I've read the report, and it's worth downloading and reviewing: The report from the NMRC is called "Not In The Public Interest - The Myth of Municipal Wi-Fi Networks -- Why Municial Schemes to Provide Wi-Fi Broadband Services With Public Funds Are Ill-Advised." I've studied it now and have some comments. Before reading my comments, you should review that report and one that's a predecessor and cited in this report and in some of the advance publicity from The Heartland Institute, which co-produced the report--The Beacon Hill Institute at Suffolk University's Municipal Broadband in Concord: An In-Depth Analysis. (See also Karl Bode's more irate analysis of the report.)
I'm going to back in time to March 2004, when the Beacon Hill Institute report was published because many elements of it are embedded in the NMRC report. The Concord report from Beacon Hill analyzes whether a proposed network in Concord, Mass., has any hopes of producing a good return with low risk. The report looks at four cities, including Tacoma, Wash., and Ashland, Ore., and also examines RCN, a cable operator that tried to offer competitive broadband services in areas with incumbent operators.
The Concord (Mass.) Journal wrote back in April 2004 that this report was funded by the New England Cable Telecommunications Association (there's no "and" in there), of which Comcast is a member. There is no funding information or other sponsorship information listed in the report or anywhere on Beacon Hill's site. An opinion piece from July 2004 in the Boston Herald blasted the Beacon Hill Institute for relying on funding from vested interests in the topics of reports they wrote.
Some financial details in the report on Tacoma and Ashland date to 2001 partly because financial information isn't readily broken out for these two projects. Based on aspects of the Beacon Hill report, it was clearly primarily written in late 2003 when full-year figures for 2002 were all that would have been available.
It's tricky to tease out where they got numbers for Ashland and Tacoma even after studying and following the footnotes and reading reports at the various project sites. For instance, a citation on Ashland borrowing as much as $20 million from other city agencies to make up revenue shortfalls in their fiber network is attribute to a site called Dynacorp-sucks.com that was "last accessed January 28, 2003" in the footnote reference. There is no record of this site at Archive.org, either, which doesn't mean it didn't exist, but means I cannot research what used to be there. On the Ashland Fiber Network site and City of Ashland's site, I cannot find recent numbers on cost and capital expenses, except that in the 2003-2004 budget, income from AFN outstrips expense by about 15 percent ($2.67 million in versus $2.33 million out).
There appears to be no primary research in the Beacon Hill report, such as interviewing or filing information requests directly from the agencies that run the two networks. There's more work to be done here to find out whether the numbers in the Beacon Hill report still reflect the situation.
The reference to RCN is fascinating because the Beacon Hill report points out how they filed for bankruptcy due to the competitive environment. But Thomas Hazlett makes the argument that they weren't allowed to compete in Philadelphia, as one example, in a recent Financial Times article I cited earlier today.
And the Beacon Hill report doesn't include successful or allegedly successful municipal networks. The NMRC report notes that there are at least 200 municipal networks in the works or built. Are the vast majority as bad as the few examples they pick? Beacon Hill also looked at expensive networks (fiber and coax) not wireless. Esme Vos at MuniWireless.com cites three cities with what she characterizes as successful municipal Wi-Fi rollouts. In a balanced report, the devil's advocate would have a place pointing out projects that seem to work and explaining, perhaps, why they haven't.
Now let's focus on the new report from the NMRC. As I have said in several previous posts, their basic proposition has several legs to it, but it boils down to a concern that taxpayer money will fund endeavors that aren't needed, tend to go over budget, could face government censorship, overlap with existing services, and deter private enterprise from engaging in building broadband.
On the face of it, these are reasonable arguments to raise and then argue the merits of. My primary complaint about this report before and after reading it is that most of the parties to it--institutions and individuals alike--are tied up with the telecoms as funding sources or former employers. Because of the lack of transparency, it's easy to read an agenda into anything they write. It's also odd because several of the entities involved in this report don't typically cover telecom; rather, they deal with issues of removing regulations of all sorts and preventing laws covering chemical and tobacco industries. It's still a mystery why this appeared. Verizon appears to be the only connection between some of these groups, and it's tenuous. (You can read my run-down of the background of the people involved in today's call announcing the report, which is a slightly different group than those who wrote it.
Let me pick this apart in pieces, and I hope that readers who support or reject this report will post comments directing us to page numbers within it. I'm using the page numbers in the PDF rather than the printed page number for clarity.
Page 12: We start off with a problem defining Wi-Fi. Many of the municipal "Wi-Fi" networks are actually using a variety of broadband wireless, including mesh. Stating that Wi-Fi works in a 300-foot-radius is like saying that cell phones work within a several thousand feet of a cell tower. It only tells part of the story.
Much of the cost savings in broadband wireless--private and public--is in reducing backhaul costs for point-to-point delivery of bandwidth to hubs that then distributes as a cloud of service (for a hotspot) or point-to-point. SkyPilot's technology, for instance, uses 802.11a--sort of. It's a variant, but it has the benefit of commodity chipsets underlying their equipment, unlicensed spectrum, and the empty 5 GHz band. But it's not Wi-Fi, nor does it work the way a hotspot does.
