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Capitol Weekly runs a column in which Daniel Ballon suggests that the Sacramento network would cost $550m to build: Readers of this site know that I am pretty dubious that the Sacramento network will ever be built by the consortium that won the bid. Still. Please. Wi-Fi networks are estimated to cost around $150,000 per square mile. These numbers are well known. You add more nodes and costs go up. If you look at the now-well-received Minneapolis, Minn., network, US Internet now estimates $24m (up from $20m) to put 45 nodes per square mile. The 55 sq mi city will cost a whopping $440,000 per square mile to build, although that was supposed to include some fiber buildout (those details are sketchy in the documents I've found).
So, gentle readers, where does Ballon get the $550m figure? By looking at the cost to build the Sacramento airport and extrapolating its cost for its limited area by the city's dimensions. Ballon, as is disclosed in his linked bio but not on this page, works for the Pacific Research Institute, which is a think-tank that receives funding from Verizon and SBC, but that wouldn't be salient to disclose here, would it? (Ballon's background is in very small things, by the way: molecular biology and biochemistry, not telecom policy.) PRI has links to Big Tobacco, and ties to the Heartland Institute, which I have extensively covered in years past.
Now the issue is not that I disagree with Ballon's conclusion that a Sacramento network might cost vastly more than predicted. The original estimate doesn't contain enough nodes, and more than doubling the number from the 18 to 20 nodes planned (as reported in the Sacramento Bee 5-Nov-2007, and not refuted as far as I can tell) to 40 to 45 nodes would increase costs. They wouldn't double, because nodes are just a part of the overall cost of the network. But it's more likely a $15m to $20m network than a $7m to $9m one. (An anonymous commenter tried to tell me that the 18 to 20 nodes per sq mi figure was incorrect, but didn't reply to a request for the source of their information.)
Rather, the point is that Ballon has ties to beholden interests. It's fascinating that he mentions an existing competitive fiber provider in Sacramento with such positive praise--I never heard of SureWest, but he says they have 30 percent of the region's market, although not which market. I checked SureWest's site, and they have 30 percent of about 200,000 homes they pass--about half the households in the city. That's significant. And there's no comparison between fiber and Wi-Fi. The availability of Wi-Fi is in no way a challenge to the voice, video, and data triple-play and triple-threat that SureWest offers.
Ballon wants to paint the Metro Connect Sacramento network as government subsidized because the municipality may--but has not committed to, to my knowledge--shift some services from one set of private companies to another set of private companies. I thought that was the point of competition?
Quasi-sock puppetry: An extremely detailed financial analysis of municipally owned networks was released by the Pacific Research Institute, a think-tank with strong industry ties. The report is called Wi-Fi Waste: The Disaster of Municipal Communications Networks, although Wi-Fi is not a component of the vast majority of networks that they look at. And they only look at Wi-Fi networks that are municipally owned--three!--a fraction of the wireless networks being deployed.
The speciousness, too, is that Wi-Fi and telecom are related. Most of the Wi-Fi networks being delivered will have small voice components initially, and won't replace residential or business telecom at all. IPTV is a component of most municipal fiber networks, and all incumbent fiber networks, where it's hardly a blip in thinking for early Wi-Fi networks due to the vast mismatch in available bandwidth.
It would take weeks to look through their assumptions and analysis on how these largely fiber-optic or fiber-coax-hybrid networks are huge money sinks. But their statement that the systems have cost taxpayers $840m over 20 years is tricky: some of these municipal entities are utilities that are required to invest continuously in infrastructure, and the money put into networking didn't come from taxpayers--it came from ratepayers or even from the electricity or water markets when surplus was sold--and wouldn't have been returned to taxpayers if unspent.
The reports uses data from no later than 2004, and that's tricky because even though a number of these networks have been in operation in some form for years, the first few years of each network's operation involves extremely expensive buildout that's paid back over many years. So a four-year window of operation could show a disaster. And I'm dubious of any analysis of Tacoma, Wash., that shows it as a financial failure--that reveals something about the assumptions used to analyze the network's revenue. It's also tricky to look back to 2004, before incumbents had deployed any real fiber and before broadband had hit its home tipping point, and expect to extrapolate in a straight line from there into 2007.
The hobbyhorse of broadband over powerline (BPL) is trotted out as a "new" technology that needs encouragement. All anti-regulation thinktanks are pro-BPL as a third pipe to the home, allowing yet another incumbent monopoly (electrical utilities) a broadband option. It's unclear whether BPL will ever be a success, though as I wrote in The Economist in December, changes in US and European spectrum regulation may wind up being a factor in promoting rollouts in certain markets. (Texas is a rare example: TXU Electric Delivery handles just the delivery of power, not retail billing or power plant operations, and their adoption of BPL on a broad-scale is still in the early stages of deployment and relates largely to their interest in having a smarter power grid. The broadband part is extra.)
