Who should build the next generation of high-speed networks?

Dan Olsen
Dan Olsen runs the municipal broadband service in Windom, Minn.
MPR Photo/Chris Welsch

Dan Olsen, who runs the municipal broadband service in Windom, was just about to leave work for the night when he got a call. The muckety-mucks at Fortune Transportation, a trucking company on the outskirts of town, were considering shuttering their office and leaving the area.

"They said, Dan, you need to get your butt out here now," Olsen recalls. "I got there and they said, 'You need to build fiber out here. What would it take for you to do it?'"

Fortune, which employs 47 people in the town of 4,600, two and a half hours southwest of the Twin Cities, relies on plenty of high-tech gadgetry. Broadband Internet access figures into how the company bids for jobs, communicates with road-bound truckers, controls the temperatures in its refrigerated trucks and remotely views its office in Roswell, New Mexico. Fortune even uses the Internet to monitor where and to what extent drivers fill their gas tanks in order to save money.

Yet, when it was time to upgrade company systems three years ago, Fortune's private provider couldn't offer sufficient speeds.

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That's where Windomnet came in. Though Fortune was a mile outside the municipal provider's service area, "We jumped through the hoops and made it happen," recalls Olsen. "The council said, "Do it and we'll figure out how to pay for it.' We got a plow and a local crew. We had it built in 30 days."

Across rural Minnesota, cities, counties, cooperatives and companies are planning or building broadband internet networks. The goal is to provide even those who live in the remotest parts of the state with high-speed internet in order to foster job growth, better health care and increased educational opportunities. The most optimistic observers think telecommuting and other internet-based endeavors could help stabilize the populations of rural areas.

The big question is, who should build these networks--public entities or private companies? The debate has been playing out all over the state, exposing the seemingly innocuous topic of internet access to the vagaries of knock-down, drag-out ideological brinksmanship.

There have been fights, disinformation strategies, derogatory letter and email campaigns, and even lawsuits. In this sense, the broadband debate is a microcosm of the national public-versus-private debate, pertaining to everything from health insurance to the delivery of the mail.

For his part, Dale Rothstein, who runs the IT systems at Fortune in Windom, says, "I get three calls per month from people trying to get me to convert. I say 'no.' Dan and Windomnet took care of us. I'm not going anywhere. It's a great relationship. When there is a problem, I call and it's taken care of. It's great to have a local company to deal with."

When it comes to building outstate high-speed networks, models abound. Sometimes the big, national companies step up. Often, small, local companies or co-ops take the lead, finding practical gain in bringing better service to a limited customer base. In other cases, often as a last resort, municipalities finance the installation of high-speed and run it like a utility.

Eighteen state projects are set to receive more than $228 million in federal stimulus dollars, infusing public money into many private systems and ushering in the heyday of the public/private hybrid.

One project, in western Minnesota's Lac qui Parle County, serves as a good example both of a public-private partnership and of a big private provider taking a pass. Pam Lehmann, executive director of the county's economic development authority, wanted to bring fiber to every home in the county.

She likens fiber to electricity or the telephone, explaining, "People who reside here have as much value as people anywhere in the whole world." Lac qui Parle was willing to throw in for a feasibility study and even planned to apply for federal stimulus dollars.

First, Lehmann went to Connecticut-based Frontier Communications, which provides telephone and internet service to roughly half the county. "The local folks at Frontier had a great interest in pursuing something like this," she says. "We had two meetings with some of the upper management. They said they didn't have the funds available for a project like this. When they are looking at the big picture, a small county in west-central Minnesota was not their priority at that time."

Frontier's area general manager for Minnesota, Scott Behn, confirmed the exchange via email. "Frontier currently provides widely-available broadband service in the portions of the county that we do currently serve," he wrote. "But, given all the facts at the time, we were not in a position to attempt to expand our service territory to the entire county."

Behn added that Frontier "believes there is a place for public/private partnerships in the telecommunications marketplace." However, "Simply pouring public money into projects that overbuild and compete with networks built by private investment discourages private investment and does not help reach those highest cost households. Duplication of the network is no guarantee of success, and is often simply a waste of both public and private resources."

Undeterred, Lehmann turned to the other provider in the county, a local cooperative called Farmers Mutual, which had already installed fiber to the majority of its customers. Farmers said yes.

Dale Rothstein
Dale Rothstein runs the IT systems at Fortune Transportation in Windom, Minn.
MPR Photo/Chris Welsch

Now, with the help of nearly $10 million in federal stimulus dollars, every Lac qui Parle resident is scheduled to have high-speed fiber to the door by 2014. Public assistance was necessary to move ahead, says Lehmann. "Would this have been possible without grant dollars? Never."

