HomeMy WebLinkAbout04.05.06 Work Session Packet
City of Farmington
325 Oak Street
Farmington, MN 55024
Mission Statement
Through teamwork and cooperation,
the City of Farmington provides quality
services that preserve our proud past and
foster a promisingfuture.
AGENDA
CITY COUNCIL WORKSHOP
APRIL 5, 2006
5:30 P.M.
CITY COUNCIL CHAMBERS
1.
CALL TO ORDER
,
2. APPROVE AGENDA
3. INTRODUCTION
4. WHAT IS BROADBAND
TECHNOLOGY - FIBER-TO-THE-PREMISE, WIRELESS (WiMAX and WiFi)
6. PUBLIC OWNERSHIP
7. OTHER FTTx CITIES
8. ADJOURN
PUBLIC INFORMATION STATEMENT
Council workshops are conducted as an informal work session, all discussions shall be considered fact-finding, hypothetical and unofficial critical thinking exercises,
which do not reflect an official public position.
Council work session outcomes should not be construed by the attending public and/or reporting media as the articulation of a formal City policy position. Only
official Council action rwrmally taken at a regularly scheduled Council meeting should be considered as aformal expression of the City's position on any given matter.
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MUNI DEBATE: SMALL CITIES i ~CjII'I,
Small Cities Can Do This:
How Windom, MN Built a
Fiber-to-the-Home Network
John Gumpel . Director of Product Management, Primal Solutions
Bringing fiber to the home is a
major financial and technical
undertaking. While many com-
munities recognize the economic
and social benefits these projects can bring,
they also view the obstacles and challenges
as daunting barriers. This article examines
the journey to broadband taken by one
small community, Windom, Minnesota.
Windom's success proves that it is possible
to rollout a next-generation broadband net-
work on time and within budget.
When smaller communities compare
their resources and budgets with these larger
efforts, they often experience "sticker shock"
and delay making decisions and taking ac-
tion. However, smaller communities can
and have successfully built and deployed
FTTH networks with limited budgets and
resources.
111e City of Windom has shown that
through effective planning, research and
education, and by working closely with
carefully selected vendors, smaller com-
munities can successfully roll out the kinds
of advanced communications services re-
quired to support economic growth and
enhance the lifestyles and well-being of
their residents.
We describe how Windom's project be-
gan, whom Windom selected as vendor
partners, issues faced and results achieved.
Included is first-hand advice from city lead-
ers on what other cities should consider be-
fore starting their own broadband projects.
Introducing the City of Windom
Windom is a regional transportation hub
in southwestern Minnesota 135 miles from
St. Paul. It has a diverse economic base that
includes manufacturing, agriculture, medi-
cal, and adult care facilities. Its population,
however, is only 5,000. For over 100 years,
Windom Municipal Utilities (WMU) has
provided the City of Windom with electric,
water and wastewater services. For the past
twenty years WMU has also operated and
maintained a cable television system, Win-
dom Cable Communications (WCC).
Last month, Windom launched a new
citywide fiber-to-the-home network. The
process took less than a year from the deci-
sion to start. The entire journey to broad-
band, however, took far longer. In the late
90s, Windom officials began investigating
options for upgrading the city-owned and
operated cable television system. Initial in-
vestigations suggested that new technolo-
gies would enable the city to not only up-
grade its cable system, but to also provide
voice communications and much-needed
high-speed data and Internet access ser-
vices.
Before Windom could formally dedi-
cate resources to addressing its communi-
cations challenge, however, the city was re-
quired by state law to obtain a two-thirds
majority vote of approval from its citizens.
Largely due to the incumbent telecommu-
nications operator's announcement that it
would upgrade its infrastructure and roll
out digital subscriber line (DSL) services
in Windom's area, the initial vote in 1999
on a new city-owned network failed. But
after the incumbent cancelled its plans
for DSL, a citizens group petitioned
Windom's city council to put the telecom-
munications project back on the ballot. In
spring 2000 Windom received approval
by the voters to begin work on a next-gen-
eration broadband communications infra-
structure project.
52 I BROADBAND PROPERTIES I www.broadbandpropertles.comIMAY 2005
Getting Started by Getting Educated
According to Dennis Nelson, Windom
City Administrator, the first challenge the
community faced was getting educated
about available technologies and about the
options that would work best for Windom.
"My advice to other communities inves-
tigating a community network," said Mr.
Nelson, "is to get educated!"
So, in early 2001, Windom's city coun-
cil formed a telecommunications commit-
tee made up of community residents. The
council had two mandates: First, to under-
stand and educate residents of the commu-
nity about available options for upgrading
the existing cable television system; and
second, to investigate the feasibility of of-
fering additional communications services
to the community.
The committee hired Vectren Commu-
nications Services to do a feasibility study.
In addition to evaluating the existing ca-
ble infrastructure, Vectren evaluated the
strength of the community's willingness to
pay for new voice, data and video services.
Findings of the study, which were based
on focus groups and surveys as well as eco-
nomic and financial analysis, suggested the
following:
· Residents and business owners believed
that their current telecommunications ser-
vices were not adequate.
. The community supported the city's deci-
sion to improve the local network.
· Residents and business owners expressed
trust and confidence in city management
and the telecommunications committee.
. Financial and economic analysis support-
ed the objectives of the project.
Based on the favorable results of the
study, the telecommunications committee
Key Vendors, Windom FTTH Rollout
commissioned a second study to evaluate
deployment options. Twelve scenarios
were considered, and a fiber-to-the-home
solution was recommended. Once the
city understood what it wanted to build, it
could address the challenge of funding.
Funding without Taxes
Windom chose to fund its FTTH project
with municipal revenue bonds. Windom's
plan is to repay these bonds from revenues
generated by the new services it will pro-
vide, rather than from tax revenues.
"Our timing was perfect," said Mr. Nel-
son. "When our bonds were issued, interest
rates were at near-historical lows."
Windom received $9.4 million from its
bond issue, of which $800,000 was used to
pay the first two years of interest, leaving
$8.6 million available to fund the project.
Based on financials and projections that
were audited and verified by an outside
third party, the City of Windom expects to
be profitable within seven years.
Critical Process of Partner Selection
After feasibility, the next step was net-
work design. For this task, Windom select-
ed Finely Engineering of St. Paul. Finely's
design was completed and approved by the
communications committee in the sum-
mer of 2003.
With the network design complete,
Windom's telecommunications commit-
tee began selection of other partners who
would be needed to build and run the net-
work.
"Choosing the right mix of vendor part-
ners is a crucial step in the process," said
Mr. Nelson. In addition to a standard
RFP process, the committee relied heavily
on vendor interviews, evaluation of vendor
Expected Service Take Rates
backgrounds and customer references to en-
sure that the city would select capable and
trusted partners. The table lists the vendors
Windom selected.
To efficiently and effectively service
2,000 homes and 300 businesses with elec-
tricity, water, wastewater, cable television,
Internet and telephone, the city's support
systems needed to be upgraded.
Windom chose Technology Solutions
& Consultants (TSC), a local professional
services organization, to help identify and
select critical operations support infra-
structure, including a customer care and
billing (CCB) solution.
"Finding a single CCB solution that
could manage the city's traditional utility
services along with its new telecommuni-
cations services was a challenge," said Jody
Crowell of TCS. The city chose Connect
CCB from my firm, Primal Solutions.
Staffing, Launch and Take Rates
To run its new operations, Windom add-
ed four positions to its telecommunications
staff, bringing the total to six - a modest size
considering the value of the new services rhe
city can now offer, including next genera-
tion triple-play combinations of voice, digital
cable and high speed Internet. Windom be-
gan building its new network last June. By
last month buildout was complete with no
delays and no cost overruns. Launch was a
few weeks ago.
Windom's fiber network, which runs en-
tirely through underground conduit, passes
2,000 homes and 300 businesses. Of the
2,300 structures passed, only five declined
hookup to the new network.
Based on feasibility studies, connection
rates and additional market research, Win-
dom city officials expect to see service take
rates outlined in the accompanying table. .
About the Author
John Gumpel oversees product development
for Primal Solutions of Irvine, CA, whose of
firings include billing solutions for munici-
palities, utilities, and other entities launch-
ing FTTH networks and services. He can be
reached at John. Gumpel@Primal.com.
MAY 2005 I www.broadbandproperties.comIBROADBAND PROPERTIES I 53
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Utah Telecommunications Open Infrastructure Agency
www.utopianet.org
Advanced Telecommunications: A Business Problem
The "long haul" infrastructure to support advanced telecommunications needs is largely already
in place. What remains is the problem of making that capacity available to the end user by
providing the "last mile" (also known as the "first mile") connection. The last mile problem has
never been a technical issue. Multiple technologies have existed for years that support the
ubiquitous delivery of true broadband. The problem is a business (expenses vs. revenues)
problem.
Expenses are an issue only to the degree that there are revenues to offset them at some acceptable
level. Return on investment (ROI), then, has been the limiting factor in the deployment of
broadband. Incumbent providers operating in a near or totally monopolistic business
environment determine, exclusively on the ROI they realize, which communities get service and
which don't.
Because any last-mile solution will admittedly be expensive, it would make sense to leverage the
costs of the required infrastructure across as many revenue streams as possible: the greater the
traffic across the "electronic toll roads" of the system, the quicker and the greater the returns.
However, current monopolistic business models do not favor competitive revenue streams over
their existing privately-owned infrastructure. The current system is anti-competitive. Thus, not
only is ROI consistently insufficient to justify expansion and upgrades for expensive
infrastructure, but the lack of competition in the market results in stagnated innovation, poor
customer service, and less-than-competitive prices for services.
As long as a single service provider owns the only available infrastructure capable of delivering
services to the end-user, there will never be fair competition on that system. A financially
feasible last mile solution delivering ubiquitous broadband is possible only in a competitive
environment where the system is open to multiple competing service providers.
The Solution: Open Service Provider Network™ (OSPNTM)
The current telecommunications business model is problematic: it operates in a closed fashion. A
single company owns the communications infrastructure (telephone wires) coming into our
houses; the same company also sells services across those wires and, to the degree possible,
closes access to that infrastructure to competitors.
UTOPIA's goal to make advanced telecommunications available ubiquitously in member cities
can only be realized in an open system. For this reason, UTOPIA has chosen DynamicCity's
Open Service Provider Network™ (OSPNTM) as the foundation for it's network.
Think of telecom infrastructure in terms of roads. Roads facilitate the transportation of goods and
services. UPS sends its trucks down the same roads used by Federal Express, Emery, and other
package delivery services. If one of these companies owned the roads, it could conceivably
preclude competitors from using them or, if required to allow them on, it could charge them
tariffs that would force these competitors to set higher service pricing.
Fortunately, cities build and maintain roads. This ensures fair and equal access to all would-be
service providers. Trucks traveling down these roads pay a gas tax and thus the city generates
revenues that are used to maintain existing roads and to build new ones. Additionally, consumers
benefit from the inherent advantages of competition in the package delivery marketplace.
The OSPNTM operates on the same model for telecommunications. Based on a publicly-owned
infrastructure that is open to all capable service providers, it advocates a wholesale approach:
cities don't own and operate a package delivery service, so to speak. They build the "roads" and
simply collect access fees from private providers. In the wholesale model, private industry is the
customer for the cities (the network owner). The end-user is the customer of private industry (the
service provider). This model leverages the cost of the "electronic roads" (the fiber infrastructure)
across multiple revenue streams, making the system feasible through the creation of an ideal
public/private partnership.
UTOPIA's Business Model
Many municipalities across the nation are engaged in some type of telecommunications project.
That which makes UTOPIA's project unique from any other in the country isn't the selected
technology; it's the business model-open access to multiple providers on a wholesale
network-which is made possible through the cooperation of multiple communities functioning as
a single entity and controlled by their Interlocal Agreement. This commitment, premised on a
"one for all and all for one" commitment, translates into the following operational keystones:
· overall cost per subscriber is reduced by sharing among all cities the costs for facilities
like the Network Operations Center (NOC), the BSS/OSS, the video head-end, inter-city
connections, and so on;
· the revenues per subscriber for smaller/less profitable communities is augmented and
balanced by sharing the profits from more financially robust neighborhoods and cities
(profit is not the motive for deploying this system; ubiquitous service is).
This cooperation means the total market size can be expanded by including communities that
otherwise would not be feasible. Were it not for the aggregate market size, the open-access
wholesale business model would have little practical application since the market would be
incapable of sustaining multiple service providers.
The wholesale approach minimizes the administrative and operational overhead for UTOPIA;
those issues are addressed by the various service providers using the UTOPIA network. As a
wholesale operator, UTOPIA sets fixed access fees and grants access to all qualified service
providers wishing to access the network.
The open-access model allows UTOPIA to leverage the capital and operation costs of the system
across multiple system users. This is a significant advantage over the monopolistic model
employed by incumbent providers: monopolies must generate, by themselves, sufficient revenues
to pay for the infrastructure costs. With the open access model, multiple revenue streams from
multiple service providers generate the income necessary for UTOPIA, as the system owner, to
payoff the infrastructure costs.
Finally, competition among multiple service providers on the open-access system keeps service
rates competitive, increasing the likelihood that take rates will increase, and improving the overall
revenue stream for both service provider and system owner.
The Loma Linda Connected Community - Project Description
Project Significance
The Loma Linda Connected Community Project (LLCCP) has systematically transformed Loma
Linda's communications delivery systems from typical to extraordinary. Loma Linda's Visionary
and Project Team were able to help guide the Lorna Linda City Council and city stakeholders in
the development and execution of a fiber optic-based City network utility.
Along the way, Lorna Linda became the first US City to promulgate new residential and
commercial wiring standards into the City Building Codes. Comprised together, Loma Linda now
enjoys a high rate of return on communications public/private assets deployed, and has taken a
leadership position in communications design for residential and commercial network utility
users.
The Loma Linda Connected Community Project
Cities are measured and remembered in unique ways. Some areas are measured or known by the
stature of their residents, others by their principal industries. Lorna Linda has created a new way
to measure cities by: technology infrastructure.
Location is key for some cities, as is their reputation as a destination for business or pleasure.
Lorna Linda has numerous claims to fame. The Loma Linda University Complex and associated
research organizations and the Jerry Pettis V A Hospital are very powerful examples of Loma
Linda's Status as a world class biotech and health care community.
A truly outstanding differentiation for Loma Linda, however, is buried. It's largely unseen, but
it's among one of the wonders of the technology world. Loma Linda has one of the fastest
community-based networks in the United States, rivaling even advanced university campuses in
speed, security, reliability, flexibility and design.
Underneath city streets and right-of-ways are a highly evolved system of fiber optic-based
network components. These are the arteries of communications that permits Loma Linda to offer
its residents and businesses the fastest common denominator of communications infrastructure
cUlTently available. The infrastructure used was built in under a year. It's a story in itself.
The Connected Communities Project: Vision Realized!
How does one leap-frog from a comparatively silent community into one of the leading examples
of communications infrastructure in the world? The answer is simple: vision and cooperation. The
Lorna Linda Connected Communities Project was driven by Loma Linda's Director of
Information Systems, W. James Hettrick with the steadfast support of the City Manager, Dennis
Halloway, and the blessing of the Loma Linda City Council.
The vision was to be able to bring the highest common denominator of communications
infrastructure to a city that had been neglected by area carriers. This infrastructure would serve
many masters. The City would use the infrastructure as the communications link for public safety
and municipal services. The same infrastructure would be the pathway for residential and
commercial broadband services, developed to be provided on a wholesale basis to various service
providers and in a private public partnership run as a utility, by the City.
The highest return will likely come, however, from the attractiveness that a city-wide, well-
connected data highway means to technology businesses. Tech businesses require fortified and
highly available, high-speed interconnection. Data is churned 24/7, with a high regard for
continuous connectivity. Would the infrastructure be able to meet this challenge?
The goals of a high common denominator of service and reliability required several factors to be
added to what had become the Loma Linda Connected Community Project. These included:
.
A method to ensure that service providers could join the network as peers. This meant
allocating space and service inside a network operations center, which would eventually
be built in the Loma Linda Civic Center. This became the Loma Linda Civic Center
Network Operations Center (LLCCNOC)
A structured method to deliver the network to all of the end nodes on the city's network,
whether in newly constructed residences or commercial structures. The Lama Linda City
Council approved a ground-breaking, first-of-its-kind law that requires the utilization of a
set of structured wiring and fiber optic standards into the City Building Codes
The capability to ensure that the entire network could be kept alive and operating during
blackouts, or brownouts. This lead to the installation of battery and subsidiary power
infrastructure not only at the Loma Linda Civic Center Network Operations Center
facility, but also at network intermediate distribution frames (IDFs) that would be located
at critical junctures around the city
The City Center Network Operations Center would need to make room for and
accommodate third party services providers. These could include VolP (Voice-over-IP)
phone providers, IPrV companies; alarm/monitoring groups, and others that provide
consumer and commercial services over the City's network. All would co-locate in a
state-of-the-art network operations center.
Multiple, self healing metropolitan fiber rings that tranverse city-wide cable paths would
be deployed to reduce service outages to localized areas.
City Codes were also altered to encompass procedures to be used by the City and builders
to help share engineering, construction, and calculate shared deployment costs in new
construction activities.
.
.
.
.
.
Meeting the Standards
Lorna Linda promulgated communications industry standards into the building codes. These
standards start at the very edge of a network, where consumer and commercial network users
connect computers, printers, video equipment, IP PBXs, and other equipment. Just as most every
home and office is covered by the National Electrical Code that requires an AC outlet every six
feet along walls, the Lama Linda Building Codes require that data jacks are present in each living
space. These data jacks can also be used for phone service, personal computers, and other digital
equipment.
In each residential, commercial development, or business park, an additional structure is added
(or combined with another functional structure) to house a subsidiary network distribution center
that's similar to a utility room, but for the City's network utility use.
Inside these distribution centers, are smaller versions of the network operations center that exist
in the Lama Linda Civic Center Network Operations Center, including battery backup for
brownout/power interruption mitigation, chemical-based fire protection, and an area devoted to
service provider equipment (VoIP, alarm, signaling, public safety/municipal service and
entertainment services). These highly secured rooms serve as the central nervous system for
neighborhood, residential community, or business park activities and servicing.
The digital data paths are clear and standardized. A business/residential consumer plugs in a jack,
which moves over a structured wiring system, through a building, to a subsidiary network
distribution center, to the City's fiber optic cabling system, then to the City's Network Operations
Center. At the LLCCNOC, the digital signals can join other connected services, including an
Internet connection, as well future interfaces that cross-connect to Internet II, the National
Lambda Rail, San Diego State University, and other regional/national communications services.
At both intermediate and the primary switching center, network routing techniques (ISO/OSI
Layer 3 Routing, VLANs, and others) are used to partition, aggregate, and otherwise highly
manage network traffic. This permits virtual networks to be designed that can easily connect, at
customer discretion, any office or room to any other in the city, simply and securely-and at
unbelievable speeds.
Each element of the communications from end to end, are covered by relevant standards. Some
are architectural standards, such as those from the American National Standards Institute (ANSI),
and the International Electrical and Electronics Engineers (IEEE). Others refer to cabling and
cable structured wiring, such as those from the Building Industry Construction Standards Institute
(BlCSI) or the Telecommunications Industry Association (TlA).
Loma Linda also provides a gradient of services to residential and commercial users of the City's
network utility, based on the number of buildings served and the speed availability of the service
to suit the needs of utility users. Additional services can be purchased over the City's network
utility, such as virtualized phone services, entertainment services, alarm monitoring, and others.
The City also has an optional set of security controls and parental monitoring methods available.
Economic Development
The very high level of performance and flexibility of the City's network utility permits
technology infrastructure construction techniques that aren't available in other communities for
businesses. The network's high bandwidth, co-location capabilities, and high availability can suit
a number of high-tech/online businesses. These include computer graphics facilities and image
rendering farms, research-based businesses, online transaction processing businesses (OLTP),
consumer-access/hosting concerns, and others that need highly flexible and lucid digital
infrastructure.
Unlike cities where high speed connections cost millions of dollars per mile to deploy, Lama
Linda already has deployed them and has made them highly resilient through the use of advanced
design techniques and backup infrastructure. This allows businesses that need to plan for rapid
expansion to take advantage of an enormous network asset that the City has deployed in
anticipation of growth and quality of life needs.
Public/private partnerships that help Loma Linda grow take priority, and advanced GIS and city
engineering services are available to prospective businesses to help them plan organizational
deployment that must be annealed to the City's data network. There is no city in the United States
with this level of embedded network infrastructure.
EducationalJRecreational Networking
Residents in Loma Linda's new residential developments have connectivity capabilities that rival
the top business parks in the United States. It's possible to sustain one hundred megabits/second
in a residence's family room, and indeed throughout the house. Residents also have the ability to
use the City's fiber optic network for telephones, TV/video-on-demand, alarm system monitoring,
and virtually every digital service used today. These services ride the city's network utility either
from City services, or from third party service providers.
Summary
Loma Linda created a public/private partnership methodology coupled to industry standards to
achieve one of the most rapid network evolutions in the country. In a very short time period
(approximately nine months), Loma Linda designed, reviewed, promulgated, and deployed one of
the fastest networks in the nation. The subsequent long term asset return can be measured not
only in decades, but in the quality of life for its citizens, and the commercial, NGO, and public
services communities.
Technologies Utilized in the LLCCP:
. GIS mapping techniques and documentation of all city network assets, rights of way, and
logistical needs.
. Active Ethernet FTTX - highly scalable, synchronous and supporting 10,3,2, or 1
Gigabit Ethernet rings
. Active Ethernet FTTX Multiple Access Platform Chassis - highly scalable, synchronous
and supporting 160,70, or 30, users per chassis with any combinations of Fiber, DSL2 or
Fast Ethernet connections.
. Multiple VLAN segmentation capabilities-reduces broadcast noise and allows for end
user tailored networks
· Layer 3 devices at the edge-helps setup proxy-sensitive end-device deployments
. Wireless RF and Laser augmentation and fiber extensions-for redundancy and object
transversal
· EPSR/Ethernet protected switch rings - ring resiliency protocol
. Network Management Systems that allows for automated bandwidth allocation, user
additions, etc.
· Fully conditioned DC and AC power at the NOC and IDF's and customer sites for
highest availability and reliability, system-wide.
· IP based video surveillance
· IP enabled thermostats
· VOIP-friendly infrastructure
· IP video ready infrastructure
· Hosted Email
· Collocation facilities deployed with service provider's favorite needs ready
· Redundant core utilizing VRRP, OSPF
High common denominator speed with branch localizing capabilities
Timeframe of Implementation
.
August 2003 - City Council conducted a discussion on smart home and internet
capabilities in new development which resulted in a request for the Director of
Information Systems to provide a specification for new residential and commercial
developments.
.
December 16,2003 - Director of Information Systems submitted a resolution and
received approval from the City Council for the Lama Linda Connected Community
Program (LLCCP) specification.
.
January 2004 - Ryland Homes appeals the requirements of the LLCCP. The City Council
upholds the resolution which requires them to build to the LLCCP specification.
.
May 2004 - Network construction started on the NOC
.
May 2004 - Network Design Finalized
.
June 2004 - FSO installed
.
September 2004 - Quadrant 1 Phase 1 fiber backbone installation
.
September 2004 - Mission Trails integration and deployment
.
September 15,2004 -The LLCCP provides services to the first residential customer.
.
October 12,2004 - The City Council's LLCCP resolution was approved to become an
ordinance.
.
November 12,2004 - The LLCCP specification and design becomes a law in the
municipal code.
.
March 2005 - Quadrant 1 Phase 2 fiber backbone installation
.
June 2005 - Quadrant 2 Phase 1 fiber backbone installation
.
July 2005 - Quadrant 1 First Ring Complete
.
July 2005 - Wireless aggregation of City water well sites
.
July 2005 - Monarch Cove integration and deployment
.
July 2005 - 2 City Parks interconnected to fiber backbones
.
August 2005 - Mission Lane integration and deployment
.
August 2005 - Centrally Managed Wireless Access installed in Civic Center,
.
August 2005 - Centrally Managed Wireless Access installed in Senior Center
.
August 2005 - Centrally Managed Wireless Access installed in Fire Station
.
August 2005 - Centrally Managed Wireless Access installed in Corporation Yard
.
September 2005 - Shady Lane integration and deployment
.
September 2005 - Park Lane integration and deployment
.
November 2005 - Heritage Park integration and deployment
.
November 2005 - Spanos apartment's integration and deployment
.
November 2005 - Wireless Mesh extended across Hulda Crooks Park
.
November 2005 - Wireless Mesh extended across City Corporation Yard
.
December 2005 - IP Cameras installed in parks on Fiber and Mesh
.
February 2006 - Quadrant 3 Phase 1 fiber backbone installation
.
March 2006 - Lama Linda University Integration
.
March 2006 - Loma Linda Medical Center Integration
.
March 2006 - Jerry Pettis V A Hospital Integration
.
April 2006 - Quadrant 4 Phase I fiber backbone installation
.
April 2006 - Oasis Apartment Integration
.
May 2006 - Loma Linda Academy Integration
.
May 2006 - Lorna Linda Plaza Integration
.
May 2006 - Barton Center Integration
.
July 2006 - Quadrant 3 Phase 2 fiber backbone installation
.
September 2006 - Quadrant 3 Second Ring Complete
.
July 2007 - Quadrant 4 Phase 2 fiber backbone installation
.
July 2007 - Overbuild Quadrant 1 with underground fiber distribution (Based upon
interest)
.
July 2007 - Overbuild Quadrant 2 with underground fiber distribution (Based upon
interest)
.
September 2007 - Quadrant 4 Third Ring Complete
.
TBD - Quadrant 2 Fourth Ring Complete
.
TBD - Overbuild Quadrant 3 with underground fiber distribution
.
TBD - Overbuild Quadrant 4 with underground fiber distribution
.
TBD - Extend fiber backbone installation into neighboring partner cities with distribution
of both wireless and fiber
Summary of Benefits
Loma Linda, its citizens, businesses, NGOs, and other partners benefit from the LLCCP in
numerous ways. Unlike other network systems, the return on fiber optic infrastructure may be
able to be measured in decades instead of years, as fiber optic infrastructure (when deployed
symmetrically) has the benefit of a long useful life. This provides a long- term return on the assets
deployed by both the city and its residential/business/NGO partners.
As Loma Linda additionally has the benefit of having standardized wiring components in new
construction, a denominator has been set by which other areas of the city will be judged, in terms
of embedded infrastructure. Unlike communities where multiple service providers have the ability
to deploy broadband wiring infrastructure using virtually any plan they prefer, Lama Linda's
construction through subsequent decades will eventually match a common denominator that's
now set.
Today, up to four different kinds of broadband providers can wire a home or business. These
include fiber-based utilities like Loma Linda, DSL/twisted pair copper cable providers, TV
coaxial cable providers, as well as new BPL (Broadband over Power Lines). Each ofthese
vendors is welcome in Loma Linda today, but in new construction, each of these vendors also has
the ability to easily cross-connect their broadband networking into each new residential or
commercial building's standardized wiring plan, a plan built to industry standards. As buildings
are tom down, and/or retrofitted with the City's Building Code-based wiring standard, the entire
community eventually becomes able to achieve a standardized expectation for service providers.
This occurs whether or not that provider is the owner of the 'last mile' of cable (or wireless
service) to the building in question.
Loma Linda also has created space inside their utility for other service providers to co-locate
either at the City or intermediate distribution center level. Unlike many 'last mile' providers, the
City invites third party service providers to co-locate in an open and competitive environment.
This encourages not only competitiveness, but innovation and variety in services for the City's
network utility users and clientele.
And finally, from a technology perspective, there are few campuses or small geographical areas
in the world that have the rich and lucid network infrastructure that's been driven by all quarters
of Loma Linda, from its citizens to its government to its Chamber of Commerce. The
public/private assets that have been deployed are remarkable, not for their vision, but for their
active, ready-now, capabilities and the realities of muscular infrastructure by any
measure-today._Loma Linda is ready to go.
Contact Information
W. James Hettrick_Director of Information Systems_City of Lama Linda_25541 Barton
Road_Loma Linda, CA 92354_909-799-2895 jhettrick@lomalinda-ca.gov
The Loma Linda Connected Community Standard - How It Works for The City and
BuilderslDesigners
The Loma Linda Connected Community Standard, hereinafter "The Loma Linda Standard" was
brought about as a public-private partnership between the City of Loma Linda, California, its
, .
citizens, and real estate developers to foster standardized, high-quality communications assets for
both new construction, and existing homes and businesses. These standards were built to ensure a
long investment life, using referential standards that provide one of the fastest and most resilient
communications infrastructures in the nation.