However, the report authors should be commended for exposing their entire set of collected research, including a long appendix showing the yearly data they used for operating cash flow, interest, capital expense, and other factors to produce their "cumulative free cash flow" number, which is their determination of success. I'm hoping a group with the resources necessary can look through assumptions and recalculate the results. Update: Per a note from Becca Daggett in the comments, I don't mean to imply that the report's numbers are an accurate reflection of generally accepted accounting procedures. Rather, that because the appendix includes all the numbers they used, their process can be reverse engineered and compared against publicly available information from the utilities and municipalities in question.
PRI receives significant funding from industries that they write reports about, according to SourceWatch, and seems to be the last hard-line group opposed to any municipal involvement in broadband except in keeping their filthy hands off it.
"Senator, I knew sock puppets. Sock puppets were friends of mine. Senator, you are no sock puppet": I had no idea that the late Lloyd Bentsen, a great politician, coined the phrase astroturf, but I commend him for having done so. Common Cause, a John Gardner founded consumer advocacy group, released a brief report called Wolves in Sheep's Clothing: Telecom Industry Front Groups and Astroturf today. The report covers nine organizations that purport to be thinktanks or grassroots efforts, but are funded directly or indirectly by incumbent telecommunications interests. (Common Cause shouldn't be confused with Public Citizen, which I did in the original version of this post.)
I have written extensively about the New Millennium Research Council, a project of Issue Dynamics, which inserted itself into the municipal broadband debate by co-releasing a report with The Heartland Institute a year ago that explained why municipal broadband was a bad approach to increasing Internet access in cities and towns. Interestingly, the report may have had its desired effect. Before the report and surrounding furor, early city plans involved using city dollars. Now, virtually all plans offset capital investment, risk, and ownership to private firms, a move that has been met with by approval from some originally involved in writing this report.
I've notified Common Cause that they are slightly unfair to NMRC, even though I used that group as a punching bag myself. NMRC discloses its relationship to Issue Dynamics, a public relations firm that has telecom and cable clients, on its About page. NMRC has also removed at least one "scholar and expert" noted on their site who complained about being included in that list a year ago.
The Progress and Freedom Foundation is included in this list, and Common Cause acknowledges that the group is almost unique in providing a list of its donors. I have less of a problem with PFF because they seem to have a broader range of positions than similar organizations. I disagreed with their Adam Thierer-authored anti-muni report, but I didn't think his sources or motivations were hidden, nor PFF's. Further, PFF was perfectly happy to engage in open dialog. Common Cause does note something I found strange: PFF papers state that they are the opinion of the author, not the organization. [link via Muniwireless.com]
It is with some relief that I close the few months of discussion of municipal broadband adherents and opponents: I've been writing about the New Millennium Research Council and its parent company Issue Dynamics (IDI) for a few months now since they announced then released with The Heartland Institution its report decrying efforts by municipalities to build their own broadband networks.
It's been tiring and not without stress. My interest doesn't lie in public policy; it lies in technology and its applications. I felt all along and still feel that the NMRC, the authors of its report, and The Heartland Institute did not fully disclose the ties between incumbent interests and themselves when releasing and being interviewed about the report and in interviews in the following months.
The head of IDI points out--see below--that the ties between them and NMRC are disclosure on both Web sites, and that IDI matches experts that have the views that their clients would like more widely heard with NMRC to disseminate them. That is, these views aren't bought and paid for but rather found and distributed.
I can't argue that the report did anything but bring so much attention to the issue that the efforts by incumbents to lobby municipal broadband out of existence were hampered--and that a remarkably amount of discussion ensued all of which has meant a better informed citizenry.
I have been criticized for shooting the messenger, but I've also delved deeply into the debate, brought in opposing views, posted comments by people who are diametrically opposed to me, and pointed to articles on sites that contain views I don't agree with. I've never meant this site or those posts to be a screed against IDI, but I have used the disparaging term sock puppets because of the lack of clarity that they've used in presenting NMRC material to reporters and the public.
In brief, if the NMRC report was issued with this statement, I would probably not have needed to post the majority of my sock puppet category items: "The NMRC is an arm of Issue Dynamics, a public relations firm that represents companies competing in this field. The NMRC presents the analysis of industry experts, who [are or are not] compensated for providing a point of view that's overlooked in this debate." Then we can talk turkey about the content, and the reportage would reflect this source of funding and adjust for it.
What I've talked about less in this forum is the fact that there are a ton of folks on the spectrum from mildly in favor of municipal broadband all the way to the "let's kill the phone company" end. Some of these adherents have believed that I am entirely on their side and that my writing about NMRC and IDI reflected my desire to cast mud on an opponent. That's never been the case. I've been agitated as a reporter trying to make sure the issue is fairly discussed. In fact, I'm a big fan of private enterprise and love some divisions of major telcos--not their lobbying arms--and expect that these telcos will co-opt and extend municipal networking because of this incredible blow-back from their attempts to stifle it.
Here's the crux of this post: it's time to move on! I'm echoing the head of Issue Dynamics, Sam Simon, who engaged my critique in a recent post on the site and responded to my response to his initial comment. I welcome any open, bidirectional discussion of the issues, and I agree with him on one count: It's time to move on and focus my efforts on this site back on its fundamentals, leaving public policy to those wonks that live and breathe it.
