Why Municipal Broadband

In light of the recent Federal Communications Commission (FCC) decisions on Net Neutrality and the ending of restrictions on local governments offering Internet services to the public, here is a dive into the idea of Municipal Broadband, why it’s needed and what are the challenges (political, technical, financial etc.) to implementation.

What problems does Municipal Broadband solve?

The FCC defines “Broadband” as Internet connectivity greater than 25 megabits per second. The current topology of Internet services in cities like Seattle are 1) the incumbent telephone carrier (e.g. CenturyLink) offering “low speed” internet access (between 1-10mb/sec) and 2) a cable franchise (such as Comcast) offering medium to high-speed (broadband) internet access (10mb-100mb). Of late, CenturyLink is deploying Gigabit speed internet in many neighborhoods but such coverage is not obligated to be universal and may be cost prohibitive to many citizens.

The more speed available, the more services an end user can consume or publish. Video conferencing, voice over IP (VOIP), video and audio streaming, file transfers and multi-player gaming are better experiences with more bandwidth.

So, the most obvious problem that Municipal Broadband solves is that it would offer ubiquitous high speed (>25mb/sec) broadband access to every building and person in the city versus the cherry picking that current carriers are providing.

Because of the nature of infrastructure franchises, there is a lack of competition in the provision of services and thus there is a lack of motivation to keep the infrastructure current and to provide customers with acceptable service levels. It is almost universal the horror stories of dealing with cable company installers, customer service, and technical support. As the linked infographic shows, typical average speeds in the United States fall miserably short of other countries including Korea and Romania having much faster speeds.

A publicly run Municipal Broadband Utility or a hybrid of publicly-owned infrastructure and highly regulated competitive service delivery would improve the provision of services to the public over the status quo.

What is the value of ubiquitous broadband?

The value of the internet has been its nearly ubiquitous connections with minimal barriers to access. Providing individuals and companies large and small the ability to access, publish, and trade information online with few or no intermediaries is an obvious benefit.. As a result, valuable companies have been spawned such as Google, Yahoo, Amazon, eBay, who have all capitalized on the efficiencies that the Internet provides to their businesses. The Seattle area is a top tier industry city in the development of companies that operate and innovate on the Internet. Seattle-based Amazon is the largest provider of virtualized computing services in the world that allow companies to provision computing infrastructure at a fraction of the traditional cost of data center buildouts. It has become the de facto standard for companies building compute resources. Redmond-based Microsoft is a major player with its Bing search services and its Azure cloud services (which competes with Amazon). And, Google operates major development and operations in the area, too, with offices in Fremont, Kirkland, and Bothell (and soon in Seattle’s booming South Lake Union district).

The challenge that cities like Seattle face is that the access to the internet has consolidated into just a few providers (Comcast, CenturyLink and newcomer Wave in a select few neighborhoods) that have no incentive to invest sufficiently in their service to keep it on par with advances in the rest of the world. In other words, the internet market is an oligopoly, just a merger or two shy of a full-blown monopoly. And prices are increasing on average as a result. Many internet providers operate by piggybacking on Cable TV franchises, service people and especially young people are less interested in buying cable TV. Bundling thus driving up internet’s cost needlessly as far as many would be customers are concerned.

The value that a city like Seattle would obtain by investing in a municipal broadband network is to enable all of its citizens equitable, affordable access to the internet regardless of where they live in the city. The next Jeff Bezos or Sergey Brin could come from the Rainier Valley. The next Neil DeGrasse Tyson or Marie Curie could live in South Park and discover the wonders of the universe from their bedroom.

The city would also reap a competitive advantage over other cities both in this state and nationwide. A company seeking to expand or locate its operations would seriously consider Seattle when such access to the Internet is readily available, free of bureaucratic restrictions, and affordably priced.Municipal internet would give Seattle another advantage over competitor cities such as San Francisco, San Jose, Denver, and others.

It is not enough to simply have an incumbent carrier offer high-speed internet to some cherry picked locations, such access must be ubiquitous, affordable and accessible to all citizens in a city regardless of location or station in life.

Why can’t “the market” provide this?

This is a classic observation of the failure of “Market Capitalism” to equitably provide a tangible good to all citizens. To elucidate on this requires an economics discussion which may also elicit some political reaction.

