As MPR reports…

Bemidji-based Paul Bunyan Communications, which provides service to some 28,000 phone customers, is slowing down an aggressive expansion of fiber optic cable because the Federal Communications Commission is shifting how it allocates money in what is known as the Universal Service Fund.

The company could receive from $3 million to $5 million less from that fund each year as more money flows instead to such large carriers as AT&T and Verizon, a company spokesman said.

I’ve heard the same sentiment from other folks, such as at the CLE Day on Broadband last week. The Local Exchange Carriers (LECs) feel as if they are paying into a system from which they can’t make a withdrawal. At that meeting Joseph Cavender from the FCC explained that the recent changes are the first of several phases, indicating that the next round of changes may help LECs. I think that feels like cold comfort right now – first because it doesn’t help today. Second, because that just leads to more uncertainty and it’s difficult to build (or sustain) a business plan or make investments based on uncertainty – as seems to be the case with Paul Bunyan.

It’s hard on the companies; it’s hard on the communities as well. A recent report from the University of Minnesota Extension (Economic Contribution of Telecommunications Companies Serving Greater Minnesota) indicates that the total economic contribution of the telecommunications industry serving Greater Minnesota in 2011 was an estimated $1.3 billion. So anything that hampers growth will hamper the economic impact. Also with the negative impact and uncertainty communities are not getting broadband.

David W. Collins, Executive Director of Hubbard County Regional Economic Development Commission has sent a email to several folks outlining the potential problems with these changes on his community and asking policymakers and community leaders to consider the impact…

We need your help!

The Hubbard County Regional Economic Development Commission (HCREDC) for several years has been trying to bring high speed broadband services to ALL of our rural areas. Approximately 4,000 homes and businesses within the Park Rapids (MN) phone exchange currently are not served, and have to rely on satellite or dial up service. These options are unacceptable. Bringing state of the art, underground fiber optic cable to these areas is vital to our future economic growth for numerous reasons, a few of which are:

1) the ability for consultants and others to operate / manage their business from home;
2) students / parents / teachers / schools being able to communicate and student being able to complete assignments (they are currently at a disadvantage compared to other students);
3) resorts being able to take reservations and market themselves, plus the ability of guests to communicate while visiting;
4) people want to live in this area, but are choosing to purchase real estate only where broadband is available;
5) medical care / monitoring plus emergencies;
6) the list goes on and on.

After communicating with several industry providers in our area, the HCREDC partnered with Paul Bunyan Communications (cooperative, based in Bemidji) and supported efforts to obtain a Rural Utility Service loan (RUS loan) thru the United States Department of Agriculture (USDA). This effort was successful and Paul Bunyan Communications was awarded a $17 million loan in September 2011 to build out fiber to each home in the Park Rapids area. It was expected that work would begin immediately with fiber going into the ground beginning Spring of 2012, with project completion estimated to be early 2014.

HOWEVER, in late October and again in November, the Federal Communications Commission issued an order to “reform” universal service fund (USF) and intercarrier access compensation. This “reform” would cost local telecoms millions of dollars annually in lost revenue. It would dramatically change the business model for these telecoms from a system that has worked and been in place for years. The “reform” would significantly reduce their annual revenues and in almost all cases eliminate their ability to invest in rural broadband / phone infrastructure. It is my understanding that one of our local area telecoms stands to lose over $3 million annually due to this “reform”, which would be implemented over the next 9 years. This “reform” will make it extremely difficult for these businesses to repay existing loans, let alone invest in further developing a broadband infrastructure in rural areas.

This is not just a Hubbard County problem. It is not just a Minnesota problem. It is a problem for rural areas nationwide!! This “reform” will negatively impact the development of rural broadband infrastructure nationwide. Imagine if rural areas did not have land phone lines or electricity? We are basically talking about the same issue for our times! And this is much more important than keeping rural post offices open!!!

But back to Hubbard County. The build out of fiber in our area has been for the most part “put on hold” because of the “reform” and its impact locally. Tough for Paul Bunyan Communication (or anyone else in our area) to build out a $17 million broadband infrastructure when the revenue model is being so drastically changed.