This technology error was in the article on The Heartland Institute's site from earlier in the week and tends to pervade this report, too. They arguing many times against Wi-Fi hotspot networks when the main issue here is wireless to the home, like DSL and cable modems, not wireless outside the home to public spaces (parks) or retail establishments (coffeeshops).
David P. McClure, the head of the US Internet Industry Association writes the first part, The Myths of Municipal Wireless Networks. His basic argument is that communities moving to build their own networks are following dreams that will evaporate leaving behind costs to pay from municipal coffers. On page 14, I disagree with his assessment that these projects are typically pushing free Internet access. The ones I'm most aware of that have moved from thinking into doing charge commercial rates commensurate with those available in large cities.
The benefits analysis on pages 14 to 15 is mostly asserted. One footnote points to a Heartland Institute report, which is a circular reference in the context described earlier.
Take pages 16 and 17 to heed, though, under The Community Response. These are terrific guidelines for any project involving public funds, and I cannot find any fault with them. All too often, nebulous goals are set with optimistic budgets, and there's no interim accountability: no one gets fired. Look at Boston's Big Dig.
The second section, Whose Internet Does Municipal Wireless Subsidize?, conflates broadband wireless with Wi-Fi hotspots consistently, and lumps in fiber optic network build-outs with broadband wireless deployments. Earlier today, I tore apart an article written by the same individual for The Heartland Institute's Web site--Steven Titch, a senior fellow there--and most of that applies here.
Titch tries to label WiMax and broadband wireless experimental, even though there are tens of thousands of networks of varying scales already deployed. The hotspot market is a red herring: none of the municipalities trying to provide residential and business Internet access via wireless are focused on hotspots. Rather, they're using well-established, mature technology employed by corporations, wireless ISPs, and even cellular operators and telcos for backhaul.
The third essay, The Viability of Municipal Wi-Fi Networks, is an interesting legal and regulatory disputation that I don't have the background knowledge to evaluate as completely as I would like. Elements were intriguing, even the First Amendment specter that was raised. There's a certain buy-in to this part of the report: that government can't and shouldn't do things that private enterprise can and will do. And you have to believe that most municipalities can't run existing utilities well. I haven't surveyed it; it might be true.
The essay doesn't mention the tradeoffs of government subsidizing private enterprise to provide universal access and availability, which is one of the municipal sticking points: billions have been granted or tacked on as separate taxes paid by telecom subscribers. Have utilities done worse in delivering on their promises than incumbent voice, cable, and broadband operators who have received public taxes and subsidies?
The fourth essay covers some well trod ground: Municipal Networks: The Wrong Solution. Regulation stifling competition is the reason for delays in broadband rollout. A few networks have run way overbudget or lost value; these have been cited elsewhere in this report already.
The fifth piece, The Competitive Effects of Municipal Provision of Wireless Broadband, comes from the executive director of the Beacon Hill Institute. It opens with misstatements about the kind of technology that will be used for municipal deployment, focusing on limitations of standard Wi-Fi as deployed in consumer access points. The unique point of this essay is that wireless ISPs (WISPs) should be the ones filling the gaps where they exist using ever cheaper equipment, including WiMax. (Of course, WiMax is a red herring: there's plenty cheap and workable broadband wireless gear available today, as noted earlier.)
The final essay, Municipal Wi-Fi Networks: Economic Viability and Economic Impact, is a fascinating one because it undermines parts of the rest of this report. Written by Ron Rizzuto, a professor of finance at the University of Denver, it argues that the costs for running a broadband wireless network are substantially lower than wireline and fiber networks--the primary examples being cited elsewhere for cost overruns in this report.
His thrust seems to be that municipal wireless networks might not stifle competition as long as rules are in place to keep government from establishing a playing field in which commercial enterprises can't compete.
My conclusions: This report is tremendously less incendiary than the snippets and press releases issued in advance of its appearance. It's full of interesting ideas and reasonable conclusions, with a fair amount of repetition.
If I can make one sweeping generalization about the report: any municipality thinking about installing fiber optic or wireline service would be well advised to read it and heed it. But I can't see the same justification for concluding that a wireless network--especially with Prof. Rizzuto's conclusions at the end--have the same kind of disruptive commercial and taxpayer impact that the authors maintain elsewhere in the report.
This report is largely about competition and fairness, and throughout, points to cases in which municipal networks don't meet their financial goals because investments are made suddenly by incumbent operators.
I'lll conclude, therefore, with this excerpt from a Tacoma News Tribune article from May 19, 2003 (page B1), about Comcast and Tacoma's Click! Network:
Steve Kipp, a Comcast spokesman, said competition with Click!, along with Comcast's satellite television competitors, will bring out the best in the company. "It's that competition that has really spurred the additional investment in cable and customer service," Kipp said.