Should Fiber Optic Network be Public Infrastructure?

Monticello_Fiber.jpgIn today’s Star Tribune, there is an article about the City of Monticello’s efforts to make itself one of the most wired communities in the country. Apparently, the effort has been complicated by a lawsuit.

According to the city’s attorney, when Monticello asked TDS Telecom to provide fiber-optic connections to every home and business in the community as a means of stimulating economic development and increasing the quality of life, the company refused. The city then held a referendum in which about 75 percent of the voters approved spending $25 million in revenue bonds to create a city-owned system.

TDS filed its lawsuit the day before the revenue bonds were to be issued. The company claims that it was willing to work with the city, but couldn’t come to terms. The lawsuit contends that municipalities shouldn’t be allowed to use revenue bonds to create fiber-optic infrastructure.

There have been several conversations, by both public and private entities, in Northfield over the past few years about making Northfield one of the most wired communities in the world. If I recall correctly, then Council and EDA member Dixon Bond suggested that it could be considered like any other utility, and provided publicly or privately.

It appears, at least to me, that no group stepped up to provide leadership in the effort. Perhaps now we’ll have to wait for the lawsuit to be settled.

46 thoughts on “Should Fiber Optic Network be Public Infrastructure?”

  1. With 2 colleges, and the infrastructure we have in place now, you would think that it would not be that much more of a stretch to become “one of the most wired communities in the world”.

    I would suspect, that if properly presented to the voters, we could get this started. I have a sneaking hunch that it would be more popular, and give a bigger boost to the economic vitality of Northfield than a new liquor store would.

    Without any hesitation at all, I would switch to this system over from my current bandwidth provider. (Don’t get me started!) The only thing keeping me from cancelling it now is the fact that my neighbor has some lovely old growth trees that are blocking line of site to a Northfield based solution. (and I am watching this service every day for service updates!)

    I would be curious to know what it would cost Northfield to get both a wired and a wireless solution in place? I know it would not be cheap, but it would be a significant investment in Northfield’s future.

    There are companies in town doing a great job with wireless, but alas, it is based on towers, and line of site. There are a few depressions and trees in town that limit some of us. A new technology that could provide high speed to all, without the limitations would be very nice.

  2. Hey John –

    Thanks for the editorial catch; I fixed it.

    Thanks also for your evaluation of Northfield’s potential for getting potential leverage from this investment, while striving to maintain its sense of place.

    Care to weight in on the public vs. private issue or suggest another model? Or perhaps share your opinion on where this $25 million in Capital Investment ranks compared to $ 1 million for the City Hall, $3 million for the Liquor Store, $6 million for the Safety Center, $8 million for the Public Library, or $5 to $15 million for the Business Park?

    Thanks again,

    Ross

  3. Well, my first question would be, is $25 million a true estimate?

    Secondly, if there was a huge amount of money to be made, a private entity would have already presented itself, and we would have the service, unless there has been some artificial interference via legislation keeping them out.

    Third, I feel very trapped into my opinion when I would be asked to rank the capital investments listed above, so I won’t address them publicly, other than to say that I am strongly opposed to the city continuing to pursue a $3 million (now) booze mart downtown Northfield.

    I say this because it has been my experience that this town cannot keep itself on a budget on any endeavor.

    I also feel that right now, we are at a CRITICAL JUNCTURE in Northfield, and our leadership needs to be VERY CAREFUL about the capital investment plan. Here is why I feel that way.

    Over the last few years, there was a strong push to get all of the housing in Northfield up to “Fair Market Value” apprisials for tax purposes. I know that my house saw increases that were just under the 12% increase cap for several years, from 2004 to 2008 assessments. Then, all of a sudden, WHAM, the bottom falls out of the market, and the values drop significantly.

    Well, the city budgets are dependent on those taxes on property (as well as businesses) for its operating budget and spending on capital improvements.

    The problem is, I am concerned that no one is planning for how these budgets are going to significantly decrease (in my opinion) over the next 5+ years as the market (hopefully) corrects itself to where it was in 2007/2008.

