Despite what the telecom industry says, RS Fiber is a house of opportunity, not a house of cards

A guest post from Mark Erickson, Former Winthrop EDA Director

I read Brent Christensen’s Minnesota Telecommunications Alliance (MTA) response regarding the growing pains faced by the RS Fiber project and just shook my head. He just doesn’t get it.

As hundreds of community leaders in Minnesota and across the nation explore the opportunity to build fiber optic networks in their townships, cities and counties, Mr. Christensen continues to ignore the systemic problem of inadequate Internet in rural Minnesota while trying to convince you that local governments can’t be trusted or aren’t smart enough to make decisions regarding such important things as fiber networks.

The dilemma for MTA members is they need government money – your tax dollars – to upgrade their outdated copper networks to fiber. But how do they continue to discreetly reach into the state and federal cookie jar with one hand while using the other to slap yours for using of your own taxes?

Mr. Christensen’s plan is to convince you HE is looking out for your taxes. Really? Let’s look at some of the facts.

He didn’t mention the fact that nearly every telephone company in the U.S. since Ma Bell first strung wire on poles has needed tax dollars to make their business plan work. Minnesota’s rural phone network was constructed and has been maintained for decades using tax dollars. Why? It cost more to build networks in rural America; there are fewer people per mile, so the networks are larger and require more dollars.

Books have been written about it. The phone industry was built with money from the federal government and has received billions in state and federal tax dollars during the past eight decades. Notice Mr. Christensen didn’t express concern about the use of those tax dollars. By-the-way, those state and federal tax dollars are YOUR tax dollars.

Just a few weeks ago, the phone industry told regulators in Washington they will be unable to make the needed investment in rural fiber networks without more federal tax dollars. Again, YOUR tax dollars.

Why isn’t he concerned about the use of those tax dollars? And how come he can use your tax dollars for his networks but RS Fiber can’t use your tax dollars for theirs?

The answer is quite simple. He needs to protect his members from spurious upstart local leaders who have the temerity to want to do something positive for their communities by investing in fiber networks.

In short, he wants to limit the competition, not enhance your opportunities. He believes that by raising the specter of taxes, you can be turned against projects like RS Fiber.

Mr. Christensen’s letter is about one thing; preserving the status quo (preventing competition) by scaring people into opposition.

RS Fiber is about one thing; building a future proof, world class fiber network that will provide more opportunities for everyone.

The folks who worked hard to make RS Fiber a reality, the city and rural leaders who decided it was time to act, tried hard not to use any tax dollars.  And they have done a pretty good job. To date, no local tax dollars (except for a $1 million grant from the state of Minnesota) has been used to build or operate the RS Fiber network. RS Fiber did receive two loans through a local electric coop via the USDA, but they are loans and will be paid back.

Every dime the cities put in to kickstart RS Fiber has been refunded.

Okay, but the fact is local tax dollars will be used. Exactly how many dollars are we talking about? The cities loaned the RS Fiber cooperative $8.8 million dollars on a 20-year note at around 4% interest.

In Winthrop that works out to about $2,100 per home, or $105 a year, or $8.25 a month. Amounts vary in each of the 10 communities because Minnesota has a complicated property tax structure, but everyone is in the same ballpark. Some a little more, others a little less.

I’ll come back to taxes in a minute but there are a few other things in Mr. Christensen’s response that need explanation.

He pointed to four successful projects in the state that should be copied. I’m on board with that.

All four projects are fiber projects. All four used tax dollars to make them successful, and in three of the projects it was a cooperative that stepped up to the plate. In the case of Rock County, the cooperative that partnered with the county hails from South Dakota.

It’s a little talked about fact that large areas of rural Minnesota, North Dakota and South Dakota are served today with blazingly fast fiber to the home and farm networks owned and operated by cooperatives.

So why would a local government put up tax dollars to help finance a fiber project? Because they know that’s the only way it’s going to get done.

And it happens with cooperatives because the coop business model fits the situation. The mission of a cooperative is to maximize benefits to the subscriber, not dollars to the bottom line. It’s about making as much of a positive difference as possible, not adding as much profit to the bottom line as possible.

It’s about making a business plan work for the customer, not the stockholders.

