Is public broadband a threat to taxpayers? Let towns decide

A casual observer might think towns across the country are contemplating Communism, rather than construction projects. Such is the state of the national debate over how to build more high speed internet, which is becoming as indispensable to modern life as hot water or electricity.

The crux of the debate is over how small cities, especially those where fast internet is in short supply, can get better broadband networks. The right answer, however, should not be a matter of partisan politics — but in looking at the competence of individual towns, and ensuring that their populations can have a say in the decision on whether or not to build. The FCC will vote on the issue on Feb 26, but in the meantime the right role for public broadband will remain a hot topic for the President, pundits and consumers across the country.

Blessing or boondoggle?

The state of the national broadband debate was on display this week in Cedar Falls, Iowa. President Obama was there to extol the town’s homegrown broadband network, and to urge the FCC to override laws in some states that restrict cities from building high speed internet projects of their own. In response, Republicans and industry groups pounced on his remarks, accusing the President of promoting a broadband model that meddles with the market and sticks it to taxpayers.

Why is a place like Cedar Falls at the center of this? The answer is the town’s community-owned internet provider, which reportedly offers its 40,000 residents connected speeds of 50 megabits a second for $45.50 and, for a little more money, 1 gigabit speeds. This sort of service is unavailable to many Americans and, especially, to those outside major cities where the fastest internet may be well below a new proposed 25 Mbps definition of broadband.

The Cedar Falls example is also what led Obama to call on the FCC to come to the aid of places like Wilson, North Carolina and Chattanooga, Tennessee, which have promising broadband projects of their own, but are being stymied by state rules that restrict their operations. The two towns currently have a petition asking the agency to invoke federal law in order to override the state rules, and there’s a good chance the FCC will grant the request since Chairman Tom Wheeler has repeatedly stated cities should be able to decide for themselves what to build.

Not everyone, however, is as enthusiastic about cities getting involved in the broadband business. Groups with names like the Center for Boundless Innovation in Technology and the Taxpayers Protection Alliance have been loudly claiming that city-run broadband projects are a sinkhole for taxpayer dollars. Here is how the latter group described the situation in a recent press release (my emphasis):

Five high-profile municipal broadband networks have failed spectacularly, including one in Provo, Utah, which was sold to Google for $1, though taxpayers will continue to pay off the construction costs for another 12 years. Another, in Burlington, Vermont, was sold to a private company for $6 million, not even coming close the $51 million cost of the network. And the debt racked up by a third network in Salisbury, North Carolina, was the reason Moody’s downgraded the entire city’s bond rating. The system in Salisbury was such a financial mess that they resorted to using water and sewer funds to make up shortfalls from the network’s expected revenue, which isn’t being realized.

You get the idea. The underlying argument is that city-run internet will inevitably turn into an expensive failure, and that state laws that limit municipal broadband projects (either through outright bans or cumbersome procedural rules) amount to a sensible shield for consumers against government boondoggles.

U.S. President Barack Obama inspects a piece of fiber-optic cable during a visit to Cedar Falls Utilities on January 14, 2015 in Cedar Falls, Iowa. Obama spoke of plans to increase access to affordable high-speed broadband internet service across the nation.

U.S. President Barack Obama inspects a piece of fiber-optic cable during a visit to Cedar Falls Utilities on January 14, 2015 in Cedar Falls, Iowa. Obama spoke of plans to increase access to affordable high-speed broadband internet service across the nation.

Despite the above claim of “five high-profile” examples, however, the overall evidence is thin that city broadband projects are intrinsically flawed or wasteful.

According to Christopher Mitchell, who leads community broadband studies at the Institute for Local Self-Reliance, most of the 450 municipal internet networks the group is tracking were not financed by tax dollars in the first place. And most of the 100 or so that are have avoided financial trouble.

Mitchell added that, in places like Burlington that have lost money, the critics have also overlooked overall benefits to the city from the project.

