Minesota Broadband Task Force June 12, 2012: Full Notes

10:00 a.m. to 3:20 p.m.

10:00-10:15 Greetings and introductions, approve meeting minutes

10:15-11:15 Policy Incentives Discussion

The Panel:

  • John Fuller, MN Senate Counsel (telecom & broadband issues)
  • Joel Michael, MN House of Representatives Research Department (taxes)
  • Bob Eleff, MN House of Representatives Research Department (telecom & broadband      issues)

MNDOT Plans:

There’s no money to be had. What are folks looking at?

Section 179 – revenue code allows certain businesses to expense rather than depreciate – you can deduct immediately. They are dollar limited. And there’s a phase out if you make a lot of purchases (so no good to AT&T but good to smaller providers). But the limit went from $25,000 to $250,000 – now it’s $125,000 – might decrease at the end of the year.

Dick – we got responses from State of MN treats depreciation differently from Feds. That’s one question. The federal rules are more liberal. Is this an area where the state might adopt the federal policy?

So much of the broadband equipment has a short lifetime. Deployment is high cost. A change in policy would make it more affordable.

Panel – Minnesota couldn’t afford that schedule. The budget has just been so tight. This applies to every business in the state. It doesn’t just target broadband businesses. Maybe it makes sense to come up with an incentive that is more targeted. Also then you could broaden it out to all providers.

Need to think about the why. Is the problem that you can’t get folks to install or is the problem the sparse population and take rate.

Use of General Obligation Bonds for fiber. There was a 2010 document issued by AG on fiber. Why can some state use GO Bonds to build out and Minnesota doesn’t?

The constitution limits use to land, public building by government owned. Most of the infrastructure is private. The fiber needs to be public. There’s an opinion that the AG says the only way you can use GO Bonds for fiber is if it’s part of a building.

Appropriation bonds may be another option.

There’s another issue – there’s a limited budget for any project.

If you consider cable a utility then maybe there could be something akin to USF to get cable customers to pay in as well. Maybe there’s an option to come up with subsidies from other providers. It might make sense to look there.

About 10-15 years ago we did the right of way law. (237) The issue isn’t the state trying to be difficult. It might make sense to build on that – mostly people do want infrastructure.

AZ Highway Act of 2012: law says DOT would allow state to install broadband in new and upgraded construction.

Section 216 – this came up two years ago. There’s a law that means you should consider transmission when you dig. There were some issues for DOT – but in general people are open to that idea. DOT has a person assigned to work on Rights of Way.

Do you know if the unserved are connected to rural highway projects?

The subcommittee is mapping out the 20 least served counties.

Getting back to public benefits – you have talked about supply and demand. Is the hope to serve existing businesses, recruit businesses, serve residents?

Yes.

In the past the focus has been on supply. There are some unserved parts of the state. But adoption has also been cited of at least equal importance. Creating public policy that allow for collaboration for adoption is a focus.

70-90% of folks are on state, county or city roads. The state would have an interest in making sure the construction was most efficient. 94% of the state has access to basic broadband. We’re looking at high costs areas with low population density.

The money the state makes available (general funds) is minimal and often conditioned on match. But in better times, maybe that’s a place to look in the future.

Some states have tried specific tax credits. So even if there isn’t money now – maybe we can look to those for models.

Telecommunications can reduce miles put on roads – maybe that’s an opportunity for a tax credit. In 2007 there was a bill that got a hearing related to that – and there have been other proposals.

These efforts seem to look at changing behavior. But are you looking to change employers and/or employees. Also need to estimate the cost. It’s difficult to estimate and in tough times that means the addition of a cap, which limits the effectiveness.

Telecommuting may be an option. There was an article in the Sunday paper on telecommuting from LqP.

Adoption  – sometimes cost is the barrier. More and more companies allow people to make the choice – but that’s only helpful when the infrastructure is there. And there is a trade-off when you shift needs from roads to fiber.

Impact 20/20 sees that it’s hard to get enough high-caliber people to move north. There are reasons they live in metro areas. Telecommuting will be a way that businesses in need will be able to get professionals in metro areas to work for them. For two years we looked at how to get people to relocate – we realized that maybe they don’t’ need to be here if the folks can telecommute.

There’s another issue – we have lots of new residents from other states. We pick up tax payers as a result of telecommuting options in Minnesota.

Another benefit of telecommuting – is ability to find jobs for spouses.

Panel: As you think about supply side incentives – think about sales tax as a way to do that: matter of sales tax policy – businesses ought not be paying sales tax so it fits existing policy (although Bus pays something like 40% of MN tax) exempting fiber from sales tax would help. This helps to target funding. And maybe you could further target for rural/underserved areas. It worked with the data center incentives.