    I also feel that Northfield is already suffering from tight budgets, and we are going to need to write some big checks to catch up on some of the equipment and other items that were deferred in previous years.

    It is going to take leadership with a strong financial background, and fiscal conservatism to get us through the next decade in this community.

    I do believe that we do need a significant amount of capital improvement, but it needs to be done in such a manner that the city is not leveraged into overwhelming debt service for the next 30 years, or that taxes are raised even higher than they already are.

    I also feel that we do need to take steps to build effective infrastructure to lure businesses to our community, but this needs to be done in a manner that does not fall entirely on the residential tax base to develop business growth.

    It is a tough one.

  4. In response to Ross’ initial question on this thread, I absolutely think fiber should be a publicly controlled infrastructure. Though because of the various large expenses Northfield is facing — as John wrote about — I don’t know that it’s realistic to have something in Northfield any time soon.

    On the general question: if I had my druthers, I’d like to see data networks publicly owned by large government entities, like federal or state gov’ts, but controlled and maintained by smaller entities (cities or townships). By having the larger network built by something that goes across municipal lines, this would promote better interconnection between the cities and township areas than simply having a city doing it.

    You could still have private industry providing the actual service: a city (or county or state or whatever) would lease the rights to their area’s network to a company for five or ten years. If the provider isn’t doing a good job, it’s easy for the public to boot them out after the contract is up. The public entity would collect enough money from the contract to maintain the network, and hopefully make a little profit to put toward other public expenses.

  5. Glad to see a discussion about such an important topic. Monticello’s estimate of $26 million is unique to them, it would not necessarily apply to Northfield. The return will be good in the long term, but it can take a decade to recover the initial costs. Fortunately, fiber lasts for decades.

    I have some strong feelings about the importance of community ownership – if interested, you can find them in a report I recently released. I’m working with some folks to get more communities in MN interested in community fiber networks – especially up where I live in St. Paul.

  6. David,
    Quite simply, people imagine it giving them really fast internet. They might not get this just because they get a fiber connection — at least not immediately (Jaguar Communications, a company that provides FTTP connections to Dundas and Bridgewater Township offers speeds that are roughly the same as Charter’s old-fashioned copper network).

    The real reason companies and governments want it, though, is because of its future promise. In 50 years, we could virtually eliminate phone lines and traditional cable connections — fiber is fast enough and able to carry enough bandwidth that it could handle those applications in addition to internet connections.

    There’s a lot more good information at on this Wikipedia article.

  7. Sean –
    I understand what fiber is (I first saw fiber optic cable when AT&T was showing it off maybe 25-30 years ago). I am a small business and I already am on fiber through St Olaf Telephone Company. My question was more like what is going to be different in Northfield after having spent $25 million ? I would think any business in Northfield that wants high speed Internet can already get it. Fiber to the home, assuming new technology does not replace, would seem better handled as a business service as opposed to a forced utility.
    Monticello’s claim at being the “most wired city” does not seem like it would be a huge motivator to businesses relocating there.

  8. David,
    I’d refer you to the first part of my comment. Just because an internet connection is “high-speed” doesn’t mean it’s fast enough. Though the connections we have today are leaps and bounds faster than what we had a decade ago, we can still go faster.

    Fiber to the home, assuming new technology does not replace, would seem better handled as a business service as opposed to a forced utility.

    I really disagree. There are homes that a barely a mile out of the city that still can’t get Charter cable connections. If we leave it up the free will of companies, there’s no way we’d get close to universal access before the technology — as you point out — becomes obsolete.

  9. In some places, like Burlington, VT, a single fiber connection has already replaced the copper phone/cable connections and offers more bandwidth. The real immediate difference of fiber compared to DSL/cable is that it offers broadband in both directions. DSL and cable mostly have poor upload speeds, which can be frustrating for businesses and residential users as well.

    In the longer term, fiber offers speeds unmatched by any existing copper networks.

  10. What’s the speed difference (download and upload) between current copper cable and fiber optic networks? The practical, real world difference, not the pie-in-the-sky-no-one-else-is-using-the-internet-and-your-data-will-be-personally-attended-by-our-trained-staff speeds that so often get quoted.

