Part 1: Where We Are
Cambridge has been interested in controlling its own media destiny since the early 1980s when a referendum calling for a city-controlled cable TV system was defeated by 38 votes. Those interests lay dormant for over the three decades until a perfect storm of events reignited them:
- Comcast, the predominant internet and cable TV provider for Cambridge, bought NBC/Universal, raising concerns about further media consolidation
- Verizon, a secondary internet provider to Cambridge, won a Federal court decision striking down the FCC’s “network neutrality” rules, heightening concerns about the power of a consolidated media landscape
- Susan Crawford, a Harvard Law professor and Cambridge resident, published “Captive Audience,” providing academic respectability to the argument that the market for broadband services had failed and that cities should invest their own resources to build municipal fiber optic networks
It was into this environment that Cambridge City Manager Richard Rossi appointed a Broadband Task Force, charged with looking at the options Cambridge had for broadband.
A Less Than Perfect Process
The process the Task Force engaged in has been less than perfect. The Task Force had to fill its own time while the City went through the bureaucratic steps of hiring a expert consultants. Once on board, the consultants — the highly regarded Tilson — seemed as hamstrung by constraints as the Task Force. Public engagement was minimal. Meetings were barely attended by residents. Tilson didn’t seem to actually hear and accept feedback by Task Force members. And, as their draft report started to be provided, it came in pieces that made it difficult to absorb and provide responses.
Nonetheless, Tilson gathered critical information about the broadband marketplace in Cambridge, about pricing and availability. The conclusions are straightforward. For most residential customers, broadband comes from Comcast or through the much slower Verizon DSL. For enterprise customers — large businesses who can afford it — have many options. Smaller businesses have fewer. The Cambridge broadband marketplace isn’t healthy, and, with virtually no competition, there’s little incentive for it to get better.
An Unpopular Recommendation in a Difficult to Understand Report
The report, in its draft form, is unwieldy, structured poorly, and uses too many words. It ties itself in knots trying simultaneously to assess the various business models, financial arrangements, and operating assumptions while sorting out options.
Tilson, constrained by the scope of work in the consultant agreement, outlines three options, what it terms as small, medium, and large. The Task Force was never happy with this framing. The “small” option is a very limited step towards providing broadband to those in Cambridge Housing Authority buildings. The “large” option is a full municipal broadband buildout. The “medium” option, the obvious compromise option in this sort of framing, is one that no one on the Task Force really likes, and most think won’t be successful.
The “Medium” Option
The option recommended by Tilson is for the City to build a core fiber optic network and leave it to third parties to extend that network to actual households and businesses in Cambridge. Tilson, itself, doesn’t really have the conviction of its recommendation, saying that, before it starts down this path, Cambridge should solicit the interest of third parties and make sure there actually is someone else to finish the work. It is an option in which Cambridge may not be able to control its own destiny.
One way to look at this option is that the City would be partially subsidizing those third parties, by taking on construction of part of the network. It’s certainly true that, given enough subsidization, third parties would find network construction and operation profitable. It would, however, be far more transparent for Cambridge just to write the subsidization check, understand exactly for what it’s paying, and negotiating for what it gets in return.
This recommendation is clearly designed to be a low-risk, hedged option, letting the City take a slow, incremental approach. It seems fair to observe that Tilson never quite “got” Cambridge, a city with enormous fiscal resources, which it wields to build award winning libraries and net-zero carbon emission schools, all the while emphasizing low taxes and a fiscal responsibility that has garnered it a AAA credit rating for over 15 years. Cambridge may be cautious, but when it decides to act, it is often quite bold.
The Business Model Conundrum
One of the complicating factors in delivering a concise, useful report is Tilson’s desire to provide a variety of options to Cambridge across a number of different elements of a networking project. These options don’t have bright lines separating them; they’re a matter of terms negotiated between Cambridge and third parties. The richness of possibilities is here is a sign that the broadband space is lively, but it’s also confusing.
On one end of the spectrum, Cambridge could build, own, and operate a broadband network on its own. On the other end, Cambridge could rely on another party — call it NotComcast — to build, own and operate a fiber optic network. Rather than exploring all the possible options, a process that quickly gets one into the weeds, one can put together a plausible set of business models for different parts of a broadband project and system:
- Build. Building a fiber optic network is a well understood process, something industry has been doing for over a decade. You raise the money, hire consultants to design it and contractors to build it. Cambridge, as a municipality with a AAA credit rating, can raise money less expensively than a third party, can take more time in paying it back, and would, in the end, hire many of the same consultants and contractors as any third party. Cambridge can do this more cheaply than a third party.
- Own. If Cambridge is building the fiber optic network, it should own it. Ownership comes with responsibilities, but owning the streets, the water and sewer systems, the traffic and street lights, come with similar responsibilities. And Cambridge, for its internal purposes, owns a smaller fiber optic network. The difference here is a matter of scale, not skill.
- Operate. Current “best practice” is for a municipality to operate a network as “dark fiber” open-access network, allowing any third parties to negotiate access, provide their own electronics, and offer services. If residents want a fully municipal system, they could organize a resident coop to provide services. If Verizon wanted to offer FIOS, they could as well.
For each of these, if Cambridge wishes to pay less than the full cost and assume only a portion of the risk, it can seek partners who will share in that cost and risk. In return, Cambridge would have to surrender at least some control and share in the benefits, including revenue, of a fiber optic network. For all the words Tilson uses, these are the tradeoffs across all the options.
The willingness of private partners to put up their own capital and take on risk is an important marker, a sign that broadband can be a viable business. This is critically important for cities with limited resources and need the help of private capital. Cambridge doesn’t and should pursue a path that leads to a full municipal broadband system.