Can You Trust Your Small ISP?

FCC Commissioner Michael O’Rielly recently made a speech at the Media Institute “Free Speech America” Gala in which he made some serious allegations against municipal broadband. From that speech:

In addition to creating competitive distortions and misdirecting scarce resources that should go to bringing broadband to the truly unserved areas, municipal broadband networks have engaged in significant First Amendment mischief. As Professor Enrique Armijo of the Elon University School of Law has shown in his research, municipalities such as Chattanooga, Tennessee, and Wilson, North Carolina, have been notorious for their use of speech codes in the terms of service of state-owned networks, prohibiting users from transmitting content that falls into amorphous categories like “hateful” or “threatening.” These content-based restrictions, implicating protected categories of speech, would never pass muster under strict scrutiny. In addition to conditioning network use upon waiver of the user’s First Amendment rights, these terms are practically impossible to interpret objectively, and are inherently up to the whim of a bureaucrat’s discretion. How frightening.

Let me address the three allegations he’s made against municipal broadband:

Municipalities create competitive distortion. The fact is that most US markets have almost no real competition – they instead have weak competition between a cable company and telco. O’Rielly is repeating a familiar talking point of the big ISPs who don’t want any competition. Customers love real competition whether it comes from a municipal provider or from a fiber overbuilder.  Consumer Reports recently listed the Chattanooga municipal ISP cited by O’Rielly as the ISP with the highest customer satisfaction in the country. I think what O’Rielly and the big ISPs call market distortion, consumers would call real competition.

Municipalities misdirect needed investments from unserved areas.. This is a particularly ironic statement. Wilson, Greenlight used those ‘scarce resources’ to build fiber to the nearby tiny unserved town of Pinetops, NC. Anti-municipal legislation in in North Carolina first required that Wilson not bill outside of their city boundaries. That same legislation then forced Wilson to sell or abandon the network when Suddenlink decided by build in the town.

Anybody who knows the industry knows that the big ISPs are not investing a single nickel of their own money in rural broadband. The big ISPs have been willing to spend the FCC’s tax money to implement 10/1 Mbps broadband from the CAF II program, but otherwise they don’t care a whit about the unserved areas of the country. I’m really not sure who Commissioner O’Rielly thinks will invest in rural America if the FCC precludes rural towns, counties and townships from solving their local lack of broadband.

Municipalities restrict First Amendment rights of customers. This allegation is almost too ridiculous to respond to. Take the example of Wilson, North Carolina, who the Commissioner singled out. The wording of the Wilson terms of service are nearly identical to the terms of service from Charter, the largest ISP in the region. I’ve not done the same comparison for Chattanooga, but I’ve done so for around twenty other municipal ISPs and they all typically mimic the terms of service of their commercial competitors.

A have a lot of clients that are municipal fiber providers, fiber overbuilders and small telcos. I can’t think of one example over the last decade when one of my clients unilaterally shut down a customer for things they’ve said on the web. They mimic the terms of service from the big ISPs, because all ISPs are occasionally asked by law enforcement to shut down a user who is harassing somebody or otherwise engaging in nefarious, illegal or other bad practices on the web. The terms of service give the ISPs the cover to disconnect customers under such circumstances.

Commissioner O’Rielly has it backwards and it’s the big ISPs that daily violate the trust of their customers. Small ISPs don’t use deep packet inspection to read emails or messaging. Small ISPs don’t record and then sell or use customer web search history. Small ISPs don’t track what their customers do on the web. Smalll ISPs don’t monetize their customer’s data.

Commissioner O’Rielly ought to talk with some customers of the two ISPs he’s singled out. Those customers will tell them that they trust their local municipal ISP far more than they trust Comcast or Charter or AT&T. The Commissioner’s talking points come straight from the big ISP lobbyists and he further supports his position by citing a discredited whitepaper paid for by the big ISPs. If the Commissioner spent more time outside the Beltway he’d find out that people love and trust their small ISPs – be that a municipality, a fiber overbuilder or a small telco.

Paying for Rural Fiber

I am in an interesting place in the industry in that our firm works for both municipalities as well as lots of small commercial ISPs like telcos, cable companies and CLECs. One thing that I have noticed over the years is that there is a huge amount of distrust by commercial ISPs towards municipalities that explore building fiber optic networks.

And I think for the most part this distrust is misplaced. It’s been my experience that there are almost no cities that want to be an ISP. I think perhaps the idea that cities want to do this has been caused by the big telcos and cable companies spreading alarms about the cities that have done this. I think that most of the cities that have built fiber, except for a few like Chattanooga, would have much preferred to have a commercial company bring competitive broadband to their city.

It’s easy to forget about the fear and angst in rural America concerning broadband. Rural communities keep seeing other rural places that are getting gigabit broadband while they still have homes that don’t even have DSL. They look around and see little towns of their own size with broadband that are thriving and they realize that if their town stays on the wrong side of the digital divide that their long term viability is at risk.

Perhaps the best example of this that I’ve heard came from Hiawatha Broadband of Winona, Minnesota. This is a commercial overbuilder who built broadband networks to a number of small towns in their region. They have been at this for a while and what they observed in the last census is that every one of the towns with one of their broadband networks gained significant population while every town around them that doesn’t have broadband is losing population.