    Our current cable connection maximum download speed (based only on my and my son’s observations) is about 600 Kbps. This is fine for most of what I need; my son wishes it were more as he uses Steam for huge game files.

    Our upload speeds are considerably slower.

    I am considering starting to backup my hard drive with an online storage site that offers up to 1 TB of their servers per customer. I’d like upload speeds to be very fast before I try this, as it would take ludicrously long to back up about 300 – 400 GB of files at current speeds

  11. Brandon,

    that is a difficult question because the answer is basically, what are you willing to pay?

    Fiber networks frequently sell symmetrical connections because they do not have the same upstream constraints as cable/dsl do, so I’ll use symmetrical numbers as examples.

    In some places, they still sell the 1Mbps as a baseline (some even go slower, but I cannot fathom why). Bear in mind that this is an actual 1Mbps connection, none of that “up to” cable talk where you never get the advertised speed.

    In Burlington, the highest advertised speed is 8 Mbps and goes for $72 month unbundled (cheaper if you go triple play). If you want to go faster, you could probably work something out. I’ve found community networks are good about finding ways to do what their customers want.

    In Utah, with the UTOPIA network, the baseline connection is 15Mbps but you can go to 50Mbps for $60/month. I’m guessing most won’t believe me, so here is the advertisement. I think there is a 100GB/month xfer limit though and you have to pay more to go beyond that.

    In Lafayette, LA, they are building a network which will not offer a connection slower than 10Mbps and all in-network connections are 100Mbps. This means you can swap files with a neighbor on the network at 100Mbps and access YouTube at 10Mbps minimum. I don’t think pricing is out yet.

    Few community fiber networks offer connections faster than 100Mbps currently, but they can go up to 10Gbps for those who want to pay enough. The Burlington schools and 15 city buildings get 1Gbps connections for some $1000/month (the approximate cost to the city for providing it).

    I’d be curious to know what Northfield schools get and how much they have to pay for it.

  12. Holy crap on a stick!

    Those are awesome speeds…

    Bummer about the transfer limit per month though, as I would want to back up my data frequently. I wonder if that’s a typical restriction.

    Another question: If your speed is 1 Gbps, does that mean you are transferring 125 megabytes of data per second? In other words, you divide by 8 to measure how much actual data is moving (the difference between bits and bytes being, usually, a factor of 8). Just want to clarify that.

  13. Brendon,

    Yes – you have the math on Bytes v. bits correct.

    The xfer limit on UTOPIA is not standard, but makes sense to my mind when they are selling the speed so cheaply. I imagine it is the only way they can make the economics work out.

    If you are doing backups, I would guess the xfer limit would not be a problem after the initial upload. Most backup programs – I’m thinking off Jungle Disk currently – should do a diff to only transfer what changes. So you can keep hundreds of gigs backed up without transfering hundreds of gigs constantly.

    I’m a photographer though and I was thinking about online backup. When I did the yearly costs (including the massive time it would take on my cable connection) I realized it was cheaper to buy USB hard drives and give them to someone to hold for me offsite.

  14. Government should not be in the fiber optic business, this should be left to the private sector.

    The internet has to remain truly free and self regulated. If the government gets involved it will be a question of time before it get’s taxed and regulated.

    1. If you government gets involved in the Internet it will only be a matter of time before it is taxed and regulated?

      Okay, color me confused – the government invented the Internet… how could it be more involved? Hundreds of cities already provide access to citizens and businesses to the Internet. If you would prefer to support a private monopoly in your access to the Internet, I think you will have that option, but I think the worst years of the Internet have been the ones where the private sector has had the most control over it and strangled it by not investing in the last mile.

      Regarding N. St. paul, I wrote a piece about it. http://www.twincities.com/ci_11742691?nclick_check=1

  15. Peter,
    I don’t really understand the relation you’re worried about. If there’s regulation to be had, it’ll happen no matter who builds the infrastructure — look at the Net Neutrality Act, which affects (quite positively, IMHO) privately build infrastructure. I think we have much more to fear in greedy private industry trying to bilk customers at the expensive of a healthy, open internet.