Would an incentive to adopt be possible? Especially for low-income, elderly, rural, disabled – traditionally under-represented folks online.

There was a proposal last session (Sondra Erickson) that would have extended an educational credit to pay for broadband; it currently will help fund computers and software. It also removed the cap. So everyone would have qualifies. Working from schools helps too.

Connect Kentucky has a program worth looking at.

What about the model where you provide support for the access to help low-income families experience the benefits?

The FCC will be offering opportunities via USF changes. General funds might not work here. Perhaps there’s an option for reducing the bill.

Politically, we need to offer deals across the board (not just to cable, telecom, satellite) or we hear from industries. It might make sense to focus on that.

The AZ model acknowledges the different modes of infrastructure. They have been working on wired and wireless.

When you go to regional conferences – have you heard anything that we should be paying attention to?

Nope.

HF 2533 – Johnson’s Bill 2%

Steve Kelly brought folks from Sweden – might be interesting to see what’s happening in differen areas.

We have been working with Connect MN on mapping adoption rates and will be looking at what has been happening in served and unserved areas to see if we can determine and differences.

Minutes Approved

11:15-12:00 Subgroup work time

Coordination Across Government Levels (Leader: Danna MacKenzie)

Hear audio of part of the session: https://blandinonbroadband.files.wordpress.com/2012/06/vid00381.mp3

Best Practices/Incentives (Leader: Dick Sjoberg)

Out of $90 million – it looks like $6 million will be used in Minnesota. That’s down from $16-18 million that would have been available – except with the restrictions on the funding. Part of the issue is the population density. The FCC put in rules that you can only get funding if the are wasn’t covered by fixed wireless (as defined by 6 miles from fix). The FCC seems open to looking this and we’re (CenturyLink) talking to them.

Any areas we need to cover?

There was a reference to a Wyoming legislation – do we have more info on that. It was for data centers?

How do we get to the remaining 10 percent?

Is there a way to create a mechanism for target counties to support? At least until the totally unserved areas are served.

If you could offset the politics, you could get a statewide fun in place. The legislature gave a way to serve those areas.

We should look at 100 percent unserved to really reach unserved – otherwise people are encouraged to provide service to area that aren’t’ populated. That’s not good use of tax dollars.

What about satellite?

You can’t work from home with satellite. We need a service definition.

Do we have an estimate at what it would cost to serve the final percentage? We think of $12,000 per passing to serve the hard to reach – at least according to the original Task Force Report. It’s tough to make that business case work. Of course that’s an average – some homes are easier than others.

We also figured the cost to fiber the whole state – it was something like $12 billion.

As we get closer to writing the reports – we may need to work backwards to figure out what this means now. Eventually we will get all of the folks we’re going to get.

This has been one of the biggest public works project done primarily via private business.

We could get a budget is all industries (wired, wireless, cable) to pay into a pool – then there might be a USF type of model to help serve the state.

The problem is getting everyone (every industry) to contribute.

Do we need to look at payment structures based on per line, per Mbps…?

If everyone had to pay something that would be more fair.

But Internet tax freedom is an issue. Then you have to look at getting around that. So maybe we tax local distance, local TV… which helps but doesn’t get funding from folks who have found a way to serve with Internet only.

There’s a lot of money and a lot of customers – it seems like there’s an opportunity. But it’s a matter of making it fair.

If you could set aside the politics, you could solve the problem – but setting aside politics is very difficult.

Some folks are against any tax. Legislators see tax and they sometime balk.

One idea – on a one time basis – when there’re a surplus in (TAM), the legislature has designated the surplus for something. They have a surplus now – and could be more even if you raise a penny.

It might be helpful to look at what states have tried to build broadband.

  • California tried. Might be interesting to see how that worked out.
  • Giving all industries the same opportunity and same tax/charges would help.

How important is tax credit for fiber?

  • Pretty significant if you’re building a lot – and especially in the sparsely populated areas.

Is it possible to target 179 to just broadband?

  • Probably no.

Is there a separate Task Force looking at telehealth and broadband needs?

  • There’s the $5.4 billion coming into 144 locations – which was discussed last month.
  • There is a classification for rural hospitals – there’s a state classification. There are several standards involved.

Education is another sector where we might be able to tap into. Could edu connections be used to serve families in their homes if/when they had school aged children? Same could be asked about elderly folks and healthcare.

Unserved areas are probably also susceptible to winter time isolation. Maybe we can tap into that too. And these ideas seem to resonate with policymakers.

Are there statistics on unserved areas and language? On the east side – over 70% of homes we serve don’t have access to computers in home (Boa).