People need broadband and they are going to live where they can get it. New homes are going to be built where there is broadband. People want to work at home and can only do that where there is broadband. And people with kids want broadband so that their family is not at a disadvantage. Towns and rural areas without broadband understand these issues and they don’t want their area to dry up and disappear.

I remember a bunch of articles back in 2012 where somebody had estimated that it would cost $140 billion to build fiber everywhere in the country. I have no idea if that is a good estimate, but obviously it would cost a lot. What I think is important to understand is that even if all of the small telcos and cable companies and electric coops wanted to build fiber everywhere that the combined borrowing power of those companies in aggregate is not large enough to get the job done. As much as folks want to think that small carriers are the national solution, as a whole they could not borrow the needed billions.

What I am finding is that communities are starting to wake to the fact that they are going to have to contribute to financing fiber if they want broadband. The likelihood of an ISP just showing up and building fiber in most rural communities is very small. It’s hard to make a good business case with rural fiber, and even if you can make the case it’s exceedingly difficult to borrow the money.

So I think it’s time to get rid of the mistrust between municipalities and small ISPs and instead come together to get the job done. I’ve done a lot of financial analysis of rural America and fiber projects are a lot more feasible when part of the project is funded by municipal bonds and not just from bank debt.

I think the way to get this done is through the creation of public private partnerships (PPPs). There are already a number of examples of places where this has worked, but there needs to be a whole lot more PPPs created. If rural towns and counties really want to get broadband then they ought to be willing to put skin in the game to make it happen. It’s something that taxpayers want and rural surveys are generally overwhelmingly in favor of local government helping to solve their broadband problems.

There are some very specific steps that ought to be taken to put together a good PPP for rural fiber. It would probably take a dozen blogs to discuss this topic thoroughly. I may or may not do that, but meanwhile, if your community needs a broadband solution give me a yell. I can tell you how other communities have gotten this done and point you in the right direction towards finding a PPP broadband solution for your area.

Should You Consider Open Source Software?

grayLinux1600There is a big shift going on in the software world that you should keep an eye on. More and more large companies are moving big parts of their software platforms to open source software. The question I raise today is whether or not it’s now time for smaller companies to consider doing the same?

Open source software has been around for decades and used by programming purists who never trusted software from big companies like Microsoft. I can remember free versions of spreadsheets, word processors, and numerous other kinds of free software as far back as the early 80s. The free software never got much traction for a number of reasons, the primary of which is that it made it hard to share your work with other people not using the same free platforms. But a small business, or a writer, or anybody who created content just for their own use was able to get by without paying hundreds of dollars every few years for the latest Microsoft Office upgrades.

Small ISPs were the first group that I can remember using open source software for commercial purposes. In the early days of ISPs, when AOL and Compuserve were signing up millions of customers, there were a few thousand local ISPs that sprang up around the country. These small companies provided more personalized ISP services than the giant companies and catered largely to business customers. Some among these ISPs wrote software that took care of basic ISP functions like operating an email server or a DNS server and made this software available to other ISPs. I can remember recommending this software to telephone companies that were getting into the ISP business, with the reasoning that because it was open sourced it was constantly being improved (and it was free). But many of the telcos could not get over the trust factor of using something ‘free’ and instead went out and spent upwards of $50,000 on software that didn’t even have all the features and functionality of the free software.

Linux is the best-known open source software. At its peak it was only installed on about 1.5% of PCs, but the Linux kernel is now built into android and is on billions of phones and devices. I think it was the experience with Linux that gave large corporations the confidence to start using and even contributing to open source programming. This move has been further pushed by the need to deal with hackers. In the last few years open source software has dealt better with hacking, both because it has fewer vulnerabilities, but also because the software recovers much faster when problems arise. And this makes sense. Widely used open source software has hundreds of smart programmers watching after it and responding during an emergency where large corporate software might rely on only a small handful of programmers. Also, the small bugs in open source software are being tested and tweaked all the time whereas vulnerabilities on commercial software are often never noticed until it’s too late.

Today we are seeing some of the biggest tech companies take the open source approach with some of their software. Companies like Microsoft, Google, and Facebook have accepted an open source philosophy for some of their software and have joined a legion of numerous fortune 500 companies that now rely on open source for some of their critical systems. The big companies are growing dissatisfied with the large operating systems like Oracle or PeopleSoft. While there are many things they like about these mega-software systems, there are parts of the big software systems that don’t work well for them and that are too hard to customize for their use. And these huge software systems are incredibly expensive. By the time a large corporation buys a large software system and then pays again to customize it for themselves they will have invested many millions along with having to pay big annual software maintenance fees.

Corporations also started breaking away from the large software packages when they found that more nimble software existed to handle some of their critical needs, such as the way that Salesforce has become a standard for CRM. Once they broke away from part of the big program systems it became easier to consider open source solutions for other needs.

As these large companies allow their programmers to work on open source platforms, those platforms get even better. Where Linux was largely written and maintained by people who also worked other jobs, there are now fleets of corporate programmers who are working to add to and improve open source software.

It’s not always the easiest thing in the world for a smaller company to make the transition to open source. Open source software doesn’t come in a nice neat package with dedicated customer support and training. But when I look around at my clients, I see them still spending a relative fortune on software for such things as billing systems, CRM systems, and hardware monitoring and interface software. Any small carrier who is spending more than a few hundred thousand dollars a year on traditional software might be better off to instead hire a programmer or two and let them find and implement open source software. It’s a bold move, but if it’s working for the big corporations it might well work for you.