  16. Sean do you mean

    greedy private industry trying to bilk customers

    vs frugal egalitarian government whom always put their clients first ?

  17. Well, come on, David. Government exists to serve the people — private industry exists to make money.

    I suppose if there were a nongovernmental, nonprofit trust that controlled these (that for-profits would rent the fiber from), that would be fine, too. I don’t necessarily think it’s essential they be government-owned. I just don’t think they should be owned by for-profit companies.

    In fact, though, I don’t see a convincing reason why this should be private while other major things (roads) are public. Nobody would seriously suggest we privatize the interstate highway system. Why, other than our being accustomed to the idea, should information infrastructure be treated differently?

  18. Sean, remember it was those evil private industry folks at Corning Glass that developed the modern fiber optics so they could bilk you. BTW: The road system is a complete mess – if the government ever gets that straightened out then turn over everything to their management.

  19. I think someone should check with Al Gore before this thread continues. Since he invented the internet I’m sure he has a sound thought about the control.

    Seriouly, I’m with Peter on this one. I don’t think government should stray into areas where private enterprise can and is working. (that includes liquor stores) It is important to remember that if, as Sean says, people a mile outside of Northfield can’t get Charter service, it is only because it is not financially viable. To have the city take over an obligation that is not viable makes no sense.

    I’ve seen very few municipal systems that are working as planned. We have examples right in the Twin Cities of very poor results. The people who really seem to come out on most of these ventures are the lawyers who represent the sides in the inevitable lawsuits that follow.

  20. Ray:

    A couple of comments on your posting #27.

    Re this:

    I think someone should check with Al Gore before this thread continues. Since he invented the internet …

    Haha.

    But, for the record, let’s keep in mind that Al Gore really did play an important role in helping the Internet become viable. The idea that Gore claimed to have invented the internet is a long-discredited right-wing canard. Here’s one source: http://sethf.com/gore/ . Let’s put this old myth out of its (and our) misery.

    Then you wrote:

    I don’t think government should stray into areas where private enterprise can and is working. … It is important to remember that if, as Sean says, people a mile outside of Northfield can’t get Charter service, it is only because it is not financially viable. …

    Hmm …

    Would you reverse the Roosevelt administration’s rural electrification program? Rip up rural roads to lightly populated places? Discontinue rural mail delivery? I doubt any of these things pay for themselves.

    Agreed, there are lots of things government shouldn’t do. If the city of Northfield proposes to open a pizza place I’ll oppose it with every fiber of my being. (A good South Indian vegetarian place I might accept.) But internet connectivity seems to me more closely analogous to electric power and school bus service than to thin crust pepperoni.

  21. In the 12 month period beginning the fourth quarter of 1999, Internet-specific venture capital investment totaled $47.3 billion.

    One has to hand it to Clinton and Gore – that they did not stop the Internet from happening

  22. Paul, I said “can and is working”, which is crucial to an analysis of government plans.
    Your example of public electric lines or road construction is fine with me—because I can only assume in the time you referenced there was none, or very little, interest in building either using private methods. Electric infrastructe did need a government boost to bring it to many areas. But I don’t think we need to continue doing it (don’t think we are). As I’ve said in other threads, I don’t have real issues with policy directions to nudge private entities in a particular direction.

    On the roads issue, there are not a lot of private roads in America. We have a few toll roads and toll bridges that seem to work OK I guess, but the vast majority of roads are public. Current roads in many municipalities are actually paid for by the land developer, then turned over to the government for perpetual use and maintenance. (That is how Northfield works)

    If David H is correct that $43 billion of venture capital was invested in internet specific plans, then it appears that the private world is doing a pretty good job addressing this area.

  23. Ray,

    Yes, I noticed your reference to whether private enterprise “can [work] and is working”. Indeed, this is the important question, and that’s why I’m fine without a municipal pizza parlor or (North) Indian restaurant.

    But you also mentioned

    [people] a mile outside of Northfield can’t get Charter service … it is only because it is not financially viable.