Thanks for everyone for a lively few months. You're welcome to post comments below, but I'm done.
Okay, this is a new one on me: the curtain is thrown back but the socks keep on talking, claiming there's no hand inside them: This is pretty remarkable, but the New Millennium Research Council and Issue Dynamics are defending their paid work on behalf of their incumbent telecom and cable customers directly. No pretense, no hiding. They want their cake and eat it, too.
Can it be said any clearer in this News.com article than a policy advocate at Consumer's Union? "Sometimes we agree with the phone companies, and sometimes we don't. But we never accept any money from an interested party."
NMRC pretends to be independent. I have asked the many reporters who have interviewed them, and unless they ask, the funding sources aren't revealed, though NMRC does disclose its relationship with Issue Dynamics on its Web site and vice versa. Reporters are being handed experts to talk to that don't provide reasonable disclosure about their financial ties to the organizations they are commenting on.
The president of Issue Dynamics, Sam Simon, says, "We try to be reasonably open about the fact that some research funding is from business interest." It's true, they are from their end. But NMRC is much less so, and it's not in Issue Dynamics's clients' interests for NMRC to be seen as an arm of the media relations firm. (Update: Simon has jumped into the fray in the comments below; I've posted his remarks unedited and replied.)
His site states succinctly on its home page that what NMRC attempts to deny is in fact the mission of Issue Dynamics: "IDI provides a complete suite of campaign management services that help our clients win their legislative and regulatory campaigns using grassroots, grasstops, third-party stakeholder support and integrated online campaigns."
Allen Hepner is noted here as the executive director of NMRC, but he's also an assistant vice president at Issue Dynamics. He cannot stand on one foot and say he is collecting independent thought on a subject and produce a report entirely biased in one direction while standing on the foot and collecting his salary from Issue Dynamics.
In a reply to the article, Hepner writes, "...in February 2005, the New Millennium Research Council (NMRC) brought together six respected and independent national experts to provide a critical review of municipal entry into the broadband market. These experts, from noted institutions around the country, offered thoughtful critiques of this issue, but were labeled as disreputable by opposing interests."
I traced the funding and relationship of the report authors and related parties in a post months ago with a detailed chart showing the relationship between Verizon, Issue Dynamics, NMRC, its board members, and several other involved organizations.. Many of them cannot be reasonably said to be independent. All of them share the mindset of the clients of Issue Dynamics.
NMRC did not solicit a range of opinion, nor did they do primary research, relying largely in the report on previous reports that have flaws that have been well documented but which Hepner disregards as "An, 'I'm right, and you're simply wrong' diatribe" which ignores the mountains of articles and research that show the outdated underpinnings of the NMRC report--often relying on data from 1997 to 2001--simply don't represent a fair assessment.
The folks in favor of municipal networks have, in my experience, been much more supra rosa than Hepner maintains. He wants us to believe that lawyers, civic advocates, and government officials representing municipal interests are hiding these connections. I need some examples. Jim Baller is a very public, very active advocate for municipal networks. We know what Esme Vos of Muniwireless.com (who has told me she receives no funding from cities or towns) stands for. Civitium has its own, public agenda that they're following. The CIO of Philadelphia, Dianah Neff, isn't trying to disguise her interests.
None of these folks, whether you agree with their positions or not, are misleading reporters and the general public about which side their bread is buttered on. None of these folks is attempting to pretend to be independent. Most of them are providing documentation with first-person reporting that contradicts the second and thirdhand out of date and often inaccurate information provided by the NMRC in their report where facts are involved.
Now before I am labeled once again a tool of municipal networks and their supporters, let me state clearly: I am not in favor of nor opposed to municipal networks. I favor private firms taking the risk in situations where that is appropriate to produce host-neutral or wholesale broadband networks. In cases in which private partners cannot be found and the necessity is great, municipalities might take on the network building themselves.
But in all cases, I favor self determination. Cities and towns need to be able to decide what is best for themselves when their public and private survival is at stake: a lack of connectivity and ubiquitous access reduces business activity and development, and leads to wrack and ruin. Incumbents don't argue otherwise; they maintain that they're the only parties with the right to provide service.
Is it a coincidence with a number of we bloggers have been so aggressive about pulling back the curtain on the puppet show that Issue Dynamics has just launched its Blogger Relations Practice? "Says [EVP Ken] Deutsch, "The Internet is for whoever writes it - that's either you, your competitors or your critics doing the postings. IDI helps our clients get their messages out right - in the right places, in the right context and with the right tone.' "
[Image in the public domain courtesy Wikipedia.]
Nothing new in this report from the incumbent-funded Progress and Freedom Foundation: This pro-incumbent institute is one of my favorites because of their full disclosure of their ties to industry with vested interests. The report recycles lots of figures and arguments from other sources, including the familiar "here's a bunch of failed municipal broadband projects," which actually aren't failures (see earlier post today on the Free Press's report) and which often involve vast investments for fiber-optic cabling which doesn't figure in here.
