For the second week in row, our staff has felt compelled to address a misleading report about municipal networks. In order to correct the errors and incorrect assumptions in yet another anti-muni publication, we’ve worked with Next Century Cities to publish Correcting Community Fiber Fallacies: Yoo Discredits U Penn, Not Municipal Networks.

Skewed Data = Skewed Results

Professor Christopher S. Yoo and Timothy Pfenninger from the Center for Technology, Innovation and Competition (CTIC) at the University of Pennsylvania Law School recently released "Municipal Fiber in the United States: An Empirical Assessment of Financial Performance." The report attempts to analyze the financial future of several citywide Fiber-to-the-Home (FTTH) municipal networks in the U.S. by applying a Net Present Value (NPV) calculation approach. They applied their method to some well-known networks, including Chattanooga's EPB Fiber Optics; Greenlight in Wilson, North Carolina; and Lafayette, Louisiana's LUS Fiber. Unfortunately, their initial data was flawed and incomplete, which yielded a report fraught with credibility issues.

So Many Problems 

In addition to compromising data validity, the authors of the study didn’t consider the wider context of municipal networks, which goes beyond the purpose of NPV, which is determining the promise of a financial investment.

Some of the more expansive problems with this report (from our Executive Summary):

State Scoop - May 26, 2017

Crowdsourced broadband mapping helps North Carolina clean its data

A new tool released by the state's technology agency is being used to refine coverage data reported by the FCC and open the way for new funding opportunities.

North Carolina's state technology agency launched a new tool for measuring broadband speeds across the state Wednesday as part of long-term infrastructure planning that could bring new connectivity to rural areas.

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A fact sheet published by the Institute for Local Self-Reliance shows that North Carolina has a deeply stratified rural-urban divide when it comes to broadband. Christopher Mitchell, ILSR's director of community broadband networks, blames the state's regulations for the disparity.

"The state perversely discourages investment from local governments and cooperatives," Mitchell writes in a 2016 report summary.

A 1999 statute limits the ability of electric cooperatives access to capital for telecommunications, while a 2011 law limits the power of local governments build internet networks.

In an email to StateScoop, Mitchell said North Carolina is "far too focused on AT&T and Charter. It is a real shame."

Disputes over how to fund the state's rural broadband efforts have been an ongoing debate in recent years. A plan sketched by former Gov. Pat McCrory had theoretically positioned all residents in the state with connectivity by 2021. Mitchell argues that the state is ignoring some of its best options by depending on a private market that has thus far consistently failed to serve certain areas of the state.

S&P Global Market Intelligence - May 26, 2017

Hard Data on Municipal Broadband Networks

Written by Sarah Barry James

There is a dearth of good data around municipal broadband networks, and the data that is available raises some tough questions.

A new study from University of Pennsylvania Law School Professor Christopher Yoo and co-author Timothy Pfenninger, a law student, identified 88 municipal fiber projects across the country, 20 of which report the financial results of their broadband operations separately from the results of their electric power operations. Municipal broadband networks are owned and operated by localities, often in connection with the local utility.

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Yet Christopher Mitchell, director of the Community Broadband Networks Initiative at the Institute for Local Self-Reliance, argued that Yoo's study did not present an entirely accurate or up-to-date picture of U.S. municipal networks.

"When I looked at the 20 communities that he studied — and his methodology for picking those is totally reasonable and he did not cherry pick them — I was not surprised at his results because many of those networks are either in very small communities … and the others were often in the early years of a buildout during a period of deep recession," Mitchell said.

As an example, Mitchell pointed to Electric Power Board's municipal broadband network in Chattanooga, Tenn. — one of the five networks Yoo identified as having positive cash flow but at such a low level that it would take more than 100 years to recover project costs.

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In fact, without the revenue generated by the fiber-optics business, EPB estimated it would have had to raise electric rates by 7% this year.

According to Mitchell, Yoo's study captured the Chattanooga network when it was still "small and growing," but misses "what's going to happen for the rest of the life of the network, which I think is the more important part."

