Thursday, January 31, 2008

Self-Reliant Lafayette

The Institute for Local Self-Reliance (ILSR) recently released "Municipal Broadband: Demystifying Wireless and Fiber-Optic Options" that should be on the bedside table of decision-makers and community activists in any locale that hopes to control its own communications future.

The author is writing against the backdrop of St. Paul, Minnesota having recently pondered and decided to pursue building a fiber-optic network. The study makes the general case that proved a convincing argument in that twin city. It is no accident that such a useful general study grew out of the specific needs of a real community.

In my judgment Christopher Mitchell gets it exactly right: the big take-away is that communities can, and should, control their own communications destiny; no one else will do it for you:
Private network owners simply have different motivations from public network owners. Private companies are legally required to maximize profit for their shareholders. Public entities have a different mission; they are focused on maximizing social and economic benefit to the community. This distinction seems to have been lost in much of the discussion around municipal broadband systems.
That's as simple and direct a statement of the obvious as any long-term advocate of public ownership could hope for.

That, happily, is not the only thing Mitchell is right about:
As St. Paul found, fiber-optic wires form the communications foundation of the future. Fiber networks last for the long term while offering un-matched speeds and capacity.
Fiber networks should not be considered an alternative to wireless networks. As noted previously, each solves different problems. Fiber networks can actually lower the cost of building a wireless network. Once the fiber network is completed, wireless nodes can be easily connected, offering considerably faster speeds than those without ubiquitous wired backhaul.
Wrapping it all up:
Fortunately, we already know the solution: wireless solves the mobility problem; fiber solves the speed and capacity problems; and public ownership offers a network built to benefit the community.
Those are the crucial points upon which an intelligent, well thought-out report is built. Having got the basics right Mitchell also demonstrates the ability to write well--explaining the critical differences between the technologies as well as he does the basic points of ownership and function. If you want to really understand the differences between wired and wireless architectures, and between cable, DSL, and Fiber delivery systems in terms that make it clear what those differences mean for the communities that use them, this is an almost uniquely useful text.

This well-done report should advance thinking in the area by making it nigh on impossible to ignore the basic case for public ownership—that only public ownership will lead to the public's interest being consistently served. It should, as well, clarify the proper role of fiber and wireless in building an advanced infrastructure for your community. As has been argued here repeatedly, fiber and wireless are both necessary but a robust fiber network is the foundation for a truly useful wireless network.

Small print; two caveats:

First: The question of the possible monopoly nature of wireline networks is not dealt with. Most discussion, and this one, implicitly assume that competition between different wireline networks can be stable in the long run and so the issue of WHO owns the network is one that is not, perhaps, pressing. --If the local provider proves unreliable or abusive it is assumed that we could provide competition later. I am not at all confident of that assumption, strongly suspect that wireline, and especially wireline fiber, is a natural monopoly and am fearful that there is but a small window for communities to gain control of their own future and avoid being subject to a monopoly run from a distant metropole with no real regard for local communities. Sounding the tocsin now is, I fear, necessary.

Secondly: I, for one, would like to see more discussion of the role of open and closed networks. ILSR comes down pretty simply on the side of open networks--while noting that its favorite example, the one of Burlington, Vt, is ambigous on this issue. Burlington endorses an open network theoretically but sells its own products at retail and has yet to actually have other firms selling retail service over its fiber. (Other than, of course, pure IP plays like Vonage telephony, which can ride any network.) This issue has been chewed over pretty thoroughly on this site and we've come to a pretty nuanced view—one which recognizes the value of real competition but doubts that public networks can survive if forced to compete at a structural disadvantage with private, vertically integrated incumbents. Examples of clearly successful municipal communications networks competing against established incumbents are easy to come by. Give people fast, low latency public fiber at a cheap price and we'll all abandon the retail, broadcast, POTS telephone provider fairly quickly--that is what's seen as the inevitable "IP migration." Voice service, is already moving in that direction quickly. Video will follow in any community as soon as there is a provider that will offer enough speed cheaply to move in that direction. But that is not in the interests of the established incumbents. And, as Mitchell correctly points out, only publicly owned enterprises would find it in the interests of their owners (the public) to allow or even encourage this migration. A fast, public fiber network like Lafayette's is the only visible realistic alternative short of a sea change at the Federal level.

