AP Takes Annoyingly Narrow View Of Muni-Fiber

Looks like the Associated Press is nothing but a shill for corporate interests that don't want competition in the area of high-speed Internet access. It's a shame because there are towns and cities that won't get wired for anything faster than DSL yet these municipalities are not supposed to wire themselves for anything faster.

Greed is definitely not good.

Dave Gram lives and works in Vermont, so its likely an easy story for him to write on the Vermont muni project. Media slants both ways depending on the author and rag they're writing for.

This gives me a great opening to ask a question I have longed to ask here on this forum.

»www.annualreports.com/Ho ··· 2009.pdf

There is the listed results from Verizon for 2009. If you look on page 15, you can see that Verizon made about 13 cents per every dollar of revenue. Much worse than in previous years.

My question to everyone in this forum is this. If 13 percent is too much profit for them, what exactly is the percentage that would be ok?? Everyone uses greed, fat cats and other adjectives but I have never seen anyone say what the threshold is that would be ok with them in relation to telco profit.

I ask this with no agenda. I am just curious about the responses I get.

You raise a very good point. I think Verizon's bad rep is mostly undeserved, but when they sue cities to prevent them from building their own network, I agree with the "greed" remarks. That said, overall, I don't believe the company is evil, like most people here would have you believe.

NYR,

I agree with your post as it relates to Muni builds. Also, my post may not be in the best thread to get an answer but one can hope. Thanks for the level headed response.

+1 This is a pretty good question, considering if you take VZW's total wireless customer base (I rounded to 90 million) and multiply times .13 you get $117 million a year. Of course you're talking about .13 per every dollar. So you'd have to find the average a customer pays, then multiply that times .13, and take that number and multiply times how many customers they have to get the actual amount of how much they make, which I bet it much much higher.

I'm just surprised that no one really wants to answer this or leave an opinion to the matter. Personally I think .10 - .15 is reasonable, but anything more is too much especially after seeing that it's already a large number (of course the math above is just an example, not really a real life equation)

RaTtMaN

Didn't they spend huge amounts for their FTTH rollout which will take some time to recoup, depending on uptake? Once they pay it off, shouldn't their net profits only get HIGHER?

I doubt it since their copper lines will continue to drop. In the annual report I posted, Verizon landline operations accounted for 1/7th of their total profits.

Of course, it would be interesting to see what their profit would be without having to run two networks side by side.

I'm not opposed to any company making a profit. But I do have a problem when these same companies want to stop municipalities from wiring themselves with fiber even when said companies have no plans to do so.

DDG,

I completely agree about incumbents stopping Muni builds. Like I said earlier, the thread you started gave me an oppurtunity to ask a question I have wanted to ask.

Who owns the Associated Press? I am sure that they are biased on behalf of the corporatist and two percenters. Such articles are always written with a Republican Big Business spin.

Mount Dora and Leesburg Florida have municipal power distribution systems and the lights are still on. The City of Eustis owns the municipal water distribution system. When I turn on my tap water comes out of the faucet. All of these services work. I am sure that the Associated Press would not mention the success of these municipalities but would focus on the sad state of the municipal owned power system in Lake Worth, Florida if the success of municipal power distribution were the issue.

More anti consumer BS brought to you by the special interest groups always paying off lawmakers.

The AP is a consortium of media outlets that all contribute stories to the service. So there's no telling where this writer is based or what the political leanings of his home newspaper are.

Politics aside, though, articles like this sell papers because they "expose" those out-of-touch government officials People like to read that stuff because it makes them feel like they're being clued in to some abuse of resources when all they're getting is a slanted story. This writer probably never even heard of muni fiber before he wrote this piece, and I'd be willing to bet that his "sources" included contacts in the cable and telco industries.

Close the bastions of communism that are libraries, schools, and the police. Free market will take care of law enforcement, and all education and information distribution in the USA.

Yes, indeed! And these government-run entities are denying private companies the opportunity to make a profit.

And let's also get rid of the first sale doctrine so people can't resell books, music, and movies they've bought...er...I mean licensed. That will increase the profits of publishers and studios, which will stimulate the economy.

I would agree with you except for the fact that the TVA story as told in Wikipedia indicates that the resistance to the development of a national broadband network is a instant replay of the resistance of the electric power cartel on rural electrification during the 1920's:

»en.wikipedia.org/wiki/Te ··· uthority.

High speed Internet has become the electricity, water, & telephone of the 21st century. That includes private sector incumbents that prefer the status quo.

AP is part of the liberal MSM, discredited daily by Conservatives.
Perhaps they actually wrote a legitimate business article, but it would be an exception.

There is nothing anti-consumer in opposing illegal government entry into a franchise territory. When the taxpayer doesn't have to ante up an extra $100 a year to prop up the socialist enterprise so his neighbor can have "faster broadband", in my book, that's a WIN for the consumer.