  • The CenturyLInk low-income option offers a low cost computer with the two year commitment.
  • It is also a content issue. The HAP reaches beyond the Hmong community. We speak 9 different languages. We serve many refugees.

How can we incent policies that will serve minority community to get computer and get online? Do we need tax credits? Or work through Dept of Education?

  • One issue is that many families wouldn’t understand what a tax credit means. We need to look at the long-term – getting something now and taking it away is not as helpful.
  • For people who are new to the county $50 can be a lot.

12:00-12:30 Lunch

Minneapolis Digital Inclusion Profile – a survey from January 2012

How to close the digital divide:

  • People have to have tools
  • People have to be digitally literate
  • People have to understand what is possible
  • First you’ve got to want to

Digital Divide Profile:

  • 30,000 households (18% without Internet at home)
  • Greatest divide
    • In NE and central parts of City
    • When over 55
    • In African American communities
    • When income less than @5,000
    • Digital Literacy opportunities warranted
    • Insufficient public PCs in certain areas

About the report:

  • Got a 30% return on survey
  • Broke City into 32 neighborhoods/clusters

Questions:

  • Do you look into how the schools and teachers are using the Internet?
  • Do you know if folks are going online to get general or specific health info?
  • Do you separate charter vs public school?
  • Who are your partners?
    • Libraries, TLC – list is on the website.

12:30-12:50 Representative from Sen. Klobuchar’s Office on S1939 Broadband Conduit Deployment Act of 2011

  • Erika     Nelson

Dig Once – reintroduced in 2011 – S1939

Main goal – expand broadband usage. Use money wisely. DOT must install conduit when they build roads with federal dollars. It costs 10 times more to do it after the fact. Also exception is when it would be conduit to nowhere.

Folks have been receptive.

Dig Once was included in President’s national broadband speech. On Thursday, the President will make an announcement on broadband.

Listen to Erika’s update: https://blandinonbroadband.files.wordpress.com/2012/06/vid00382.mp3

12:50-1:50 Rights-of-Way, Permitting and Dig Once Strategies Discussion

Cost and access to backhaul has been expressed as a big barrier so we wanted to look into it…

  1. Is access to affordable backhaul an issue?
  2. What are pros and cons to strategies such as dig once?
  3. What are other opportunities?

Listen to the session: https://blandinonbroadband.files.wordpress.com/2012/06/rtw-bb-june-2012.mp3

  • John      Schultz, U-reka Broadband

Coordination of Dig once is a good lofty goal. But it requires a lot of coordination. It’ comes down to a  lot of inside baseball – learning to know the insiders and having pre-planning meetings could be key.

We tried to put things in state right of way – and that conduit is pretty used. (Moorhead – TCs – South). So it does work – it will facilitate broadband deployment.

What could be change? Under and unserved areas could be aided with waived for fees from MNDOT, DNR and some others.

Look back at the original rules. Each city is very different – looking creating a standard would help.

Public-private partnerships can help. They waived the fees. The price came down – to the tune of $125 per customer.

  • Dan Gasow,      CenturyLink

Many areas have high permitting fees depending on where you have to go. The DNR application can be $25000 to apply. Paralleling the highways is often not allowed – so having duct put in when they dig would help a lot.

Getting to underutilized areas – we’re getting to some of them.

  • Toby      Brummer, Hiawatha Broadband

The dig once bill would be a benefit to everyone – especially in places where it is difficult to construct. Places like the bridge over the Mississippi in Winona. It establishes a path that will be there forever. The construction costs you save would be astronomical.

It should apply to county and city state aid highways as well – for backhaul and redundant fibers. There should be access points along there – then we could serve neighborhoods along the way. Not sure how that would work – but it would be nice to have an open mind for it.

It brings up questions. Relocation costs – will that diminish costs. What about locates? What about access points? Who could use them? Can there be electronic equipment there?

It is a good idea. Once the path is there the opportunity begins.

Mapping for MNDOT – does MNDOT take permit applications for the maps? That might be helpful. (They don’t.) It might make permitting process easier. As far as DNR – they are costly, especially for water crossings and natural areas. Railroad crossing permits are another big ticket item. It’s often too expensive to deal with the railroads.

Notification would be easier after the permit. Another question: what do you do with municipalities and counties sharing with commercial entities?

  • Dave Seykora, MN Department of Transportation

Was in telecom before MNDOT. I support utilities accommodations in my role.

MNDOT we control truck highways. They have different characteristics:

  • Tend to be wider
  • Ave ditches and vegetation (drainage)
  • Conduit is rarely under highway – unless crossing a highway – we use side of the road
  • Providers usually direct bury conduit – in ditch

We have a group that handles utility permits (electric, gas, telecom). Need to make sure they don’t interfere with each other and safety of highway and access to conduit. MNDOT charges no permit fees.