“The City did indeed borrow $51 million and the network has recently been sold in part for $6 million – but the deal is much more complicated. These groups often ignore all the revenue generated over the life of the network – so they compare the full costs of debt with only some of the revenues. Now in the case of Burlington, it happens that the debt does outweigh all the revenues over the years – but the network also lowered prices from competitors in the market, generated many jobs, and other benefits,” Mitchell said by email.

Meanwhile, in the case of Chattanooga, which made a prescient decision to invest early on in a fiber network, the project has not just been financially sustainable in its own right. It has also brought the town new cachet as a “gig city” that can attract businesses in search of fast and affordable internet.

The upshot is that there doesn’t appear to be an over-arching economic case one way or the other as to whether cities should supply broadband in the same way they do sewers or electricity.

“I don’t think every city should do it, but I think every city should analyze it,” said Mitchell, adding that places with a history of competent local government, including Wilson, are good candidates for broadband projects, while those with a history of corruption are not.

The problem is that municipal voters in many states don’t get a choice to decide in the first place.

Should states ban city transit too?

As the President noted in his Cedar Falls speech, there are 19 states in which legislatures have passed laws to ban or restrict cities from building broadband infrastructure (a recent report suggests the number of states is actually 21 — see full list below).

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Craig Settles’ report breaks down state laws restricting broadband into 3 categories: 1) “If-Then laws” that impose requirements on communities before they can build; 2)  “Minefield Laws” that create major obstacles but fall short of a total ban; 3) Total Bans (some states may have loopholes)

Despite the prevalence of these laws, however, they don’t seem to be grounded in economics. Instead, as a withering investigative report from last year suggests, they appear to be the fruit of a larger campaign by telecom incumbents like AT&T to stymie competition through lobbying and litigation.

The result is a situation in which millions of Americans can choose from only one company — and sometimes none — that is capable of offering real broadband (defined as 25 Mbps). But at the same time, their local governments are also barred from acting to increase competition.

Harold Feld, a senior lawyer with advocacy group Public Knowledge, likens the situation to one in which states forbade cities from building public transit.

“Take public transportation as an example. Sometimes it works out well, sometimes it works out poorly. But no one would say that the problems we’re having today in Washington DC prove that New York City shouldn’t be allowed to operate a subway system,” said Feld by email.

The issue of what cities can and cannot do in terms of internet infrastructure will become clearer in the next month or so when the FCC decides whether to pre-empt the state laws. (If the agency does opt for the pre-emption route, however, the process is likely to end up in a swamp of court challenges brought by AT&T or another big incumbent).

In the meantime, the current legal logjam means thousands of towns across the country will not only continue to lack Cedar Falls style internet amenities, but they will be cut off from pursuing them in the first place. As Feld notes, this situation bodes poorly not only for the push for more broadband, but for basic American principles of self-governance as well.

“As a rule, communities don’t get into the broadband business unless they feel they have no alternative. That ought to be their decision, not the decision of special interests lobbying state houses to get bills passed behind closed doors. Preempting these state bans used to be a bipartisan issue. I’m hoping it will be again.”

The states with laws that ban or restrict municipal broadband, according to a 2015 report by analyst Craig Settles, are: Alabama, Florida, Arkansas, California, Louisiana, Missouri,  Colorado, North Carolina, Montana, Iowa, South Carolina, Nebraska, Michigan, Utah, Tennessee, Minnesota, Virginia, Nevada,  Pennsylvania, Washington, Wisconsin. 

OpenShift now live…now what?

Red Hat has a nice play in the cloud, and this is another step. While I don’t see them displacing the larger public cloud providers as of yet, I do see them having a nice share of this emerging market.

State tries to ban online teacher torment

North Carolina wants to ban students from signing up their teachers for online porn sites or engaging in other forms of cyber-bullying aimed at school officials.

Apple building another smaller data center in North Carolina

Apple is building another smaller data center, next to its massive iCloud data center, in Maiden, North Carolina, according to local reports. The new planned 21,030 square-foot data center will store clusters of servers; for comparison the current data center onsite is 500,000 square feet.

