FTTH News

On Wednesday, February 27, 2008, Joey Durel -- Republican City-Parish President ("Mayor") of Lafayette, Louisiana -- testified to the House Energy and Commerce Committee's Subcommittee on Telecommunications and the Internet about Wireless Consumer Protection and Community Broadband Empowerment. The eight paragraph of the written testimony articulates an experience that many municipal leaders have encountered as they seek to understand why their communities (and the entire Country) are so far behind on broadband infrastructure:

One of my first acts in office was to authorize a feasibility study on taking the concept [a municipal fiber utility service] to the next level of public discussion. Having come from the private sector, my first thought was why we would want to compete with something the private sector was doing. However, as I educated myself, my thought was "shame on us if we don’t at least look into this." I told my staff that we would move forward until we ran into a hurdle we couldn't jump over. The feasibility study was made public around March of that year, the public discussions began and the hurdles began sprouting up: but none that stopped us. I was visited by our cable and phone companies. I asked, in fact begged them to do it so we wouldn’t have to. But we received the same answer Lafayette received in 1896 when the private utility companies chose not to install that new infrastructure called electricity..."It makes no sense in an area the size of Lafayette." We started informing our community and council. And they started misinforming. Ultimately, the message to our community was that if we didn’t do it, we we're not going to get it, just like in 1896. [link]

Seattle has had direct experience with this same sort of response from incumbent providers.  Way back in 2005, when the City's Broadband Initiative Task Force was preparing their report, Qwest wrote a letter with the following statement:

Qwest would prefer that the City of Seattle allow the telecommunications industry the opportunity to respond to the market for broadband services in an open and unfettered environment. As a general rule, Qwest opposes government intervention, by way of infrastructure ownership, because of the adverse economic effects such action has on private industry. [link]

Comcast -- the primary cable company in our incumbent duopoly -- wrote a similar letter:

While we generally understand the Task Force’s overall goal, we would need additional specifics on the applications that you don’t believe we are capable of providing with our network. We believe that the network we have in place is either already providing these services today (as generally described above), or capable of providing these services in the next year. [link]

Seattle has a Utility, just like Lafayette.  Our message to the community is exactly the same as Lafayette's was: "If we don't do it, we're not going to get it."

Frederic Lardinois -- writing for ReadWriteWeb -- calls attention to the decline in U.S. average Internet connection speeds as reported in Akamai's latest State of The Internet report. The U.S. ranks first in the number of unique IP addresses active during the period and fifth in the number of per capita unique IP addresses active during the period, but barely makes the top twenty in a list of average connection speeds by country.  In other words, the U.S. leads in demand for Internet services and trails in the supply (i.e., speeds at which those services are delivered).  This revelation should not surprise anybody.

Take a moment and think back to whatever introductory Economics course you may have taken at university.  Do you recall the Supply and Demand curves?  What happens to price when demand is high and supply is low?  That's right: the price is high.  For suppliers wanting to maximize revenue this is the preferable outcome.  This is why an "up to" 15mbps asymmetric Internet connect in Seattle (if you can get it) will cost you ~US$42.95/month when a 100mbps symmetric Internet connection in Hong Kong will cost you ~US$13/month.  What would a 100mbps symmetric Internet connection cost you in Seattle?  Good luck finding one -- in all practical terms, they don't exist.  Supply is constrained on purpose to maximize "rents" to the producer.

"What happened to market equilibrium", you ask, "Aren't market forces suppose to equalize supply and demand, thereby minimizing rents?"

First, we don't actually know what point on a set of Internet bandwidth supply and demand curves represents equilibrium.  (For all we know, Hong Kong could be over-supplying bandwidth -- also known as creating a "surplus".)  Second, market equilibrium is only possible when competition exists in a market.  Broadband Internet service is a natural monopoly. Monopolies always result in higher prices.  Third, who says that market equilibrium should be a goal for broadband Internet?  Would we apply the same goal to basic education, water, telecommunications, or roads?  We haven't in the past, and for good reason.

Again, nobody should be surprised by this Country's taking of 18th place in a ranking of average Internet speeds.  Our fetishistic fixation on free market solutions has fostered market failure after market failure in those cases where free market solutions were obviously inappropriate (e.g., natural monopolies).  Need I bring up Enron?  How about Health Care?  Last-mile Internet service is no different.  It's time that we accept the fact that the free market won't solve the bandwidth divide.

Since the release of Seattle's Broadband and Telecommunications Task Force's report, many people involved in the effort have sincerely wished for a private enterprise answer.  Realizing that no private enterprise was interested in building out a fiber to the home (FTTH) network in Seattle, many of the same people sincerely thought a public-private partnership would be possible.  You could almost hear crickets chirp in response.  (Nobody was interested unless the public-private partnership meant that the City would be putting up the money.)  The fact is that it's in the best interest of Seattle's Citizens to build their own FTTH network.  It's really no different from the world-class city-owned electricity, water, and parks that Seattleites enjoy so much.

A group of dedicated citizens and City employees have worked tirelessly on the issue of broadband access for Seattle since the early part of this decade.  Members of the Seattle Broadband Initiative Task Force, the City's Telecommunications and Technology Advisory Board (CTTAB), and the City's Department of Information Technology (DoIT), have studied the issue, written reports, issued Requests For Information, evaluated responses, and commissioned feasibility studies.  It is fair to say that the experience has been a long hard slog.  No private business ever stepped forward to build the necessary infrastructure.  No public-private partnership ever got off the ground, even though Seattle offered substantial incentives.  No political will existed to make it a priority as a community.  At least not until Mike McGinn announced his mayoral campaign in early 2009.

There was no reason any of us had to believe that Mike McGinn would win the race for Seattle City Mayor at that time, but we were all excited to see the topic become part of the political discourse for the campaign season.  As the race progressed and all but Mike McGinn and Joe Mallahan were eliminated from the ballot through our "top two primary", many of us thought there might be a real possibility that the necessary political will to build a municipal fiber to the home (FTTH) network may reside in the Mayor's office come January 2010 -- that is, of course, if Mike McGinn won.  Joe Mallahan famously didn't understand the issue even superficially.  In a interview by the Seattle PI, Joe Mallahan responded to a question about community resistance to cell phone towers in Seattle neighborhoods with the following statement:

I can't imagine that being anywhere near the top priorities of my administration. It is interesting, as a technology guy, for me to hear Mike McGinn talking about building a municipal Wi-Fi network (McGinn has said he wants to build a city-wide fiber optic network). That to me is just not pragmatic. People in suits and ties sipping lattes having Wi-Fit [sic] access, I think we've got that covered. We've got to make sure there's Internet access for poor people, in public facilities, in libraries, keeping libraries open...Muni Wi-Fi is not the most important thing for economy, and I don't think Mike gets that.

Source: Howie In Seattle Blog

It's frightening to think that somebody who is so full of contempt for people who literally run their business lives from Seattle cafes could win the campaign and end up setting any sort of agenda for our City Government.  The political polls were followed with interest and the voting results were watched with baited breath.  Then Mike McGinn won.  Seattle would get a Mayor who understood the transformative social and economic benefits of a municipal Fiber To The Home network.