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Telecompetitor - May 25, 2017

Municipal broadband networks do not have a strong financial track record, according to an analysis conducted by the University of Pennsylvania’s Center for Technology, Innovation and Competition. The municipal broadband financial analysis, which looked at 20 municipal fiber projects, found that only nine were cash-flow positive and that of those, seven would need more than 60 years to break even.

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An Opposing View

Municipal network advocate Christopher Mitchell, director of the Community Broadband Networks Initiative at the Institute for Local Self-Reliance, pointed to several flaws in the Penn Law municipal broadband financial analysis.

He noted, for example that a substantial portion of the 20 networks studied were “early in the process and very small.” He also argued that the 2010-2014 study period may have biased the results, as that period included a recession and subscribership for some of the networks has increased substantially since 2014. He noted, for example, that EPB’s broadband network in Chattanooga had about 50,000 to 55,000 subscribers in 2014 but has now hit the 90,000 mark.

The Penn Law authors’ approach was “not the proper way to measure these networks,” said Mitchell in a phone call with Telecompetitor. The analysis “doesn’t take into account jobs created or the impact on the municipal budget,” he said.

He argued, for example, that a municipality that previously paid $1 million annually for connectivity might instead pay itself $500,000 for connectivity on the municipal network.

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Read the full story here.

Highlands, North Carolina, deployed a Fiber-to-the-Home (FTTH) infrastructure and fixed wireless complement to serve the community. The small rural community has been operating the municipal network in the Appalachians since late 2015, but is now considering passing the mantle to a private partner. They recently released a Request for Information (RFI) and responses are due June 9th.

High In The Appalachians

Tourism is one of the town’s staple economies, as it’s known for its natural surroundings atop the Nantahala National Forest in the mountains. While less than 1,000 people live in the town all year, summer tourists swell the population to around 20,000. There are several country clubs nearby that cater to the affluent second-home owners in Highlands and there are at least 500 homes that are valued at $1 million or more.

The FTTH network does not serve the entire community. Local leaders want the network available to the entire community, in part to keep second home owners in Highlands for extended periods of time. With better connectivity, many could work from home. The community also operates a municipal electric utility that owns 2,600 utility poles and 110 miles of line, most of it aerial. Interestingly, the Highlands Electric Utility serves over 3,000 accounts, some in the suburban Atlanta areas.

Highlands issued the RFI to search out  provider that would be interested in expanding the FTTH network and acquiring more customers for the network as a whole. They still want to own the infrastructure, but hope to attract a provider willing to lease the existing network and add to it.

Read the rest of the RFI.

Responses are due Friday, June 30th.

Since August 2016, the small community of Pinetops has been on the verge of losing their best connection to the 21st century - high quality Internet access. The North Carolina Legislature has a chance to change all that this session with legislation that will carve out an exception to restrictive state laws that prevent a local municipal provider from serving this rural town.

The State Blocks Service

When the U.S. Court of Appeals for the 9th Circuit reversed the FCC’s preemption of state law restricting geographical reach of broadband from municipal electric utilities, Pinetops was in a pickle. Nearby Wilson had extended its Greenlight high capacity Fiber-to-the-Home (FTTH) service to the tiny community where residents and businesses were still slumping on DSL, dialing up, or not connected at all. The court’s reversal required the city of Wilson to risk losing their ability to serve their own community if they continued to do business as a provider for Pinetops.

The only way Pinetops and another customer outside Wilson County - Vick Family Farms - could continue with Greenlight was when the City Council voted to continue temporary service at no charge. Elected officials made the decision based on the expectation that legislators would introduce proposals to carve out exceptions for both Pinetops and the Vick Family Farm, commercial potato farm also located outside of Wilson County. Last week, they made good on that promise.

Reps Step In To Help

How do we connect rural America? Unreliable, slow Internet service with data caps is the norm for much of the country. Even though the federal government gives billions of dollars to large telecom companies, North Carolina is one of the many states that still has an urban and rural digital divide.

