Lake County offers good look at broadband’s public-private divide

Of the couple dozen high-speed Internet projects approved for Minnesota under the federal stimulus program last year, none is more intriguing than the one in Lake County.

At $66 million, it's the biggest award wholly in Minnesota. And it's drawn some fire because a key figure in its plan came from a fiber project in Vermont that has run into financial difficulties since he left. (County and city officials are meeting tonight to hash that over.)

But the real point of interest is that it throws into stark relief the debate over whose job it is -- if it's anybody's -- to provide access to the Internet to everybody in the 21st Century. Other stimulus grants went to small phone companies working in cooperation with local government, as in Lac qui Parle County. One went to Carver County but involves backbone service that doesn't extend to the home or business. The city of Windom got money, but that's an established municipal broadband operation trying to expand to nearby cities.

The Lake County project is the one ground-up government-owned operation just starting and promising fiber to every home in the area. And it hasn't taken long for the private companies who provide service to some of those homes to complain. It doesn't seem destined to become a model of public-private cooperation, but it might provide a good test in the marketplace.

The Lake County News-Chronicle has offered detailed coverage of the project's development.

Lake County proposes to build a fiber optic network in the next three years that reaches some 15,000 households, all of those in Lake County plus some in neighboring St. Louis County. The county would own it and would contract with the non-profit entity National Public Broadband to operate it.

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The plan's backers say it will reach homes and businesses not served now, will provide faster and more reliable service and will be the same price or less than the service provided now in towns like Two Harbors, Silver Bay, Hoyt Lakes and Aurora by Mediacom's cable operations, Frontier's DSL service over phone lines and others.

"It's a very sound network and a very sound group of people putting it together," says Lake County Commissioner Paul Bergman. Like rural officials all over the country, he fears being left in the dust in terms of economic development if Lake County doesn't improve the Internet access it has available.

And he says Mediacom or Frontier have shown no interest in cooperating with the county to extend their own service. Lake County has projected that it needs 60 to 65 percent of the area's households to sign up for the county-owned project to succeed. Based on the speed fiber can achieve, Bergman thinks it will hit 85 percent.

Not likely, says Thomas Larsen, group vice president for Mediacom, which provides broadband service to several towns through its cable TV operations. "There's no way for this project to succeed without taking every one of our customers."

If the county's project moves forward, it will generate a marketplace battle, Larsen says, in which "the government is trying to put us out of business and we're trying to put government out of business." The stimulus award pays far more than the marketplace value of a household's Internet service, he said, and he questions just how much faster customers really want their Internet to be.

"There are very, very few people in America that need faster service than 10 megabits (per second)," Larsen said. "It's frustrating for a company that's put in its own private capital. We did a favor to the cities of Lake County and now they're going to overbuild us."

Between them, cable operators Mediacom and MidContinent serve more than half the households in the Lake County service area. He said Mediacom offers speeds up to 20 megabits per second and will go to 100 megabits in the next 12 months, a promise Bergman likens to drinking Kool-Aid and blowing smoke.

Mediacom is complaining to the U.S. Department of Agriculture about the stimulus grant, arguing that the county claimed it was going to offer service unavailable in the county and citing as proof language in the joint powers agreement Silver Bay signed. The county says that language isn't in the final plan that went to the federal government. Bergman calls the Mediacom complaint "time-delaying and foolish."

Frontier Communications is the area's other big private provider, offering DSL service to almost all its phone customers. The service can serve 6 megabits per second, although many receive 1 to 1.5 megabits, says Kirk Lehman, general manager for Frontier's northern Minnesota operations.

Frontier isn't planning any formal challenge to the Lake County stimulus grant, but Lehman agrees with Larsen that the county will have a hard time hitting its numbers. "You can't borrow $70 million and hit all those lake homes and structures and pay that back with revenue," Lehman said, predicting revenue shortfalls for the county's project.

Cook County offers a contrast right next door. There, the Arrowhead Electric Cooperative won a stimulus award to run fiber throughout the county. Both Lehman and Larsen said that made more sense than the Lake County project because the cooperative already has the infrastructure and workplace structure and because the county presents more of a challenge for a private provider relying solely on the marketplace.

One possible outcome in Lake County is for other service providers, including Mediacom and Frontier, to use the county's fiber network and offer service to compete with the county's. Bergman says that's one of the points of having a publicly owned network. At this point, Larsen and Lehman aren't expressing much interest in that.