There's a lot of speculation and ideology in this report by Adam Thierer, and very little that I can hang onto to talk about that I haven't read elsewhere, usually in deeper form with more citation.
(The following has been updated after receiving additional information.)
Tom Lenard's separate report looking at the finances and strucutre of the Philly plan directly has a number of interesting ideas in it and it challenges optimistic assumptions in the Philly plan. However, the first page notes that the report was published simultaneously by the New Millennium Research Council.
The PFF's Patrick Ross has a very interesting response to this post on the PFF's blog that notes the diversity of funders of PFF and their varied opinions on municipal broadband. I'll be writing something separately about this whole issue and the PFF reports as it deserves deeper coverage.
The Thierer report points out what appeared to me to be an inconsistency in the business plan for Wireless Philadelphia: the first year capital cost is project at $10,000,000 but the next four years at just a grand total of $500,000. After reviewing the plan more thoroughly, the capital budget for years 2 to 5 is hidden because the money comes from cash flow: there's $4 million in there that Thierer doesn't discuss.
The initial cash required by the plan is $15 million with the $10.5 million for the capital budget and the rest for staff and operational costs of setting up an organization of this size.
In years 1 to 5, the capital budget noted in the plan is from funding sources: foundations and bank loans. But in years 2 to 5, there is a supplementary working capital budget that will reach $4 million by year 5 which comes out of cash flow. This working capital budget plus the $500,000 allotted from initial funds totals nearly 50 percent of the initial expense that's projected which is a reasonable budget for a project of this scale.
Over time, the existing equipment will need to be replaced or updated, but falling equipment costs mean that more bandwidth and better functionality with lower cost will be the case across the board. And the initial cost includes all of the work to build infrastructure to bring power and backhaul to the mesh nodes.
We've seen it before, and it's back from the dead! Rizzo's rambling on metropolitan Wi-Fi: Philadelphia Councilman Frank Rizzo's letter to the Wall Street Journal against a project that he doesn't understand or represent accurately has now appeared in the Chicago Tribune as an editorial. I've already dissected it once.
But here are a few choice tidbits: "Independent analyses and prevailing market prices for network and construction costs make clear that the real costs could range from $30 million to $100 million for a feasible network. And this is just the starting point."
There have been no independent analyses, only numbers supplied to Rizzo by folks like the New Millennium Research Council, an arm of Issue Dynamics, which has almost all major telcos as their clients. Thus "independent" numbers are coming from reports issued by dependent organizations. Philly's $10 million number may turn out to be low, but I wouldn't turn to the NMRC for an estimate. Philly could hire a disinterested third party and guarantee their report will be published. That's the way these projects are usually overseen.
"Indeed, municipal forays into local telecom networks have created a sea of red ink in Georgia, Iowa, Oregon and elsewhere." This is so depressing when Rizzo recites failures that don't exist. None of these three projects were failures. Only the NMRC and its ideological and similarly incumbent funded ilk promote that view, and they use incorrect numbers that don't reflect reality.
Tip to Philadelphia reporters: ask Rizzo for specifics about these failures and where he got the information from.
Joseph Bast of The Heartland Institute equates municipal broadband with socialism: In any discussion in which two parties are ideologically opposed it is inevitable that the leftists call the rightists Nazis (or sometimes vice versa and the rightists call the leftists communists or socialists. Bast is the founder and head of The Heartland Institute, and he purveys the latest misrepresentation of the facts surrounding municipal networks. He calls municipal networks "an experiment with socialism" rather than, as I would expect a true conservative to do, call anti-municipal bills an experiment with state-controlled institution of de facto monopolies and duopolies reducing competition and innovation.
"Advocates of municipalization accuse anyone who disagrees with them of being in the pocket of big telecom companies." I am not an advocate of municipal networks. I am an advocate of competition in local markets which municipalities may have to be involved in fostering or wresting control over despite the obvious concerns and problems with government offering technology services. Many of the bills under consideration or passed into law effectively prevent competition with incumbents in the guise of restricting municipal networks by disallowing municipalities the ability to foster FCC-recommended public/private partnerships.
I am an advocate of public safety and homeland security improvements through better use of technology to replace, supplement, or add to the tools of fire, police, and rescue, which many municipalities would be banned from building even if they do not offer any services to the public under the most severe of the anti-municipal bills.
I am an advocate of libraries and other similar organizations offering Wi-Fi to their patrons, a position echoed in the New Millennium Research Council (NMRC) and Heartland Institute co-authored reporter on municipal networking--Wi-Fi that would be banned under the Texas bill currently under consideration.
I do not accuse The Heartland Institute of being in the pocket of big telecom. I can't because they don't reveal their funding. I created a chart, posted weeks ago, that shows the connections direct and barely indirect between Verizon and all of the board members of the NMRC and several individuals involved in the NRMC/Heartland municipal network report. The ones that don't have connections to Verizon are principally those that do not disclose their funding, so it's impossible to know.