Western North Carolina Public Radio (WCQS) recently spoke with our Christopher Mitchell about local ways to improve rural Internet access. While Christopher spoke of electric cooperatives, two other initiatives are also seeking creative solutions in the western half of the state.

Potential Service from Electric Cooperatives

Communities across the U.S. are already bringing better connectivity to their homes and businesses. Specifically, Christopher pointed to the growing number of electric cooperatives providing Internet service: 

“When you look at the threat communities face from not having broadband Internet—the way people are moving away, and fewer people are willing to move in—these electric membership corporations really have to think about what they can do to make sure there’s a high quality of life.”

In our 2016 North Carolina Connectivity report, we explored the work of two local electric cooperatives, Lumbee River and Blue Ridge Mountain. They collaborated with telephone cooperatives to provide high-speed Internet service in the several rural counties near Georgia.

Spotlight on Local Solutions

The WCQS article reported on two more local initiatives: the community network in Highlands, North Carolina, and the nonprofit Land of Sky Regional Council. 

Back in 2015, the people of Highlands saw that poor Internet access was hurting their community. They quickly built the Altitude Community Broadband network. Highlands Internet Technology Director Matt Shuler told WCQS: 

This is the transcript for episode 242 of the Community Broadband Bits podcast. Our Christopher Mitchell invites Professor Susan Crawford to reflect on her recent travels through North Carolina and Tennessee. Both states have restricted communities from building new municipal networks. Listen to this episode here.

Susan Crawford: It's much more about a very bipartisan, quite progressive group of people thinking about how to make life better in their communities, and that's terrific. That's truly American.

Lisa Gonzalez: This is episode 242 of the Community Broadband Bits podcast from the Institute for Local Self-Reliance. I'm Lisa Gonzalez. We're pleased to have Susan Crawford back on the show this week. She's a Professor of Law at Harvard Law School, but she's also served as Special Assistant to President Obama for science, technology and innovation policy. Susan's CV is too long for us to go through point by point. She's authored several publications, including The Responsive City: Engaging Communities Through Data-Smart Governance, and The Telecom Industry and Monopoly power in the New Gilded Age. She's been on the show before to talk with Christopher about access to high-quality connectivity, and it's always a pleasure to have her back. As it turns out, Susan has been on a walkabout of sorts, visiting local communities as she works on her current book, and in this discussion she shares her impressions with Christopher. She's got some ideas on how she feels are the most effective ways to bring better connectivity to the most people, especially in rural areas, and she and Christopher hash through her findings.

For local schools, finding ways to cut costs can be challenging but allows more money to be spent directly on students. While trimming small costs here and there adds up, eliminating leased lines from telephone companies and making the change to VoIP phone systems can be a big savings with improved service. Pitt County Schools in North Carolina are one of the latest to upgrade and save big.

Goodbye Copper, Hello Fiber

The district owns a fiber optic network and has ditched copper wire telephone service in favor of a new VoIP system at nine of its facilities. The cost to replace the phone system at those facilities was $32,000 but the district reclaimed $13,000 so far by eliminating the need to lease copper phone lines.

District officials plan to replace all the phones in the district with a fiber based system at a cost of $210,000, pending the availability of funding. They estimate annual savings will be approximately $107,000, so the project will pay for itself in less than two years.

More Than A Trend

Carroll County Public Schools (CCPS) in Maryland and Austin's public schools in Texas found that switching from traditional phone lines to VoIP supported by fiber saved their districts significantly. CCPS began saving approximately $400,000 per year when they partnered with the county and several other entities to develop the Carroll County Public Network (CCPN). Austin Independent School District (AISD) collaborated with several other entities in Austin, Texas, and AISD’s investment in their network paid for itself in less than 3 years. In 2011, AISD estimated they saved almost $5.8 million in telephone and Internet connectivity avoided costs.

It's Not All About The Money

In Pitt County, school officials are finding better service is an added benefit: