Bloomberg ran a piece about the inadequacies of the Internet in the United States, making the oft-mentioned point that we really don’t get much bang for our buck. She wonders why broadband isn’t more of a government venture, citing some municipal initiatives such as the one in Lafayette, Louisiana:

In 2004, the Lafayette utilities system decided to provide a fiber-to-the-home service. The new network, called LUS Fiber, would give everyone in Lafayette a very fast Internet connection, enabling them to lower their electricity costs by monitoring and adjusting their usage.

Push-back from the local telephone company, BellSouth Corp., and the local cable company, Cox Communications Inc., was immediate. They tried to get laws passed to stop the network, sued the city, even forced the town to hold a referendum on the project — in which the people voted 62 percent in favor. Finally, in February 2007, after five civil lawsuits, the Louisiana Supreme Court voted, 7-0, to allow the network.

From 2007 to mid-2011, people living in Lafayette saved $5.7 million on telecommunications services.

Since Lafayette went down this path, other communities have followed. According to the Institute for Local Self-Reliance, a group that advocates for municipal fiber networks, these community-owned networks are generally faster, more reliable and cheaper than those of the private carriers, and provide better customer service.

I have seen one of these municipal networks in action, and I have to say that they are a pretty great deal. Especially when the local utility companies are charging too much or dragging their feet on upgrading service. More generally, there is a strong argument to be made that utilities that lend themselves towards natural monopolies, like cable internet, cable TV, and phone service, ought to be government rather than private ventures. I mean, if you’re not going to have actual competition between suppliers, why not cut out the middle man?

Sometimes, it’s because the middle man has something to offer. Out here, broadband began as a co-op but eventually was sold on the private model in large part because the cable company had access to more and better resources for expansion and upgrading. The co-op more or less abandoned the city right about the time I was arriving, though they still cover the outlying part of the county. However you look at it, there’s no good reason that a private company shouldn’t have to prove itself to the people.

There were other aspects of the article I was less keen about, however. Where I felt like the article was misleading.

It’s true that in the past private industry had little interest in covering rural America and needed the pitchfork of the government to do so. Rural America and small towns owe a debt of gratitude to the FDR and the federal government in that regard. And, as is the case in Callie, a lot of it they had to do themselves because they were (and in some places still are) below the radar of corporate America. However, it has to be said that (as far as I can tell) this is a lot less true than it used to be. Proclamations that but for the government, national communications and entertainment companies would tell small towns and rural places to go to hell no longer seems to be true except for a relatively small sliver of what we would consider to be rural.

My current town, Callie, population 3,000 with nary another town of remotely comparable size (or larger) for 50 miles in any direction, has 3G from Verizon and (non-LTE) 4G from AT&T. Verizon’s LTE network extends to cover almost 90% of the country, which includes a lot of small towns. Places such as Butte, Montana, and Twin Falls, Idaho, are covered. You see something similar with local channels in satellite. Back when I used to work for a satellite carrier, they had all but said that there were some DMA’s that they would never bother to cover. Now, Dish Network covers everybody and DirecTV covers almost everybody. Twin Falls and Butte both have their local channels broadcast by satellite. And they aren’t actually charged any more than the big cities are for the privilege (a hat tip to arguments about the USPS being a giveaway to rural America because letters to the middle of nowhere cost the same as letters between population centers). There is, in fact, money to be made in rural America and small towns, and the same subsidies that the government has actually apply to private industry as well (ie Dish Network makes more per subscriber in Seattle than Twin Falls because of per-capita usage they get out of resources expended).l

Another issue I had with the article was any comparison whatsoever between the United States and South Korea and the like. You simply cannot compare the two in any meaningful sense. Not with Internet, and not with cell phone coverage. The US faces enormous challenges that smaller and more urban nations do not. The degree to which we are spread out makes coverage more difficult. This applies to rural areas, but also suburbs (and the fact that our urban cores themselves are not remarkably dense, in most places). This is one of the downsides to American settlement patterns, but it’s not going away any time soon. So coverage of such things is going to be weaker, and more expensive.

Which brings us, of course, to questions of how and where the federal government should promote service. I’ve written on this before. Now, as a rural-liver, I wouldn’t mind it one little bit if the federal government decided to lay broadband out here. I’d use it and happily so. The only downsides are the extent to which the same people who would champion a national broadband policy will turn around and complain about “rural subsidies” and, more substantively, I don’t think it’s actually the best allocation of resources.

While we do need to make sure that everybody has access to high speed Internet of one sort of another (I’m a commie that way, I suppose), I believe it only makes sense to approach each areas needs individually. Callie doesn’t need fiber. A lot of places don’t. As satellite internet gets better and more affordable, this may well be a problem that takes care of itself. So long as we keep expectations reasonable.

Which is why, ultimately, I think this should be mostly a local issue. More cities should either do what Lafayette has done or use the threat of doing so to leverage a equipment upgrades by the local suppliers. The primary role I see in the federal government is to use fiber for redevelopment zones. Take cities that have capacity outstripping their population or that are simply struggling to keep their population numbers stable, and start offering it to those areas. Places like Detroit or Redstone. That could be helpful in enticing employers to utilize these services and attract and retain local talent. But beyond that, different places are going to have different needs. The alternative starts to look like this.

Category: Market, Server Room

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6 Responses to Connecting America

  1. Anonymous says:

    Re: America being harder to cover: yes, but as I understand it, even in New York City our internet sucks.

  2. trumwill says:

    I don’t think that the two are entirely disconnected, though. I think that our emphasis on trying to spread far and wide – and policies we have towards that end – hobble efforts to speed up connections in more dense metropolitan areas.

    I would be supportive of NYC, and like place, of going the Lafayette route and improving their connections, though. As I am in favor of different policies for different places more generally.

  3. Peter says:

    A few weeks ago I was at a worksite in Queens, literally no more than three or four miles east of the Empire State Building, and when I tried to go online using my phone it was impossible to get a useful signal. And this was from a roof-level parking deck.

  4. David Alexander says:

    I think the best way to look at the scenario is to compare what rural and urban users are getting around the world. In other words, is Will Truman’s Swedish, Canadian, Australian, or French equivalent getting better or worse service than him? And if so, at what price points? Is David Alexander’s equivalent in Germany getting cheaper and better service?

  5. trumwill says:

    I’m not sure if there are any Trumwills in Sweden. Maybe in the others.

    That may be a fair comparison for broadband. In the case of mobile phones, though, I don’t think it is because we’re dealing with national networks and money spent giving Twin Falls 4G is money not spent upgrading the network in New York.

    The same is true to a lesser extent for the Internet. More rollouts mean slower improvements in existing areas. The coverage isn’t quite as national for cable as it is for mobile phones, though.

  6. David Alexander says:

    I’m not sure if there are any Trumwills in Sweden. Maybe in the others.

    You’d be surprised. It gets awfully empty and cold in Northern Scandinavia and Finland. 🙂

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