We have been working with telecom providers. We think there is a lot of backhaul. We are looking at utility accommodation policy. If you have input, please let us know. Last year we interviewed a lot of providers.

How can we work together? I created a chart of the planning process that MNDOT goes through. It begins with long range – we began that a year ago with a variety of interest groups. Next we look at 20 year level. Then we have individual plan for each mode (air, train…) Then we get to 4 year statewide transportation improvement plan. This includes funding plans. That section is probably of the greatest interest. These are on our website. www.dot.state.mn.us Click on future projects.

In 1998 right of way legislation passed – for municipalities and counties – that might run under the pavement – but we are usually talking about utilities at the far reaches of the right of way.

  • Gary Shelton, Scott County

County right of way – we’ve built a lot of fiber 250 miles – connecting schools, libraries, build to Mankato rather than lease dark fiber. We share fiber without costs to schools, state et al.

In terms of right of way – the state should enact right of way rules. Reason for permitting – find out where conduit et al are. Requiring electronic permitting should be good. It shouldn’t be a revenue source. (Recouping cost is one thing; by revenue generating is extreme.) There should be standard formulas.

We already have a dig once policy in the county. Every time we dig roads in the county, we add conduits – and think plural! It’s not that expensive to add more conduit. We share with private entities. We’re weeks away from an open access policy.

Backhaul is an issue – especially the farther you get away from a regional seat or metro area. If you want high capacity, you have to think of access to the premises as well. We encourage utilities and cities to dig once. Every time you dig up the road – you ought to put conduit in – someone will use it. We’ve been doing it since 2009 – and it’s saved us money already for our new libraries.

We incent folks to dig once policy by communicating what we are doing. There should be an open access component to any conduit provided through dig once conduit.

QUESTIONS

Mention of permit fees. Is there a comprehensive list of fees: needs and ranges? Might be nice to get that

Why did we pay $55,000 to move our right of way when it changed? (In St Cloud)

  • That fee was the cost of moving.

Are there standard sizes of conduits?

  • There are different diameters. MNDOT will certify at a different level than some (different hand holes). But part of the issue is managing the multiple fibers from multiple parties. Honeycomb can work – but it’s easier to have multiple conduits.

Most folks will put in multiple conduits. School districts often put in one; and sometimes cities.

What about empty existing conduit? We ignore cuts because Gopher One calls can be expensive. We care if it’s populated but not otherwise.

  • One of the policy questions – who pays for the installation of conduit and who maintains? And then who gets access? From MNDOT – we can’t manage a telecom system. It would be nice to know that there was someone who could do that.

It seems like there’s a value to continuing this conversation. AZ addressed it to some part. Also they have fiber in place to manage their smart highway.

  • Minnesota does have fiber – often with Admin. The State has a network – and we do use network to track how highway is performing.

AZ also looked at data transportation and classified it as transport.

There’s been dialog on role of utilities and transportation. We don’t distinguish between other facilities (water, electricity…) The question is – can we use the trunk highway funds for telecom? We don’t think so.

Who could pay for fiber maintenance?

  • The sooner anyone can find out a about a project – the better. Then we could be collaborating. And maybe that would help potential managers step up.

It would be wise to put out an RFI.

We think there would be others who would be better qualified.

If you put the conduit in it might speed up the process of far flung communities getting fiber.

Does MNDOT have a relationship with railroads – it might be nice for providers to know when conduit is going over railroads – maybe a cross railroads once idea.

  • The railroads are a property owner. So it’s difficult when you don’t own the land. There are some statutes – maybe worth looking into those again. But currently the MNDOT is doing what they can.

The key is communication. So if we know that Exel was going into an area – maybe we could go with them. We could share the cost.

Seems like there’s a great need for cooperation – especially in terms of crossings. We need the report to address that.

When you go through environmental study for right of way – does that forgive a utility from having to do the same thing?

  • Never seen an example where utility has done environmental study has been done. To the best of my knowledge yes.
  • The NTIA allowed previously completed environmental to count; RUS didn’t. If you use federal funds and a stipulation required an environmental statement – even if you’re working on MNDOT right of way.

1:50-2:30 Subgroup work time

State of Broadband (Leader: Matt Grose)
Broadband Adoption (Leader: Shirley Walz)

Monitor/Understand Impact of FCC & PUC Decisions; Cost of Broadband (Leader: Gary Evans/DIck Sjoberg)

Our jobs is to translate the actions of FCC and PUC and figure out costs of pro

Connect America Fund – they will distribute $500 million (rate cap) / $80 million to CenturyLink in Minnesota they would have spent $16 but can only spend $6 million due to restrictions on un/underserved. (Mostly there’s a fixed wireless provider in that area.)