To achieve this high common denominator, the Loma Linda City Council in conjunction with
builders and city IT executives, designed a modular high-speed fiber optic design around the city
using numerous redundant rings. The City Council also promulgated connectivity standards into
the City's building codes to ensure that each new residence or commercial building would be
connected to this City fiber utility using a methodical approach and common structured wiring
scheme. These additions to the Loma Linda Building Codes were the first in the United States to
reference this high common denominator of data communications speed with referential integrity
throughout.
Lorna Linda runs a city-wide Internet/connectivity matrix consisting of multiple and redundant
fiber optic loops and wireless communications coverage areas. These areas serve municipal
services and residential/business communities at a data rate that's among the highest in the world.
The Lorna Linda Standard assures a consistent interface between utilities and structured building
wiring in new construction for communications purposes. Each component cited in the Loma
Linda Building Code is referential to common US industry standards.
The Loma Linda Standard mandates that new construction connect to the City's fiber optic
communications infrastructure. Other vendors and wiring plans can optionally be installed
provided the building meets the minimum Codes. The Building Codes describe specific
compatible communications components and architectures into each new building, describe
development and use of City right-of-ways for communications connectivity, and standardizes
specific wiring standards for structures.
At the end of construction, each development has capital communications assets deployed in an
easily understandable, highly usable configuration. There is no requirement to use City
Communications Utilities, but there is a considerable cost savings.
Architectural Concepts
According to Lorna Linda's Building Codes, builders of new residential or commercial structures
work with the City from the design phase through to post-construction inspection to ensure
compliance and high-availability of the agreed-on communications structure as outlined in the
Building Codes. Liaison is provided at each construction phase to ensure a positive and desired
outcome.
Each construction permit requires liaison with the City to both ensure that standards are met, but
also to assist builders in compliance with the Building Codes. Typically, compliance costs are
born both by the final owner of the property and the City in a public-private partnership. In turn,
the highest gradients of communications are realized through this highly available, highly
redundant system. The City runs this fiber-based system as a utility, terminating in the Lorna
Linda Civic Center, in a state-of-the-art network operations center (NOC). Municipal
communications services also terminate in the same NOC along with tie points to Network
Access Points (NAPs).
The Loma Linda Standard specifies a unified but flexible methodology for distribution of
numerous services over its utility fiber optic infrastructure. Services to all structures include, but
. .
are not limited to: basic Internet connectivity, voice-over-IP (with analog or digital
phones/handsets), TV/video distribution, telemedicine, distance learning, web/web services
hosting, and other digital services.
Structured Wiring
Traditionally, each vendor has their own network/communications cabling plan, none of which
have been standardized?leading to multiple cabling plans in residences and commercial
installations. Although the Loma Linda Standard allows any vendor to attach any cabling system
to any home or commercial structure, it also mandates a specific structured wiring plan for each
structure. This plan mandates a fiber termination with the City utility, and a structured wiring
distribution frame to be installed in each new home or business that follows accepted (and
codified) industry standards.
Residential construction Building Code sets the number of data outlets and TV/Video/coaxial
cable connections per room and measure for each home. In turn, these connections terminate,
usually in the master bedroom closet to a distribution frame containing an unintenuptable power
supply, as well as fiber-to-data cable conversion within an Ethernet switch/router. Which in turn,
is connected to the data jacks in each room of the home?
.
Commercial wiring follows IEEE, ANSI, and BlCSI standards, and also refers to
industry-accepted referential models for uniform communications infrastructure.
Together, the Loma Linda Standard framework builds a community-wide, highly
available communications infrastructure with referential integrity that can grow when
new standards for performance are made.
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Who will own
Minnesota's
information
highways?
Becca Vargo Daggett
and David Morris
Institute for Local Self-Reliance
June 2005
A publication of the New Rules Project
of the Institute for Local Self-Reliance
IL~R
-V
2
WHO WILL OWN MINNESOTA'S INFORMATION HIGHWAYS?
Other publications from the New Rules Project of the
Institute for Local Self-Reliance:
Minnesota's Biomass Mandate: An Assessment
by David Morris, June 2005
A Better Way to Get From Here to There: A Commentary on the
Hydrogen Economy and a Proposal for an Alternative Strategy
by David Morris, January 2004 (expanded version forthcoming, August 2005)
Seeing the light: Regaining Control of Our Electricity System
by David Morris, 2001
The Home Town Advantage: How to Defend Your Main Street
Against Chain Stores and Why It Matters
by Stacy Mitchell, 2000
Available at www.newrules.org
IL~R
_v.
The Institute for Local Self-Reliance is a nonprofit research and educational organization that
provides technical assistance and information on humanly-scaled, sustainable economic sys-
tems. Since 1974, ILSR has worked with citizen groups, governments and private businesses in
developing policies that extract the maximum value from local resources.
Institute for Local Self-Reliance
1313 5th Street SE
Minneapolis, MN 55414
Phone: (612) 379-3815
Fax: (612) 379-3920
www. ilsr. org
@ 2005 py the Institute for Local Self-Reliance
All Rights Reserved
No part of this document may be reproduced in any form or by any electronic or mechanical means, including
information storage and retrieval systems, without permission in writing from the Institute for Local Self-Reliance,
Washington, DC.
WHO WILL OWN MINNESOTA'S INFORMATION HIGHWAYS?
Who will own Minnesota's
information highways?
Becca Vargo Daggett and David Morris
Contents
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Introduction .....................................................4
Community Ownership ............................................6
Should government get involved? .................................6
Can government be involved? ....................................7
Responding to the arguments against community ownership ...........7
Information Delivery Technologies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Technological Lessons Learned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Community Ownership Case Studies ............................... .13
Table: Comparing Community Owned Networks.. . . . . . . . . .. . . . . . . . .. . .19
Resources ..................................................... .20
Notes .................................................... .21
3
"The very fact that a
community can, by vote of
the electorate, create a
yardstick of its own, will, in
most cases, guarantee
good service and low rates
to its population. I might
call the right of the people
to own and operate their
own utility a 'birch rod in
the cupboard,' to be taken
out and used only when the
child gets beyond the point
where more scolding does
any good."
-Franklin Delano Roosevelt
"
WHO WILL OWN MINNESOTA'S INFORMATION HIGHWAYS?
The history of great infrastructure developments in this
country is a tale of private sector-public sector partnership.
In broadband, business will lead the way-as it should.
But there is a role for government, too...
-Federal Communications Commissioner Michael J Copps, 2004
Executive Summary
The 21st century has been accurately called
the information age. In the near future much
of our entertainment, information, and even
personal services could be delivered over the
Internet (e.g. phone, movies, music, books,
news, education, medical consultations, tele-
conferencing). High-speed communications
has become as essential a component of a
modern infrastructure as water and sewer
pipelines, electric grids, phone wires, and
road networks.
The United States has fallen far behind
other nations in the delivery of low-cost, high-
speed communications services. One reason
for this is a lack of competition at the local
level. Private companies have been slow to
introduce advanced telecommunications tech-
nologies. The high prices they charge dis-
suade many customers from connecting.
Currently, our communities depend on
only two telecommunications service
providers: the cable company and the phone
company. The federal government has dra-
matically reduced a community's control over
the quality and cost of the services provided
by these companies. The FCC has also ruled
that the networks these companies built as
franchisees and regulated monopolies are pro-
prietary; the companies have sole authority to
decide who may use their networks, what
they will transmit, and what they will refuse to
transmit.
A growing number of communities-both
to gain access to low-cost, high-speed commu-
nications networks, and to enable them to
have some influence over the structure and
content of their future information systems-
are fnstalling their own networks. These com-
munity owned systems vary widely in their
organizational structure and the range of
services they provide. We briefly describe 10
community owned telecommunications net-
works. Half of these are inside Minnesota;
half are in other states.
This report was galvanized by the early
2005 announcements that Minneapolis and
Saint Paul are in the process of designing
their future information highways. Other
cities in Minnesota are in the same situation.
We argue that a community owned system
would generate benefits for these cities. It
would, for example, provide a yardstick against
which to measure the effectiveness of privately
owned telecommunications networks. It would
allow community services like fire and police
and libraries and schools to take advantage of a
low-cost, high-speed network. Most important-
ly, it would allow telecommunications cus-
tomers a seat at the table as our communities
elaborate their information futures.
Introduction
Our quality of life and the economic vitality of
our communities depend on a reliable, acces-
sible, inexpensive and modern infrastructure:
water and sewer pipelines, electricity and tele-
phone wires, road networks.
In the 21st century, high-speed telecom-
munications networks have been added to the
list of essential infrastructure. An increasing
proportion of commerce is e-commerce. The
transformation is not yet complete, but
already the changes are impressive. Not long
ago, the U.S. postal service delivered the mail.
The cable company delivered television. The
telephone company delivered phone service.
The bookstore delivered books. We drove to
the movies to see a film, or the video store to
rent one. We traveled to meetings.
Today all of these products or services
are, or soon will be delivered electronically or
photonically.!
E-commerce is only the beginning.
Telemedicine promises to change how com-
munities, especially rural communities,
receive medical care. Telecommuting holds
the possibility of reversing the century-long
trend of urbanization. Interactive distance
education brings the nation's finest professors
to remote locations.
This is not the first time the United States
has experienced an infrastructure revolution.
One hundred years ago, electricity and tele-
phones were just entering our every day lives.
Demand soared, but the new networks didn't
WHO WILL OWN MINNESOTA'S INFORMATION HIGHWAYS?
reach all potential customers. The private sec-
tor willingly offered electricity and phone
service to business districts and wealthy
neighborhoods in urban centers. But it proved
unwilling or incapable of providing reliable,
economical, universal service. As a result, the
federal government, many state governments,
and thousands of communities stepped in to
regulate private providers and create commu-
nity-owned phone and electricity networks.
Perhaps the most visible and direct public
involvement in infrastructure development
occurred in the 1930s. The Great Depression
had revealed massive fraud and mismanage-
ment by the huge interlocking electricity
trusts. The plight of farmers was exacerbated
by the unwillingness of electricity companies
to extend service to rural communities. As a
result, Congress passed the National Rural
Electrification Act to finance customer-owned
electricity companies.
In 1932, Presidential candidate Franklin
Delano Roosevelt summed up the rationale
behind publicly owned utilities:
[W]here a community, or a city, or a
county, or a district, is not satisfied with
the service rendered or the rates
charged by the private utility, it has the
undeniable right as one of its functions
of government. . . to set up . . . its own
governmentally owned and operated
service . . . (f) he very fact that a com-
munity can, by vote of the electorate,
create a yardstick of its own, will, in
most cases, guarantee good service
and low rates to its population. I might
call the right of the people to own and
operate their own utility a 'birch rod in
the cupboard,' to be taken out and used
only when the child gets beyond the point
where more scolding does any good.
Today the introduction of affordable and
accessible high-speed telecommunications
networks has sparked a level of urgency, con-
troversy and anxiety similar to that generated
by the introduction of electricity services in
the early decades of the 20th century.
Yet few politicians today are willing to
speak to the need for public ownership. They
sound less like FDR and more like his 1932
opponent, incumbent President Herbert
Hoover, who insisted, "[t]he majority of men
who dominate and control electric utilities
belong to a new school of public understand-
ing as to the responsibilities of big business to
the people."
Indeed, today policymakers seem eager
not only to restrict public ownership but to
limit public control. In the 1990s, Congress
dramatically reduced its regulation of the
telecommunications sector. Since 2001, the
Federal Communications Commission (FCC)
has issued rules that grant cable and phone
companies the right to restrict, burden, or
prohibit competitors from using their distribu-
tion networks.
At the same time, states have enacted leg-
islation that restricts or bans communities
from owning or operating modern telecommu-
nications networks. Today, in Texas and
Missouri, scores of municipalities that created
their own electricity distribution systems a
century ago have been prohibited from
adding telecommunications capabilities to
those systems today.
In most communities, private sector com-
petition that could drive innovation and devel-
opment does not exist. The vast majority of
our communities are duopolies. They have a
single phone company and a single cable com-
pany. The FCC has declared this a vibrant
level of competition, and the federal courts
have supported that view.2
Recent mergers threaten to degrade com-
petition even further, from a duopoly to a
monopoly.3
At the same time that private competition
is dwindling, technological developments are
accelerating. New communications technolo-
gies are spawning new delivery possibilities
and lowering the costs of transmission.
This is the political and technological con-
text within which states, counties, cities, and
private firms are making telecommunications
decisions.
This report focuses on Minnesota, a state
of 4.5 million people that created hundreds of
municipal and cooperatively owned electric
and telephone utilities in the last century,
many of which continue to operate today. To
offer guidance to Minnesota policy makers,
this report draws on experiences both inside
and outside the state.
Minnesota became involved in creating a
statewide high-speed telecommunications net-
work development in 1989, with the creation of
MNet. MNet provides videoconferencing over
leased lines to state and local governments,
public and private universities, and some pub-
lic schools.4 An initiative begun in 1997 would
have installed thousands of miles of conduit
and fiber optic in highway right-of-ways, and
brought fiber optic connections to within 10
miles of 90 percent of Minnesotans. But the
project faced strong opposition from cable and
telephone companies, and was eventually
scaled back to about 250 miles of conduit.s
In Minnesota, the number of people sub-
scribing to Internet service rose rapidly from
1992 to 2002. But since 2002, demand has sta-
bilized. The number of people who subscribe
5
The vast majority
of our communities ,.. have
a single phone company
and a single cable compa-
ny. The FCC has declared
this a vibrant level of com-
petition, and the federal
courts have supported that
view.
One might argue
that community ownership
is one of the few ways left
for communities to foster
competition.
6
WHO WILL OWN MINNESOTA'S INFORMATION HIGHWAYS?
What is broadband?
When most people speak of broadband, they
are using the term to refer to high-speed
Internet connections.6 But what constitutes high
speed? The definitions vary widely. The FCC, for
example, defines "advanced telecommunica-
tions capabilities" as data transmissions speeds
of more than 200 kbps (kilobits per second or
thousand bits per second), both up-stream and
down-stream.' "High-speed", according to the
FCC, is more than 200 kbps in at least one
direction.