Bast's non-denial denial doesn't say that Heartland nor any of the affiliated parties in this report haven't taken money from telecoms. Everything in the chart is built from publicly available information provided on the Web sites or in non-profit IRS filings from the organizations. I'm not imputing anything. Bast also says elsewhere that no one organization contributes more than about 10 percent of Heartland Institute's budget. Which is easy to read between the lines that some organization do contribute up to about 10 percent of their budget.
"Municipal governments can and do use coercion to drive competitors out of the market." This is absolutely true. Thomas Hazlett likes to point out the inconsistency between Philadelphia spending years fighting RCN entering the Philly cable TV market and now miraculously discovering the benefit of competition via public/private partnership. I've heard from others that municipalities cherry pick the customers they serve allowing them to bypass universal service provisions that incumbents are subject to.
"To see the future of municipal broadband, look at rural telephone exchange operators. They hold onto last century's technology, rely on massive public subsidies, tolerate no competition and offer no consumer choice." Strangely, this just reminds me of incumbent, monopoly and duopoly telecommunications and broadband services in most major cities and virtually all served smaller cities and towns. There's a myth that incumbents don't receive taxpayer dollars through the form of taxes and surcharges collected and used directly by the incumbents and taxes paid separately that are used to subsidize incumbent services.
"Early estimates of Philadelphia's proposed "free" Wi-Fi network, for example, were widely criticized as being far too low." Philadelphia never proposed a free network and they're not proposing it today. San Francisco has, and it's not yet even at the proposal stage, and I expect never will be. The people who said the price was too low didn't provide realistic alternative pricing; Philly councilman Frank Rizzo came up with a number out of thin air that doesn't correspond to the densities and capital/maintenance costs experienced in real private and public infrastructure of the same kind.
"The right choice is not municipalization but getting government out of the way and letting private companies compete for our business." I could not agree more with getting government out of the way. If any of these anti-municipal bills had any hope of allowing CLECs or other competitive broadband, telecom, and cable providers entry into a market, I would be cheering.
Instead, the anti-municipal bills are tools of retrenchment, refranchising, and renegotiation by the incumbent carriers.
Well, we were all wondering where February went to: Philadelphia has delayed releasing its detailed plan for a wireless broadband infrastructure from early February to an unknown time. There's a missing piece in this coverage that I wanted to mention: Dianah Neff keeps saying "broadband" while Comcast and Verizon say "broadband" and they don't mean the same thing.
Neff's project will be able to deliver reliably hundreds of Kbps. Whatever they build starting today won't put megabits per second into people's homes. Comcast and Verizon can, today, put 3 to 6 Mbps of downstream bandwidth at only slightly more than the city's proposed price albeit in the locations they have facilities to offer it.
By late 2006, when Philly's plan is fully unveiled, even if they use the most modern widely used most inexpensive equipment, the incumbents will be offering 10 to 20 times the bandwidth at likely 20 to 50 percent higher cost. Ubiquitous Wi-Fi is a great way to reach a large audience but it cannot reach every resident with its full potential nor can even the most ideally placed residents achieve consistent speeds at a level that incumbent wired providers can easily push through.
I don't understand why this hasn't been factored into the reporting or the critique on either side of this divide. The point of Neff's network is to offer broadband speeds everywhere. Ten times faster than a modem is broadband and it enables true Internet connectivity for audio, limited video, and virtually all other purposes. One hundred to 200 times dial-up speeds takes you into an entirely different realm in which video-on-demand, downloadable movies, and multi-line VoIP are all trivial.
This will create a new digital divide, but one that's less critical than today's. Verizon and Comcast should be trumpeting their speed and what they envision possible in 18 months. It would be more effective (and more frank) commentary. Comcast once again in this article explains how, without building wireless networks themselves, they are more qualified to explain to the city and its taxpayers how difficult it is rather than, say, a town that has built a large municipal network with wireless.
This is the first article in which Verizon confirms they will bid on parts of the Philadelphia plan, which sort of defeats the whole argument that this is a municipal-run network that can't be built. The article also notes that thousands of access points will be required, which seems realistic.
Councilman Frank Rizzo chortles with glee about the delay in this Wall Street Journal article; he also wrote a letter (linked from the article) to the Journal criticizing Lee Gomes's recent column on Philadelphia's plan. Rizzo is parroting lines provided by the sock puppets I've exposed elsewhere, so he's acting indirectly on behalf of Verizon and Comcast through their intermediaries. This is interesting because Rizzo receives thousands of dollars in contribution from IBEW (International Brotherhood of Electrical Workers) Local 98 which is full of folks who build networks and work for incumbents and others. Does the union understand that Rizzo isn't acting in their interests by trying to suppress competitive networks that would increase overall demand for their labor? Or does the union expect these new networks will all be the work of non-union employers?
In Rizzo's letter, he cites Georgia, Iowa, and Oregon as failures. These are fiber-optic installations he's citing, and while I don't know the details on Iowa, both Marietta, Georgia, and Ashland, Oregon's systems have been widely misrepresented through clever accounting omissions by the folks criticizing them.