So, we are asking that:

1) our congressional delegation (Senator Klobuchar, Senator Franken, Congressman Colin Peterson & Congressman Chip Cravaack) make this issue a top priority; [See note from Klobuchar/Franken]
2) we need our congressional delegation work to have the FCC order nullified or reversed or amended in a way that our project could proceed;
3) and we may need our congressional delegation to extend the deadline for using the $17 million dollar RUS loan authorization. Time is ticking away on us as this issue is being “discussed” in Washington. The “reform” issue needs to be resolved, but when that happens we still need to be able to access the $17 million RUS loan;
4) the Association of Minnesota Counties to actively become involved in this issue. Perhaps by asking each county to pass a resolution of support, and by actively engaging their Minnesota and Washington lobbyists and political action network;
5) Bill Richards, Richards Policy Group, representing Governor Dayton & Minnesota, become actively involved in resolving this issue;
6) Impact 20 / 20 (Northwest Minnesota Foundation) to become involved and mobilize their network;
7) Blandin Foundation Broadband Initiative become involved and mobilize their network;
8) Governor Dayton and his staff to make this a priority and communicate the same to the Richards Policy Group and entire MN Congressional delegation;
9) that the Rural Broadband Alliance (based in Washington, D. C.) continue to work with us towards a satisfactory solution.

Apparently challenges to the “reform” have been, or will shortly be, filed in the 10th Circuit Courts (Denver). However, this route to remedy the situation could take years at best. Congressional action is needed and needed now. The intent of the USDA’s RUS program is solid, the FCC needs to keep its USF and inter-carrier access fees in line with and supportive of that intent.

I offer the content of his email almost in its entirety as a roadmap for anyone who has similar concerns.

The City of Monticello has put bondholders on notice that the municipal broadband network once hailed as a national model is unable to meet its financial obligations with revenue generated from FiberNet Monticello customers. Instead, city leaders now will discuss how to restructure payment of $26 million in revenue bonds to save the faltering broadband network.

A financial report prepared for the Monticello City Council meeting on May 14th acknowledges that FiberNet “continues to operate at a loss. For the quarter, FiberNet lost around $100,000, not including its 2012 debt payments.”

A blunt letter sent to Wells Fargo Bank in March indicates the City does not have an obligation to continue making up the losses incurred by FiberNet.

I contacted Jeff O’Neill, the city administrator at Monticello for his take on an update. He touches upon some of the issues we’ve heard in the past: the budget has taken a hit starting with obstacles caused by the lawsuit brought against the project at the onset of the initiative. Also they have seen some fierce competition from other providers. But I think it’s interesting to take a look how a community network can and should measure success. Obviously finances is part of the equation – but providing the community with the infrastructure it needs to succeed is another part.

Here’s what Jeff had to say…

When evaluated as a whole, FNM has been wonderful for the community.  As requested by its citizens, FNM has delivered.   The system is performing well with FNM staff and HBC getting great reviews from customers.  The community is benefitting from telecommunication service at a level and cost that is the envy of the nation.  With telecommunication costs  dropping 35-60% since the inception of FNM, the savings to the community are enormous.  This savings and improved performance is certainly a huge plus for the local economy and supports the goal of  job creation.

When measured from a purely profit and loss basis,  original business plan has been impacted significantly by the one year delay created by the TDS lawsuit along with a variety of impacts resulting from the great recession.   Also, the presence of an army of Charter door to door salespeople selling 30 meg internet, all video channels and four movie channels for $59.90 has blunted the growth of FNM subscription rates.    Please note however that FNM subscription rates are actually quite good (Appros 39% of Single/two family) and we have a strong and steady base of customers that continue as FNM customers due to fair prices and great service. These customers have turned away Charter salespeople on multiple occasions.   Some have mentioned that they will not take the Charter deal as doing so would be self-defeating and like cheating against themselves and their neighbors who voted for building the system.

Over one quarter of businesses in the community are using services (120+) and the number continues to grow.  Overall, business and residential citizens in the community are saving millions due to the reasonable prices by FiberNet combined with the drastically low prices by Charter.   The original David and Goliath story ended with the sling of a single rock… this modern day version is ongoing… Monticello is fighting the good fight and doing what it can to enhance financial viability through cost cutting and development of new revenue sources.  We are confident that these business development efforts will ultimately off-set the economic damage resulting from the lawsuit and unbelievable competitive pricing.

 

I know that many people were impressed with Dakota County’s presentation at the April Minnesota Broadband Task Force meeting, especially their one-stop-shop for right-of-way permission. It’s a glimpse at the kind of seemingly common sense approach they take to streamlining processes in Dakota County. I say seemingly because I know a ton of work must have gone into assessing the policy and procedure for each type of application and finding a way to make them work on a common online form.

It was interesting to talk with David about other projects happening in Dakota County and beyond – from the physical layer up through applications.

