Not Only Will the Lion Lie Down With the Lamb, He Will Make Big Bucks Opening a Feed Store (While Still Running a Butcher Shop on the Side)

Y’all remember how AT&T (under its old name SBC) launched over a hundred lobbyists into the Texas legislature to kill muni broadband in TX? How it tried to kill muni broadband in Indiana? Not just once, but twice?

Guess what? AT&T has now cut a deal to build a muni wifi system in Springfield, Il. The article quotes an AT&T spokescritter as saying that AT&T expects to close many more such deals, and will seek them out where it makes economic sense.

Whoa! What happened to all of that rhetoric about the brave incumbent telco capitalist captain of industry going eyeball to eyeball with the evil Socialist menace of a publically financed internet? Answer: increasingly, the incumbents have realized this is a losing issue for them and have decided to figure out how to make money out of it.

While I take this as the latest and most potent sign that the move to outright kill muni broadband has run out of steam, I think a note of caution is advisable as well. Some victory snark and reflections on the future challenges for both muni broadband and other forms of community-based broadband below.

I have said for awhile that corproations confronted by a serious challenge to their business model undergo their own version of the famous five stages of grief. Denial (“There’s no way this can seriously challenge us!”), anger (“How dare they challenge us like this! To the regulators to squash this at once!”), bargaining (“O.K., instead of banning it, lets regulate it to create a ‘level playing field’”), acceptance (“We are no longer going to lobby on this”), and profit seeking (“Hey, if we think about it for a minute, we can figure out how to make money on this!”)

While I expect we will still see the occassional odd flare up, resistence to the idea of muni broadband has certainly faded since incumbents got over 15 state legislatures to consider banning or or crippling the ability of local governments to provide broadband networks. While one never wants to completely take one’s eyes off the incumbents, I think we can ratchet down from Red to Rainbow or whatever on the alert scale of nasty incumbent tricks. The pro-muni broadband provision in the otherwise pro-Telco Barton Bill and the revision of the anti-muni broadband provision in the Stevens Bill to a pro-muni broadband version indicates that Congress has no intention of squashing muni broadband at this point.

As always, I get a warm tingly happy feeling when all that democracy and civic engagement stuff works. As I’ve written before, despite the efforts of telcos and their supporters to make this a classic “government bad, private sector good” fight, folks on both the right and left of the political spectrum rallied to the defense of muni broadband. Even the old dodge of shouting that this was a socialist plot that would destroy private investment proved unavailing. Efforts to convince the Red Staters in “the heartland” that this was a plot to raise-taxes-on-honest-God-fearin’-working-folks by wealthy-elitist-Liberals-with-their-fancy-laptops to build -broadband-networks-so-they-could-give-comfort-to-Al-Qeda-and -spread-pornography-and-godlessness-while-sipping-their-lattes fell on deaf ears. Happily, folks looked past the rehtoric and saw the truth, monopoly incumbents failing to deploy and prefering to regulate rather than compete.

So the question to ask is, what now? While I’m pleased with how things have turned out so far, I do want to give a bit of a warning of possible problems ahead.

1) Dangers of using an incumbent for muni broadband. As I’ve said before, one possible reason for wanting a muni system is that it can provide some much needed competition to a market with only one or two broadband providers. If you use the incumbent, you don’t get “competition” so much as “extension.” The muni system becomes the low-cost version of the incumbent offering picking up a different market segment, rather than a real competitor that can force the incumbent to lower prices, maintain good customer service, and offer innovative new packages.

2) The cable capture experience. A long time ago, localities used to give cable operators exclusive franchises. The cable guys used their long-term relationships with local government to exercise considerable influence. For example, when the FCC was reviewing the Adelphia/Comcast/TW deal, various members of the DC government lobbied hard for the FCC to require Comcast to carry the Nationals. They got the relief they wanted. By contrast, no one from Philly city government (where Comcast is headquartered) pressed to get the FCC to impose a condition that would make Comcast share its sports programming. As a result, Philly remains the one market where Comcast doesn’t have to sell sports programming to rivals.

In dealing with incumbents, local governments need to take every effort to make sure they insulate themselves from this kind of “capture.”

3) Embrace, extend, extinguish. Microsoft used to have a strategy when it encountered a disruptive application it couldn’t squash. First Embrace — adopt the disruptive feature and ensure that MS’ huge customer base had access to the MS version. Extend — extend it in ways that made the MS version subtly different from the competing versions, forcing those using the disruptive ap to cater to the MS version and neglect other versions with less market share. Extinguish — over time, exacerbate the difference bteween the MS version and competing versions so that the MS version becomes dominant and extinguishes the potential threat.

Localities need to be wary of how incumbents can employ similar strategies here. This is particularly likely where a local government wants to build a system because the local incumbent hasn’t deployed. Once the incumbent gets around to building its competing private system in the area, local governments will need to be alert for any sign that the incumbent is using its control of the muni network (as opposed to advertising) to try to shift customers to the private network.

4) The difference between “muni broadband” and “community broadband.” Finally, it is important to recognize the difference between municipal networks of whatever flavor and non-commercial community-based networks. By this I do not suggest that the two are in conflict, but they are different networks and serve different functions. A municiple network is operated by a local government with a responisbility to all of its residents and operated for specific purposes responsive to those broader needs. Community-based networks are maintained by residents and private (usually non-profit) organizations within specific communities to meet the needs of that specific community. Often-times, this may serve a purpose of empowering a traditionally marginalized community and encouraging dynamic local content as well as providing internet access.

There is a danger that municipalities may replicate the “cable model” of viewing a single municipal franchisee as sufficient, and regarding smaller community-based networks as either unnecessary (and therefore unworthy of support) or as competitors (and therefore actively opposed). Municiple networks may also resent or regard as impractical criticism or demands from community groups when the municiple system sees itself as attempting to provide much-needed services for everyone.

Similarly, there is a danger that community based organizations may not appreciate the multiple and sometimes conflicting demands on municiple systems. In pressing for desired services, deployment schedules and so forth, community groups may move from seeing municiple systems as partners to outsiders or usurpers. Alternatively, local organizations may, in fact, have unrealistic expectations for municiple networks.

During the struggle to preserve the rights of local governments to provide broadband services to the public, supporters of muni networks and supporters of community-based networks worked closely together to support one another. Generally during the debate, the differences between muni networks and other forms of community-based networking blurred or were set aside as not relevant to the immediate fight to protect the maximum flexibility for local communities to shape their broadband destinies.

With the end of that struggle, we may see these tensions emerge. During the course of the next few years, it will be extremely important for supporters of muni networks and supporters of other kinds of community-based networks to work together and respect each other.

Contracting with an incumbent increases this challenge. An incumbent has its own history with both the local government and the local community. It has its own interests and agendas, motivated in no small part by its extensive interests and resources outside the community. While an incumbent with good community relations can help promote a new broadband network and bring valuable resoruces to the table, the presence of an incumbent can also create unanticipated issues of trust and concern about community empowerment.

As with any enormously complex problem, we can expect the challenges and opportunities along the way to evolve over time. The fight to protect the potential for community based networks — both muni networks and other forms of community networks — looks pretty much over. Despite the popular belief that powerful incumbents own the political system and can make it dance to their tune, we beat back the effort to kill muni networks and prevent local governments from supporting other kinds of community based networks.

The next challenge becomes, how do we make that potential a reality? In many ways, this challenge is a lot more complicated than simply winning a political fight. Even the surrender of the incumbent Bells and their willingness to jump on the muni broadband bandwagon carries challenges with it.

But you know what? It’s a damn good challenge to have. It’s a challenge worthy of people tired of being passive consumers and willing to put in the effort to be citizens.

In other words, it’s a challenge worthy of us all.

Stay tuned . . . .

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6 Comments

  1. becca vargo daggett says:

    Very good points, Harold. I have to correct one, though.

    You wrote: “Finally, it is important to recognize the difference between municipal networks of whatever flavor and non-commercial community-based networks…A municiple network is operated by a local government with a responisbility to all of its residents and operated for specific purposes responsive to those broader needs.”