Lac qui Parle's experience is typical, says Jack Geller, director of the EDA Center at the U of M, Crookston. A big telecom, he says, "asks, 'How are we going to deploy our capital?' They're going to deploy it where it's going to have greatest return on investment. In Minneapolis and Seattle and Denver and Albuquerque. Over time, they deploy that capital farther and farther out. But Lac qui Parle will wait in anybody's timeline."

"If you look at the history of the deployment of broadband," continues Geller, "when it first was being rolled out in the early part of the 2000s, it was not uncommon to see the smaller rural companies and cooperative telephone companies deploying this technology first. It was simple to see why. They have small service areas. Where else are they going to invest?"

Two sites that have emerged in recent months as broadband battlegrounds are Sibley County in south central Minnesota and Lake County on the North Shore.

City and county officials in Sibley County and neighboring Renville County have formed a joint board to plan what would be a publicly owned fiber optic project to deliver high speed Internet service to thousands of homes, farms and businesses. They have run into opposition from Frontier.

Lake County was the recipient of the largest federal stimulus award in the state, $66 million in loans and grants, but its planning has sputtered. Cable company competitor Mediacom has objected loudly and the county had to change consultants when the first one it chose was tainted by association with a troubled project in Vermont.

One of the more contentious examples in the state's broadband history unfolded a few years ago in Monticello, a commuter city about 40 minutes northwest of the Twin Cities, where now there are two competing fiber networks. One is owned by TDS, a private provider based in Chicago. The other, FiberNet, is owned by the city.

Back in 2007, perceiving that available internet speeds were too slow and priced too high, 74 percent of the citizens of Monticello voted to build a municipal fiber-to-the-door system. The city was in the process of selling the bonds necessary for the project when it was slapped with a lawsuit by TDS, which claimed the financing scheme was illegal because broadband shouldn't be considered a utility. The courts eventually sided with Monticello, but not before TDS began laying its own fiber network throughout the city.

Fast forward to today, a city with two fiber networks. Andrew Petersen, director of external affairs for TDS, acknowledges "the importance of broadband to stimulate economic development in urban and rural communities" and says his company would have built a fiber network eventually, without prodding from the city. He believes the network may be somewhat ahead of its time, though.

TDS offers 100 megabits per second connections, Petersen says, yet, "the vast majority of our customers have speeds between 1.5 and 3. That's both perfectly adequate for telecommuting and downloading video. And it's also affordable."

Monticello's city administrator, Jeff O'Neill, says the city doesn't rue building the year-and-a-half-old FiberNet, although it got a later than planned start on drawing subscribers because of the lawsuit. "We're getting good take rates," O'Neill says, largely because of the city's focus on attentive customer service. "We're marching toward a successful business plan."

Standing in FiberNet's "head end" building, full of the spotless, quiet equipment that makes the network run, O'Neill explains, "We built this to have freedom, to have choice. The community, liberals and conservatives, found a common goal here, to have the freedom to get the service you need to preserve your economic security. Some say government shouldn't get into this, but private companies shouldn't be entitled to a monopoly."

"How do you get the incumbent to build a fiber network?" asks O'Neill. "You build one of your own."

Even the Monticello citizens who aren't signed up for FiberNet are benefitting, O'Neill adds, because TDS has lowered its rates. (TDS's Peterson denies a correlation, stating, "I think we set the price in the marketplace. We think competition is always good..") In the end, O'Neill says, "You can't measure success solely by the bottom line, but by how it affects the community."

Municipal systems draw less fire in the far-flung parts of the state, where bigger telecoms have less at stake. Places like Windom, which is cited as a resounding success or a miserable failure, depending on whom you ask. Critics point out that Windomnet has lost money five years in a row.

Dan Olsen retorts that Windomnet was never designed to make money; one of the benefits of a municipal system is that nobody takes profits out of it. He says the plan was to break even by year five, which arrived in 2010, and it looks like they'll come within $50,000 of doing so.

"We don't charge enough to make money," says Olsen, noting that Windomnet serves the vast majority of the town's 2,000 homes with internet, phone, cable or all three. They also provide free service to city buildings and the library. "The point is not to make money, but to break even," Olsen says. "The number one goal of the system is to provide broadband to the residents of Windom."

Now, because of almost $13 million in stimulus dollars, Windomnet is expanding to include eight surrounding towns: Jackson, Lakefield, Round Lake, Bingham Lake, Brewster, Wilder, Heron Lake and Okabena, where many citizens still have dial-up. The stimulus money will go to the eight cities and they, in turn, will pay fees to Windomnet, acting as the network's hub.

There are many ways to measure a broadband network's success, says the U of M's Geller. "You can measure it by, yes, the public voted for it and they have a system. You can measure it financially, which is more tricky. You can measure it by, are people getting good service for a good price?"

He describes the situation in Monticello as a major grudge match. But, Geller says, "Look at the infrastructure now. It's great. Maybe you measure that as success."