Municipal broadband projects under attack

In an effort to expand access to high-speed internet service for residents in their communities, many municipalities are building their own broadband networks. But they face growing opposition from the telephone and cable industries in what is shaping up as a battle over U.S. internet policy with important implications for schools.

Internet traffic is growing faster than at any time since the boom of the late-1990s, and communities from coast to coast are trying hard not to get stuck in the internet slow lane. Some 60 towns and small cities, such as Bristol, Va.; Barnsville, Minn.; and Sallisaw, Okla., have built state-of-the-art fiber networks, capable of speeds many times faster than most existing connections from cable and telecom companies. An additional two dozen municipalities, including Chattanooga, Tenn., have launched or are considering similar initiatives.

Their efforts highlight a dispute over internet policy in the United States that is sure to affect education. Although most schools now have high-speed networks and fast internet connections, the ability for students to do research, take classes online, and download large files from home depends on the connection speeds of their households.

Once the undisputed leader in the technological revolution, the United States now lags behind a growing number of countries in the speed, cost, and availability of high-speed internet service. Cable and telecom companies are spending billions of dollars to upgrade their service, but they’re focusing their efforts mostly on larger U.S. cities for now.

Smaller cities, such as Chattanooga, say they need to fill the vacuum themselves or risk falling further behind and losing highly paid jobs.

For instance, Chattanooga’s city-owned electric utility began offering ultra-fast internet service to downtown business customers five years ago. Now, it plans to roll out a fiber network to deliver high-speed internet, TV, and phone service to some 170,000 customers. The city has no choice but to foot the bill itself for a high-speed network expected to cost $230 million if it wants to remain competitive in today’s global economy, says Harold DePriest, the utility’s chief executive officer.

But it’s a risky endeavor. Some municipal internet efforts, including wireless projects known as Wi-Fi, have failed in recent months. EarthLink Inc. confirmed last week it was pulling the plug on its wireless partnership with Philadelphia. A number of towns have abandoned a municipal fiber initiative in Utah, called Utopia, amid financial difficulties.

The latest efforts have aroused intense opposition from private-sector providers. Cable and telecom companies have successfully lobbied 15 state legislatures to pass laws preventing municipalities from entering the broadband business. Comcast Corp., Cox Communications Inc., and other cable and telecom providers have also filed lawsuits against existing projects, arguing they’re an improper use of taxpayer money and amount to unfair competition. In Chattanooga, Comcast sued the city’s utility late last month in Hamilton County Chancery Court.

"They don’t know what they’re getting into," says Stacey Briggs, the director of the trade group Tennessee Cable Telecommunications Association, of Chattanooga’s plan. She says the utility has underestimated the costs involved, among other things.

DePriest counters that the suit is just a stall tactic. "So long as they can delay us, they can hold on to their customers," he says.

Such disputes take on greater significance as the internet enters a new phase of explosive growth, much of it driven by user-generated video and images. More network and cable TV shows are being shown online, and web-enabled cell phones are bringing the internet to new users all over the globe.

According to a recent report by Cisco Systems Inc., total annual internet traffic will quadruple by 2011, reaching a size of more than 342 exabytes. (One exabyte is the equivalent of one trillion books of about 400 pages each.)

In the United States, where most of the critical infrastructure that led to the creation of the internet originated, questions persist about how well-positioned the country is today. South Korea, for example, now reportedly generates about the same amount of internet traffic as the U.S., with just one-sixth the population.

In terms of adoption, or the percentage of households using broadband, the United States (with 57 percent) ranks 10th out of the 30 leading industrialized countries that are members of the Organization for Economic Cooperation and Development, a Paris-based research and policy group. The U.S. was among the leaders in this category at the beginning of the decade. The nation fares only slightly better in affordability, ranking 11th most affordable (at $12.60 per megabit per second), behind countries such as Italy and Norway.

The United States has fallen behind in speed, too. In the same study, conducted by the Information Technology and Innovation Foundation, a nonpartisan think tank, the U.S. ranked 15th in the average advertised download speed, at 4.9 megabits a second. That’s slower than the 17.6 megabits a second in France and the 63.6 megabits a second in Japan, which ranks No. 1 in this category. In other words, it takes a little over two minutes to download a movie on iTunes in Japan, compared with almost half an hour in the United States. The average U.S. download speed is even slower, according to other estimates.

Chattanooga’s DePriest compares his agency’s plan for providing high-speed internet service to the rollout of electricity, which came to many parts of Tennessee only in the 1930s as a result of the creation by the federal government of the Tennessee Valley Authority. That was three decades after many businesses and homes in major urban areas such as New York first were electrified.

The country’s electricity at the time was largely provided by private companies, which denounced any government efforts to get into the business as "socialist"–echoing the debate over municipal fiber networks today. Against this opposition, many public utilities, including Chattanooga’s Electric Power Board, or EPB, were formed to help bring electricity to their towns and the surrounding countryside.

Electricity, of course, would later be used for many home appliances that didn’t exist at the time, from refrigerators and stereos to televisions and computers. Similarly, bringing fiber to the home is "not about what services are available now in the market, but about things that haven’t even been invented yet," says Katie Espeseth, head of the Chattanooga fiber project.