You'll note that Washington (Tacoma) isn't included in that list. The "analysts" who have critiqued municipal networks do learn: they started omitting Tacoma around the time the New Millennium Research Council report came out because Tacoma (really Tacoma Power, a separately chartered public institution) comes out fighting and has entirely open books on their Web site that refute the contentions of earlier reports. (I've completed half an interview with Tacoma Power that I need to finish so I can write about their fascinating network here.)
Rizzo also doesn't seem to understand how a city could structure a plan in which a private partner would assume all risk. Private/public partnerships are structured all of the time like this and I imagine that the city has some in place already that have the same fiscal controls and contracts.
News.com looks into the death of the Indiana bill that would have made it virtually impossible for municipalities to build out networks of any kind: This article is full of the touching concern that incumbents have been offering for the poor taxpayers in the areas they serve:
"When you look at a time when state and local budgets were severely strained, we think there needs to be a system in place that monitors government entry into what could be high-risk telecom investments on the backs of taxpayers," said Mike Marker, a spokesman for SBC in Indiana.
Lobbyists don't get involved in these issues because they're concerned about taxpayers. SBC is concerned about its bottom line and should simply say that it feels that municipal networks threaten their ability to produce a good return for their shareholders. It's likely a true statement.
The back of the Indiana bill doesn't want municipal competition, but it sounds like his office hasn't surveyed what's available and what's not.
I haven't heard any proposals for legislation yet that would impose less than draconian conditions on municipalities or ban their network build-outs altogether. I would expect to see some compromise legislation that might look at aspects of universal availability: if a city or town has broadband (defined as 1 Mbps down, 256 Kbps up in many cases) available from incumbents to fewer than 50 percent of its residents, then perhaps then with certain constraints on funding (bonds, not tax receipts) a network could be planned that allows multiple service providers to use the infrastructure.
It's all or nothing right now.
Okay, so it's my fault, but I said puppet too many times: In the world of Google advertising, context is king. There's one fellow who has built a site develop to asbestos litigation because the Google AdWords price on those words is so enormous--because of ambulance chasers or noble consumer advocates (you pick the term)--that he can make a small fortune by focusing on it.
Now, me, I used the term sock puppets. Sock puppets, sock puppets, sock puppets! I was writing in recent weeks about PR firms that set up and fund friendly institutions that describe themselves as independent and then consistently release one-sided reports that have the same viewpoint as the PR firms' client. I call these sock puppets borrowing from terminology common elsewhere, such as on Usenet.
What does Google's automated goldmining algorithm for placing advertisements on my site do? It gives me puppets. Everyone sees a slightly different set of ads at left right and middle of this page--just the Ads by Google, not our image-based banner advertisement--and if you're like me, you are scratching your head about the puppets.
And there I went again. I said puppets. We'll weather this puppet storm and return to our regularly scheduled advertising soon, I imagine. Google deprecates ads that don't perform on given pages based on clickthroughs.
I distilled everything I've learned about the NMRC and related organizations into a visual display: This chart shows the disclosed and reported relationships, mostly found on the various organizations' Web sites, between the entities responsible for releasing the report castigating municipal broadband without revealing their funding and ties.
Downloading: Some readers have reported a problem viewing the PDF-based chart. This is related to Adobe's support of viewing PDFs within a Web browser. If you click and get a corrupted file error, please right-click the link to the PDF and select to download it, and then open it from the Desktop or within Adobe Acrobat Reader.
Now you see it, now you don't: The New Millennium Research Council has removed the page listing its board of directors. On their About page, it used to have a link to the board and to internships. Now just look at it. The NMRC was behind the report that came out last week agitating against municipal broadband; they are owned by Issue Dynamics, a PR firm representing cable and telephone companies, including Verizon.
If we take the WayBack Machine from the Internet archive and set it to Feb. 2004, we can see that Karen Buller, Allen Hepner, Barbara O'Connor, and Jorge Schement are listed as board members. When I saw this page a few days ago, Allen--identified as affiliated with Issue Dynamics back then--was relegated to a contact page where he is listed as executive director.
Buller was listed as the chair of the board. I'm unclear who funds her organization as this information isn't provided on their site. The National Indian Telecommunications Institute seems to have great goals and is widely cited across the Net as a progressive force.
But Buller sits as a member of the board of directors of the Alliance for Public Technology (APT) alongside Barbara O'Connor, the founding chair. The APT states on its board of directors page that "Membership is open to all nonprofit organizations and individuals, not members of the affected industries." However, inexplicably, the sponsors and affiliates page lists BellSouth, SBC, and Verizon. The statement about this is that "These affiliates provide a portion of APT's financial support but do not vote or serve on its Board of Directors."
That's a great non-denial denial, just like the Heartland Institute's very specific note that no donor provides more than 10 percent of their budget.
