speeds than available from the cable and DSL providers. Under Washington law, the PUDs cannot sell telecommunications services directly to customer. The PUD builds the network infrastructure and allows independent service providers to lease access while competing with each other for subscribers. Though this is a great approach for creating a competitive broadband market, it has proved difficult to finance (if one believes this essential infrastructure should not be subsidized as roads are). When the PUD considered whether to pursue the expansion (meaning taking a federal grant covering 75% of the costs and agreeing to run the network for 22 years), it asked the ratepayers for feedback:

Sixty-four percent of 450 randomly chosen Chelan County registered voters who were part of phone survey in August said they favor taking the grant and completing the buildout, even if it means their electric bills will go up by as much as 3 percent — about $1.50 more on a $50 per month power bill.

On November 9, PUD Commissioners approved the rate increase. Chelan's service providers currently offer connections of 6Mbps/384kbps or 12 Mbps/384kbps.

Though I did not spend a lot of time following stimulus proposals, two excellent proposals did catch my eye from Idaho and I hoped that at least one of them would be funded. Alas, neither was funded by NTIA or RUS. These are exactly the networks we need throughout the country, and Idaho is exactly the state that could benefit greatly from federal assistance. I hope these projects have better luck in the second round or in securing future funding from RUS outside the stimulus project. (This is not to suggest I disapprove of the Coeur d'Alene Reservation Fiber-to-the-Home (FTTH) Project that received funding - I am not as familiar with it and therefore have no comment on it.) The town of Ammon, some 13,000 people near Idaho Falls in eastern Idaho, developed a proposal for an a type of next-generation open access network in that it would offer greater flexibility to subscribers and service providers than many current open access networks. The other project, to serve the Northern Panhandle area, was designed with Ernie Bray, who previously consulted on the Powellink network in Wyoming. The Boise Weekly briefly discussed these projects a few weeks ago, noting their open access approach that would serve residents, businesses, and key institutional anchors with fiber-optics:

"Every entity we need to work with is already a stakeholder; we're ready to go," he said. "And we will use revenues for expansion and build out. We're trying to expand the concept of a service provider and services beyond just the triple play, voice-video-data," he said. "Telemedicine is a service, hospitals are service providers. We want to take fiber to every home and every business, then connect them to libraries, schools and job services so they can take advantage of programs to help lift them up."

Local jobs are at stake and incumbent providers are doing little to help:

Quest [Aircraft], who builds the Kodiak airplane, they've gotta exchange large engineering files in real time; 250 jobs are at stake.

Verizon is busy trying to offload all of its rural territories on Frontier (a company famous for slow and poor service) so it isn't about to upgrade facilities in Idaho.

Dover, a city of over 12,000 in Eastern Ohio south of Canton, has been considering a publicly owned fiber to the home network for years to complement its water and electric muni utilities. The City Council is mulling the latest proposal, one that shows a lower cost to build (probably due to a combination of technology lowering prices and lower price for labor in a recession).

The summary indicated that total funding costs have decreased from $11,615,791 in December 2008 to $10,663,410 in December 2009. Shaw estimates that operating income would make the system financially feasible after the third year and could enable the city to pay off its debt in 15 years vs. 16 years as had been predicted two years ago.

A press release from Uptown Services, a broadband consulting company provided some history:

They originally hired Uptown in 2004 to complete a broadband feasibility study. The results of that study were promising, but the City chose to wait for the economics to improve as the technology matured and costs came down over time. Uptown completed a refresh of the original study in 2008. The case had improved, but the City wanted to fine tune the cost estimates through the completion of an actual system design prior to making any final decisions on a City wide deployment. Uptown was selected in 2009 through an RFP process from a slate of qualified proposals to complete this design.

Judging from the local site explaining the networks, they really understand the power of publicly owned broadband. The FAQ include this gem:

Remember this critical point: The incumbents look for a profit and answer to their shareholders, while the City of Dover looks for the betterment of the community and answers to its citizens.

They city has Verizon and Comcast as incumbents respectively. I suspect Dover is one the thousands of communities Verizon is trying to dump on Frontier Communications rather than invest in smaller communities. The stumbling block currently appears to be deciding how to finance the proposed network.