    This part sounds to me like a gotta-pay-for-itself principle, which if applied rigorously would discontinue rural mail service, shutter schools, turn off streetlights, etc.

    I know you don’t favor such absurd moves, but where and how would you draw the line? Isn’t rural high-speed data connection pretty closely analogous to rural electrification?

  24. Paul Z, I don’t think rural mail or schools or streetlights will be problems, because we use congregate fiscal sources to pay for all of them. When I mail a package for $9 to Mpls, I don’t really think it costs $9 to get it there. And I assume it is far cheper to deliver my mail in Northfield that it is at the end of a long dead end rural road. But I understand that a portion of the price goes to subsidize other efforts of the Post Office. In the same vein, when a business pays a telephone bill, we know we are subsidizing a portion of other customers. So the customer base ‘on average’ pays what the market will bear, and the market delivers what the custoer will support. The state sends the same dollars of basic aid for pupils (almost) to all school districts regardless (almost) of what the district may be spending per pupil. Averages work in all these instances.

    With rural electricity it needed to get out to the rural areas because there were no other electric options. With high speed data I think there are other options. For example, my company uses wireless service, but I could get the service via Charter wire or over the phone line….and maybe via some other wireless digital format too.

    But, I will say that if it is determined that hard wire cable in rural areas is something that is desired, the cable companies should look at it and come up with a plan for doing it. Just as the Post Office figures out a First Class stamp price, cable companies could figure out what it would cost ALL subscribers to create a rural system. then you would have dense city customers helping to support a thin rural population, just like the Post Office does.

  25. Sean.. your a cute little socialist. John said in #4 -“if there was a huge amount of money to be made, a private entity would have already presented itself”. That said, I would assume money will have to be continually thrown at this… where do you plan to get the money to run this? to pay more government workers to maintain it? Hard working citizens will have to work even harder to pay for more government workers paychecks. Correct me if I’m wrong, but doesn’t China control their internet? Private companies survive on profit. Making money keeps companies competitive with one another. Forcing them to provide better service at a better cost, otherwise they go out of business. Government has no competition… if it goes your way. Competition is healthy.

    Just my two cents…. unless I can get the government to pay for that too…..

  26. Nick,
    I’ll reiterate that I don’t believe the government building/controlling the physical infrastructure is related to the government controlling the use of it. Even though our internet infrastructure today is privately built, there are radical laws proposed to affect it. It’s just foolish to think that because a private company builds it, it’ll somehow be perfectly open.

    That said, I would assume money will have to be continually thrown at this

    Well, yes, just like money is continually “thrown” at roads and sanitary sewer systems. I’m not saying we shouldn’t charge people, as on a tollway, for an internet connection, I’m just saying that the entity receiving the check (and putting that money back into the system) should be some level of gov’t or a nonprofit.

  27. Sean and Paul Z, part of the problem lies in whether this will be a government monopoly. The post office and many utilities would cease to exist almost over night if the market were open to competition. You could not establish your vision without shutting out competition but this also shuts down future innovation and becomes very unhealthy in the future.

  28. Quoting: “I would assume money will have to be continually thrown at this… where do you plan to get the money to run this?”

    Just because there is a profit available down the line does not mean the private sector will jump on it. You have to take return on investment into account. Muni water systems pay for themselves … over 20 years. Profits on these fiber networks come after 5-7 or even 10 years. These networks will not be operating at a loss (like our socialist roads, for instance).

    Nevertheless, the private sector (rightly, based on our incentive system) refuses to build these networks in rural areas because the ROI takes far too long and they can get better returns elsewhere.

    This is nothing new – we dealt with it with electricity and phones decades ago and have always dealt with it in roads. This is why government involvement is necessary if we want everyone to have fast, affordable access to the Internet AND if we want to keep pace with the rest of the developed world that is racing ahead with smart government investments.

  29. Sorry It took me a couple of days to respond. I was busy making a profit and spending it as I see (not the government) fit. So, I really think this discussion is about what role the government plays in our lives, not wireless internet. By the way what is your problem with making profits? I never thought you meant to have free service… but why should the money go to the government or a non-profit……. seriously what is your problem with profits????? Where is the incentive to produce, to come up with new ideas, to work hard, to compete? If you start to take away the potential to makes profits we will fail. Do you have some hatred or contempt for people who work their asses off to be wealthy. Forget internet, we need to figure this out first.