The classic assumption of Market Capitalism is the “efficient distribution” of goods based on scarcity in a market and generating a profit. Many adherents of Market Capitalism do not acknowledge the existence or validity of a Commons, or if they do acknowledge a Commons, they call for it to be privatized and exploited. Yet such Commons exist in many places in our society. Some examples include the street in front of your house, the water or electrical supply to your house, the park systems, the public transportation infrastructure such as buses and trains. The existence of the Commons provides core value to private property. It is this rationale that distinguishes a city such as Seattle with its infrastructure of roads, transit, sewer, water, parks and recreation facilities from a rural burg with few of those features (urban benefits).

Further, many aspects of the the new economic possibilities spawned by the internet fly in the face of the scarcity model. The internet has successfully demonstrated the idea of “Long Tail” economics as viable versus a more traditional top down, market share driven approach. For example, the qualitative difference that makes Google Search the dominant search engine is that it values the small, obscure search results and attention to detail in those results versus their competitors who concentrate primarily on what results are “the most popular”. The Google approach yields higher satisfaction among customers

What we have observed in the consolidation of internet providers is reduced access to people through price mechanism (the creation of scarcity, artificially), lack of investment to keep the value of the network for its participants, and the attempt to segment the network into tiers that can be exploited with tolls (an anathema to the original concept of the Internet). This forces people to make choices about their access to the internet.

By convention, the private market needs conditions of scarcity to exploit and make a profit. Such behavior necessarily excludes “marginal” actors. Another reason to argue municipal internet is superior to the private market is that our democratic republic, as fashioned by its founders, thrived only with an educated and enlightened electorate and enshrined the social values of equal opportunity and equality in the law (at least after a century of slavery, another century of Jim Crow, a half century of the new Jim Crow…OK we’re working on it). The Internet, as designed by its founders, was envisioned as an egalitarian entity to educate and enlighten its users. It exists because barriers to access were minimized.

Development approach and risks

There are at least a couple of approaches to developing a Municipal Broadband Service. The first option is for a city to design, build, and operate a system lock, stock, and barrel. This is the approach that one Seattle-based advocacy group (Upgrade Seattle!) favors. In this model, the City would set up a division or utility for this purpose. It would have its own capital plan, acquire equipment, and build the system, and then perform all of the customer service and operational aspects of the system. This approach has been tried in other cities with mixed success. Some have failed, others have had qualified success. The City of Tacoma is embarking on such a service with their “Click” network. The issues that have been identified are:

• Massive investment required—on the order of $400 million to $600 million to build the system
• A high cost per subscriber to cover operations and capital recovery
• Risks of disatisfied customers

Another approach is what this author is calling a hybrid approach. In this model, the City of Seattle would take on the building of the network, but would franchise access to the network to private entities which could be existing internet service providers (ISP’s) or newly formed non-profit/cooperatives. Each would pay a franchise fee and a monthly per subscriber fee to the city/entity. This could be successful because it puts market forces in the right approach and socializes the risk. The capital outlay for the system is borne by the public, the ISP’s are responsible to deliver service in accordance with a highly regulated Service Level standard and are severely penalized for short-changing customers. The city/entity is similarly on the hook to maintain and modernize its network to serve its customers (the ISP’s and the public).

In Seattle’s case, there are some interesting possibilities to consider.

• The City already owns two entities that touch every building and provide service to every person that resides or works in Seattle. Its public utilities (water, sewer) and its electric utility subsidiary. It would be an interesting integration “play” to have an Internet Utility be under the charter of the Electric Utility.
• The City should mandate the modernization of all electrical meters to “Smart Meters” that can provide information back to the utility on an instantaneous basis thereby allowing better power and line management.
• The City should also be strongly encouraging solar and wind power on individual property with the City brokering power generated from within the city utilizing this network of smart meters.
• The City could require that these smart meters be connected by a city-wide grid of fiber communications cable. This would shift the capital outlay for a fiber to the premises grid to the electric utility and have a built-in mechanism for financially maintaining endpoint connections through the standard billing fees.
• The electric utility already has a long standing track record for maintaining wire infrastructure in its service area and already has the fleet of equipment and trained personnel on staff to do this work.
• The Seattle City Light electric utility is a legally separate entity from the City with the City Council acting as its board. It has a completely separate financial structure from the City and has separate and very substantial bonding authority apart from the City.

There are several legal and political impediments to this approach. One is that current state law mandates this legal separation and that the utility charge the City a “retail” price for any asset it sells (or buys from) or service it provides to the City. So the idea of dual-purposing the fiber infrastructure that a City-owned electric utility would provide gets complicated.

This author does not believe these impediments are insurmountable, but do complicate things. The prospect of in-city generation of renewables at a scale that augments the city’s power capacity would be highly desirable. Given the political talk of combating climate change, this approach might prove politically attractive.

The Urbanist will track this issue with periodic updates.