Cooperatives are a lot like cities in that respect. They aren’t out to make as much money as they can from taxpayers (the patron). Their goal is to provide the best possible service while keeping taxes (prices) as low as possible.

Mr. Christensen wrote that “RS Fiber entered a telecommunications market that is highly competitive.” That’s just a bunch of hogwash. There was very little, if any, competition in the 10 cities before RS Fiber. And there continues to be very little, if any, competition in most rural communities in Minnesota and the United States today.

In the great majority of cities, the cable company is the Internet provider of choice because their copper technology is a few degrees better than the phone company’s copper technology.

That was the case in eight of the communities who were served by one cable provider before RS Fiber. Two cities didn’t have a cable provider. Those towns, Green Isle and New Auburn, had just one wired Internet provider, CenturyLink.

In late 2008 when the Winthrop city council decided to explore a fiber network, the city was served by Winthrop Telephone and Mediacom. The phone company offered Internet speeds of 1/4 of a meg down (256k) and an 1/8 of a meg up (128k) for $50 a month. If you wanted more bandwidth you could get a 1/2 a meg down (512k) and a 1/8 of a meg up for $100. Mediacom, if I remember correctly, offered something around 15 megs down and 5 megs up for $60 a month.

Is that competition? Which Internet service would you choose?  The one that was OK or the one that was incredibly slow and more expensive.

The other cities were served either by CenturyLink and Frontier, both known for their below average internet service in rural areas. And both of those companies recently took hundreds of millions in tax dollars from the federal government to upgrade their rural copper networks to the blazingly fast speed of 10 megs down and 1 meg up. Again, YOUR tax dollars.

It might sound to some that I’m purposely dissing the phone and cable companies. That’s not my intention. I’m just stating facts. Phone and cable companies operate copper networks that are, for all practical purposes, outdated. Fiber networks are to copper networks what the tractor was to the horse.

From the beginning, RS Fiber was never an anti-phone or anti-cable company project. We provided the facts, we educated people as to their situation and let them make up their own minds.

So, what about the competition? How did the other providers respond when RS Fiber announced they were going to build a fiber network? Did they take their bat and ball and go home or did they step up to the plate? In Winthrop’s case, and to everyone’s benefit, it was batter up.

Mediacom and Winthrop Telephone, faced with new competition, increased Internet speeds and, in the case of Mediacom, lowered prices. Competition can be a good thing.

On a side note, Winthrop Telephone just accepted $8 million in federal tax dollars to build a fiber network in a few partial townships. We applaud their effort, and we’ll take a little credit, but I need to point out again that they are using YOUR tax dollars to make their business case work.

I believe Mediacom did the same in other communities and I’m not sure how CenturyLink responded.  I would hope they increased Internet speeds and lowered prices. That’s usually what happens when you have competition.

For me, one of the nice side benefits of RS Fiber is the money I have saved. And while my taxes might go up $9 a month, I am saving $40 on my monthly cable and Internet bill. In fact, I have saved about $1,200 in the 30 months I’ve been an RS Fiber customer.

I suspect other area residents, whether they are RS Fiber customers or not, find themselves in a similar situation. Perhaps not so much for some because RS Fiber just began operations in their community. And others not at all because they don’t have RS Fiber in their community and no real competition.

Ask people in Arlington and Henderson if their Internet speeds and cable service has improved or their prices have dropped. Both of those communities opted out of the RS Fiber project.  My guess is that customers in those two communities pay more for Internet and cable service than customers in RS Fiber communities.

Truth be told, that’s one of the reasons the Brownton city council voted to join RS Fiber. They discovered that similar Mediacom packages in the city of Hutchinson (where they have competition) were about $50 less than the same packages in Brownton. When the council asked Mediacom to come to a council meeting and explain the difference, the representative told them they charged more in Brownton because they could. That didn’t sit well with the Brownton council.

Internet from the area phone companies really isn’t very robust. What’s sold as 10 megs down and one meg up is too often four megs down and a half a meg up, and sometimes not even that.

If you are lucky enough to live close to the central office, you might get faster speeds, but that speed will also depend on how many people are using the Internet when you are. The more people online, the slower it becomes.

With the RS Fiber network, it doesn’t matter how far you are from the central office or how many people are online. If you pay for 100 megs, you will always get something very close to 100 megs. Pay for a gig, get a gig, 24-7-365.