In a recent post the NY Times Bits Blog, Saul Hansell reports "Verizon Boss Hangs Up on Landline Phone Business" - something we have long known. Nonetheless, this makes it even more official: private companies have no interest in bringing true broadband to everyone in the United States. Verizon is happy to invest in next-generation networks in wealthy suburbs and large metro regions but people in rural areas - who have long dealt with decaying telephone infrastructure - will be lucky to get slow DSL speeds that leave them unable to participate in the digital age. These people will be spun off to other companies so Verizon can focus on the most profitable areas. For instance, Verizon found it profitable to spin off its customers in Hawaii to another company that quickly ran into trouble before unloading most of its New England customer on FairPoint, moves that enhanced Verizon's bottom line while harming many communities (see the bottom of this post and other posts about FairPoint). Isen has been writing about it recently - picking up on FairPoint immediately breaking its promises to expand broadband access in the newly acquired territories. No surprise there. Isen also delved deeper into Verizon's actions, with "Verizon throws 18 states under the progress train." He is right to push this as a national story - the national media focused intently on the absence of major carriers in the broadband stimulus package but they seem utterly uninterested in major carriers running away from broadband investments in rural areas. Though Frontier likes to position itself as a company focused on bringing broadband to rural areas, it offers slow DSL broadband and poor customer service to people who have no other choices - more of a parasite than angel. As long as we view broadband as a vehicle for moving profits from communities to absentee-owned corporations rather than the infrastructure it truly is, we will farther and farther behind our international peers in the modern economy.

Opponents of publicly owned broadband networks often hold up examples of wireless networks that did not turn out as planned -- more often than not, they ignorantly use examples of privately owned networks like Earthlink networks in Philly, Houston, or proposed privately owned networks in San Fran and Chicago. It is true that many wireless networks (especially those using Wi-Fi) came in above projected costs and late. It is also true that this happened across all manner of network ownership types. GoMoorhead, a publicly owned Wi-Fi network in Minnesota, was recently sold to a private company - and I am working on a report about that. However, there was also a recent announcement that the privately owned wireless network being built in Burnsville, Minnesota, is behind schedule.

Frontier Communications expects to extend its Wi-Fi hot spot service to Burnsville's performing arts center this fall, but a company official admitted Friday that knitting together complete citywide coverage has gone more slowly than expected. The phone provider for the southern part of Burnsville as well as Apple Valley, Farmington and Lakeville, Frontier had expected to have 90 percent of the city covered with a network of broadband Internet Wi-Fi hot spots by now. But Frontier is still moving its wireless service from the south, where it kicked off service in October 2007, into the northern parts of the city.

Additionally, the public-private partnership in Minneapolis remains behind schedule (privately owned but built with substantial amounts of public money). The problem is the technology - not the ownership. We continue to believe that the future should feature wireless as a complement to the more reliable and faster wired connections that should be available to everyone. But the more we talk to communities, the more we learn that wireless is more difficult to work with and often more expensive than expected.

Last year, Verizon sold all of its landline assets in New England to a tiny company named Fairpoint. Even as Verizon was starting to wire suburban and urban areas with fiber-to-the-home networks, it continued to underinvest in rural communities, where those lucky enough to have DSL generally paid a lot for slow very slow speeds. Rather than continue ignoring these properties, Verizon sold them to Fairpoint in a deal that some questioned as fraught with problems. Fairpoint has since met expectations: it is woefully unable to provide good service to people living in New England. More recently, Fairpoint is hinting at future bankruptcy

In a filing with the Securities and Exchange Commission, the company warns that if the offer does not go through, it might not be able to make its interest payments due Oct. 1. In a worst-case scenario, it said, this could lead to "an alternative restructuring plan (that) may include a bankruptcy."

If this were a publicly owned network, it would be championed by cable and phone companies as proof that those networks fail. We are not suggesting the opposite - that this is proof that all private networks in rural areas are doomed to failure, but it does offer evidence that a purely private sector-based model in rural areas is foolhardy. Verizon is now getting rid of more rural assets by selling them to Frontier - a company better poised than Fairpoint to handle them, but also a company known for offering slow DSL speeds with a 5GB cap. Communities that want to keep up with the rest of the world should look to themselves to build the networks they need. The private sector is either unable or unwilling to build the necessary networks to compete in the digital economy.