Sustainability through the eyes of Apple

It seems that the last six months has brought an increasing focus on Apple’s conscience as everything from its labor practices in Asia to it its sourcing of power for its to data centers to how recyclable its computers are has been scrutinized.
Apple has actually begun to respond to negative publicity surrounding its sustainability practices, first by responding publicly to Greenpeace’s criticism of its power sourcing at its North Carolina data center and the most recent example being its quick reversal of its decision on the Electronic Product Environmental Assessment Tool (EPEAT) registry. Following some bad PR surrounding Apple’s decision to exit the government certification of green electronics standard, Apple abruptly reversed course, posting a letter on its website Friday from its hardware engineering head Bob Mansfield in which Mansfield described the original decision as a mistake.
While no one knows for certain why Apple originally removed 39 laptops, desktops and monitors from the government’s EPEAT registry of green approved electronics, reasonable speculation surrounds the fact that the battery and the display in the new Macbook Pro with retina display were glued in, making them difficult to recycle. Apple is a design focused company, which is why I found its orignal decision on EPEAT consistent with its culture, which puts great design and usability ahead of every other priority, which is why, for example, we’re still waiting for an LTE iPhone. Apple refused to build a phone that might have subpar performance due to battery issues related to LTE and if gluing the display case into the new Macbook made that laptop a millimeter thinner, the company wouldn’t hesitate to do so.
EPEAT CEO Robert Frisbee commented that Apple told him “their design direction was no longer consistent with EPEAT requirements.” And upon Apple’s return to the fold, Frisbee posted that he looked “forward to Apple’s strong and creative thoughts on ongoing standards development,” and noted that “the outcome must reward new directions for both design and sustainability.” It’s not hard to read between the lines and figure out that Apple wants credit for its avoidance of toxic materials like polyvinyl chloride (PVC), reporting greenhouse gas emissions for each product, and the overall energy efficiency of its computers while at the same time being offered some leeway to design its products on much of its own terms. Good thing Apple has a significant say in how the future standards will be written.
It’s helpful to contrast Apple’s behavior surrounding the registry with how it has handled the greening of its data centers. Apple decided to build its data center in the North Carolina hub, which has proved so attractive to big IT because of its dirt cheap power which comes from coal and nuclear power.
But pressure has mounted on leading IT companies to source clean power for their data centers and Apple ultimately opted to build two 20 megawatt solar farms complemented with a 4.8 megawatt fuel cell facility.
For starters, greening its data centers with clean power has no impact on the end consumer product or the consumer experience. If anything, a miniscule minority of customers will feel better about using a greener iCloud. But more importantly, Apple’s renewable energy generation may actually make its consumer products perform better.
Not because consumers care or are even aware of the solar farms but because iCloud will become a more stable product. Power outages are on everyone’s mind right now and the last month has seen Amazon go down, impacting Netflix and Pinterest, and salesforce.com had two interruptions of service over just a few weeks period. While it’s clearly very expensive to generate on site renewable power, it does act as an insurance policy against outages and puts data centers in a position of using the grid power as a backup or a compliment rather than being fully dependent.
From Apple’s back and forth with EPEAT to its decision to source clean power for its North Carolina data center, the central thread is that the company will be sustainable as long as it doesn’t impact product development. And if there’s been a small shift in the last year, it’s just that Apple is starting to respond to public criticism, likely a hedge against the extremely small possibility that one day it might have a competitor (Google) with better green credentials (and a product in the same ballpark of quality). For now, the company will put design first and throw in some sustainability, particularly when, as in the case of the North Carolina data center, there are benefits to the consumer.

Question of the week

Will Apple’s sustainability policies ever impact Apple’s revenue?

The controversial world of clean power and data centers

As the world demands more clean energy, will North Carolina — and its power that largely comes from coal and nuclear — continue to attract these types of data center deals? Or will areas that can provide more grid-connected clean power win out?