In one sense you can‘t falter the phone and cable companies for their lackluster Internet speeds. They do the best they can with their copper networks and they are unable to make the needed investment to upgrade their networks unless, or course, they get more federal money. I’ll remind you one more time, those dollars are YOUR tax dollars.

Mr. Christensen is right in one respect. It IS very difficult to build a business case for constructing fiber networks in rural Minnesota. RS Fiber worked hard to come up with a viable plan.

Further, he wants you to believe it’s not fair that residents who aren’t RS Fiber customers will have their taxes raised as well. That’s true, residents who choose not to take RS Fiber will also have their taxes raised.

That’s not even a downside because the upside is those residents and businesses can also save more money on their monthly cable bills than their taxes will go up. It’s that competition thing again.

At least they SHOULD be saving money. Perhaps not everyone has figured it out, so let me explain.

If you live in an RS Fiber community and choose to stay with Mediacom, that is your choice. But you don’t have to pay more while your neighbors pay less. Just call Mediacom and tell them you are thinking about switching to RS Fiber (you can always switch later). I can almost guarantee your monthly bill will go down. Darn that competition.

Mr. Christensen says that RS Fiber really isn’t really a cooperative, just a “thinly veiled joint powers agreement.” Well, that’s just not true either.

RS Fiber is a fully constituted 308B cooperative duly registered with the Minnesota Secretary of State.

What I think Mr. Christensen means is the RS Fiber project isn’t a traditional cooperative and that is true

In its entirety, RS Fiber is a public-private partnership (PPP) that has the 10 cities partnering with a private business (the cooperative) to finance the network. There are scores of PPPs in Minnesota. I don’t know for sure, but I think RS Fiber is the first PPP created around the idea of a fiber network.

Let’s talk again about Internet service. Notice Mr. Christensen didn’t mention Internet speeds from the phone companies? As you may have already figured out, copper-based networks don’t have a lot to brag about when it comes to Internet service..

So just how fast is RS Fiber Internet?

RS Fiber customers can subscribe to symmetrical gigabit Internet for $70 a month. That’s 1,000 megs up and 1,000 megs down. For the geeks and gamers, that bandwidth comes with a latency of around 10 milliseconds and no data caps. What does the cable company tell you about data caps? They tell you that if you go over the limit you will pay more. RS Fiber doesn’t have data caps.

In addition to that, nearly 800 farms located outside the cities get wireless Internet service from RS Fiber of 50 megs down and 25 megs up for $70 a month and no data caps.

Mr. Christensen further complained that “taxpayers are caught in the middle.” I’m not sure what he means by that, so I will assume he is again talking about taxes. He believes taxes that will support RS Fiber are unfair to you, the taxpayer.

It seems to me in this case fairness, like beauty, is in the eye of the beholder.

The competition RS Fiber brought to the area has done a beautiful thing to my monthly cable bill as well as the speed of my Internet service. The bill is down, the speed is up and that’s just beautiful.

Or perhaps he means you were hoodwinked and not told about the possibility your taxes might be needed. It’s possible but not true.

The dozens of elected and unelected men and women who promoted RS Fiber convened more than 100 public meetings and mailed information to more than 14,000 households. The possibility of a tax increase was talked about at every meeting as part of the regular presentation. The possibility of a tax increase was included in every mailing. The same information was repeated to townships, city councils and county commissions. Anyone who listened or read about RS Fiber was told about the risk.

What is interesting is that in those public meetings the discussion about a possible tax increase was usually followed by a conversation that there is perhaps more risk in doing nothing.

It’s a fact of life that if you want to something to change, and you choose to do nothing, nothing will change. Fortunately, the reverse is true. And sometimes, when we choose to do something for the right reason with the right partners, good things happen. In my opinion, that’s exactly what has happened with RS Fiber.

The real risk is from community leaders do nothing. If community leaders continue to wait for phone and cable companies to upgrade their networks to fiber, they will fall further behind a world that relies more and more on faster Internet speeds, speeds that only fiber networks will be able to deliver in the years to come.

RS Fiber cities don’t have to worry about being left behind because they are served with a network capable of increasing symmetrical Internet speeds to 10, 50 or even 100 gigabits. That’s GIGABITS, not megabits.