I'm not sure why everyone here is against "Big Business", or their marginal earnings. If they're so evil and profitable, why not buy their stock, and send the dividends to the charitable cause of your choice?

said by the guy who has access to high speed internet

Nice try. We paid through the nose to move to this location.
If high speed internet was not available, and it was so important, we would have paid, again, the price, to either bring it in, or move, whichever made more sense. Not that I wish that choice on anyone, but broadband isn't a right, and corporations aren't charities.

Indeed. That stupid liberal MSM, discredited by Fox News every day of the week.

Great point about the municipal utilities in your towns.

The reality is there are literally thousands of competently run municipal utilities around the country, reliably delivering electricity, gas, water, sewer, telephone, television, and/or internet services. Why is their story not mentioned? Because it's not a story.

quote:

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These ISPs frequently can't be bothered to upgrade networks -- but yet can usually afford either lawsuits

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Incumbent ISPs have lawyers on staff and it doesn't cost much to sue potential competitors.

quote:

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Burlington, Vermont's Burlington Telecom -- whose $50 million in debt and looming Federal investigation the AP declares is a "cautionary tale" for cities interested in wiring themselves for broadband:

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The issue here is what concerns many opponents of municipal broadband. And that is cross-subsidization by other city taxpayer funds not backed by the issuing bonds. That is, the muni broadband's income stream can't cover the interest on its bonds and then the municipality takes other taxpayer money to prop up the failing venture.

Which brings up the major issue of municipal ventures - you can't trust the pols to not fall back on their graft grasping ways and tendency to make staffing decisions based on nepotism and payoffs to political contributors.

»www.washingtonpost.com/w ··· sec-tech

quote:

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Burlington Telecom is that it suffers from a combination of factors that doom many businesses, chief among them too much debt and not enough revenue.

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The issue here is that if the business is private, the stockholders/bondholders take the hit. And the business is easily sold off to a bigger enterprise at a discount. A public entity has a much harder time accepting that failure and is much more likely to dip in to more taxpayer money than they are to just fold up.

Unfortunately many cities attempting to establish a municipal broadband network, spend more money fighting the incumbents legal challenges than the cost of installing the system. I drive on city streets and I am sure that the highway use taxes do not fully pay for their construction and maintenance.

In the 1930's most rural power distribution systems were constructed by consumer owned power distribution cooperatives. I receive electric power through one such power cooperative. The incumbent power cartels fought development of these systems tooth and nail except where it was not profitable to install the necessary equipment to provide service. The power cartel even fought the development of the Tennessee Valley Authority.

Nope. Taxes on the fuel you burn help too.

One of the biggest misconceptions ever is that roads pay for themselves. Almost no road in the country does that. Only (privately-owned) toll roads manage to do that, and there aren't many of those in the USA.

Local roads are almost exclusively paid for through property and sales taxes. They don't remotely pay for themselves.

State roads do better, because they collect fuel taxes, but their finances are also ugly and require subsidies from General Funds tax revenue. The federal government is in the same boat as well, as the Highway Trust Fund is spending significantly more than it brings, requiring subsidies from the General Fund.

Here's a quote from D. P. Lubic, a regular commenter on the cahsrblog.com, who has done a lot more research on this topic:

quote:

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In 2008 (last year for which statistics are currently available), this country, as a whole (Federal, state, and local governments), spent over $182 billion on roads, but only collected a bit over $94 billion in fuel taxes and tolls ($84.9 billion and $9.3 billion respectively). The $88 billion difference, spread over the approximatly 174.5 billion gallons of motor fuel sold that year, works out to a bit over 50 cents per gallon. This is on top of whatever you are paying now.

»www.fhwa.dot.gov/policyi ··· hf10.cfm

»www.fhwa.dot.gov/policyi ··· mf21.cfm

All this material comes from a USDOT website called “Highway Statistics.” Curiously, for all the statistical information there (and the site is a gold mine of information!), the subsidy cost I just mentioned above is not in it; you have to work it out yourself between the two tables listed above.

General link:

»www.fhwa.dot.gov/policy/ ··· ndex.cfm

Now, if we had an honest accounting, the additional 50 cents per gallon would be bad enough to pay on top of, say, $3.00 per gallon, but there are other costs, such as deferred maintenance, poor design and compromise in construction standards due to limited available funding, and external costs such as air pollution, unrecovered accident costs, and, at least until recently, a couple of oil wars.

My seat-of-the-pants estimate is that gasoline in this country really costs about $7 to $8 per gallon, and I’m conservative. There are others who estimate the cost to be as high as $15 per gallon. (You’ll have to do an internet search for the “true cost of gasoline” to find out more about this, due to the limited ability of this page to relay links, otherwise I would have a couple for you.) You–we–are paying that $7 or whatever now, hidden in our income taxes, sales taxes, property taxes, insurance costs, and so on.

