Publicly-owned broadband

Minneapolis is currently moving forward with a plan for a new, privately owned and operated, citywide broadband network. This plan was formulated essentially without public input, and without evaluating the benefits of public ownership. In the past month, eight neighborhood associations have expressed their concern about the City’s lack of transparency on this issue.

City officials are offering several justifications for their decision.

1. One is that the City does not have the ability to manage a network. Hundreds of cities across the country have discovered that they can manage a high-speed information network. Portland, Ore., manages not only the fiber network that connects city facilities, but also a second fiber network that provides connectivity for schools, county government, and other public entities.

Although many other cities have shown themselves capable of managing a network, the public could own the network without the City assuming management responsibility. Day-to-day operations could be contracted out to a private service provider.

The advantage of a publically-owned network is if the City is displeased with how the network is being run, it can re-negotiate the management contract or seek other bidders to manage its network. With a privately- owned system, one company controls the infrastructure that provides the wired and wireless connectivity on which municipal operations rely. This fact locks the City into a relationship with the network’s owner for the life of the network.

2. A second justification is that information technology is rapidly evolving, and a publically-owned network would be too big a risk. The technology certainly is improving. But fiber optics, which is the backbone of the network, is the copper of the 21st century. Other technologies may eventually match the capacity of fiber, but this will not make fiber obsolete.

Better wireless technologies will no doubt be available, but there is little chance that a system built with today’s technology will be obsolete in the near future. The difference is that when new technologies become available, private companies are less likely to upgrade their networks, preferring instead to extract every last bit of profit out of existing equipment.

3. A third justification is that the regulatory environment is hostile to municipal ownership. It is true that cable and phone companies are lobbying aggressively at both the state and federal level to limit local competition. Recently, the federal government has consistently ruled that having a phone and cable information duopoly is an acceptable level of competition.

Portland, Ore., required, as part of its franchise agreement, that its cable company allow competing companies to provide internet access over their cable networks. The company fought open access requirements. The Federal Communications Commission not only took the cable industry’s side, it went further. This year it will end existing open access requirements for phone networks. Phone and cable companies will have sole authority to decide what information they will or will not transmit. They may also prioritize traffic from affiliated content providers, or those that pay fees.

The federal government’s refusal to enforce laws that would encourage competition at the local level means that city governments have an even greater obligation to do so.

4. A fourth justification from City officials is that money spent to build an information network is money not spent on police and other services. In fact, this network presents an opportunity to provide better municipal services at lower costs, and to generate revenue.

The City is a huge consumer of information services. It plans to transfer at least $2 million in current spending on phone and cellular services to the new network. That number will only grow as more capacity is needed for schools, libraries and other public entities. A publicly-owned network allows the City to save money by negotiating with competing service providers for the lowest price as its needs change. Savings will be passed on to police, fire, schools and libraries.

Many companies will be willing to pay for access to business and residential customers via a public network. If just 15 percent of Minneapolis households and small businesses subscribed at a rate of $20 per month, subscription revenues would exceed $6.4 million annually. Corpus Christi is currently negotiating with several private companies that want to lease space on the publicly-owned fiber and wireless network.

Finally, supporters of a privately-owned network say the City has learned from its mistakes in the cable franchise. There is an old saying, “Fool me once, shame on you. Fool me twice, shame on me.” Minneapolis negotiated one of the best cable franchise agreements in the country. It has spent the last 20 years trying, unsuccessfully, to enforce that agreement. Most recently, a federal judge dismissed the City’s lawsuit against Time Warner Cable.

This is not the first time the City has tried to convince a private company to build this infrastructure. In 1998, the City began negotiating with its cable franchisee for an institutional network in exchange for concessions on the franchise agreement. In 2000, the City issued a request for proposals that is, accounting for changes in technology, nearly identical to the current one issued in April 2005. The cable franchisee eventually agreed to build the network, but the company never followed through.

This history makes the failure to consider public ownership all the more disturbing. It is not too late for the City to change its course. The first step is for new City councilmembers, and citizens, to get a full accounting of the process to this point.
Please attend the Minnesota Global Forum’s discussion on Wi-Fi on Wed. Jan. 18 from 5 to 7 p.m. at the Acadia Cafe, 1931 Nicollet Ave., Mpls. For more info, call 612-331-5615.

Becca Vargo Daggett is a research associate at the Institute for Local Self-Reliance, and co-author of “Who Will Own Minnesota’s Information Highways?” available at www.newrules.org.