Wireless auction is September – to provide at least 3G wireless.

The ICC will be an issue. Minnesota companies have a lot at stake. Small companies have three-pronged business plans – access will be going away. July 1 is filing date for tariffs.

The money that’s available should be helpful. Rate of return providers should benefit from auction.

AT&T has been telling the FCC to move quicker on secondary transactions to get business moving. We could have covered 99 percent of the state with LTE – but not we’re going with a lower percentage. It’s a side effect of changes.

Some say 2013 we’ll see a spectrum exhaustion. Half of wireless users use a smartphone.

Verizon and Tmobile have applied for ETC in Minnesota. So they are likely candidates for the auction – Verizon is most likely.

PUC has a docket for ICC.

How can we determine cost? It would be interesting on dollar per Mbps – for end user. Nice to get historical and other comparison. Might also be nice to get stats on usage.

Would be nice to get cost from provider perspective but there are so many factors. From $8 per foot to $100 per foot.

  • Is it the cost to the consumer for the product or for consumption?
  • I think it’s looking at cost for providers. Maybe helpful to look at recent deployments. SMBS, maybe Elhert.
  • Might be nice to know if there’s a gap between CAF and cost to provide service and come up with a program that might encourage deployment.
  • $2.16 billion was a napkin estimate on cost to reach everyone in Minnesota with FTTH.

Another issue is giving FTTH to folks who have nothing versus folks in the gap area. DO you leap frog that way?

Important to be forward looking – how to be supportive of multiple types of infrastructure.

Within next 6-8 months we’ll hear about more ways to serve rural customers (with landlines). Few folks are looking to serve rural customers. So folks are getting creative.

If there’s a customer out there, who is off the grid and needs broadband we can do it – but it will cost money.

HAP – how do we educate parents about how to access Internet and what to access when they’re online. Now folks can steam radio and programs in native languages. Accessibility is an issue. Affordability is an issue. Language can be a barrier.

  • 90 percent of students in Hmong charter schools are Hmong – and we suspect that the adoption is much lower in those schools.
  • Finding a way to get lower cost access to folks immediately (versus tax rebates) would be useful.
  • It might be nice to get telecommuting credits too. And finding costs of such programs would be helpful.
  • Potentnial areas to provide incentives:
    • Low income
    • Telecommuting
    • Schools/education

2:30-3:00 Subgroups report to full task force and feedback

Shirley (Adoption) –

Connect MN did a map overlay of availability goals overlaid on adoption statistics. Benton is the only 80% county. It will be helpful to look at some of the counties that are doing well and see if they have done things to spur adoption.

We are working on a brochure for Itasca County for our next visit that highlights broadband availability locally.

We’ve started working on a website plan to promote digital inclusion.

We’re also talking about “what is an adopter?” Traditionally adoption has been home-based subscriptions – but is that an effective definition in the world of handhelds and wireless.

Is it good news if we claim success?

20-22% of rural businesses have websites – it matters what we count.

Dick  (Policy) –

We rehashed the speaker notes. We looked at consumer tax on the Internet – but you run into the Internet Tax Freedom laws – but are we using long distance (USF) fees to subsidize broadband? Is it working? Customer support might help.

We looked at telecom tax credits.

FCC/PUC

We talked about tax credits for low incomes folks for computers, broadband and training. But the pay back is deferred, which is not practical for low income households. Maybe there’s a mechanism that speeds up that process.

The tax credits you mention do put up a lot of barriers. They might not get traction with target audience.

Danna (infrastructure)

We gathered the panel for the session. We have been learning a lot. There’s value in continuing to look at permitting process – even if only to outline them. There’s value in continuing to explore conduit and rights of way to unserved areas. Opportunities to improve MNDOT mapping has come up in other settings too. Railroad crossing are clearly an issue. Rules but in place in 1999-2000 were good rules – but not everyone is following them. The needs are not the same in all parts of the state – so a cookie cutter solution will probably not work. We hope to find some best practice models.

Maybe it makes sense to look into railroads and then call in the railroads to talk.

3:00-3:10 Public comments

Next meeting July 16

  • Do reservation visits in Walker in early morning  (start 8 am)
  • Go to Deer River High School Media Center (finish at 3 pm)
    • Education
    • Tribal panel
    • Ojibwe language center

Thief River in September

3:10-3:20 Other business/Upcoming meetings/Adjourn meeting

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s