The National Academy of Sciences defines
broadband as an access service that enables the
creation of applications and content.6 By this
definition, broadband is not a fixed transmission
speed. It is the capacity to use existing applica-
tions and create new ones. Thus, 1.5 Mbps
(megabits per second or million bits per sec-
ond) downstream and 256 kbps upstream may
be considered broadband today, since it meets
most people's demand for Internet services. In a
few years, the downstream capacity demanded
may be much higher to accommodate, for
example, video-on-demand. The demand for
upstream capacity will increase if more peer-to-
peer networking applications are developed.
to high speed Internet service is increasing
very slowly, both inside Minnesota and
nationwide.
There are two mutually reinforcing rea-
sons for the slowing growth of high-speed
telecommunications demand. Service is expen-
sive, causing most people to view it as an
unnecessary luxury. And the absence of a mar-
ket discourages the development of applica-
tions that would be found useful by large num-
bers of people. The relatively small number of
customers sharing the cost of service in turn
raises the per household cost of services.
Minnesota local governments have
entered into the telecommunications arena to
accelerate affordable, universal access. In
early 2005, several telecommunications-relat-
ed announcements occurred almost simulta-
neously in Minnesota:
. Windom, a small city on the Iowa bor-
der, launched its municipally owned and oper-
ated ultra-high-speed, fiber based telecommu-
nications network that connects all house-
holds and businesses in town.
. Minneapolis issued a request for bids
on a wireless system that would initially serve
its own municipal government needs. The
request ruled out public ownership or opera-
tion of the system. The city's role will be
restricted to that of a large initial customer.
. Saint Paul's City Council launched a
formal study of various telecommunications
options preparatory to issuing its own request
for proposals.
Just a few months earlier, Chaska's city-
wide wireless network, among the first of its
kind in the country, became fully operational.
These announcements, reflecting the
diversity of approaches embraced by
Minnesota's local governments, spurred the
writing of this report. We hope it will prove
useful to policy makers trying to elaborate an
information highway that achieves two impor-
tant objectives: 1) economical and universal
service; and 2) direct customer participation
in the design and evolution of the system.
Community Ownership
Should government get involved?
"It's easy to bash city governments as
being full of maladroit bureaucrats
eager to manhandle a new technology,
and even economists who support
municipal networks say cities shouldn't
rush into them. But well-thought-out
city plans could help everyone by act-
ing as a catalyst and shaking up the sta-
tus quo. Some might even call that
competition."-Lee Gomes, Wall Street
Journal, February 14, 2005
In October 2003, 54.6 percent of U.S.
households had Internet connections, but
only about 20 percent of households had a
conne.ction that provides speeds of at least 200
kbps.25 By some estimates, DSL or cable
modems are not available in 60 percent of
U.S. zip codes.26 In Minnesota, only about one-
third of Internet subscribers have a connec-
tion of at least 200 kbps, which, as we noted
above, should not be considered high speed.27
Although thousands of miles of fiber optic
backbone cable have been laid by the private
sector, there has been no incentive for the pri-
vate sector to take fiber the "last mile" to
homes and businesses. No single service
provider could justify the investment based on
short-term profitability.
When the private sector has proven
unwilling or incapable of providing high speed
communications service, and in areas where
high-speed communications service is avail-
able only at a very high price, local govern-
ments have stepped in.
In Minnesota, this has occurred mainly in
small- and medium-sized towns not served by
private companies. These communities have
chosen to own their own systems and also act
as a service provider, as have about 200 others
throughout the county. When those who use
WHO WILL OWN MINNESOTA'S INFORMATION HIGHWAYS?
their networks only for municipal purposes are
included, the number of communities that have
built their own infrastructure grows to 600.
In most cases these community-based
networks develop incrementally. Local govern-
ments in cities and towns have installed fiber
I-Nets (institutional networks) to meet their
own needs for data sharing among municipal
offices, video conferencing, traffic monitoring,
utility management, etc.2S
With local fiber networks in place, little
extra effort is required to add connections for
schools, hospitals and businesses. Citywide
wireless networks can utilize this existing
fiber loop; indeed, many cities have installed
citywide wireless exclusively for municipal
and emergency services.
Can government be involved?
As of May 2005, in all but two states, munici-
palities can own a telecommunications net-
work. Fourteen states either prohibit or cre-
ate barriers for municipal telecommunications
activities. Fourteen others are considering
such legislation.29
These laws vary widely. For example,
Missouri and Texas prohibit municipalities
from providing telecommunications services
under any circumstances.30 Pennsylvania allows
municipal telecommunications only if the local
telephone company will not provide such serv-
ices. Others, including Washington, Utah, and
Wisconsin, allow wholesale municipal networks
(publicly owned infrastructure with bandwidth
available to private service providers at whole-
sale prices) but restrict municipal retail systems
(publicly owned infrastructure with the city act-
ing as service provider).
Minnesota has no restrictions on either
wholesale or retail service, except that it
requires a referendum approved by 2/3 of vot-
ers for a city to offer telephone services.31
Responding to the arguments
against community ownership
Those opposed to community ownership raise
three main arguments.
1. Public ownershiP leads to monopoly and sti-
fles competition.
If Minneapolis or Saint Paul were to opt for
a municipally owned information network, it
would stimulate, not stifle competition. The
cable company and the phone company and the
electric utility already operate in the two cities,
and in cities around the region. Their opera-
tions will not disappear simply because there is
a city-owned network. But as FDR said over 70
years ago, the city-owned system can operate as
a "yardstick" and a "birch rod". It puts the pub-
lic-that is, the customers-at the table.
Empirical research shows that public
investment in communications infrastructure
often stimulates competition.33 One might
argue that community ownership is one of the
few ways left for communities to foster com-
petition. Here's why.
In 1996, the FCC issued its Local
Competition Order. The Order required
incumbent phone companies to provide com-
peting carriers with access to their infrastruc-
ture at a reasonable COSt,34 Most phone com-
panies stopped investing in infrastructure they
would have to make available to competitors.35
Cable networks faced no such common
carrier requirements. In 2002, the FCC ruled
that cable modem service should be classified
as an "information service" rather than a
"telecommunications service" and thus not
subject to the same open access rules as tele-
phone company lines under the Local
Competition Order.36
If cable modem service is a "telecommu-
nications service" it is more strictly regulated,
like telephone service, under the
Telecommunications Act of 1996. If it is an
"information service" it is not subject to the
same regulatory requirements. Those who
support this differential treatment argue that
information services are a new technology,
and minimal regulation of new technologies
results in greater innovation.
The phone companies complained that
cable companies were given an unfair advan-
tage in the broadband market and challenged
the FCC's policies in court,37 In 2003, the FCC
addressed the phone companies' complaint by
exempting the telephone companies' fiber
optic networks from common carrier require-
ments.3M
In 2004, however, the 9th Circuit Court of
Appeals overturned the FCC decision on
cable modems. A U.S. Supreme Court deci-
sion on the matter is expected by July.39
If the Supreme Court upholds the 9th
Circuit's decision, cable companies would
have a statutory duty to provide service to
consumers and competing internet service
providers(lSPs) at rates that are "just and rea-
sonable". They could also be obligated to
interconnect their networks with other net-
works. Their rates, terms and conditions
would be subject to federal review, and they
would be subject to the universal service tax.
If the Supreme Court upholds the FCC's
position, neither cable companies nor phone
companies (if the latter uses fiber optic net-
works) would have to share their delivery sys-
tems at a reasonable cost.
One might argue that the U.S. govern-
ment, or to be more precise, the FCC has a
long history of making decisions that inhibit
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WHO WILL OWN MINNESOTA'S INFORMATION HIGHWAYS?
on
competition. In the early 1980s, the FCC
carved the U.S. into 734 tiny mobile phone
districts and issued two provider licenses for
each district-one to the incumbent telephone
company, and one drawn by lottery. In the
mid-1990s, as the U.S. lagged behind other
countries in cellular phone network develop-
ment, the FCC opened enough spectrum for
six nationwide networks and auctioned it off.42
Unlike cellular telephone service, howev-
er, the national broadband network is in place.
Long-haul fiber optic capacity exceeds
demand for the foreseeable future. Thus the
national infrastructure is already in place for a
competitive information highway.
What communities are doing is designing
the on-ramp. The current FCC model of "mul-
tiplatform competition" leads to communities
having a choice only between the cable com-
pany's on-ramp and the telephone company's
on-ramp.
In Minnesota, some 55 percent of rural
Minnesota communities have only one broad-
band provider; 15 percent have no broadband
provider.43 Most cities have only two telecom-
munications providers: one telephone and one
cable company. For example, Qwest and
Comcast serve Minneapolis, Qwest and
Comcast serve Saint Paul.44
Besides the obvious problem of stifling
competition, this also stifles innovation and
diversity. National companies that serve hun-
dreds of communities find it most efficient to
impose a one-size-fits-all system. The incum-
bent cable and telephone companies want to
offer the same on-ramp in every community.
In a short time, all of these on-ramps may con-
sist of fiber optic cables to the neighborhood
or the curb, then either copper phone lines or
coaxial cable to the home. A small number of
communities will have fiber-to-the-home.
Communities, on the other hand, have
different needs. Large cities, for example,
have sufficient traffic to justify multiple on-
ramps. Small towns may require only one. The
latter may be more suited to broadband over
power lines or wireless than to DSL or cable.
Given the hands-off federal regulatory
environment and the concentration of private
ownership of telecommunications networks,
community ownership may be the only effec-
tive way to guarantee true competition both in
services and technology. It is, as FDR said, the
"birch rod in the cupboard" to be taken out
when private companies have failed to provide
access that is universal, affordable, and truly
high-speed. One particularly effective way of
stimulating competition is a community owned
network that offers space for private compa-
nies to deliver competitive services to the
community's household and businesses.
The U.S. vs. Japan on
Telecommunications Competition
Japan's telecommunications policies follow the
original philosophy behind the U.S.
Telecommunications Act of 1996. Regional
phone companies are required to allow com-
petitors to access to their networks for a mod-
est fee. Antitrust authorities monitor the sector
to ensure that the companies do not create
obstacles for their competitors. The national
government not only encourages rural munici-
palities to set up their own networks, it subsi-
dizes start-up costs.
Japan's regulatory approach has spurred
competition to provide faster telecommunica-
tions speeds. The result is that today' nearly all
Japan's 46 million households have access to
connection speeds of 26 Mbps for about $22
per month-the lowest price in the world.
As of mid-2004, an ultra-high-speed fiber
connection of 100 Mbps or more was avail-
able to more than 80 percent of the Japanese
population.
In the United States, the FCC currently
supports what it calls "multiplatform" competi-
tion. It argues that competition between cable
and telephone companies is sufficient to create
a competitive market. One result is that at the
end of 2003, barely more than 600,000 U.S.
homes and businesses had fiber connections.
That may expand to 3-5 percent of the 115
million US households by the end of 2005.
Since 2000, the U.S. dropped from 4th to
13th place in the global rankings of broadband
Internet usage. Internet access available to
U.S. households is slower, more expensive,
and less reliable than what is available in
Canada, Europe, Japan, and South Korea.
2. Publicly owned telecommunications systems
will be poorly managed and uncompetitive.
There is over 100 years of empirical
research on the comparative efficiencies of
public and privately owned infrastructure. The
studies consistently find that publicly owned
water and sewage and roads and electricity
systems are managed at least as effectively as
privately owned systems.45
The telecommunications sector, while
new, so far fits this pattern. Allegations made
by private companies and their advocates that
specific municipal telecommunications proj-
ects are failures have proven unfounded.46
In fact, one can argue more persuasively
that it is the private telecommunications sec-
tor that has been poorly managed. In 2001, 27
telecommunications companies, each with at
least $100 million in debt, filed for bankruptcy.
WHO WILL OWN MINNESOTA'S INFORMATION HIGHWAYS?
In 2002, 31 telecommunications companies
with a total of $130 billion in debt filed for
bankruptcy. The industry's default rate was
four times higher than the overall rate, and it
accounted for half of the $45 billion in bond
defaults in 2001. Among those that filed for
bankruptcy were World Com, Adelphia, Global
Crossing and Enron Broadband. The
Securities and Exchange Commission has
investigated all of these companies for fraud.47
One should also point out that publicly
owned systems use a different type of cost-
benefit analysis than private companies.
Private companies strive to maximize the
short-term benefit to their stockholders and
upper level management. Municipally owned
utilities strive to maximize the long-term ben-
efits to their community as a whole. A publicly
owned communications utility might reduce
its profits (surplus) to extend access to all
parts of the community. Or it might reinvest
its entire surplus into upgrading the system
even though the current demand for improved
services comes from only one part of the
community.
Glasgow, Kentucky's electric utility offers
an example of the difference in public and pri-
vate cost-benefit perspectives. The utility has
offered cable since 1989 and didn't begin post-
ing positive net income in 1998. But the bene-
fits to the local economy began immediately.
The utility estimates that in each year since it
began operation, customers have saved
$800,000 to $1 million in cable fees.48 This
keeps more money circulating in the local
economy both because community residents
pay less than is charged by private providers
in neighboring communities, and because a
much higher proportion of the money paid to
the utility remains in the community than
would be the case with an outside company.
Glasgow, a rural town of 14,000, has also
offered broadband at speeds of 4 Mbps since
1995. Until recently, Minneapolis and St. Paul
customers have had access to only half the
speed at twice the price.
3. Local governments have the tools to influence
the development telecommunications systems
(e.g. franchise agreements). They need not own
the system.
This criticism had some validity 20 years
ago. It is far less true today. The reach of fran-
chise agreements has been severely circum-
scribed so that today its only authority appears
to be on establishing the franchise fee and the
original design of the telecommunications system.
A few years ago, AT&T purchased TCI,
and thus its Portland, Oregon cable franchise.
Portland agreed to transfer the franchise but
under the condition that AT&T allow inde-
pendent internet service providers to sell
their service over its cable. AT&T refused.
The 9th Circuit Court of Appeals backed the
company, and said that only the FCC has
authority to decide whether or not to impose
open access rules on cable companies:9 Thus
it came to be that cities had no right, even as
part of franchise agreements, to require com-
panies to allow access to their networks. And,
as mentioned above, the FCC has declined to
impose such a requirement.
In late May, Minneapolis filed a lawsuit
against Time Warner for $4.5 million in
unpaid franchise fees and penalties. The suit
is just the latest skirmish in a ten year battle
with Time Warner over the city's principal
complaint: the company's refusal to make 25
percent of its network capacity available for
city use, as set forth in the franchise agree-
ment. The company maintains that cities have
no right to regulate Internet or telephone
services carried over cable networks.