But my quibbles are minor—asking any one study to address so many topics is surely unreasonable. Especially when what is before us is so astonishingly well done.

Highly Recommended theIND blog post notes this is as a study which praises Lafayette and the choices we've made. True, we get two nicely favorable mentions. But they are only mentions. Wait until we're up and running.


christopher said...

Thank you for the great review. I would like to challenge your first caveat. I actually note that wired networks tend toward natural monopoly (check the Common Carriers & Regulation box) but you are correct that I do not press the issue. To be honest, I cannot fathom how someone could argue a citywide wired network does not constitute a natural monopoly. I've talked to a few economists about this, and we have a all agreed on it.

I think you are right about the need for more discussion about open networks. I have been coming around to the idea that perhaps the best model is the Burlington one - where the owner provides a triple play (offering financial stability to the network) while wholesaling access on a non-discriminatory basis.

I do think publicly owned closed networks offer a community much more than they would get from solely relying on private providers, but I believe the long term benefits are greater with the competition that comes with open networks.

Perhaps we can do a joint pro/con sheet?

John said...

Hi Christopher,

Thanks for the feedback!

You're right; you do explicitly note the tendency to monopoly in telecom networks. Read carefully, It is much stronger than I recognized. But for me that raises an overwhelmingly pressing question: Whose ownership will determine in whose interest the final monopoly is run? I want that last man standing to have the public's interest at heart. I have argued on these pages that ONLY if that network is publicly owned can the possibility that services on the network will be openly competitive be realized. And that can be secured only if the public network effectively prevails in its footprint. I'm glad you've found good economists. ;-) The dominant school of economics these days (Chicago) tends to doubt natural monopolies exist on theoretical grounds and the FCC and its band of econmetricists seem to actually believe in this thing they call modal competition. Most analyses I see, including those coming from those sympathetic to communities and consumers reflect this trend toward denial by proceeding with an analysis that presumes that phone, cable, and overbuilders (public or private) can indefinitely coexist. I'm glad to realize that you are not to be counted in that number. I seriously doubt such competition will prove stable and the problems of private overbuilders in Texas (Grande), and in the northeast/California (RCN) recently help me stay strong in this conviction.

I do think competition a good thing and one that should be pursued... but the question is where the natural monopoly ends and the free market begins. For me this is where the issue of natural monopoly kicks in and shapes what I think prudent. Public ownership (preferably local) of this essential natural monopoly infrastructure is the basis for competition in services and so it should not be risked until the ultimate survival of the public alternative is guaranteed. That means (for me) using the strongest possible business plan to strengthen the financial basis for the public offering. That, on the evidence of history, is vertical integration. Faced with opponents whose sheer size give them enormous competitive advantages it seem suicidal to try and carve out an alternative, local replacement with less than the most robust economic model possible for the little, public guys.

But that said...I think that public utilities do not need to go beyond offering the legacy vertical services that give the current incumbents their strength. Time is our friend. I am pretty convinced that no network monopoly (public or private) will in the long run be able to resist the coming commodification of bits... the internet is the open model that will eventually prevail. It will swallow up the traditional, vertically integrated monopoly services that funded network construction. VOIP is the harbinger and Video will clearly go the same way. Publicly owned utility-oriented networks have no reason to resist this. (LUS has very clearly signaled that they realize that cable TV and POTS telephony are bridging technologies and has pledged to allow all IP services common carriage. They anticipate the withering away of traditional services--and hence their role in providing them.) But the private telecoms cannot abide commodification...or being reduced to utility status as a consequence...a status utilities, conversely, actually welcome. The net neutrality debate is, IMHO, really about resisting this commodification and those areas that have public utilities will have a much smoother transition as the giants collapse. (Or, in the worst case for the country, the giants will succeed in finally killing common carriage, the idea of net neutrality will vanish and those communities who have insulated themselves against the resulting high-priced, lousy service regime will become regional powerhouses. Not international--there is no sign that any foreign country is prepared to allow anything like as much silliness as our FCC embraces.)

So...that is a very long-winded way of saying "Yes" --lets do think about this thing in some sort of side-by-side analysis. A pro/con sheet would be fun and quite possibly useful.