Tag Archives: MDUs

Another Municipal Model

Seal_of_San_FranciscoCity officials in San Francisco recently issued a report that takes a very different stance than most other cities that are looking at broadband issues. The city essentially rejects the normal demand-based commercial model for broadband and looks at a new structure that will bring broadband to everybody.

The report is authored by the office of supervisor Mark Farrell and reflects some of the recommendations from the San Francisco Municipal Fiber Advisory Panel. The report very correctly observes that today’s commercial broadband model leaves a lot of citizens without broadband. Numerous nationwide surveys have shown that the majority of households without broadband access today feel they cannot afford the market prices for service.

So the San Francisco report recommends that the City institute a $26 per month fee on all households – with a higher fee on businesses – to help pay for broadband to everyone. They further recommend a public private partnership model to operate the business and assume that tiered pricing will still allow for profitability for a commercial partner.

The numbers are based upon an estimate that it would cost $867.3 million to build a fiber network in the city and $231.7 million per year to maintain the network. In my experience in looking at other large cities, both numbers feel very high. One has to assume in an open access network where fiber was built to everybody that the ongoing maintenance expenses for a network would be far lower than that since much of those costs would accrue to the ISPs and not to the city.

The city is not the first place that has looked at paying for fiber using taxpayer money, but they are by far the largest. A few small communities like Leverett, Massachusetts have paid for fiber construction with tax levies. The city of North Kansas City built a network and essentially is giving free service to residents for the next ten years. And the Utopia system in Utah recently looked at the tax-payer funding model, although it looks like a lot of the communities involved are rejecting the idea.

It’s a very interesting concept that has a bunch of pros and cons. On the plus side this would certainly solve the digital divide if every household in a community had a fiber connection. There would still be the issue to solve of making sure that everybody has a computer, but that seems like an easier problem to solve than getting the fiber network built to everybody.

But I can foresee a few major hurdles in implementing such an idea in an NFL city, such as the following:

  • The City probably doesn’t have the right to insist that they can bring fiber into apartment buildings. The FCC has made it clear that building owners have the right to control the wiring and the access to services on their own property. Many of the apartment owners will already have made a long-term contractual arrangement and be doing revenue sharing with the local cable company or some other service provider.
  • One can envision multiple lawsuits from citizens and businesses that wouldn’t want the city solution or who won’t want to pay the fee. It’s one thing to do this in a tiny town like Leverett, MA where there was no existing broadband, but in a large city there are bound to be many who don’t want the city doing this.
  • This is such a drastic solution that it surely would invite legislative action and multiple lawsuits from the incumbent providers. California is one of the states that allows for municipal competition, but using direct tax revenues to compete against the existing broadband providers would raise legitimate concerns about unfair competition. One can envision attempts to pass state or national legislation that would outlaw the proposed business plan. ISPs would use every tool at their disposal to fight this for fear that it might work and could spread elsewhere.

As the report points out, cities have a broadband dilemma today. Even where there is fiber or good broadband today there are a lot of households that can’t afford broadband. The report estimates there are over 100,000 people in San Francisco that can’t afford the market price for broadband and another 50,000 that still use dial-up.

There is also the issue of carriers building to just some parts of a city. One only has to look at all of the east coast cities that have Verizon FiOS to see the result of allowing commercial broadband providers to cherry-pick in markets. These cities have some neighborhoods with fast fiber broadband and competition between the telco and the cable company (which many observe is not real competition). But they have many neighborhoods without fiber and none of these cities can formulate a business plan that can justify bringing fiber to the neighborhoods that Verizon bypassed as too expensive to build.

The San Francisco report was a little fuzzy on a few of the details, which is natural since those details can only be made clear through negotiations with carriers willing to operate on such a network. You have to give the city kudos for creativity. But I foresee a big uphill battle if they try to implement this. But it’s an idea that should work if it can overcome the opponents that will spend huge money to try to prevent it.

Broadband in Big Cities

san_francisco_skyline-wideI’ve often written about the issues with rural broadband, but today I thought I would take a look at the state of broadband in the large cities. As people read and hear about Google and other fiber projects I think the natural assumption is that the cities either have fiber or soon will get fiber. I don’t think that’s true.

Let’s look at a few of the larger fiber builders and what they have done with cities. First is Verizon FiOS. It’s a great service and I had it at one of my previous homes. But for the most part it’s not been built deep in the heart of the larger cities. FiOS has been a suburban and medium town product and you are far more likely to be able to get FiOS in a suburb than if you live downtown.

Google is currently building a few cities. Both they and AT&T have also released a list of possible candidate cities for fiber. But Google only builds in neighborhoods where enough customers sign to buy fiber. And AT&T’s fiber construction seems to be more press release for now than substance.

And nobody wants to talk about is that none of these providers builds to MDUs. Not FiOS, not Google, not AT&T, not the munis and pretty much not anybody else. Nobody has solved the inside wiring issues that come with multi-dwelling units, and so none of the big fiber providers are building to them. In some cities over half of the living units are in MDUs, and even when fiber comes, these residents don’t get it.

There are a few companies that are specializing in MDUs, but they either concentrate on student housing or on that small slice of apartment buildings that have already been wired with category 5 cable. And most apartments and condos are wired only with traditional coaxial cable and telephone copper. And then you have to layer the contractual issues on top of the wiring issues. The FCC took a stab a few years ago of fixing some of the more egregious abuses where cable companies had tied up the rights to the existing wire inside MDUs. But they didn’t close all of the loopholes and there are plenty of apartment complexes that are still contractually locked into allowing only the cable company.

But then one has to ask if any of this is all that bad, because the cable companies in the large cities have increased cable modem speeds and it’s hard to find a city that doesn’t have speeds of at least 100 Mbps available. But you have to look a little closer to see that is not as good as it sounds.

The faster cable modem products are expensive. In many cities the 100 Mbps products are around $100 or more per month, absent any sign-up specials. But that is not the only cost customers face. For example, I have Comcast and they wouldn’t let me buy a 50 Mbps cable modem without having to take some of their cable product. Cable companies don’t have to sell naked cable modems, and so there are a lot of households that just can’t afford the big packages that are needed to get the faster cable modem speeds. This goes back to the same categorization of broadband as an information service, and just like with net neutrality, the FCC doesn’t have the authority to force cable companies to sell naked cable modems. Finally, there are problems with cable modems in some MDUs. Some of them with older wiring will not allow the delivery of faster data speeds. Or, in some MDUs the internet comes with the rent and you get whatever the landlord will pay for.

There is some good news for cities in that over the next decade the cable companies are going to be able to offer speeds as fast as a gigabit. They have a lot of work to do on their networks to get to those speeds, but the technology to get there is already developed or on the drawing boards at Cable Labs. One has to wonder if the cable companies will upgrade in cities where they don’t have a real competitor. One has to think that the cable companies will be as judicious in handing out gigabit speeds as they today are handing out 100 Mbps speeds. It’s one thing to be in a market that has the potential for very fast data speeds, but it’s something else to be able to actually order it or to be able to afford it.

I am afraid that most cities are going to be at the mercy of the cable monopoly for decades to come. FiOS is no longer expanding. Google is going to go where they go, and that is not going to be everywhere, even in the cities where they do build.

There is some hope in the future for apartment buildings. I’ve reported before on a technology that uses ultrawideband that looks to be able to deliver gigabits of data over existing coax without disturbing the cable traffic. Think of it as DSL for cable systems. But the fast versions of that technology are still a few years away, and even that is going to require somebody to build a fiber to the front of an apartment.