by Dan Bubis
Colorado law requires that municipalities hold a referendum before providing cable, telecommunications, or broadband service, unless the community is unserved. Our community is not unserved, we have several providers and yet we have not seen a ballot issue addressing whether taxpayer funding should go to providing either broadband or telecommunications. For the County to engage in the provisioning of these services they stand a reasonably good chance of being sued.
One of the major problems with the CCEDC’s proposal is that they don’t really have a plan beyond building towers. They have no commitments from any providers of Internet or Cellular service. While “if you build it, they will come” may work in a movie, businesses need more concrete commitments to ensure success. AT&T has demonstrated an unwillingness to increase their current equipment and they already have a tower. If the existing Internet providers could make the use case for additional towers, they would erect those towers. Perhaps the CCEDC is planning on providing access to the towers at no charge. Then how will maintenance and support be funded. See the map of DD Wireless (now Secom) towers for an idea of existing coverage.
We need to define broadband. In 2015, the FCC changed the requirement for Internet speeds to be considered broadband from 4 Megabits per second download speed and 1 Mbps upload to 25 Mbps down and 3 Mbps up. That meant millions who had fast enough Internet speeds suddenly did not have “broadband”. The decision was completely arbitrary and capricious and was not based on any science. Recently (under a new administration) the FCC is proposing broadband standards be changed. If the Republican proposal goes forward, speed requirements will be reduced to 10 Mbps down and 1 Mbps up. If Democrats have their way, the standard will be raised to 100 Mbps. So if the Republican standard is adopted, Custer County already has well over 70% coverage. If the Democrat standard is adopted, the new towers being planned will not increase “broadband” availability.
The truth is that what speeds you need are dependent on how you use the Internet. Many people are perfectly happy with DSL speeds of 1.44 Mbps and can stream video and music to their heart’s content. Netflix recommends 5 Mbps download speed to stream High Definition video.
There are 9,122 parcels in Custer County. You won’t find that number in the reports from the CCEDC. The number of houses that have access to broadband depends on multiple factors. First, it depends on whose numbers you use. But the bottom line of the study is that if the towers are built, 870 addresses will gain access to Internet. Of those 870 parcels, we have no idea how many are built on. And, of course, we have no idea if any of the parcel owners want Internet and can’t get it. So what is the cost of providing access to these 870 parcels? Over 2 million dollars construction costs and no clue about on-going maintenance costs. So for about $2,300 of tax dollars per parcel, these pieces of land will gain access, not service, just access, to Internet. It would be cheaper to just pay for satellite service for those people and then they would at least have service.
There is an empirical study entitled “Municipal Fiber in the United States: An Empirical Assessment of Financial Performance”, written by two University of Pennsylvania professors. While this study doesn’t cover all applications of municipal broadband, it is highly indicative of how well a municipality can expect any broadband utility to work. The take-away from the study is:
“The data contained in this study are sobering. Municipal fiber is not an option for the 86 percent of the country that is not served by a municipal power utility. Of the 20 municipal fiber projects that reported the results of their municipal fiber operations separately, eleven generated negative cash flow. Unless operations improve substantially, these projects can not continue to operate over the long haul, let alone cover the capital costs needed to establish operations. Of the others, five are projected to take more than 100 years to recover their costs, and two others are projected to take over 60 years. Only two are on track to break even, and one of those is based on a highly urban, business-oriented model that few other cities are likely to be able to replicate, and the other includes data from two years of stronger performance when it offered only DSL service.”
The study points out how big an albatross municipal broadband is. Here are some of the colossal success stories:
Marietta, Georgia (1996–2004), sold its system for $11.2 million at a loss of $24 million;
Provo,Utah (2004–08), soldits system for $1, leaving behind $39 million in debt;
Dunnellon, Florida (2011–13), sold its system for $1 million against $7.4 million in debt and substantial operating losses;
Quincy, Florida (2003–14), incurred $5.1 million in debt and racked up $6 million in operating losses before transferring its operations to a private company;
Bristol, Virginia (2003–16), sold BVU Optinet for $50 million after it had invested $52.8 million in subsidies, $23.4 million in interfund transfers, and $79.6 million in bond funding and operating cash flow.
Before looking into the immediate future for coming technology, it is important to remember that both existing providers will add towers and improve the technology as the fiscal incentive merits. Before 2020, less than three years, 5G will deliver gigabit Internet everywhere and really, the theoretical speed could be 10 Gigabits per second compared to 4G which is about 100 Megabits per second. 5G was deployed for the Olympics and is being deployed across the nation already. Then there’s the satellite race. Big names like Boeing, Elon Musk, Virgin Galactic and SpaceX among others are launching satellites that will provide Terabit Internet. And this access will be every place on the planet that can see a piece of sky. Musk has already received FCC approval and is launching the first satellite the week of February 18, 2018. Even the most remote places on earth will have this access. Google and Facebook have their own proposed solutions which involve covering the whole planet as well. Their plans involve balloons and drones. AT&T has been approved and has deployed a stationary drone at 100 feet above ground, which is tethered to a downlink to provide 5G in disaster situation and has received FCC permission to deploy instead of building towers. As we have repeatedly seen, the competition will expand the quality and services while driving down prices. Without wasting tax dollars.
Supporting Documents