Texas is currently considering legislation
that would allow local phone companies to
raise rates, eliminate local franchise rules, and
prohibit municipal competition.5O
Telecommunications companies see the pro-
posed Texas law as a model for the rest of the
states, and for rewriting the 1996
Telecommunications Act.
Some telecommunications companies
have announced their intention to seek
changes at the federal level that would restrict
state and local regulatory authority over their
industry. After San Francisco announced its
plan to build a municipal Wi-Fi network,
Verizon CEO Ivan Seidenberg set forth his
highest priority for a Congressional rewrite of
the Telecommunications Act. 'The first thing
we'd do is pre-empt the states. That's priority
No.1, No.2 and No. 3."51
4. Government should not decide what we can
and cannot do with our information network.
The question is not whether local govern-
ment should decide what is carried on the
telecommunications network, but whether
those decisions are better vested in local gov-
ernment than in the federal government or
private companies. In the 1980s, the federal
government abandoned its 60-year-old public
interest requirements for radio and television
broadcasters. Recently it has focused on
restricting the sexual content of broadcast
shows. Private cable companies frequently
exercise their right to drop popular cable sta-
tions because they can increase their revenue
by substituting another channel. Privately
owned systems have, and will continue to,
censor shows, especially for political content.
When people use a cable modem they are
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WHO WILL OWN MINNESOTA'S INFORMATION HIGHWAYS?
connecting to the Internet through the cable
provider's gateway. The American Civil
liberties Union charges that cable networks,
and by extension fiber optic networks and any
other proprietary networks, "lack the
Internet's open and nondiscriminatory design
on the technicallevel."52 This allows the com-
pany to interfere with and monitor online
activity in a variety of ways:
. Providers can control the overall speed
and reliability of the connection.
. Providers can block customers from
using particular applications (e.g. video con-
ferencing, von>, and virtual private net-
works), or require customer's to use the
provider's own proprietary application.
. Providers can slow or block access to
certain sites on the Internet, whether because
the content is deemed objectionable or because
the site does not have financial arrangements
with the provider. Conversely, providers can
speed transmissions to and from sites with
which they have financial arrangements.
. Providers can force customers to
access the Internet through a particular home
page. This is similar to what AOL has done
with its "welcome screen", which contains
both news stories and paid promotions.
. Providers can monitor online activities.
In February 2002, Comcast began to track
customers web browsing without their knowl-
edge. The practice was discontinued after it
became public. Information on web browsing
habits is viewed as a valuable resource for
marketing purposes, however, and efforts to
protect copyrighted materials also create
strong pressures to monitor online activities.
Of course, local governments may
attempt to exercise similar controls, but it is
ultimately responsible to its citizens in a far
more direct way than a global corporation is
responsible to its local customers. Local elec-
tions occur, on average, every two years.
Information can be delivered via a wide array
of technologies that can be divided into two
broad categories: wired or wireless. Wired, or
land line, connections include copper tele-
phone lines, cable television lines (coaxial
cable), optical fiber, and electric power lines.
Land Lines (Wired)
Copper phone lines Currently copper
phone lines deliver very low speeds when
using a dial-up connection (56 kbps), but are
capable of offering speeds 500 times greater.
ADSL (asymmetric DSL) typically pro-
vides speeds of about 1.5 Mbps downstream to
subscribers in the U.S. However, it is technical-
ly capable of delivering at speeds of at least 8
Mbps, and that delivery capacity may increase
still further in the near future. ADSL is limited
by distance; customers must be close to a cen-
tral office of the provider (within 18,000 feet or
about 3.5 miles).
High-speed DSL technologies (VDSL) are
not widely used but can deliver speeds of 52
Mbps over a very short distance (4000 feet,
about 4/5 of a mile). The high speeds of
VDSL are possible in part because, unlike
ADSL, it can be used in conjunction with fiber
optic networks. to
In Japan, communications are routinely
delivered at speeds of 26 Mbps ove~ copper
wire.
Coaxial cable Coaxial cable, used to
transmit video (IV) signals, also utilizes cop-
per wire. U.S. cable companies typically pro-
vide speeds of 3 to 5 Mbps downstream and
up to 1 Mbps upstream. Speeds of up to 10
Mbps are possible using current technology.
As with DSL, they may increase substantially
in the future.
More than two-thirds of households with
broadband in 2001 had cable modems; this
dropped slightly to 56 percent in 2003 as DSL
gained subscribers relative to cable.11
Electric power lines Broadband over
power lines (BPL) is an emerging technology
that can be used either as a wired technology
that brings data directly into the home over
power lines, or a wireless technology that car-
ries data over power lines then broadcasts a
wireless signal from utility poles into homes.
BPL's development was slowed by the fact
that the use of power lines to carry communi-
cations traffic can interfere with Ham radio
and other emergency radio signals.12 In
October 2004, the FCC ruled that it would tol-
erate a small amount of radio interference in
certain areas in exchange for making broad-
band services more competitive.13 Only a
small number of BPL systems have been
installed.14 Maximum speeds are comparable
to DSL (in the range of 1 to 4 Mbps), but may
be many times higher when broadcast as a
wireless signal from utility poles.
Optical fiber cables Optical fibers, or
fiber optics, are long, thin strands of glass or
plastic surrounded by optical material and an
outer covering. The Internet "backbone" is
made up of fiber optic cables that run from
coast to coast, as well as across the Atlantic
and Pacific oceans. Fiber-to-the-premises
(F1TF, or to-the-home, F1TH, sometimes also
written as F1Tx) networks utilize fiber in
every segment of the Internet connection,
from the backbone to the home. Fiber can
WHO WILL OWN MINNESOTA'S INFORMATION HIGHWAYS?
I
,
transmit data at speeds of 10 to 1000 Mbps or
more, depending on fiber used and the tech-
nology used to route traffic through the lines.
Wireless
Wi-Fi In the U.S., wireless technologies
are sometimes referred to by their IEEE
(Institute of Electrical and Electronics
Engineers) standard numbers. Wi-Fi, for wire-
less fidelity, and WlAN, for wireless local area
network, are names for IEEE standard
802.11.15
Wi-Fi uses unlicensed radio spectrum to
transmit signals.16 It is what your local library
or coffee shop uses to create a "hot spot".
Maximum range is about 300 feet, and speed
for individual users is around 1 Mbps. The
coffee shop (or library, or your home net-
work) connects a wireless access point to its
wired Internet connection.
But Wi-Fi can also be deployed as a clus-
ter of hot spots, sometimes called a "hot
zone", which can cover a downtown zone or a
whole city. This can be done by mounting the
access points (also called nodes) on street-
lights and other infrastructure and connecting
them to wired broadband connections. In
places that want to minimize the need to
install additional wired broadband connec-
tions, Wi-Fi hot zones can also be built using
either using directional antennas or mesh net-
working. Directional antennas create a relay
path from one to another. Mesh networks are
more like the Internet itself-a grid of access
points, all of which can communicate with
each other. The data travels on the best path
to or from the service provider. 17
WiMAX IEEE standard 802.16, called
WiMAX (Worldwide Interoperability for
Microwave Access), will be officially certified
sometime in 2005. WiMAX is a technology,
but it is also a seal of approval-WiMAX prod-
ucts are guaranteed to work with all other
WiMAX products, so a network can be built
from the best available devices from any com-
bination of vendors. Wi-Fi products do not
currently have the same guarantee. IS
WiMAX has a range of 1 to 6 miles,
depending on the technology. These longer
distances are possible because WiMAX will
use licensed as well as unlicensed frequencies.
Wi-Fi installations will not necessarily
become obsolete when WiMAX comes in.
Intel and the WiMAX Forum are promoting
WiMAX as a complement to rather than a sub-
stitute for Wi-Fi.1Y In many places, WiMAX
may be more cost-effective than fiber to deliv-
er bandwidth to Wi-Fi access points and Wi-Fi
access points are more cost-effective at deliv-
ering bandwidth to the ultimate customer
than WiMAX.20
Two other wireless technologies are avail-
able but not widely used.21
Satellite, along with other forms of fixed
wireless, represents only one to two percent
of household Internet connections. Satellite
connections are cost prohibitive under most
circumstances.
On the other end of the scale, ultra
short-range connections are possible with
IEEE 802.15.1, called Bluetooth, and IEEE
802.15.3, called ultra-wide band. These are
most commonly used to connect devices with-
in a home or office. Maximum range is about
30 feet, and maximum speeds are 1 Mbps for
Bluetooth and 400 Mbps for ultra-wide band.
For those looking to establish a citywide sys-
tem, the choice of technologies can be daunt-
ing. And for communities wanting to become
involved in the ownership or operation of the
system, there is the fear of technological
obsolescence.
Here are a few things decision makers
should keep in mind.
1. Fiber-to-the-home is currently
viewed as the only "future-proof' technol-
ogy; you'll never have to worry about out-
growing the system's capacity. However, it is
also the most expensive type of information
highway, in part because of the cost of the
fiber and associated routing technologies, but
also because of the cost of digging up streets.
About 200 U.S. communities have fiber-to-
home networks, including several in
Minnesota.22
Fiber-to-the-home costs about $1200 to
$2000 per connected building, depending on
the networking technologies employed and
the distance between homes. The cost can be
cut in half or more if the underground con-
duits already exist. Communities planning to
dig up their streets for other purposes (e.g.
undergrounding electricity wires, separating
water and sewage pipelines, etc.) should
install "dark fiber" (optical fiber without the
systems needed to transmit traffic) or con-
Time to download a 2-hour movie
in digital format9
56 kbps dialup modem 13 days
1 Mbps DSL connection 17 hours
3 Mbps cable modem 5 hours
100 Mbps fiber connection 10.4 minutes
1 Gbps fiber connection 1 minute
11
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12
WHO WILL OWN MINNESOTA'S INFORMATION HIGHWAYS?
duits to facilitate future fiber optic networks.
Most cities and many smaller communi-
ties have at least partial fiber networks,
installed for university or municipal use. Some
communities have access to dark fiber that
was installed by companies that subsequently
went bankrupt. In the aftermath of the
telecommunications boom and bust of the late
1990s, the price of fiber plummeted.
Universities, companies not involved in the
telecommunications business, and in some
cases cities purchased miles of dark fiber at
very low prices.23
As the ability to deliver high speeds over
copper and coaxial cables increases, more net-
works are utilizing fiber-to-the-neighborhood
or fiber-to-the-curb, both of which then use
existing copper connections from the street
into the home.
2. Wi-Fi has the lowest capacity but
also the lowest cost, and the greatest
speed of installation for citywide net-
works. Currently wireless is most often used
in conjunction with wired systems. Wireless
access points are connected to a fiber optic
network that circles a city or neighborhood.
The fiber network is in turn connected to the
Internet backbone also by fiber optics. In this
configuration, cost per home can be about
$200, but it varies according to residential
density and whether or not new fiber is being
installed. A public hot spot serving 60 users in
a 300-foot radius can cost about $4,000.24
Wireless mesh networking can further
reduce the cost of broadband per home, and
make network expansion even easier. Using
this system, wireless access points can be
added to an area without the need to extend
fiber optic connections to all the access points.
This can be particularly useful in densely pop-
ulated areas, where a large concentration of
access points is desirable, resulting in a cost
per home in the range of $30 to $100.
Similarly, broadband over power lines
offers the possibility of transmitting band-
width over power lines to utility poles, then
using wireless to transmit from the utility pole
to the home. Costs for BPL are currently
unknown, but may be as low as $50 to $150
per home in high-density areas. However,
BPL at present can carry a signal only a mod-
erate distance(1000 to 3000 feet) without
using repeaters (at $200-500 each). Therefore
it is more economical on lines that service a
number of homes rather than long rural lines
that serve one or two.
WiMAX offers the possibility of wireless
connections directly to the Internet backbone
over distances of one to six miles without the
need for intermediary fiber optic cables. This
is useful in less densely populated areas,
where fiber installation would be cost prohibi-
tive. But it may also be used in conjunction
with Wi-Fi, with WiMAX transmitters rather
than fiber optic cables delivering bandwidth to
Wi-Fi access points, or as a means of deliver-
ing bandwidth for BPL distribution. WiMAX
may reduce cost per home to as little as $30.
3. Channels can be carved out in
DSL, wireless, and fiber optic systems to
allow competing service providers to use
the same network. The same is not true
for BPL. All BPL systems that serve the gen-
eral public currently are franchises to private
firms that lease the lines from the utility and
sells retail services.
4. Engineers are learning to increase
the speed and capacity of all types of
delivery systems. These improvements will,
in all likelihood, continue. Copper telephone
lines, for example, are being used in other
countries to transmit information at speeds of
26 Mbps or more, even though most current
DSL customers in the U.S. receive informa-
tion at 1 or 1.5 Mbps. Wireless communica-
tions speeds have been pushed to 54 Mbps in
a relatively short period of time.
Transmission speeds depend both on the
medium (e.g. copper wires or fiber optic
cables) and the technology used to compress
bits and route traffic on the network. At this
point, investment in a fiber optic network vir-
tually ensures access to enough capacity to
meet business and residential needs for the
next two decades or more. However, as traffic
management, compression, and wireless data
transmission technologies evolve, it is possi-
ble that wireless will be able to achieve the
same capacity as fiber by the time 100 Mbps
or more is demanded for residential service.
In the meantime, high-speed DSL technolo-
gies can meet the demand for more capacity
over existing copper lines to homes, and BPL
may be able to do the same.
WHO WILL OWN MINNESOTA'S INFORMATION HIGHWAYS?
On the following pages are 10 case studies of
community-owned telecommunications sys-
tems. They reveal a wide array of ownership
structures and technological delivery sys-
tems.
In the state of Washington, two cities with
municipally owned electric utility systems
offer different structures. Tacoma is involved
with telecommunications systems at the retail
level; Chelan PUD offers service at the whole-
sale level.
Minnesota's Windom has the highest
speed telecommunications network in the
country and sells phone, cable, and other
services directly to residents and businesses.
Saint Peter, on the other hand, has installed
conduits under the streets, which has enabled
competing companies to lay in competing
fiber networks, including a locally owned firm.
In Utah, a consortium of 18 cities with
one third of the state's population is develop-
ing a fiber-based wholesale communications
network. Philadelphia has established a non-
profit corporation to oversee the installation of
a citywide high-speed wireless network.
Which of these systems and ownership
structures is best? Only time will tell. Our
sense is that there is no single best model.
Communities need to decide what is right for
them.