If the folks in Gaylord had decided not to participate in RS Fiber and instead wait for CenturyLink to improve residential Internet speeds to gigabit levels, the proposed four-year medical school (expected to have its first class in 2020) would never have happened. I was involved in the early medical school discussions and I can tell you with 100% certainty that without RS Fiber there would be no possibility of a medical school in Gaylord. No fiber network, no medical school. It’s as simple as that.

Said another way; no new fiber network, no new opportunities.

Fortunately, the city councils and residents in all ten communities realized if they wanted to improve their circumstances they had to take steps to change those circumstances.

Waiting for the phone companies to make fiber investments is like watching molasses come out of a bottle on a cold Minnesota winter afternoon.

RS Fiber took the pledge of a tax increase, built a fiber to the home network in ten communities and a wireless network in most of the rural area in just three years. That’s like molasses coming out of the bottle on a hot summer afternoon.

I’m sure we will hear more from Mr. Christensen about the unfairness and the dangers of projects like RS Fiber project and the poor decisions obviously duped local leaders made to put your tax dollars at risk for your benefit. They will throw big dollar numbers around and tell you the world, as you know it, is coming to an end if you are foolish enough to allow your elected leaders, like those rubes in the 10 RS Fiber communities, to go down the same ill-fated path.

They will complain, like Mr. Christensen did in his letter, about the “hundreds of thousands of dollars” folks in RS Fiber communities will pay in additional taxes and then turn around and take hundreds of millions of your tax dollars to make their business plans work.

Several years ago, I had the opportunity to talk with people at the Courtland community center about RS Fiber. During the Q&A, representatives from three different area phone companies started asking technical questions I couldn’t possibly answer in what turned into a team effort to ridicule me. They succeeded. It wasn’t any fun, but I learned an important lesson.

I learned you can’t believe the misinformation, obfuscation and Chicken Little talk that comes from the telecommunications industry today about the “danger” of community-based fiber projects.

More importantly, perhaps, I realized those affected the most by substandard Internet service should have the most say about how to improve their situations, not those who have the most to gain by doing nothing.

Too many telecommunications providers look out for themselves first and you second. They aren’t concerned about your taxes, they are concerned about their profits.

Too many phone companies don’t have the time – or their own money – to worry about the tens of thousands of homes, farms and businesses in Minnesota or the millions of people throughout the country that suffer from less-than-adequate Internet service.

Sadly, the people in those homes and businesses will continue to suffer unless they decide to do something about it.

I’m proud of RS Fiber. I would do it all over again in a heartbeat.

Respectfully submitted,
Mark Erickson
Former Winthrop EDA Director

This entry was posted in Community Networks, FTTH, MN, Rural, Vendors by Ann Treacy. Bookmark the permalink.

About Ann Treacy

I have a Master’s Degree in Library and Information Science. I have been interested or involved in providing access to information through the Internet since 1994, when I worked for Minnesota’s first Internet service provider. I am pleased to be a part of the Blandin on Broadband Team. I also work with MN Coalition on Government Information, Minnesota Rural Partners, and the American Society for Information Science and Technology.

2 thoughts on “Despite what the telecom industry says, RS Fiber is a house of opportunity, not a house of cards

  1. This post illustrates the fundamental conflict that currently dogs American telecommunications policy. The author is correct it cannot serve the public interest if ownership of telecom infrastructure is left in the hands of investor owned providers whose first and primary obligation is to their shareholders. How the nation resolves that conflict going forward will have enormous implications for telecom infrastructure modernization to fiber and the vital services delivered by advanced telecommunications.

  2. Mark

    I want to commend you on an extremely well written article. I also applaud you calling out the hypocrisy of Mr. Christiansen and the MTA. I am President of Velocity Telephone, Inc and Gigabit Minnesota. MTA doesn’t like companies like me because I’m just like you. We look for ways to bring fiber to people who need and want it because MTA members and the old Incumbent providers just won’t provide what customers demand and need. Please feel free to reach out to me anytime you need help.

    Jim Hickle, President
    Velocity Telephone, Inc./Gigabit Minnesota
    Jim.hickle@gigabitmn.com
    (763) 222-1004

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