The EPB views the fiber effort as central to the revival of a city long in decline. In 1969, Walter Cronkite announced on the CBS Evening News that Chattanooga had America’s dirtiest air. The decline of passenger rail traffic and the local iron industry was followed by massive unemployment, the abandonment of downtown, and soaring crime.

Today, after more than a billion dollars of investment, the city’s downtown is coming back to life. Although some factory buildings remain abandoned, others are being filled by high-tech start-ups and by a handful of restaurants, coffee shops, and galleries that cater to the start-ups’ young employees.

In a converted saddle factory there, 38-year-old Jonathan Bragdon runs a 40-person company that he says couldn’t exist without a lot of affordable internet bandwidth. Seven of his employees live and work in other cities, including New York and Leeds, England. His business, called Tricycle Inc., transmits high-resolution 3-D simulations of carpeting to interior designers.

More important than download speed for such work is upload speed. Yet, on most connections, it often takes longer to upload files to the internet than it does to download them from the internet. With Comcast, Bragdon was getting a download speed of eight megabits a second, but an upload speed of only one megabit a second.

About two years ago, Tricycle switched to the EPB’s fiber network. Bragdon says this lowered his costs several-fold and gave him the flexibility to upgrade to speeds as fast as 100 megabits a second. "With the rivers and the mountains, young people want to live here," says Bragdon. "But you need good bandwidth to work here."

A Comcast spokeswoman says the company recently increased its speeds for small businesses to 16 megabits a second in many markets, including in Chattanooga, and upload speeds to two megabits.

Critics of the notion that internet service in the United States is falling behind other countries say gaps stem from cultural and political differences. More than half the citizens of South Korea, for example, live in multi-tenant buildings of at least 50 units concentrated in large cities, making it easier and cheaper to connect people there, according to a report this month from the Information Technology and Innovation Foundation. In the U.S., by contrast, most people live in single-family homes.

Other countries, such as France, have benefited from increased competition by governments forcing their former telecom monopolies to open their networks to new providers. In the U.S., the regional successors to the former Ma Bell resisted such regulatory efforts, arguing it made little sense for them to invest in their networks if forced to share them with potential competitors.

As a result, in most markets in the U.S. there have been only two broadband providers, one telecom and one cable company. While some countries were aggressively trying to catch up to the U.S. internet lead, "not much changed in the U.S.," says Susan Crawford, a professor of internet governance at the Benjamin N. Cardozo School of Law in New York.

Change is finally starting to happen, as cable and telecom companies compete more aggressively in each other’s traditional businesses. Bills are now making their way through Congress to remove the state barriers to municipalities offering broadband. And the Federal Communications Commission recently revamped its definition of broadband, which had been just 200 kilobits a second, to bring it more up-to-date. It now includes several tiers of speeds, starting at 768 kilobits per second.

Verizon Communications Inc. is in the midst of a $23 billion project, called FiOS, to bring fiber to the homes of more than half of its 33 million customers in 28 states by 2010. Comcast last month began boosting speeds on its network, and the company estimates that 20 percent of its customers will have access to faster speeds by the end of the year.

Still, these ultra-fast networks are destined only for certain parts of the country, such as major urban areas, at least for the foreseeable future. In large swaths of the United States, particularly second- and third-tier cities and towns with more dispersed populations, providers consider deploying broadband less profitable.

In downtown Chattanooga, James Busch, a 37-year-old radiologist and medical-software entrepreneur, says when he opened his business, he couldn’t find an internet service that was fast enough. Comcast’s plan was too slow, and AT&T said it would take three months to build a dedicated higher-speed connection to his business.

Busch’s clinic, located in a strip mall, consists of 10 radiologists who provide remote diagnoses for rural hospitals that can’t afford their own radiologists. Transmitting the high-resolution medical imagery often requires a very fast speed, which he says the EPB network now provides him.

"Information technology means a smaller country with fewer people can now do the same amount of work as a larger country," says Busch. "If we don’t become more efficient, we lose our big-country advantage."

Late last month, the EPB raised $219 million through municipal bonds, which it says will primarily be used to upgrade its existing electrical system. The upgrade will involve laying a fiber network to create a so-called "smart" grid, which will allow the utility to remotely monitor and control how power is distributed, says DePriest. He acknowledges that once the fiber is laid, it can be used to deliver TV, internet, and phone service–but he says that’s a separate venture altogether, and one that will require an additional $60 million to get off the ground.

In its lawsuit, Comcast argues the grid isn’t Chattanooga’s primary objective. It says the real goal of last month’s bond issue was to bring internet and other services to residents. If the utility fails to meet payments on the new debt, ratepayers would be stuck with the tab, says Comcast.

"We believe the plans constitute a cross subsidy prohibited by Tennessee state law," says a Comcast spokeswoman. "Our intention is to ensure … that Comcast be allowed to compete in a fair environment."

DePriest remains undeterred. He expects to have most of the smart-grid network completed within three years, serving 80 percent of the city. "The issue is, does our community control our own fate," he says, "or does someone else control it?"


Organization for Economic Cooperation and Development

Information Technology and Innovation Foundation

Electric Power Board of Chattanooga

Federal Communications Commission


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