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Fascinating. Thanks for the links and read.

The problem with that is that we allow companies to become to big to fail at which point we have all of the cons for both public and private institutions.

The small town I live in the Power is half city power and half private. The original part is City Power and the annexed is private shareholder. The private is cheaper and supplies the City their feed at wholesale. Sometimes being small costs more.

The biggest problem I have is the benefits gained just because they are a government. They don't pay taxes and their funding is guaranteed by taxes. If they could be set up as totally independent and somehow self funded then more power to them. Telco and cable is no longer really natural monopolies like power, streets, water and sewer. If the city can put the fiber in then so could a private company. The cities put up all kinds of road blocks that just seem to disappear when it is their project.
In the Wilson case they did go to Embarq telco and TWC but don't know if any funding was offered. If they would not do it then the city should put out bids and backing incentives to a private company. Let the the government just be the party that brings people together. I realize in fiber build cases that may not work if nobody on one side shows up.

Telco and cable are still natural monopolies. No one will attempt to put in fiber in your area- no one.

For example:
»news.yahoo.com/s/ap/2010 ··· _telecom

Which by all accounts is wildly successful and is a metro with population of around 300,000 people

Here is what I see as a summary of who's involved in this issue and why they take the positions that they do.

First are muni-fiber proponents. Many of them are upset at their incumbent providers for failing to offer faster speeds, higher or no caps, and better pricing. They feel as if the providers are taking their money and not upgrading their networks.

Then there are the opponents, excluding the providers (more on them in a minute). Some opponents oppose muni-fiber because they don't think the local government can manage it properly. Others genuinely believe that the public sector should, as a rule, not compete with private industry. Still others simply don't see a need for faster speeds, lower prices, higher caps, etc. What they have is good enough for them, and they may feel that, should enough people need more, someone will come along and offer it.

Then there are the cities. The ones that get into muni-fiber are often doing it either because of dissatisfaction with the incumbents, as voiced by their constituents, or they see muni-fiber as offering them some sort of economic advantage, or they see it as a way to make their community stand out as progressive in hopes of attracting new residents and/or businesses.

Then there are the incumbents. They are driven by competition or the lack of it, and, given that they are for-profit companies, they aren't going to do anything that they aren't under economic pressure to do. And, as to their determined effort to keep muni-fiber out using tactics that many perceive as anti-competitive, the reason is actually pretty simple. Using lawyers, most of whom are already on the payroll, is much cheaper than having to upgrade a network. And, even if an area is not economically attractive for a company to deploy upgraded services, it might become attractive and therefore more profitable in the future. If it does, the local network might be upgraded if it is beneficial to the company. If the area does not offer increased opportunities for profits, then the network will likely be sold to another provider.

Now, as for strategy for those wanting to promote muni-fiber:

What incentives are you offering, really? At this point, blazing-fast connections mean little to the average consumer or small business. They perceive the Internet's main use as Web surfing. Yes, there's video, but that's still a niche market, and it's still viewed as something geared toward entertainment. If you're going to promote these blistering speeds as a benefit to the local economy, then there need to be applications that take full advantage of all that speed. As for attracting businesses, Google, Microsoft, Apple, etc. all can get as much bandwidth as they need right where they are, so building a fiber network isn't going to convince them to move. The businesses you might interest are the ones who need the speed of a T-3 or two but who can't afford them.

And work out some real-world financial projections. No intelligent person buys a house without first knowing the asking price, how much the mortgage payments will be, and whether their income will cover them, so you have to expect resistance if you propose a very expensive project without lots of numbers to back up its viability. You still won't convince the die-hard free-marketeers, since their argument is a philosophical one, but you will go a long way to allay the fears of those who are worried about where the money will come from.

And be ready for the incumbents to attack. In fact, be proactive by showing how much cable, Internet, and phone bills have increased over, say, the last 10 years. Again, show real numbers. And, when you show all those great applications that can run on this super-fast network, make sure you point out how quickly they'll blow through the incumbents' caps, assuming they'll run at all. Use the strongest, most detailed, and most credible arguments right out of the gate, and keep hammering them home. The incumbents will still use their usual assortment of tactics, including push polls, lawsuits, and lobbying for protectionist legislation, but, if you can get out there first and frame the issue the way you want it presented, you put the incumbents on the defensive from the start. Don't even allow them to get to the point of attacking your proposal. Instead, make them have to defend their business practices instead.

Just my opinion, for what it's worth.

You won't get the applications until you build out the network. So far we have OnLive and Netflix, and those are being threatened by duopolies and caps.