Here’s a sample of what’s happening:

Metro County Fiber Interconnect

Dakota County met with several other counties (Anoka, Carver, Hennepin, Olmsted, Ramsey, Scott and Washington) and Hiawatha Broadband (HBC) to discuss Metro County Fiber Interconnect. They are working on an MPLS network between all 8 counties, which will be completed by the end of June. MN.IT (formerly OET) is driving the work and will provide private network space that was allocated to each county.

The counties are working together with HBC to find ways to cost-effectively expand their fiber networks. The goal is to make the best use of existing conduit and connections, rather than building from scratch. The counties and local government agencies get to improve infrastructure. It makes the most sense to map out existing infrastructure, map out plans for future development and pool the pockets of funding to build only when necessary and pull extra strands of fiber (or post equipment on towers) whenever possible.

Homeland security, disaster recovery and transportation have been a few of the possible pockets for funding. While the infrastructure clearly supports those goals- the investment is helping in other areas as well.

This underlying layer of physical connectivity has allowed the counties to streamline processes and build new applications that save money for tax payers. Looking at the infrastructure alone, building up this mesh network among counties has allowed different entities to terminate T1 connections – those connections were costing up to $1500/month. Also each expansion is bringing increasing rural area closer to high speed broadband.

Reducing Government Operations Costs

One of the ways Dakota County has been able to use ubiquitous broadband is their SIP phone system. SIP phones use voice over IP. There are several advantages – first they are like super-sonic phones and work well for videoconferencing. David mentioned that staff in Dakota County is just as likely to meet video videoconference, even while in the same building, because of lack of conference room and convenience of videoconferencing.

Second, the phones work anywhere they can get online. So if you have relocated or have a meeting in another building, your phone still works. In case of a disaster, whole offices can be moved pretty seamlessly to new locations – the phones and computers will work. Dakota County recently moved  3,800 phones to the new SIP system.

The County is looking at virtual desktop options, where much of the interworking and content would live in the cloud, while the desktop is really just a portal to the information. There are some similar advantages to SIP phones, in that the content becomes decentralized and can be accessed remotely – but also virtual desktops should not require the same sort of upgrades as regular desktops (and laptops) require today.

Applications in the Field

Dakota County just doled out 3500 IP addresses to traffic signals across the county. They are used to track stoplights and pedestrian crossings. Good – but I must admit I didn’t really understand all of the implications until talking to David. The stoplights are tracked. The buses are tracked. So the stoplights can speed up or slow down a bus when necessary – ensuring that buses aren’t falling off schedule and grouping together. Also the lights can be tracked and through artificial intelligence will learn to direct traffic as necessary – reducing red lights for the bulk of travelers, saving both time and money. And of course smart appliances like this could be helpful in an emergency or disaster recovery situation.

Next Steps for Dakota County

The next step for Dakota County is sharing infrastructure and technology with area businesses. That is where working with folks such as HBC helps.

The County doesn’t necessarily want to get involved with providing broadband services to the end customer – but they are willing to invest and collaborate so that broadband is available. Again is feeds into supporting the tax bases and providing the services that area business and residents want and need.

Connecting with businesses and nonprofits is the next step for Dakota County. Some counties/communities may not be at the same stage – and for those folks David was also kind enough to share a series of documents that he has used coordinating various parties in public-private partnerships. The hope is that these might become templates or fodder for other counties looking at fiber options.

Agreements Between Partners – Templates

• Joint Powers Agreement for the Development of Optical Fiber Network (between state, county and cities)
• Joint Powers Agreement for the Development of Optical Fiber Network (between state, county and MNSCU)

Board Documents

• Authorization To Execute Joint Powers Agreements For Development, Use, and Management Of An Optical Fiber Network
• JPA with State for Development of Fiber Network
• JPA with State, County and School District

Working with Vendors

• Request for Bids to Build Fiber Network
• Contract for Fiber Network (includes labor and materials)

Rights of Way

• Proposed Fiber Connectivity – Buck Hill Radio Site Tower Shelter (description of how/why fiber to tower will improve communication)

Todd County FIBERBAND 40 people in attendance Nate Burkett, county coordinator goal of meeting -
Inform, gather information from users, find partners, not make decisions

Timeline on project:

• April 2011 – County board approves resolution seeking broadband
• May 2011 – Countywide meeting
• August Blandin grant
• January 2012 – feasibility study completed and presented to county board.
• March 2012 – interest survey through tax statements – 400 responses.
• April – meeting with Arvig to discuss partnership possibilities

What’s next?
Community decision making.