If you view the HTML at APT's Web site, the first comment reads: "Designed and developed by Issue Dynamics, Inc. For more information see http://www.idi.net". Welcome to another arm of IDI. The Executive Director, Sylvia Rosenthal is "also Assistant Vice President of Issue Dynamics Inc. where she devotes her time exclusively to management of APT." The group is linked via SourceWatch.
Jorge Schement is a professor at Penn State and a co-director of the Institute for Information Policy, which lists Issue Dynamics and Verizon among their sponsors.
Am I going to wake up with a horse's head in my bed? I'm a fish-a-tarian. Could it be a full-sized Tofurkey, instead? [Thanks to Karl Bode of DSL and Broadband Reports; he can have half a horse's head.]
There's a lot more readily available details about the New Millennium Research Council than I realized: The NMRC is the co-publisher of a report that says municipal broadband is anti-competitive and a waste of taxpayer dollars. eWeek broke the news yesterday that they're a division of Issue Dynamics, Inc., a group that specializes in creating the appearance of grassroots and independent support for ideas on behalf of their clients. They don't hide this specialty.
The NMRC lists this relationship on their About page; I'm embarrassed that I missed noting this: "The NMRC is an independent project of Issue Dynamics, Inc. (IDI), a consumer and public affairs consulting firm that specializes in developing win-win solutions to complex policy issues." (IDI lists the US Internet Industry Association as a client; the head of the USIAA wrote part of the NMRC report.)
An email correspondent who prefers to remain anonymous but has had dealings with the NMRC and IDI wrote in to note, "If you need an 'independent' third party to provide support for your particular issue interest, IDI will find an independent expert who will write a supportive piece for you--the report will then be issued by the NMRC or another front org. There is no direct money passing from the corporation to the person writing the research, and as a technical matter, the funding for NMRC comes directly from IDI. However, people like Verizon pay IDI a pretty stiff retainer, and IDI essentially uses part of that to fund NMRC."
IDI says about NMRC: "A unique component of Issues Management & Research services is our relationship with the New Millennium Research Council. The New Millennium Research Council (NMRC) has an experienced staff that provides clients with topical briefs, targeted policy research, and in-depth issue analysis. The NMRC also provides clients with a network of policy experts who can provide content and services over a range of topics. NMRC research projects include, but are not limited to, telecommunications, Internet, and technology policy issues."
The executive director of NMRC, Allen Hepner, wrote in this article at IDI's site (which is linked from the NMRC About page), "Next Generation think-tanks are able to present their views to larger populations including national and influential decision makers and attain a new level of credibility at a much lower cost. When it comes to winning the war of ideas, bigger isn't always better in this case."
eWeek connects NMRC to Issue Dynamics, a telecom lobbying firm: Wayne Rash reports at the end of a story about Philadelphia's upcoming municipal wireless announcement the following blockbuster about the ties between the New Millennium Research Council, co-issuers of today's report "Not In The Public Interest - The Myth of Municipal Wi-Fi Networks." (I've written extensively about this report and its precursors over the last few days.)
Rash writes: While preparing this story, eWEEK.com learned that the NMRC is actually owned and sponsored by Washington lobbying firm Issue Dynamics Inc., whose clients include most of the major telecommunications companies in the United States. Those companies have been active in opposing municipal wireless and broadband efforts. The company claimed that its reports were nevertheless completely independent.
I've been saying these folks were sock puppets for days and criticizing the lack of transparency about funding among several organizations involved in creating this report, while still listening to the message. (I had some positive things to say about parts of the report earlier today.) This should be a major embarrassment to Issue Dynamics's clients who are now starkly revealed as the puppeteers.
More prosaically, Rash describes the public/private partnership that Philadelphia expects to use, which is in contrast to the kinds of entirely municipal efforts decried in the NMRC's report. Tropos may have the lead as it was involved in a four-square-mile test. And note throughout the article that Philly's CIO Dianah Neff is talking about broadband wireless, not "Wi-Fi," as the report continually conflates.
The ever-insightful Carol Ellison also weighed in about the NMRC report. She summarizes the phone conference about the release of the report today as, "The rollout of municipally held Wi-Fi networks will likely have a detrimental effect on city budgets and on competition." Ellison castigates the press event and the report, noting, "But while the session promised to fill the gap on the dearth of in-depth analysis on the subject, it and the report that accompanied it offered many more sweeping statements about failed projects than information about why they failed."
Ellison shreds the NMRC for its undisclosed connection to Issue Dynamics: "The NMRC made a point to say that none of the researchers who participated received any money from NMRC. But in case you're wondering who's paying the bills at IDI, take a look at its client list. If you don't want to read the whole huge thing, let me summarize those of interest in this issue: Ameritech, Bell South, Comcast, Pacific Bell, Qwest, SBC Communications, Sprint, U.S. West, Verizon and Verizon Wireless."
It's fair to say that the disclosure of the NMRC's parent firm may alter the entire landscape of debate on municipal wireless.
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.
BusinessWeek's Tech Beat blog says muni bad, muni fall down and go boom: The fine folks at BusinessWeek seem to have fallen for tropes, sock puppets, and strawmen. In this post, they say that Philly probably shouldn't get into the business of offering municipal wireless Internet access because other municipalities have failed and shouldn't cities be putting their money elsewhere?