    It is true that the majority of what we call municipal networks currently in operation are in fact municipal networks. That is, they are owned by the municipality.

    Some, but not all of these municipally owned networks are also operated by the local government. For example, Chaska, MN at first operated the network itself but now contracts that out to Siemens.

    The majority of pending “muni wireless” networks (Philadelphia, San Francisco, Minneapolis, Aurora, Portland, usw) will be neither owned nor operated by the local government. They will be owned and operated by a private company that is also a service provider (i.e. Earthlink, MetroFi, MobilePro, and most recently US Internet).

    It’s a non-negligible difference. Communities that have neither a municipally owned network nor a community network have no network that is responsive to the community rather than investors.

  2. Pete Collins says:

    Becca:

    I’d even take it one step further.

    There are networks owned and operated by the municpal entities. Municipal networks in the truest form.

    There are networks owned by the cities and operated by an outside provider. Again local ownership.

    And then there are networks operating in a community, fully owned and operated by a private organization – the Earthlinks and MetroFis of the world. While they may provide an infrastructure for municipal use, they’re not much different than setting up a private vlan over T1’s using an incumbent provider. They are a “for profit” entity providing a “paid for” service, even if that payment is only in exchange for electrity and pole attachment fees. I have a problem calling these entrants “municipal broadband providers” because using those criteria, a cable provider providing an inet to city/school buildings is also a “municipal broadband provider.”

    What concerns me is the mangling of terminology, as usual, to make all things equal. They’re not, any more than WiFi, Wimax, DSL, Cable modems, FTTN, and FTTP/FTTH are the same thing. They’re all “broadband” but hugely different.

    AT&T is NOT building a muni network. AT&T is building a “for profit” network.

  3. Johnny Nords says:

    My key takeaway is that you just hate the incumbents. First you hate them for NOT building, then you hate them for building.

    Methinks you are overly paranoid.

  4. Harold says:

    Hate, no. Deeply suspicious and thinking that anyone with market dominance needs to be treated with the same care that you use when working with U-235? You betcha. I work with ILECs and other companies regularly on issues where we agree. I do so knowing they may change positions based on how they percieve their best interests.

    As I have said numerous times, the behavior of for-profit companies is entirely predictable — they seek to maximize profit. That’s not a criticism. It’s a truism like “a knife is sharp.” I like sharp knives to cut things, but I am careful about how I handle them.

    Too many people personalize this. I no more “hate” an incumbent than I “hate” a knife for being sharp. If we want to abolish regulation and rely solely on competition, then it behooves us to create rules that create a competitive environment. Start thinking about corporations the same way you think about people (love them, hate them, trust them, etc.) and you lose sight of reality.

    But relax, reality will not let you forget it, no matter how soothing the metaphors or how preoccupied you become with treating for-profit firms as if they were human beings. sooner or later, it will firmly bite you on your sensitive spots — without any regard for how much you trusted it or treated fairly.

    As I said elsewhere, that’s why I love reality, you just gotta love something that democratic.

    So no, I don’t think I’m overly paranoid. I just want to make sure that, if you’re going to juggle chain saws, you either keep the safeties on or understand the risks.

  5. Jim says:

    Has anyone studied the situation in Iowa where the Legislature there decided to build a network for “distance learning”? It became quite a monster. It’s called the Iowa Communications Network, and is a government-owned money-hole which was completely obsolete with the advent of internet/IP and other technology not long after it began. The state can’t keep up with the pace of industry, and can’t adapt to changes like the private sector.

    This is an area that governments should lead, but not enter as a competitor. Neither should governments choose a single provider.

    Why not let the people decide? There are a lot of options for wireless data out there (WiFI, Wireless Broadband from multiple carriers, etc.)

    Just a few thoughts to add to the debate.

  6. Harold says:

    I’m certainly in favor of letting people decide. Muni networks will not be right for every community. What I’ve fought about for the last year and a half is giving communities the flexibility to shape solutions to what fits their unique needs.

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