Mark Birkholz – ACS

No current business model works for FTTP now PP partnership might work – evaluate… Breakeven – 25, 36 to 43 years Be ready if BB stimulus funds become available.
Be positioned for USF changes – proposed changes will not help project.
Fiber is the end all – be all for broadband deployment.

John Schultz U-reka Broadband Ventures

Cites the county for moving relatively quickly. John recognizes Blandin, Toni Merdan and Alex Weego.

Starting does lead to action.. Todd County has started!
Marketing study, Build options, Capital requirements, Business modeling, possible next steps.

Residential
96 % of people still have a land line telephone.
53% Internet penetration

• Rural customers less satisfied
• Customers want faster speeds, more bandwidth 74% cable and satellite penetration
• Charter in town
• Dish in rural areas
• Where ACS has capacity, they also offer video

65% “likely” to change providers
same percentage in rural and urban

Expected bundle pricing
39% – $85-100 per month
20% – $101 – 110
18% – more than 110 dollars

Business survey

• 86% of businesses use a broadband connection Only 37% have a web site those not using cannot get broadband 62% would like higher speeds at work
• 100 % want faster service at home

A few Todd County customers have FTTH through ACS or Consolidated Telephone or WCTA.

Rural outside ACS
Town/city outside ACS
ACS Service Areas

Total build cost with 100% penetration – $65 million 65% penetration used. ACS competitive pricing model – Staples and Wadena
30 year model – $42 million capital cost and operational costs based on 65% penetration. Includes electronics refresh.

Cash flow positive in year 3.

Intangible benefits

• Savings due to competitive environment – 30%?
• Economic development surrounding the network development
• Significant jobs impact
• Improved governmental and educational services

Jobs – construction and operations and permanent new business and jobs and telework.

Now

• further discussions with ACS
• Sales/education and marketing program to demonstrate 65% penetration Discussions with funding sources – bonding, etc.
• Meet with RUS
• Follow USF discussion and exploit opportunities

Questions -

Recruiting market/education team.

Issues around multiple devices and the use of bandwidth.
Cannot take online classes due to poor broadband.
K12 districts need students with broadband; new online training enabling college courses. Schools need the bandwidth too!
Bundling would be a big saver for residential and business.
Rural people may be/would be willing to pay more.
Move forward as a county .
Wireless did not work when it rains, snows, etc.
Timelines on decision-making.
County goal 20/10 Mb by 2014 in towns, in rural areas by 2016.
Hoping for federal action.
3 year build out to spend $65 million.

Wireless as the solution. Many limitations to wireless; it is significantly cheaper. Fiber is future proof. Copper is definitely limited.

Need to work to get the discussion going across the county, with lots of people participating. Make it easy for the county board to say yes.

So many people want and need broadband. We need a local partner, one with local customer service. People in rural MN understand the needs and value of both rural and city livers.

Discussion about enhanced competition. and the effect on pricing and take rates. Schultz indicated that they need 65% take rate and around $100 ARPU.

Community questions about making things happen. How do we get the word out? How does this work get done?

geography differences – what are they?

New worker in Todd County – tech consultant. Able to get high speed in town. This is critical for business and education. Colleges and high schools are becoming increasingly intertwined. Bandwidth is the link to connect students and educational institutional . Lives in Clarissa. Ready to help get things going using social media and local contacts!

The Cloquet Valley Internet Initiative (CVII) is an effort by seven rural townships north of Duluth to bring broadband internet to our region. These townships (plus 2 unorganized townships) are located between two big fiber optic projects (Lake Connections and North East Service Coop) but so far are not being included in their development or in development by any of the private internet providers.

Internet to our citizens is, at this time, provided by dial-up, satellite, and a patchwork of low-speed DSL and wireless. This is a grass-roots effort by rural township government and interested citizens. With advice from many experts, including Bill Coleman and the Blandin Foundation, the CVII team developed educational materials and distributed them to citizens in the area.

The team developed a questionnaire to gauge the level of satisfaction with current internet access and interest in paying for improvements. The Blandin Foundation team (thanks Ann and Bill!) turned the questionnaire into an on-line survey. The CVII team used the on-line survey, plus door to door distribution, mailings, and newsletters for distribution. The results showed strong dissatisfaction with current internet access and also showed a very good market for improved broadband. We took this on the road to various providers, but generally got the message that our population density is too low.