The report they cite, not yet out, is from the New Millennium Research Council which is a sock puppet for the incumbent telecommunications interests. The Council, with three listed board members, is related to several other institutions that serve as ostensibly disinterested mouthpieces for industries that want less regulation and are afraid to speak directly to that point. Sascha Meinrath unearthed the connections at three institutes a few weeks ago. In fact, I believe I received an executive summary of this report co-branded with The Heartland Institute a few weeks ago aimed at op-ed pages.
BusinessWeek believes the anti-municipal hype, which is that Philly is going to round up garbagemen and street cleaners and put them to work building out and maintaining the network. I exaggerate. But it's been clear for months that Philly is talking about finding a commercial, private partner which will build and run the network for the city on a contract basis, just as many cities don't empty the garbage themselves but hire firms (which can be fired) to do so.
In the report I believe BusinessWeek refers to, several strawmen are set up, including the fact that two municipal broadband projects--one in Tacoma and one in Ashland--have failed to meet goals and have gone overbudget. But the "report" disregards, conveniently, that these two projects were in small, struggling cities trying to reinvent themselves as more than just lumber-smell central (Tacoma) and the Oregon Shakespeare Festival (Ashland). They were ahead of the curve, deploying fiber optic connections without necessarily having clear goals. They wanted to attract more business. Ashland's situation is particularly complicated.
The author conveniently ignores Palo Alto, an early fiber-optic deployer, and I have no idea whether that project was vastly successful or a huge failure. Based on what I know about the growth of Internet businesses around Palo Alto that have remained post dotcom bubble, it seems that fiber might actually attract business.
Finally, we're talking about wireless here: no need to tear up the streets again and again. No need to wonder whether fiber can be brought to the home or into businesses on a cost-effective basis. Broadband wireless is already a well-known commodity that can be delivered on a reliable basis with current technology. And it can reach plenty of areas that DSL and cable don't serve at a fraction of the raw infrastructure cost.
The reason WiMax is getting so much attention is not that WiMax makes this possible, but, rather, that WiMax turns a variety of disparate non-interoperable ideas into a coherent set of possibilities that will lower costs through standardization. WiMax doesn't enable broadband wireless; it enables cheaper, more standard, more robust flavors of broadband wireless.
The Tech Beat writer also seems to misunderstand that these aren't hotspots: But some of these hot spots might be never used (My elderly neighbors are unlikely to hook up to the Web any time soon). And in places like parks and public libraries where lots of people might want to use Wi-Fi, chances are that private companies like Wayport have already installed their access points. So, what's the point?
Philly is building broadband to the home and to work as its central purpose. They may use Wi-Fi, but it's Wi-Fi as a delivery mechanism not as a cloud of access. Philly isn't building a city-wide hotspot network; they're building a municipal dial tone that guarantees each resident the possibility of high-speed Internet access in the same way that telcos have been regulated to provide the opportunity (and subsidized funding) for every individual to have a telephone dial tone.
(On an unrelated topic, the writer notes, Here in Portland, Ore., which was severely impacted by the recession, I see homeless people standing at every freeway exit asking for money every day. Shouldn't the cities help people in need first? The answer is yes. We have those folks in Seattle, too, where we have a reasonably large homeless problem. The folks at freeway exits may be homeless, but they're actually hustlers: I see them in Seattle changing shifts, handing signs off, etc. It's a scam. The real homeless problem is much more hidden than freeway exits, and it's much more real.)
The writer also notes, So, that might mean that when a city's pockets get lean -- and that's something that happens every few years -- it could very well cut the Wi-Fi service off. And without proper maintenance, the infrastructure could quickly fall apart. It depends how the contract is written: Philly has a plan to be cash-flow positive within a few years and to establish the service on a contract basis. If the city goes bankrupt, right, the service might get cut off. But this isn't a yearly budget item any more than garbage service and water/sewer are budget items that have to be renewed. They're fee-based services that have to pay for themselves.
So what's my point in thrashing through all this? Once again, the incumbent interests are trying to pursue an agenda through misdirection rather than directly addressing what's at stake. They want less regulation in order to more efficiently pursue profit, which is not, in itself, a bad thing in a capitalist society assuming some of the returns go to shareholders. (Not a given in this executive overcompensation day and age.)
The pro-municipal forces state their cases clearly with examples, dollar figures, objectives, and real arguments. They aren't acting as sock puppets for other causes. They represent themselves. These fronts for interests degrade the quality of the debate by trying to slap the equivalent of disinterested academic rigor on top of their statements.
Let me see that Heartland Institute/New Millennium report signed by Verizon Wireless or whoever paid the bill that keeps these institutions humming. I sound pro-municipal wireless, but am actually pro disclosure.
(Disclosure: I believe that cities and other entities should have the right to install their own networks, but am dubious about whether municipal networks that aren't host-neutral will be viable in the long term.)