But communities can only decide if they
have the information, and if their political
leaders allow community ownership to be
included in the range of possibilities exam-
ined.
Buffalo-Buffalo Wireless Internet Group (BWIG)
Model: Municipal utility, retail service provider
Population: 1 3,000
location: 40 miles northwest of Minneapolis
Date of First
Service Offering: 1997 business service, 2001 wireless service
System Type: Fiber loop with non-Iine-of-sight wireless
Services Offered: Internet
To Whom: government, business and residential service
Alternative Providers: none preexisting; subsequent Charter Communications
Buffalo is an excellent example of incremental growth in a municipal network. Buffalo's
network began in 1996 with a city fiber backbone for municipal use. The city began considering
network upgrades in 2000, both to increase network capacity and to improve utility monitoring.
It considered both adding more fiber optic cables and point-to-point wireless, and determined
wireless would be more cost effective.
Businesses asked the city to include their requirements in considering network upgrades.
The local telephone company offered only dial-up connections or very expensive T-153 service,
and the cable company offered no Internet service at all. The final system includes wireless
point-to-point service for business and residential customers, and some businesses purchase a
connection directly to the city's fiber network.
The city spent $750,000 on five wireless towers in 2001, with anticipation that the invest-
ment would pay itself off in four years. The non-line-of-sight54 technology it chose provides
slower speeds than line-of-sight wireless, but offers easier installation and fewer problems with
obstructions. By 2004, the Buffalo Wireless Internet Group(BWIG) had enough subscribers to
run a monthly operating surplus of $7700, which it reinvests in the system.55
In late 2004 the city installed a wireless mesh network covering its 26 square miles. The
mobile mesh network is only for municipal use; subscribers do not have access to the mesh
network. The city will consider offering roaming access56 if it determines its has excess capaci-
ty after its emergency services needs are met.
The city charges $10 per month for 128 kbps and $34 per month for 384 kbps bi-direction-
al. The fastest available speed is 1.5 Mbps, for $50 per month. Mer the city government
announced its plan to offer business and residential service, Charter Communications intro-
duced cable modem service for $45 per month for 384 kbps, bi-directional. For 3 Mbps down-
stream/256 kbps upstream, the price is $55 per month.
13
14
WHO WILL OWN MINNESOTA'S INFORMATION HIGHWAYS?
Chaska-Chaska.net
Model: Municipal utility, retail service provider
Population: 18,000
Location: 20 miles southwest of Minneapolis
Date of First
Service Offering: October 2004
System Type: Wi-Fi (wireless mesh and fiber backhaul)
Services Offered: Internet only
To Whom: business and residential
Alternative Providers: preexisting Time Warner cable, Sprint DSL (limited availability)
In 2004, Chaska spent $600,000 to set up more than 200 transmitters (about $2,200 each)
on utility poles throughout the 16 square mile city. It also had existing infrastructure from pro-
viding Internet service to businesses and schools for several years, which would have added
$300,000 to $400,000 to the price if purchased with the rest of the system.
Chaska charges $16 per month for 1 Mbps. The service already has 2300 subsctibers
(about one-third of the city's households), surpassing its requirement of 1700 to operate, pay
back the capital investment, and generate a small profit to be used for future system enhance-
ments. Time Warner offers cable modem service at 3 Mpbs for $45 per month, and Qwest
offers DSL at 1 Mbps to some homes at $40 per month.
Moorhead-GoMoorhead!
Model: Municipal utility, retail service provider
Population: 33,000
Location: Northeastern Minnesota
Date of First
Service Offering: anticipated July 2005
System Type: Wi-Fi (wireless mesh and fiber backhaul)
Services Offered: Fiber and wireless Internet access (fixed location and roaming)
To Whom: government, business, residential
Alternative Providers: preexisting Cable One cable, DSL
In December 2004 the Moorhead City Council authorized the formation and operation of a
new telecommunications utility by Moorhead Public Service (MPS). In March 2005 the City
Council authorized the city to loan MPS enough money to pay for the new utility from revenues
generated by the electric and water utilities that would normally go to the city's general, capital,
and economic development funds (about $4 million in 2002).
The utility already has a fiber optic ring around the city, completed in 2000. Some 300 wire-
less access points will be connected to the fiber ring, mounted on streetlights and utility poles
throughout the city. The wireless access points and other technology needed for the utility to
become an ISP will cost about $2.3 million.
Moorhead's citywide wireless (13 square miles) will go live in July 2005. The broadband
division is a separate division of the municipal electric and water utility, Moorhead Public
Service (MPS). It will offer 1 Mbps for $20 per month to residents and $25 per month to busi-
nesses. The lowest price competitor, Cable One, offers 1.5 Mbps for $40 per month.
Saint Peter
Model:
Population:
Location:
Date of First
Service Offering:
System Type:
Services Offered:
To Whom:
Alternative Providers:
Municipal conduit
10,000
60 miles southwest of Minneapolis
municipally owned conduit
conduit leasing
private telecommunications companies
preexisting Mediacom cable; subsequent Hickory Tech fiber-based DSL,
Owest DSL, Mediacom cable
WHO WILL OWN MINNESOTA'S INFORMATION HIGHWAYS?
As part of the rebuilding effort following the 1998 tornadoes in Saint Peter (pop. 10,000),
the city-owned electric utility decided to replace above ground electric wires with underground
wires. At the same time, the city installed conduit that makes it easier to install fiber optic
cables, at a cost of about $500,000. It considered building its own fiber optic network, but chose
conduit because it reduces the cost of installing fiber by about half without forcing the city to
choose among technologies.
The city reached an agreement with Hickory Tech, a local competitor to incumbent tele-
phone and cable companies, to install a fiber network. The system uses fiber loop and fiber to
the curb, with copper connections to the home. Hickory Tech offers voice, data, and video serv-
ice over its fiber optic network. Internet service of 1 Mbps is $40, and a full package including
phone, cable and 1 Mbps is $95. Qwest and Mediacom upgraded their networks as a result of
competition from Hickory Tech.57 Mediacom now offers 3 Mbps for $30 per month, and basic
cable packages start at $40 per month.
Windom-WindomNet
Model: Municipal utility, retail service provider
Population: 4500
Location: Southwest Minnesota
Date of First
Service Offering:
System Type:
Services Offered:
To Whom:
Alternative Providers:
April 2005
fi b er- to- th e - p re m ises
phone, Internet, video
government, business, residential
preexisting Southwest Wireless; subsequent Southwest Wireless, Owest DSL,
Comcast cable
Windom is a small town of 4500 people that has a history of taking the lead in telecommu-
nications. It started its own municipal cable television service 20 years ago because cable com-
panies had similarly bypassed the town. In 1993, it was host to the country's first teleconfer-
ence town meeting, with Rep. David Minge connecting from Capitol Hill to a fiber optic con-
nected studio in Windom. The studio was already in use for an interactive class with Hamline
University.
In April 2005, the city began offering services through its fiber optic network, can deliver
100 Mbps to every home and business. City officials saw fiber optics as a way to "future-proof'
their telecommunications infrastructure. The system will be able to meet telephone, internet,
and video demands for the foreseeable future.
The city tried to pass a referendum to establish its own telephone company in 1999. Under
Minnesota law, municipalities may own and operate their own telephone systems, but such an
enterprise must be approved by a two-thirds majority in a referendum if there is an existing
telephone service provider. In Windom's case, the existing company was Qwest, which offered
only dial-up internet service in town. In 2000, Qwest promised to extend DSL services to 13
rural Minnesota communities other than Windom. The same year, a referendum passed with 70
percent of the vote. Qwest announced its intention to provide DSL to Windom in 2003, but by
that time the municipal system was underway.
In May 2004 the city issued $9.4 million in revenue bonds to fund the network and the first
two years of interest payments. The city plans to retire the bonds over 20 years with revenues
from the services provided. As of May 2005, take rates are exceeding the targets set out in the
business plan.
WindomNet's first customer was Toro Co.'s manufacturing plant, which moved there from
Indiana in 2002. The city also has other industrial development and a hospital, all of which
needed access to high-speed telecommunications.
Prices are $30 for 750 k up/512 k down, $36 for 1.5 Mbps/512 kbps, and $66 for 1.5 Mbps
bi-directional. Faster speeds are available for higher prices. 'Triple play" (phone, internet, and
cable) packages are also available.
Qwest now offers DSL in Windom. Prices are $40 per month ($45 if you don't have phone
service with them), plus $60 for modem, for 1.5 Mbps/896 kbps, $32 for 256 kbps. Southwest
Wireless Net, part of New Vision Coop, offers fixed wireless service. It began in 2001, and is
available only to those with a clear line of sight to a tower. They offer 256 kbps for $30 and 512
k for $40.
15
16
WHO WILL OWN MINNESOTA'S INFORMATION HIGHWAYS?
Chelan County, Washington-Chelan County Public Utility District
Model: Public Utility District, wholesale access
Population: 67,800
Location: North central Washington State
Date of First
Service Offering:
System Type:
Services Offered:
To Whom:
Alternative Providers:
2003
fiber-to-the-prem ises
Internet and telephone (television available in 2005)
private service providers
preexisting telephone incumbent; subsequent 14 ISPs, including telephone
incumbent
Chelan County Public Utility District has a functioning municipally owned fiber-to-the-home
system that sells wholesale access to service providers. Currently, more than 2000 end-users
receive service through one of the fourteen competing Internet service providers, Most of the
ISPs are locally owned. There is only one conventional telephone providers, but all of the ISPs
offer VOIP either through their own system or a third party such as Vonage. Television service
will begin later this year.
The cost per location is about $1,000. Chelan County PUD expects to reach 75 percent of the
county (30,000 homes and businesses) by 2008, at a total system cost of about $70 million.
Revenues generated by the sale of surplus hydroelectric power finance the investment. The system
is projected to have positive cash flow in 2013, assuming that about one-third of homes subscribe
to each service. It expects a full return on investment in 2020. So far, take rates are on target.
BPL and fixed wireless are being tested for hard-to-reach areas. Wireless hotspots connect-
ed to fiber backhaul are being installed in several areas.
Nelson County, Virginia-Central Virginia Electric Cooperative
Model: Cooperative Utility
Population: 15,000
Location: Rural central Virginia
Date of First
Service Offering: April 2004
System Type: BPL
Services Offered: Internet
To Whom: electric utility customers
Alternative Providers: satellite
The Central Virginia Electric Cooperative (CVEC) was the first cooperative utility to com-
mercially deploy a BPL network. The system is entirely power line based, but in the future it
could incorporate wireless to deliver signals to homes,
CVEC has an agreement with !BEC (International Broadband Electric Communications),
which is building the BPL network using CVEC's infrastructure and provides Internet service.
The first phase reaches 4000 homes and was completed in November 2004. The second phase
is scheduled for completion in spring 2005. !BEC offers 256 kpbs bi-directional speeds for $30.
The only other Internet service available is via satellite.
1
WHO WILL OWN MINNESOTA'S INFORMATION HIGHWAYS?
Philadelphia-Wireless Philadelphia
Model: Non-profit corporation, wholesale access
Population: 1.5 million
Date of First
Service Offering: anticipated 2006
System Type: Wi-Fi (wireless mesh and fiber backhaul)
Services Offered: Internet
Alternative Providers: cable, DSL
Under the terms of Philadelphia's "public/private partnership", the city created a non-profit
corporation ("Wireless Philadelphia") that will handle the design, construction and manage-
ment of the network.
The total estimated cost is $60,000 per square mile over the city's 135 square miles. Total
startup cost is estimated at $7 to $10 million, with an additional $500,000 annually over the first
3 years. Startup funds will come from taxable bonds, foundation grants, and low-interest bank
loans. The city projects the investment will be recouped in five years.
Access will be available at wholesale rates to private service providers. Basic service is
expected to cost $16 to $20 per month, with discounts for low-income subscribers. The non-
profit will not sell access directly to individuals or businesses. Its mission does, however,
include providing discounted computers and instruction in use to low-income residents of the
city. Free access (nodes that are not password protected) will be provided in public spaces.
The city expects to decide on a vendor by early July, and begin the project in early August.
Tacoma-Click! Network
Model: Municipal utility, overbuilder
Population: 200,000
Date of First
Service Offering:
System Type:
Services Offered:
To Whom:
Alternative Providers:
'1998
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fiber-to-the-curb, hybrid coaxial cable to the home
Retail provider of cable television, wholesale access to ISPs
government, business, residential
preexisting TCI cable (purchased by AT&T); subsequent Comcast (purchased
AT&T), Owest DSL, three 10callSPs using Click! Network infrastructure
Tacoma Power decided in 1994 that a fiber network could help the utility maintain its quali-
ty of service by helping to pinpoint problems in its 180 square mile network. It began construc-
tion on its network in 1997, utilizing fiber optics to the street, and coaxial cable to the home.
Funding came from surplus revenue generated by energy sales. According to Tacoma Power
officials, no tax dollars have been dedicated to the project and no electric rate increases have
been attributable to it.
Click! Network is an overbuilder-a term that refers to companies that build networks to
offer services already offered in the area, generally by a monopoly company. Before municipal
competition was introduced, the incumbent provided poor service, as measured by complaints
filed with the city and time to install new service, and had a bad reputation. It did not provide
service in all areas of the city, and did not offer comparable television packages to those in
neighboring communities.
In 1998, it began offering cable television service in competition with the local franchisee
(rCI), as well as communications between Tacoma Power facilities and residential power meter
reading. In 1999 it became the first city on the West Coast to offer cable modem service
through three competing, local ISPs. Click! Network maintains a second fiber optic I-Net under
contract with the city.
In 1999, TCI was purchased by AT&T, which sold the network to Comcast in 2003. Now all
residences have access to cable, and Click! Network has expanded to cover neighboring cities.
Tacoma power has about 148,000 customers. One-third of those who have access to Click!
Network are subscribers. Comcast and Qwest also have customers in the market.
In the places where Click! is available, prices for cable 1V and high-speed internet are 20 to
25 percent lower than areas where competition does not exist. Tacoma even has lower prices than
Seattle. Customers pay about $64 per month for 125 television channels and high-speed Internet
Tacoma is one of the few markets in the country to have video-on-demand (at a cost of $3
to $5 per movie), which Comcast launched in April 2004, and Click! in February 2005.
17
18
WHO WILL OWN MINNESOTA'S INFORMATION HIGHWAYS?