  30. Nick, I don’t have a problem with profits, I have a problem with the threat of for-profit companies on essential services. Historically, our truly essential services (water, sanitary sewer, roads, mail) have been controlled or heavily subsidized by different levels of government. Why? Because as others have pointed out, if there’s no short-term profit incentive, a for-profit company won’t be interested.

    As the internet is more widely used — especially as it begins to supplant old phone lines with VoIP — it needs to be viewed as the same sort of essential service as roads or mail: it should be provided to all, even if it’s not profitable to provide it to one specific person.

  31. All,

    To reinforce what Christopher stated above, the link below is about Jaguar Communications and how with Obsessed determination of the companies owner and with help of a loan from all places the USDA is able to bring fiber optic out to us country folk.

    isp-planet.com/profiles/2007/jaguar_communications.html

    Previously, my phone and internet was provided by Deskmedia a small fly by nite in Albert Lea. Since Qwest who own the phone line had no interest on upgrading the line with repeaters to support DSL to where I live 10 miles out of town (NO SHORT TERM ROI PROFIT). I was stuck with a cobbled in IDSL line that on a good day would hit 107kbps, when it was working.

    Jaguar came by last spring and offered to bring fiber optic to my door if I signed up for 5yrs of phone and internet(3Mbps) at the same cost I was paying for the IDSL and phone with Deskmedia.

    I will be able to add TV later this summer when they get their system working and then I can dump my satellite dish.

    I feel ,as with REA and rural phone, that government helping with some of the high front end costs will more than payback for all in the decades of use to follow.

  32. Sean after spending god knows how many billions on the project when a better technology by a for profit company comes along and renders it all obsolete, do we A) stick with the government back dinosaur tech B) shut down the US Dept of Fiber Communications and layoff all employees or C) Steal the new technology and tell the profit mongering thugs to bugger off ?

    1. Well put! This is why building roads is so dumb. Because for profit companies have a magical ability to invent new technology that defy physics and will probably come along with flying cars as soon as the stupid government builds roads everywhere.

      This question comes up again and again. If there were a technology better than fiber that will come along in the next decade, we would know about it. These things take many years to develop – from the basic science research (done by government grants because “basic” science research is rarely profitable) to the drawing board to engineering to standards setting to finding out if it is marketable to full scale deployment.

      In the coming years, speeds over fiber will increase dramatically. Wireless speeds will increase less dramatically. If a for-profit company were to come up with something newer, it will take sufficiently long that the fiber networks will have more than paid for themselves, as did the phones and electrical grid.

  33. Sean you said “it should be provided to all”. Really? I guess I don’t see internet to my home as an “essential service” as you put it. Maybe a nice convenience, but not essential. Also, I do believe some company’s like Verizon, or Sprint offer up internet anywhere. You just plug in a card and you connect through satellites (or something like that, I’m not a computer person). So what is wrong with that? for profit companies by the way.

  34. Chris, I stand corrected. Roads have been such a great investment. 50,000 die each year on them. The road infrastructure is crumbling and cannot be supported. The companies manufacturing the vehicles to convey us along on these roads are going bankrupt. You are right lets have the government jump into laying fiber just asap.

    As to flying cars – now that is where the stimulus would go if the American people were directing funds.

  35. Indeed the roads could be better – and I do agree that we have overbuilt the roads and put too many eggs into the “road” basket as opposed to sensible mass transit options.

    That said, it drives me nuts to hear people harping on the downside of roads when investments like the Interstate only fueled the strongest economy in the history of the planet. Could we have done it better? Absolutely, we should have had better policies.

    Could the private sector have done it? Not in a billion years – there are no incentives for the private sector to invest in long term infrastructure. We don’t want the private sector to do long term investments – that is for maximizing social benefit. We want to build solid long term infrastructure so private companies can focus on building widgets faster, better, and cheaper.

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