The next step was to conduct a broadband feasibility study to understand the details of what it would take to expand broadband and what it would cost. Grants were obtained from AgStar Financial Services and from the Blandin Foundation, and St Louis County and Lake County facilitated the matching funds. At the same time, the ad hoc team developed a joint powers agreement among the townships to create a single organization to promote and leverage broadband internet. We all realize that individual rural townships simply don’t have enough people to attract the infrastructure for broadband, and we have to work together.

We are embarking on two feasibility studies. The first study will provide an objective analysis of the capacity, capability, monthly cost and pros and cons of all the potential broadband provider types. The second study will provide an engineering analysis for fiber to the premise and fiber to the node with DSL to the premise. These two options are likely the most expensive to deploy, yet would yield the greatest capacity and capability for broadband levels at or above the Minnesota state standard. Both studies will give us valuable information for our town supervisors and for our citizens to understand the costs and benefits of various types of broadband internet. And we can use the results to further convince providers that it is feasible and profitable to build in our region.

A real challenge for rural townships such as ours is the limited capacity and capability of rural townships to initiate broadband projects on our own. Our townships do not have an “anchor” city, county, hospital or school within our borders. We are a tiny part of St Louis County, that already has areas of broadband deployment – our situation is, rightly, not viewed as county-wide, although our county has a lot of rural under-served areas and other townships in a similar situation.

Our government offices have very limited administrative capability; town supervisors, clerks and treasurers all work on part-time schedules – most less than 10 hours per month. There are no full-time administrative staff. Rural townships are typically in the business of fighting fires (by volunteers), grading and plowing roads, and some have cemeteries. We have no larger organizations with deep capabilities and deep pockets to seek the large sums required to deploy broadband infrastructure. However, within our townships, our citizens are small business owners, doctors, lawyers, professors, public and home school children, fire departments, and seniors, all needing high speed internet capability and capacity, the requirements of which are growing daily.

When we look across the broadband development landscape, we see mostly cities, counties, telephone companies, and electric coops in public-private partnerships to develop broadband infrastructure. We are likely not unique in Minnesota, since the state has many rural areas that are under served for broadband. One good thing that rural townships have is neighbor-to-neighbor relationships and trust among our citizens. These relationships will be valuable for communication, education and promotion, if and when we can find partners to work with us to leverage broadband. We have received a great deal of encouragement in our strategy, and we are hopeful that we can demonstrate a good market and an unfilled niche for broadband from one or more providers.

Their next Governance Group meeting is scheduled for June 21. The plan is to invite last mile providers to make presentations on their services. If you know of any last mile providers who might be interested, please have them contact David Minke.

The meeting will start at 9:00 AM in Room 705 at the Anoka County Government Center. Please pass the word along to all those who may be interested in learning more about last mile connectivity including council/board members, EDA members, economic developers, cable commissions, etc.

Sibley County Commissioners voted to move forward with a multimillion–dollar fiber optic broadband project that would bring faster Internet to Renville and Sibley Counties and even individual farms in the area….

The proposed fiber–optic system would be publicly owned, but privately run and connect every home, farm and business in the area to high speed Internet.

Sibley County EDA Tim Dolan says, “Each person has the choice to either opt in or out.”

The involved communities would sell around $70 million in revenue bonds to build the network, which will be paid off with user fees.

Dolan says, “We’ve gone over the 55% mark that are interested in the project which when we do our cash flows and projections gives us profitability for all 30 years.”

Many of the area cities have voted to be part of the network; Renville County has also voted in. Arlington has voted not to participate.

Minnesota Public Radio highlighted the potential impact on rural residents – some of which are still using dialup connections…

Linda Kramer and her family grow corn, soy beans, even a little wheat. The family’s farm is on 1,100 acres in rural Sibley County, about 85 miles southwest of the Twin Cities.

Kramer pays about $60 per month for Internet access that by today’s standards is archaic.

“My husband on the farm needs to send files… He’ll throw them in an email, send it out, let it run overnight, come back in the morning and two-thirds of them haven’t gone through,” Kramer said.

They talk about the community support – as demonstrated by local residents signing up for service…

So far, over 50 percent of the residents said they would take some combination of phone, Internet or cable TV service from the broadband project. In parts of rural Sibley County it’s closer to 80 percent of residents.

The meeting begins at 10 am tomorrow; the vote is expected to happen soon after the meeting begins.

• Jackson – Our first three construction phases have been identified. We intend to have phases 1-3 completed by June, 2012. The entire City of Jackson will be completed by fall, 2012.  Southwest Minnesota Broadband informational material will be delivered to homes according to construction phasing in the coming months.
• Brewster, Heron Lake, Lakefield, Okabena, Round Lake - installations are near completion.