By Amina Fazlullah, Mozilla Fellow 2018 and Christopher Mitchell, Director of the Community Broadband Networks Initiative at the Institute for Local Self-Reliance as well as the Director of Policy for Next Century Cities
Take a second to think about your Internet connection. Most Americans have a love-hate relationship with it — they love all the benefits and conveniences that come from high-quality Internet access but are frustrated with their provider. And most Americans do not have much of a choice in providers, even in big cities.
But for a lucky few, they have not only a robust gigabit connection but also a choice of many providers. This is most common in an arrangement called “open access.” Some 30 communities spread across the United States have embraced this model — where the local government builds a fiber-optic infrastructure and acts as a wholesaler, allowing independent Internet Service Providers (ISPs) to offer the actual service to households and businesses. If you live in one of the communities, the local government builds a fiber-optic connection to your home, but you get service from the ISP you choose and they pay a fee to the local government.
These networks are most common in Washington State, where most of the electricity is provided by publicly owned utilities (Public Utility Districts most commonly) that have also begun investing in fiber networks to encourage economic development and due to a lack of private investment in rural areas. State law has long required these PUDs to wholesale access, which has worked well in several pioneering communities.
Grant County, Washington isn’t just one of the largest open access networks in the nation, it was one of the first places in the world to have fiber-optic connections all the way to the home, starting nearly 20 years ago. Now 17 providers compete to offer various services to residents and businesses across this rural county. Some 16,000 subscribe to the network, which is available to 70 percent of the county.
This success should beg an important question: how does this network pay for itself? Answering it requires delving into the economics of fiber networks. These networks require very high upfront capital costs — burying fiber or attaching it to thousands upon thousands of utility poles … in this case across a single county 50 percent larger than the state of Delaware. The costs to operate and maintain the network are comparatively small but the one-time capital costs are staggering. A normal county would have had to issue bonds that would be repaid over decades.
But Grant County was blessed with hydro power well in excess of its own needs. It sold its excess power to California utilities and used some of those funds to build the network. This lesson is key: these networks are most sustainable if the one-time capital costs of building the open network is subsidized. This is not essential, but it really helps. In many ways, fiber networks are digital roads. Our physical roads are massively subsidized, well beyond user fees, because they enable commerce, emergency services, and any number of other essential services. Extending that logic to fiber — which has a lower one-time cost, much lower operating cost, and generates much more revenue directly — is logical.
These basic network economics have led a few communities to tax themselves to improve Internet access (though that list is growing more rapidly than ever — Lyndon and Leverett are examples in Michigan and Massachusetts, respectively). In rural Rio Blanco, a county in northwest Colorado, they used general fund dollars with matching funds from the state to build an open access network. They expected approximately 40 percent of the town population to sign up but the interest was closer to 80 percent!
Some communities have shown success with an incremental model that does not require subsidization. Again in Washington, the city of Mount Vernon has been slowly expanding an open access network to businesses and local government offices over the past 20 years. It has resulted in impressive economic development wins and much of the region is now investing in fiber optics after watching its success. Mount Washington did not subsidize the network, relying on a combination of fiber and conduit investments as part of other capital projects (i.e., when streets are replaced, dramatically lowering the cost of extending conduit) and reinvesting the net income from previous years.
A more recent model comes from Ammon, Idaho, which has received national attention from the National Institute of Justice and a visit from FCC Chairman Pai. As explained in the video below, Ammon is pioneering both an advanced software-based portal and a new financing model. Homeowners who want to connect to the network have a choice in an upfront fee in the neighborhood of $2500-$3500 or amortizing that cost over 20 years in the form of a monthly bill of roughly $17 via a voluntary assessment on their home. Those who do not wish to connect pay nothing. This low-risk approach is being considered by many local governments and others will undoubtedly iterate on the idea in coming months.
But the story of open access is not without misstep or controversy. One of the most well-known open access networks goes by the name UTOPIA — the Utah Telecommunications Open Infrastructure Agency. Unfortunately, one of the reasons it became famous was because of the serious financial challenges it faced after a series of unfortunate events, from poor management to state laws written by incumbent providers aimed at crippling the network to the revocation of a crucial federal government grant.
For many years, UTOPIA was called a failure by supporters and critics alike. But recent years have brought better news, as UTOPIA is financially stable, expanding, and strongly supported by the residents and businesses that can take service from it. It might have struggled financially, resulting in some taxpayer subsidization, but it has freed thousands upon thousands of Internet subscribers from a hated monopoly offering expensive, comparatively slow, and less reliable Internet access. And it is expanding, with many nearby communities seeking its benefits.
Open access is a prospect for thousands of communities that want to improve Internet access but do not want to directly compete with established firms in the industry. There are more options than ever, and plenty of lessons learned from the pioneers. You can build an open access fiber network across an entire city quickly if the capital costs are subsidized. You can build an open access network without subsidizing it by embracing a longer time horizon or by having homeowners take on the risk.
Communities interesting in pursuing this option should consider:
- Dig Once Policies — dig once policies can get fiber and conduit for future fiber in the ground at the lowest cost possible: when the streets are already dug up for utility work.
- Institutional Networks — Another option is building an Institutional Network, which connects municipal facilities such as first responders, utility locations, city hall, libraries, and more with a fiber network.
- Building a Future Proof Network — When building a network consider building in 144 or 288 fibers or more — the cost of extra fiber is practically nothing and the city can use those fibers as part of the backbone for a future open access network.
These are common-sense actions that cost little in the short term and rapidly pay for themselves in more efficient services, lower telecom budgets, and the benefits of greater flexibility down the road to create a real market for Internet services.
Christopher Mitchell is the Director of the Community Broadband Networks Initiative. Christopher’s work focuses on telecommunications and helps communities ensure the networks upon which they depend are accountable to the community. He was named as one of the 2012 Top 25 in Public Sector Technology by Government Technology, which honors the top “Doers, Drivers, and Dreamers” in the nation each year. He earned a Master’s degree in Public Policy from the Hubert Humphrey Institute of Public Affairs at the University of Minnesota and a Bachelor’s degree in Political Science from Macalester College.
Amina Fazlullah was a Mozilla Fellow (2017/18) where she worked to promote policies that support broadband connectivity in rural and vulnerable communities in the United States and abroad. She is currently Policy Counsel with Common Sense Media focusing on federal policies that impact the digital equity and privacy of kids and families. Amina was formerly the Benton Foundation’s Policy Director, where she worked to further government policies to address communication needs of vulnerable communities. Before that, Amina worked with the U.S. Public Interest Research Group, and for the Honorable Chief Judge James M. Rosenbaum of the U.S. District Court of Minnesota and at the Federal Communications Commission. She is graduate of the University of Minnesota Law School and Pennsylvania State University. She is also a board member of the National Digital Inclusion Alliance.