Tempe, Arizona-WazTempe
Model: Private ownership, wholesale access
Population: 160,000
Date of First
Service Offering: 2002 (downtown hot zone), anticipated 2006
System Type: Wireless (Wi-Fi with WiMAX and fiber backhaul)
Services Offered: Internet
To Whom: government, business, residential
Alternative Providers: preexisting cable, DSL
On April 21, 2005 the Tempe City Council approved a 5-year contract for citywide wireless
broadband service to MobilePro Corporation, which is a network systems vendor but not a
service provider. Competing Internet service providers will have access to the network.
Tandem networks running on different frequencies will be deployed using the same infra-
structure, one for public use and one for municipal use. In exchange for access to the city
street light network and existing fiber backhaul (connections from access points to the
Internet), the city will not be charged for municipal use of the wireless network. .
The City of Tempe and Arizona State University already offer free wireless service in
downtown Tempe.58 The Tempe WiFi Community Alliance has been a motivating factor in both
the downtown and new citywide networks. Free access will be continued in the downtown zone,
and access to city and ASU sites are available free of charge to those without a subscription.
The network will cover 40 square miles. It will reach approximately 65,000 households,
1,100 businesses, and 50,000 students, and provide municipal services to Tempe police, fire,
emergency, city, and ASU personnel. Customers will be able to subscribe to services ranging
from low-cost Internet services to high-speed services capable of handling VOIP and video.
Western Utah-UTOPIA
Model: Intergovernmental agency, wholesale access
Population: 724,000
Location: Western Utah
Date of First
Service Offering:
System Type:
Services Offered:
To Whom:
Alternative Providers:
anticipated 2006
fi be r-to -the -p re m ises
telephone, Internet, video
government, business, residential
none preexisting; multiple providers anticipated, including large telecommunica-
tions and cable companies
Utah Telecommunication Open Infrastructure Agency (UTOPIA) is an inter-governmental
agency, founded in 2002 and made up of 18 Utah cities comprising one-third of the state's popu-
lation. UTOPIA plans to install fiber with speeds of at least 100 Mbps to every home and busi-
ness in each member city, at prices comparable to cable or DSL.59 UTOPIA will own, operate,
and maintain the infrastructure.
The total cost for the system is $470 million. Each municipality will issue revenue bonds for
its portion of the overall investment. Service will be installed in cities in the order in which they
approve funds. Access to the fiber optic network will be sold to private service providers.
Proceeds will be used to pay operating expenses and retire the bonds. It anticipates positive
cash flow in the first ten years, possibly reaching the break-even point for operations and debt
service by year 7.
The anticipated take rate of 40 percent is lower than the actual take rates of more than 60
percent in Provo and Spanish Fork.60 At this rate there would be 270,000 residential and 34,500
business subscribers. Over 20 million feet (about 3788 miles) of above- and below-ground fiber
optic cable will be installed.
UTOPIA expects private service providers will use its network to offer high-speed Internet
access, HDTV, video on demand, medical monitoring, teleconferencing, and phone services.
Community services will include community programming on demand, traffic monitoring,
meter-reading, and advanced communications for emergency services.
19
WHO WILL OWN MINNESOTA'S INFORMATION HIGHWAYS?
Comparing Community Owned Networks
Community and
System Name Starting date Technology
Population
Coverage
Speeds
Rates
Private
Services
Competition Structure
Chaska October Wi-Fi 18,000 16 square 1 to 3 Mbps $16 residential, Wireless (with Time Warner Municipal
2004 (wireless mesh miles symmetric $25 business roaming) and Cable $45; utility, retail
Chaska.net and fiber (including city- fiber internet Owest DSL service
backhaul) wide roaming service (limited avail- provider
access) ability) $40
~__~~~_'_~"'T__~ ---~~---~~~ '---~~~-,.~~~-
Buffalo 2001 Wi-Fi (fiber 13,000 26 sq uare 1.5 Mbps $10/128 kbps; Wireless (no Charter Municipal
backhaul) miles $34/384 kbps; roaming) and $45/384 kbps; utility, retail
Buffalo Wireless $50/1.5 Mbps fiber internet $55/3 Mbps service
Internet Group service provider
(BWIG)
--~~,~.__._-,,---~~-_.~'~...._,....,
Moorehead July 2005 Wi-Fi 33,000 13 square 1 Mbps $20 residential, Wireless (with Cable One Municipal
(wireless mesh miles $25 business roaming) and $40 1.5 utility, retail
Go Moorhead! and fi ber fiber internet Mbps/200 service
backhaul) service kbps, $50 3 provider
Mbps/300
kbps; Ouest DSL
-------
St. Peter 1999 Conduit 10,000 citywide Leased conduit Hickory Tech, Municipal
Mediacom, conduit
Owest
--._--
Windom Feb ruary 2005 Fiber-to-the- 4,500 all homes & 100 Mbps Internet, Owest DSL $32 Municipal
premises businesses television, 256 kbps, $45 utility
Windom Net phone 1.5 Mbps/512
kbps;
Southwest
wireless $30
256 kbps, $40
512 kbps
-- .__._~c~__,,_.~;______,,~~_~~___.'.,__~m;..~
Chelan County Fiber-to-the- 67,800 75 percent 100 Mbps Internet, 141SPs, Public utility
premises, BPL of homes by television, most locally district,
Public Utility and satellite in 2008 phone owned-typical wholesale
District, remote price $28 3 access
Washington locations Mbps, $50 6
Mbps
_.__~~____~."_~._~_o_~___.._~~".~~~_~_~_..._~.,~.".,
Nelson County, November BPL 15,000 4,000 homes 256 kbps $30 Internet Satellite, 256 Cooperative
Virginia 2004 in first phase, kbps $50 utility
remaining
Central Virginia homes in 2005
Electric
Philadelphia est. 2006 Wi-Fi 135 square 1 to 3 Mbps $16 to $20, I nfrastructu re Nonprofit
(wireless mesh miles some free for Internet corporation,
Wireless and fiber access wholesale
Philadephia backhaul) access
Tacoma, 1998 Fiber-to-the- 200,000 citywide Digital cable, Cable, Internet 1 Mbps $30 Municipal
Washington curb,coaxial and some standard utility, retail
cable to the neighboring package $40 and wholesale
Click! Network home communities access
---->'._-_._--~-_.~~-~.
Tempe, Wi-Fi 160,000 40 square 1 to 3 Mbps As yet unkown, Infrastructure For-prof!
Arizona (WiMAX and miles some free for internet corporation,
fiber backhaul) acces wholesale
WazTempe access
~.~._~-~~-~~~~...~.~.~~._--~~"-'~-~""~~-'"~.=.._--~.''',~,-,,"""'-' ~,____.,___"d__'__=__"."~_,~. ~._,,_~.__~.._.."__~'. _."LT." .."_.._.",',~'__" .._.'_ __,~_:__, ,,' ~'>_h ~~,"~',"'~,.."~~.:~_"~,,,,_._'" " ~'"~"m"_"'~"'_~'.__'_'_____'''''__~_"~'~_..''~._~ .
Western Utah Est. 2006 Fiber-to-the- 724,000 all homes & 100 Mbps Infrastructure Municipal
premises businesses for internet, consortium,
UTOPIA television, wholesale
phone access
20
WHO WILL OWN MINNESOTA'S INFORMATION HIGHWAYS?
Blandin Foundation - Get Broadband
www.blandinfoundation.org/bsite/bbsite.swf
Encourages greater broadband use in rural
Minnesota, as well as public and private
investment in broadband infrastructure.
League of Minnesota Cities
www.lmnc.org
Works to promote telecommunications com-
petition in Minnesota cities of all sizes.
Minnesota Association for Rural
Telecommunications
www.mnart.org
Represents rural telecom providers at the
state level and promotes a competitive
telecommunications marketplace in rural
areas.
American Public Power Association
(APPA)
www.appanet.org
Extensive resources in support of public
power, and guidance for power and broadband
system operators. The Community Broadband
section includes updates on FCC and FERC
decisions, a chronicle of legal challenges, and
sample leases and requests for proposals for
members.
Baller Herbst Law Group
www.balter.com
Represents the APPA, regional and state
municipal electric associations, state municipal
leagues, local governments, and public power
systems in regulatory, legal, and legislative
matters involving telecommunications. Offers
an excellent collection of writings on public
sector participation in telecommunications.
Broadband Reports
www.broadbandreports.com
Updated daily with the most important news
stories in the broadband world.
Fiber to the Home Council
www.jtthcouncil.org
Supported by companies and organizations in
the broadband industries at all levels, includ-
ing municipalities.
Free Press-Internet and Broadband
www.jreepress.net/issues/ internet
Emphasizes the importance of community
ownership in maintaining free speech and
independent media. Also concerned with dis-
advantaged communities and universal
access.
Friends of the Commons-Airwaves
www.jriendsojthecommons.org
An overview of broadcast spectrum policy,
and why it matters.
Lessig.org
www.lessig.org
Website of Stanford Law Professor Lawrence
Lessig, author of Code and Other Laws of
Cyberspace. .
MuniWireless.com
www.muniwireless.com
The Community Wireless section details com-
munity undertakings in the U.S. and around
the world. Don't miss the Reports and Guest
Commentary sections.
United Power Line Council
www.uplc.org
Supported by electric utilities and companies
working on broadband over power line.
Wi-Fi Alliance
www. wi-fi. org
Supported by companies that produce Wi-Fi
equipment and provide Wi-Fi services.
WiMAX Forum
www.wimaxforum.org
Supported by companies that produce
WiMAX equipment.
WHO WILL OWN MINNESOTA'S INFORMATION HIGHWAYS?
1. In the computer and Internet age, data is delivered
in the form of bits, which are represented within the
system by fluctuations in the flow of electrons or pho-
tons Oight particles). Since light travels faster than
electricity, photonic switching and delivery systems
are replacing electronic systems. An excellent, accessi-
ble discussion of this can be found in
Howstuffworks.com, "How Bits and Bytes Work".
2. U.S. Telecom Association (USTA) v. FCC, U.S.
Court of Appeals, District of Columbia, May 24, 2002.
See also Thomas Bleha, "Down to the Wire", Foreign
Mfairs, May/June 2005.
3. AT&Ts divisions were split among Comcast,
Cingular, and SBC. Either Verizon or Qwest will soon
acquire MCI in 2005. Comcast and Time Warner
recently announced a deal to jointly purchase
Adelphia. After the two companies divvy up the new
customers and swap some markets between them,
Time Warner will have 14.4 million customers - 85
percent of its customers in five large clusters, with
more than a third of its overall customer base in either
the New York or Los Angeles metropolitan areas-and
an additional 1.5 million in a partnership with
Comcast. Comcast will have about 23.3 million basic
cable customers of its own and an additional 3.5 mil-
lion subscribers held in various partnerships. Much of
its customer base is concentrated in the Boston to
Washington corridor, as well as the upper Midwest.
Industry analysts predict there will be further rounds
of consolidation as cable companies buy their way into
the wireless business.
4. MNet contracted for the use of privately owned
infrastructure. In the mid-1990s, the state was criti-
cized for lacking a coherent plan to prevent duplication
and minimize costs. The legislature wanted MNet to
be self-sustaining, and while departments were given
funds to purchase services, the network received no
direct subsidies unti11995. South Dakota's Rural
Dakota Telecommunications Network (RDTN), on the
other hand, received state subsidies to start up and
was permitted to sell services to the public and private
sector alike. RDTN's videoconferencing rates were half
those of MNet and its public sector counterpart,
Minnesota Equal Access Network Systems.
5. In December 1997, Governor Arne Carlson
announced "Connecting Minnesota", a public-private
partnership to create a statewide fiber-optic backbone
to bring fiber optic connections to within 10 miles of 90
percent of Minnesotans. Two companies were to
install and maintain the network and lease capacity to
telecommunications providers. The state control 20
percent of the capacity in exchange for allowing the
companies use of public right-of-ways. Construction
began in November 1998, and was scheduled for com-
pletion in 2001, but faced legal, regulatory and legisla-
tive challenges. The Minnesota Telephone
Association(MTA), the trade group for the state's
phone companies, argued that no telecom provider
should have exclusive building rights along state road-
ways, even if the provider did not sell retail services
over the network. MTA also questioned the need for
the project, noting that its members had deployed over
21,000 miles of fiber-optic network throughout the
state. The FCC and courts found in favor of the state,
but the challenges impeded progress. In February
2001 the contract was cancelled for lack of private
financing. Later that year a portion of the project was
salvaged as a contract to install conduits in the Twin
Cities and along 1-94 to Wisconsin. With the work that
was done before the contract was cancelled, about 250
miles of Connecting Minnesota was completed, includ-
ing a stretch from Moorhead to St. Cloud.
6. In the 1980s and early 1990s, broadband was used to
describe rates greater than 45 Mbps, while "wide band"
referred to rates of 1.5 Mbps to 45 Mbps. In the mid-
1990s, broadband came into use to describe anything
1.5 Mbps or higher.
7. Down-stream refers to the speed at which data
comes into one's computer, such as incoming emails
or visiting Internet sites. Up-stream refers to the speed
at which information goes out of one's computer, such
as sending email, posting information to an Internet
site, or peer-to-peer networking.
8. The National Academies Committee on Broadband
Last Mile Technology offers two definitions for broad-
band: 1. Local access link performance should not be
the limiting factor in a user's capability for running
today's applications. 2. Broadband services should pro-
vide sufficient performance-and wide enough pene-
tration of services reaching that performance level-to
encourage the development of new applications.
9. You can go online and estimate downloading time
using various communications connections at Speed
and Bandwidth of the UTOPIA Network, from M&I
Partners, FiberSpeed program.
10. For a more detailed explanation of DSL and a chart
comparing ADSL, VDSL, and other types of DSL, see
Jeff Tyson, How DSL Works, at HowStuffWorks.com.
21
22
WHO WILL OWN MINNESOTA'S INFORMATION HIGHWAYS?
11. This is in part because cable companies went to
greater lengths to invest in technologies using unregu-
lated cable networks than in regulated telephone net-
works. For more information see the discussion below,
or Robert X. Cringely, "Why Your Phone Company
Hates DSL," I, Cringely, PBS, February 22, 2001; U.S.
Department of Commerce, National
Telecommunication and Information Administration, A
Nation Online: Entering the Broadband Age, September
2004.
12. Ham radio operators say the Cinergy BPL roll-out
has not created the interference they expected. Mike
Boyer, "Cinergy wired for expansion", Cincinnati
Enquirer, April 17, 2005.
