Broadband front lines: The cities' dilemma

Municipal broadband projects are now so numerous that the ability of cities to build networks of any kind--through municipally owned utility companies or by themselves--is being widely challenged at the state political level and often locally by incumbent service providers.

But what is a municipality to do, when service providers make their investment disinterest clear?

That's the position in which Fontana, Calif., officials found themselves in 2000. The town of 151,965 residents 50 miles west of Los Angeles was growing rapidly as new housing projects went up, but new residents were finding one unpleasant aspect of moving to Fontana was the lack of broadband availability.

"The city was growing extremely fast with nice new homes being built," said Janice McClintock, technology services manager. "People would move in from Los Angeles or the county and not be able to get anything but dial-up service. They were not happy and they were letting their elected officials know that they were not happy."

Her experience is typical of city managers or technology managers who find themselves caught between the rock of demand and the hard place of unresponsiveness from incumbent carriers.

McClintock was hired in 2001, in part to address the issue of better customer access to broadband. She hardly set out to be a network mogul, however.

"We went to the incumbents to enlist their help in trying to solve the problem," she said. "But it was obvious there wasn't any money or desire there."

Most of Fontana was served by SBC, which was providing DSL service to older neighborhoods but not newer areas. Adelphia was the cable provider and was in the midst of its bankruptcy issues. Verizon serves a very small piece of Fontana, which was part of a GTE franchise.

"The city also went out looking for overbuilders because of Adelphia," McClintock recalls. "But we were not close enough to the existing Southern California headend to attract an overbuilder."

That left the city without any real choices other than to consider building its own network, she said.

That is the typical situation, said Mark Cooper, president of the Consumer Federation of America.

"Municipal broadband networks are providers of last resort," he said at a recent press conference devoted to municipal broadband. "They come into existence because existing service providers don't see it as profitable. They don't come into existence to thwart the existence of other providers but because there are no other providers."

McClintock would be the first to say that her job would be easier if she had a service provider to provide broadband access to Fontana's residents and to what it hopes will be a growing business community.

The city conducted a feasibility study in which it encouraged incumbent participation so that it could determine possible options, she said.

"Part of that study included carrier access analysis of our city," McClintock recalled. "It was pretty apparent that Fontana wasn't really going to rate high on anybody's scale."

The problem was the business market in Fontana, which consisted more of branch offices than corporate headquarters and was dominated by the transportation industry, not a high-volume telecom user.

"On a scale of 0 to 15, we rate about an 8," she said. "Anaheim would rate a 13. And in the telco climate of 2001-2002, there was not investment dollars for a city like ours."

Still, as a growing community, Fontana wanted to attract businesses to drive economic development, but couldn't do so without a broadband infrastructure.

"It was a chicken and egg problem," McClintock said.

The city has not been shy about investing for improvements. In recent years, it has spent $5 million to redevelop its downtown area, $42 million (which includes state bonds) to build a new library, and $50 million in a new economic zone on the city's south side, in addition to building an industrial park and expanding its parks and recreation facilities.

In 2003, Fontana put out a broad request for proposals, hoping to entice a service provider to build a broadband network for its community that would meet a number of needs, in addition to helping economic development.

"We wanted to be able to bring services to our schools, because we have some big English language literacy problems in our schools," she said. "There were some health care needs, and we wanted to bring partners in who could help us address the Hispanic community's needs. We said, 'We think we need this type of an infrastructure, but you tell us. We are open to anything. Oh, by the way, we are open to any business plan that will get us there, from you owning it to us owning it.'"

The response was tepid, to say the least.

"Every single one of them came back and told us we were going to have to build it ourselves, that we were going to have to build and own," McClintock recalled. "Nobody would build it themselves and take the risk on."

So, somewhat reluctantly, Fontana embarked on a feasibility study to determine if it could make sense of building a network and selling services on a wholesale basis.

"We do not want to be in the services business," she said. "We will build the infrastructure to enable the private sector, and let the private sector provide the services."

So Fontana has joined the ranks of the municipalities that are preparing to build their own networks, although the final decision awaits approval based on financing and other details. Because technology is changing rapidly, McClintock is not making final decisions on vendors or specific approaches until things are more certain.

The company has run into resistance from SBC, which has complained at city council meetings. The telecom giant is including new sections of Fontana in its Project Lightspeed plans, she said, but not promising what it will do for the existing residents without broadband.

"They have pegged an awful lot of our city as low-value customers," she said. "The best outcome for me is to get the services to the citizens. I have no stake in how it gets to the citizens. I want to see our city improve, educationally and economically and I'd like to see that happen for our city, regardless of how that happens."

In talking with her fellow city managers, McClintock has seen lots of others in a similar position.

"Most are not willing to take on what Fontana has done," she said. "They are just resigned to saying, it will get here when it gets here."

A growing number of municipal executives are not taking the passive road, however. This year's spate of legislation seeking to limit or even prohibit cities and towns from building broadband networks has spawned an outpouring by mayors and--somewhat surprisingly--businesses as well.

"A broad coalition of citizens and private sector companies and mayors have come out in force and demanded that this anti-public legislation be stripped out," said Ben Scott of Free Press and co-author of a White Paper, Connecting the Public: The Truth About Municipal Broadband. "It's the public interest and industry versus the incumbents this time around."

Fontana has spent about $625,000 on consultants and other fees related to the broadband network possibilities--not a huge line item on its budget, McClintock said. The city must still decide whether to take the next step.