From a technical design perspective you should have no more than
One water line to the house
One electricity line to the house
One twisted copper line (you can have multiple pairs)
One coax line to the house
One fiber

You might not have all but having two of the same kind does not make sense from a design perspective. A demand for a second line (of the same type) is a failure in the market. Reuse is efficient use of invested infrastructure.

It is hard to sell different water
It is hard to sell different electricity
It is easy to sell services on a packet network.

The network needs to sustain itself and not be subsidized by services. Nothing else is sustainable for an extended length of time.

The ultimate technical design is obvious (why argue) what might be discussed is how to get there but any proposals that does not encourage the optimal design and reuse of infrastructure fails on the logical side.

How well are we executing today against the correct design? Not very well in my book almost no infrastructure is reusable. E.g. I have better reuse capability of my electricity infrastructure than my broadband infrastructure (that is pathetic).

Good design can have bad implementation but bad design is domed from the start.

A single failure of municipal fiber and a single success of municipal fiber do not have equal weight. A success proves it is doable (that is big) a failure just proves that success is not guaranteed.

/Hagar

From a technical point of view:

One twisted copper line (you can have multiple pairs)
One coax line to the house
One fiber

A big part of the "why" the incumbents are so opposed to muni fiber is because it is fiber. And fiber is the ultimate natural monopoly. Once you have it you don't need (and won't pay for) their twisted pair phone or coaxial video.

Happy to have cut both cords in Lafayette...

Yes I agree fiber will eventually kill the other wired packet solutions. Not cost effective to maintain multiple fixed networks.

Unfortunately there are plenty of examples where fiber monopolies are not living up to its (technical) potential.

A good technical design can always be killed by bad implementation, e.g enough lobbying and bad regulation.

Waiting for fiber is an easy way out, we need to use our existing infrastructure more effectively. E.g. if we are using our existing infrastructure poorly no reason to believe fiber will be built/used more effectively.

Some here think that this shouldn't have been reported this way, but dig a little deeper.
BT is a perfect example of the risks of muni fiber projects (really any muni project, beyond the scope and knowledge of the local Gov't)
They risked $50M on the project and believed they would get a take rate higher than you can typically expect over the first few years of operation (yes SOME areas have reach 50% but 30% is more realistic) for that $50Mil they now serve around 5,000 homes and a much lesser percentage of businesses, the school district and some city functions plus have 15 or so wifi hotspots (free subscribers, $5/day to "guests") the rate aren't that great, and the payback (assume a generous 10k subs at $100 per month) will be 50 months, IF their was NO operating cost, NO debt service, NO outside bandwidth cost, NO insurance cost, etc.. then the timeframe is MUCH longer (currently they seem unable to pay the equipment leases or the debt service)

So what's the damage?
well the $50 million which ALL residents (not just those that wanted or use the service) are obligated to pay, plus, because BT was unable to repay the $17 million, on demand in august the city and muni airport bond rating has dropped meaning substantially higher borrowing cost on future project for years to come, and on the temporary financing keeping the system operating for another month while the mayor negotiates a new loan (at a much higher cost) OR the sale to a private party (likely well below the value, certainly less than what is currently owed)
The other choice is to wait until the end of the month when the current lender seizes all the equipment leaving the city with a big debt and fiber that runs to an empty room.
I not against muni fiber , but to sweep this glaring example of failure (or others) away by pointing out those sucessful ones is sticking your head in the sand.
Like many muni projects it was underfunded, over optimistic, and the downside potential was ignored.
There was NO indication that the city was slowed/harassed/otherwise hampered in going ahead by incumbents legal maneuvers (in fact the telco's appear to have judged the lack of demand/unlikelyhood of a profitable return and thus choose not to build)

That's why I proposed in this thread »Government subsidizes electric and phone through REA.. that instead of federal grants, that the money go into a low interest loan fund (google could throw their fiber project money in there too, plus whatever part of USF eventually gets sent for the NET) that has a condition of ascessment of the viabilty of the project (could include google (lots of experience there) and various other consultants who have NO direct benifit (ie not the contractor or salesman from XYZ fiber corp.) for any particular buildout one way or the other, .
if the accessment suggested "more funding" "lomger term payoff" "faster or slower buildout" the plan would have to be revisited AND presented to taxpayers (' each home will now be "on the hook" for $xx,xxx should it fail, the breakeven/payoff is X subs for 10 years, and so on)
Basically those at risk (taxpayers/stakeholders/shareholders) should be making and informed AND realistic decsion.

companies that profit from and are part of old media will fight the hardest to keep the dough rolling in... it's called (in)vested interest.

you don't see muni fiber springing up in a Verizon territory with FIOS, do you?

These are strategic deployments aimed at neglect and abuse of the market place anybody who doesn't see that has their head up their ass, or someone else's while their pockets are lined while wearing spiked rose colored glasses.