Posted upon request of Minnesota Public Broadband Alliance..
The Minnesota Public Broadband Alliance whose members are from cities and counties who provide services or funding for broadband networks would like to respond to the industry perspective with the municipal perspective. The language in quotes is from MTA’s opinion piece on the President’s speech in Iowa regarding broadband.
“Last week the President spoke in Cedar Falls, Iowa about Broadband and his administration’s ideas on how to get it to rural America connected and by whom. The President’s (and many in DC) solution is for local units of government to build competitive networks.”
We welcomed the President’s comments in Cedar Falls but we don’t think he believes that local government overbuilds are the ONLY answer to providing a robust broadband network. Nor do we as a group. We do believe that the more flexibility our citizens have in getting broadband to everyone, the better the state will prosper. This would include public – private partnerships like Lac Qui Parle county’s network as well as public – public partnerships like SMBS’ partnership with Windom.
“There are three problems with this concept. First, how does a municipality overbuilding a community where there are already one or more private providers help solve the problem of getting broadband to the areas without it?”
How does it help? The same way it helps a private provider, by increasing the market geography so that there can be an increase in market share to finance the more costly build outs. In the case of cities, there are city limits of authority and separate finances between city, county and even township finances, which in turn limit where a city can go, much like a cable company. That’s why you are seeing far more new energy coming at the county level to address rural build outs to the under and unserved citizens.
“Second, telecommunications is not like other utilities. Unlike electricity, water, wastewater, and gas, telecommunications is a competitive utility.
We agree, telecommunications is a competitive utility. But unlike the industry, our emphasis is on the ‘utility’ while private providers emphasize the ‘competitive’. The landscape changed in 1996, true. But in 1996, there was no broadband and getting people a dial up connection to the Internet was considered progressive. There were only a few, perhaps twelve, people in the 104th Congress to vote against the Telecom Act. Congressman Collin Peterson and Senator Paul Wellstone were two of them. They were concerned that new “competitive monopolies” would form and leave rural Minnesota behind. They did do that, in the form of RBOCs, ours was US West at the time. The point is that the landscape is constantly going to change as telecommunications becomes broadband communications.
“While competition is generally good for consumers, it also puts pressure on the companies to operate more efficiently and it can act to limit the amount of capital resources that a company can reinvest in its network to provide services, including broadband.”
True again, however the difference here between municipalities and private corporations is this–a corporation makes those decisions based on what’s best for their shareholders, while municipalities (much like cooperatives) decide based on how to best serve their customers.
“Third, there is no transparency of process for taxpayers. Right now in Minnesota any local unit of government can spend millions of dollars on overbuilding broadband networks. They usually issue Revenue Bonds for the project, and when they can’t pay the bonds back, they default on the bonds, like the City of Monticello did.”
Since you brought up Monticello, one of our members, let us take an opportunity to add this information to the discussion. There was an overwhelming vote by the public to proceed taken, the private providers were asked to provide higher broadband service and declined at the time, and from our perspective, the lawsuit filed by TDS which delayed the issue of bonds and construction was the killing blow to the Monticello project’s competitive position. During the time the lawsuit was in district court, then appeals court and ultimately refused by the Supreme Court and dismissed, both TDS and Charter overbuilt their own networks to fiber and lowered their prices. Good for consumers as this is, it looked like bullying in the marketplace from this side of the street. Monticello continues to look for the best options for their constituents and we will continue to assist them as they move forward.
“Ultimately, this affects the City’s bond rating and makes borrowing money more expensive in the future, which means taxpayers have to pay more………In other words, a city’s monopoly utility is subsidizing their competitive utility.”
And TDS customers in other territories are subsidizing the low prices in Monticello but that’s a long discussion to have later. Monticello’s bond rating is A2, classified as high average and not inappropriate for a municipal rating.
“In those rare cases when there is no other viable alternative, there has to be transparency in the process for local units of government to complete against the private sector……. School districts are required to hold a specific number of public meetings, follow a pre-described time line and process to ensure taxpayers are properly informed before they vote. Municipalities should have to do the same thing before they risk taxpayer money. The better question is who could possibly be against transparency of government process and why?”
Well, here’s why…the comparison is flawed since school districts impose their own levy and are not part of the local municipality government. A city or county levies for many reasons and does not hold hearings on each separate use of their finances, but there are public hearings on the levy itself. Those revenues are then shared and used for things like an economic development commission, building a new hospital or upkeep of park property. We have transparency in public finance in Minnesota because we owe it to our citizens. We do not owe business cases to our competitors.
“We are all on the same page when it comes to concept that all Minnesotans deserve access to quality broadband.”
Yes, we are. We only ask that we move forward to the thinking that public providers and public partners are not the problem, but part of the solution.