13. Federal Communications Commission, FCC-04-245,
October 14, 2004.
14. These include the Manassas, VA Department of
Public Works, Cinergy Corp in Cincinnati, and Idacorp
in Boise. Ambient Corporation is currently testing BPL
in a high-rise residential building in Manhattan.
Before investor owned utilities enter the retail or
wholesale telecommunications field state regulatory
agencies will have to decide how to address the issue
of ratepayer financing of such a venture. Some states
already have pole-attachment and conduit fees in place.
This is the case in Ohio, where Cinergy created a non-
regulated unit called Cinergy Broadband, which pays
the regulated utility for the right to use its infrastruc-
ture. Texas is the only legislature so far that is consid-
ering BPL enabling legislation for investor owned utili-
ties. Senate Bil11748 passed in early May and a ver-
sion is now being considered in the Texas House. For
more information on regulatory issues in BPL see The
National Association of Regulatory Utility
Commissioners, Report of the Broadband Over Power
Lines Task Force, February 2005.
15. Versions are indicated with letters, for example
802.11b or 802.11g. For more information, see the Wi-
Fi Alliance.
16. There is no interference protection in these unli-
censed bands, which represent a small part of the
spectrum that has been set aside as open for public
use. The federal government has auctioned spectrum
licenses since the 1920s. Broadcasters pay a fee for the
right to transmit on certain frequencies in certain geo-
graphic areas without interference. The auction is
seen as the most efficient way to allocate scarce radio
spectrum, but it creates a cost barrier to access, limit-
ing free speech, and adds to the cost of broadcast serv-
ices. Licensed spectrum was appropriate to the tech-
nology at the time it was created. However, technologi-
cal advances in transmission and receiving now make
it possible to share spectrum without interference.
Open spectrum policy, with a phase-out of spectrum
licensing, would make more efficient use of radio spec-
trum, increase the frequencies available to wireless
networking, and allow for higher quality of service.
For a more detailed discussion of open spectrum and
an explanation of why it is technically possible, see
Kevin Werbach, Open Spectrum: The New Wireless
Paradigm, New America Foundation, Spectrum Series
Working Paper No.6, October 2002.
17. For a good explanation of how mesh networks
work, see Brad Grimes, "Wireless gets connected,"
Washington Technology, January 26, 2004.
18. Some products already on the market are being
sold as ''WiMAX compliant" because the manufactur-
ers expect that their products will be certified when
certification is available. It is expected that an interop-
erable standard for 802.11 will be certified by 2007.
19. Kevin Suitor, "What WiMAX Certified products will
bring to Wi-Fi," Business White Paper, Broadband
Wireless Access, Redline Communications and
WiMAX Forum.
20. The first citywide deployment of pre-WiMAX was
launched by Speakeasy in Seattle in May 2005. The
service area includes nearly every building in the busi-
ness district, and access requires a receptor in the
office window or on the roof. Speakeasy will charge
businesses $500 per month for 1.5 Mbps, ahd $800 per
month for 3 Mbps. The same speeds are currently
being offered in Wi-Fi systems, including some in the
case studies below, for less than half that price.
21. G3 technologies currently target hand-held devices
and are not discussed here.
22. Alberta, entire community, Incumbent Local
Exchange Carrier (lLEC, or incumbent local exchange
carrier, a term used to describe the existing telephone
companies when local markets were opened to compe-
tition after the 1996 Telecommunications Act); Baxter,
entire community, Competitive Local Exchange
Carrier (CLEC, or competitive local exchange carrier,
used to describe the companies that offered services
in competition with ILECs); Brainerd, entire communi-
ty (CLEC); Brandon, entire community (ILEC);
Chokio, entire community (lLEC) , Evermoor,
Rosemount Development (CLEC); Holloway, entire
community (lLEC) , Lonsdale, entire community
(ILEC); Milaca, entire community (CLEC); Morris,
entire community (CLEC); New York Mills, entire
community (ILEC); Nisswa, entire community
(CLEC); Rice, entire community (ILEC); Town Lakes,
Albertville Development (CLEC); Victor Gardens,
Hugo Development (CLEC); Victoria, Minneapolis
Development (lLEC); Windom, entire community
(Municipal) .
WHO WILL OWN MINNESOTA'S INFORMATION HIGHWAYS?
23. In the late-1990s, enthusiasm for all things Internet
made it possible for startup telecom companies to
obtain financing for fiber optic infrastructure. This
financing came in the form of high yield debt-essen-
tially equity financing with the prospect of high
returns for lenders, or ownership of the asset if the
borrowers cannot generate returns to pay back the
debt. Manufacturers that wanted to encourage installa-
tion of their products also provided vendor financing.
The transmission capacity in the U.S. increased 500-
fold, due to the amount of fiber laid and advances in
transmission technologies while demand only quadru-
pled. Similar to the private electric utilities in the
1920s, there were too many firms expanding parallel
networks. Far more capacity-especially long-distance
capacity-was installed than demanded. Most of these
companies went bust. Unused fiber optic capacity
became so common it was given its own name-"dark
fiber", referring to fiber that is installed but not used to
carry traffic. It has been a tremendous resource for
universities and the research community. A mile of
fiber that sold for $1,200 before the telecom bust could
be purchased for $200 after, putting universities in the
position to buy their own networks for less than the
cost oflong term leases. For more on universities and
dark fiber, see Florence Olson, "Lighting Up Dark
Fiber", The Chronicle of Higher Education, March 14,
2003.
24. Florida Public Service Commission, Office of
Market Monitoring and Strategic Analysis, Broadband
Services in the United States: An Analysis of Availability
and Demand, October 2002.
25. Of those households that do not have an Internet
connection of at least 200 kbps, the most common rea-
son cited is "not interested" (44 percent). ''Too expen-
sive" runs a close second, however, at 39 percent, and
another 10 percent say service is not available where
they live. Income is the best predictor of whether or
not a household has broadband: households with
incomes of $75,000 or more are two to three times
more likely to have broadband than those with
incomes of $35,000 to $50,000. U.S. Department of
Commerce, National Telecommunication and
Information Administration, A Nation Online: Entering
the Broadband Age, September 2004.
26. Sanford Nowlin, "Castroville and other towns try-
ing electric lines for a faster web", San Antonio
Express-News, March 24, 2005.
27. Nearly two-thirds of American households with
Internet access use a dial-up connection, even though
broadband technology has been available for two
decades. BellSouth deployed its first FITH network in
Florida in 1986. Speeds of 1.5 Mbps over copper
lines-the speeds offered by most DSL providers
today-were possible in 1990.
28. For an overview of I-Nets see Baller Herbst Law
Group, The FAQs About Institutional Networks.
29. MuniWireless.com maintains a list of pending
broadband bills that restrict municipal ownership
and/or operation of telecommunications systems.
30. The FCC denied a challenge to the law by the
Missouri Municipal League. The U.S. Supreme Court
upheld the FCC decision in Nixon v. Missouri
Municipal League in March 2004.
31. For a complete list of state restrictions see the
American Public Power Association's list of state barri-
ers to community broadband service.
32. Minn. Stat. Ann. ~ 237.19 states: "Any municipality
shall have the right to own and operate a telephone
exchange within its own borders, subject to the provi-
sions of this chapter...if the proposal is to construct a
new exchange where an exchange already exists, it
shall not be authorized to do so unless 65 percent of
those voting thereon vote in favor of the undertaking."
33. See George S. Ford, "Does Municipal Supply of
Communications Crowd-Out Private Communications
Investment? An Empirical Study", ApPlied Economics
Studies, February 2005.
34. In exchange for this requirement, Congress
reduced federal regulation of the cable and telephone
industry and allowed companies to enter new geo-
graphic and product markets. The regional bells were
allowed to operate local telephone exchange services
and to offer long distance as well as cable 1V service,
and become involved in equipment manufacturing.
35. Terrence P. McGarty, Ravi Bhagavan, Municipal
Broadband Networks: A Revised Paradigm of
OwnershiP, MIT Internet and Telephony Consortium
Group, August 2002.
36. Federal Communications Commission, News
Release, March 14, 2002.
37. In effect, this resulted in their holding back the
implementation of the regulatory aspects of the 1996
Act while allowing them to take advantage of the
deregulatory aspects.
38. In August 2003, the FCC ruled that ILECs do not
have to share new fiber optic networks with competi-
tors. John Borland and Ben Charny, "New broadband
rules draw criticism", CNET News, August 21,2003. In
2004, the FCC extended this ruling to include fiber
optic cables installed as part of existing copper net-
works. Marguerite Reardon, "Baby Bells win another
FCC victory", CNET News, August 5,2004.
39. The cases of National Cable Telecommunications
Association v. Brand X and FCC v. Brand X, Nos. 04-
277 and 04-281, were consolidated The underlying dis-
pute is over the classification of cable modem service
under the 1996 Telecommunications Act. In March
2002, the FCC ruled that Internet access through a
cable modem should be classified as an information
service. The 9th Circuit Court of Appeals had ruled in
2000 that it should be regulated as a telecommunica-
tions service. In Brand X, the court noted that cable
modem service consists of two elements: a transmis-
sion pipeline and the Internet service transmitted over
that pipeline. The court found that it was bound by its
previous decision, and gave no deference to the FCC
rule because it could have taken a position earlier than
it did, but chose not to. The decision in the case may
hinge on whether or not the court should have
deferred to the FCC decision, rather than classifica-
tion.
23
24
40. Thomas Bleha, "Down to the Wire", Foreign
Affairs, May/June 2005.
41. Ibid.
42. Bleha, op cit.
43. Center for Rural Policy and Development,
Broadband Access in Rural Minnesota, April 2004. It is
difficult to offer precise figures on broadband accessi-
bility. The FCC reports the number of providers by zip
code, but it does not report the number of providers
when three or fewer providers report having sub-
scribers in a zip code. The percentage of broadband
subscribers that have service through the regional
Bells, cable television companies, or competitive carri-
ers cannot be discerned from the FCC's reporting,
because some data is ''withheld to maintain confiden-
tiality." FCC, Local Telephone Competition and
Broadband Deployment, High Speed Services for
InternetAccess, 12/04 Release.
44. Competing providers do have access to Qwest's
telephone infrastructure. But they are charged ahnost
as much to access Qwest's phone lines as Qwest
charges its residential customers for DSL Internet
access. Thus their rates are not competitive. For exam-
ple, Visi.com, the number one reseller of Qwest DSL
services, charges $20 per month for their ISP service
plus $28 per month for Qwest's line charge, while
Qwest charges $40 per month for the same package.
45. For a summary and discussion of studies see S.
Renzetti and D. Dupont, "Ownership and Performance
of Water Utilities", Greener Management International,
No. 42, 2003.
46. See John M. Kelly, Paying the Bills, Measuring the
Savings, American Public Power Association, March
2005; and Jim Baller, Responses to SBe's examPles of
supposed municipal 'Jailures", Baller Herbst Law
Group, April 3, 2005. For example, Marietta, Georgia is
often cited as a failed public system because it was
sold to a private company before the city fully
recouped its $35 million investment. The Marietta net-
work had posted positive earnings before interest,
taxes, depreciation and amortization (EBITDA, a com-
mon industry accounting measure) since it began
operation in 2001, and was on track to post net positive
earnings beginning in 2006. The private company that
purchased the system has made no changes in its
management or operations.
47. In May 2003, WorldCom paid a $1.51 billion, which
paid investors about 30 cents on the dollar. Adelphia
paid a $715 million settlement to settle a federal fraud
investigation in April 2005. The Global Crossing inves-
tigation was settled with an administrative agreement.
Criminal charges for conspiracy and fraud are current-
ly being pursued in the case of Enron Broadband.
48. William J. Ray, "Infotricity: Why Muni Electrics
like Cable TV", Public Utilities Fortnightly, November
15, 2000.
49. AT&T v. Portland, Ninth Circuit Court of Appeals,
June 22, 2000.
WHO WILL OWN MINNESOTA'S INFORMATION HIGHWAYS?
50. In late May 2005, Texas House Bill 789 died when
House and Senate conference committee members
could not agree on a compromise between the House
bill, which banned municipal telecommunications net-
works, and the Senate bill that promotes community
Internet services. As of early June, telecommunica-
tions industry lobbyists pressuring state legislators to
add the House bill to the special session agenda. For
more information see www.savemuniwireless.org.
51. Todd Wallach, "Verizon CEO sounds off on Wi-Fi,
customer gripes," San Francisco Chronicle, April 16,
2005.
52. No Competition: How Monopoly Control of the
Broadband Internet Threatens Free Speech, ACLU
White Paper, 2002.
53. "Ti is a term coined by AT&T for a system that
transfers digital signals at 1.544 megabits per second
(as opposed to ISDN's mere 64 kilobits per second).
Of course, ifTI doesn't cut it, there's always 1'3. (f2
seems to have been bypassed altogether." CNET
Glossary.
54. At some frequencies, radio waves travel in a
straight line and do not follow the curve of the earth's
surface. line-of-sight technology requires that the
transmitter and receiver can "see" each other; that is,
they must be high enough that they are not obstructed
by objects on the ground (or the ground itself). Non-
line-of-sight technologies get around this problem by
sending an array of elements, the signals of which can
move through the air separately before reassembling
at the receiving end. For a more detailed explanation
see Brad Schrick and Michael J, Riezenman, "Wireless
Broadband in a Box", IEEE Spectrum Online, June
2002.
55. Phil Davies, Broadband.gov, FedGazette, Federal
Reserve Bank of Minneapolis, November 2004.
56. In a roaming access system, users can fire up their
laptop or PDA anywhere in town and be able to log in
to the network with the same password they use at
home. They can also move from one place to another
without losing the signal, provided they remain within
the network coverage area. This is useful for police
and, for example, municipal inspectors, who may need
to access information from anywhere in the city.
57. Gerry Blackwell, "CLECs Selling Cable TV.
Marketing Suicide?", ISP Planet, 2001.
58. Coverage map
59. Residential service requirements are now 64 kbps
for voice, 1 Mbps for data, and 10 Mbps for video.
They are expected to grow to 128 kbps voice, 5 Mbps
data, and 54 Mbps video in the near future, so the
available bandwidth of 100 Mbps per subscriber is
expected to be adequate to service demands.
60. Provo, Utah Mayor Lewis Billings testified before
the U.S. House Telecommunications and Internet
Subcommittee in favor of municipal broadband on
April 27, 2005.