Our guest on the latest GeekWire radio show was Bill Schrier, the former CTO for the City of Seattle and current state point of contact for FirstNet, a $7 billion program passed by Congress to build a nationwide wireless network for first responders.
The topic: the prospects for municipal broadband in Seattle. Last week, the City of Seattle released a study by Columbia Telecommunications Corp. that found the city would need to spend anywhere from $480 million to $665 million to build a municipal gigabit fiber network.
If you missed the show, or just prefer text, continue reading for edited excerpts.
Todd Bishop: Bill, why is broadband such an important issue, and why is it such a difficult issue for municipalities around the country?
Bill Schrier: This is an important issue for municipalities because mayors and city councils are so excited about Internet. They want to attract high-tech business to a city. They want economic development. They want smart people to live in their city. People with college degrees who want Internet access. So, it’s all about a robust city, a robust city life, and economic development.
Todd: It seems, at least in the city of Seattle, that we have what it would take to really get this off the ground. There are many miles of what is called “dark fiber” under the city: fiber optics that aren’t being used that could be leveraged for municipal network like this. One of the conclusions of city officials from this report this past week was, at least on its own, the city would not be financially wise to pursue municipal broadband on its own right now. Why is it such a difficult issue?
Schrier: Well, historically, it has been difficult here in Seattle because it has been a monopoly. Comcast and Wave Broadband each shared parts of the city and they provided cable TV and they provided Internet access and that was your basic source for Internet. It was a monopoly. Lately, Century Link has come in and started to overbuild neighborhoods with gigabit. The “dark fiber” that you mentioned that’s in the ground has actually been built by the city but it’s already in pieces. So, parts of it are owned by Seattle Public Schools, parts by the University of Washington, parts by Seattle City Light. So it’s hard to put it together into a coherent network.
Todd: The report estimated the total cost of building a municipal broadband network anywhere from right around $480 million to more than $600 million, depending on whether the new broadband utility would work with Seattle City Light to use part of their power infrastructure to string some of the fiber. Were there any big shockers to come out of this report?
Schrier: No, I don’t think there were any shockers, at least to me. Certainly, the landscape has changed over the last ten years. Ten years ago, a municipal broadband utility made a lot of sense, because there was a single monopoly provider. Today, it doesn’t make so much sense anymore because there is a lot of competition. There is CenturyLink. There is Wave Broadband. There is Comcast. Plus, the services are changing. Instead of having to buy your TV over cable television, you can now get it over the Internet. So, the technology is changing rapidly. And, there is more competition.
John Cook: So, what about Tacoma? Everyone brings up Tacoma as having the city-owned municipal broadband network. Are they doing it right, in your mind? How has that played out in Tacoma versus what you are seeing maybe in Seattle, where we don’t have it?
Schrier: So, is losing $8-9 million a year doing it right?
John: I don’t know. Maybe not. Thanks for clarifying!
Schrier: No, it has actually been a success, but recently they have been unable to keep up with the technology. So, Comcast and CenturyLink have gotten ahead of them in technology and they can’t compete on speeds or prices. And, the estimate from Tacoma Public Utilities, which runs the network, is that they lose $8-9 million a year.
John: But, this is a potential warning for Seattle. Once you build the network, you’ve gotta keep the network up and upgrading it. So, there could be additional costs down the road. So, did that come into play in the decision making process?
Schrier: Oh, I think so. First of all, the city of Seattle has not made a decision, as far as I know. They just have the report. But, cities are really good at providing stuff that doesn’t change very much: water, for example. Forty years ago and 40 years from now, you are going to turn on a spigot and water’s going to come out.
Todd: Hopefully.
Schrier: Hopefully, exactly! But, Internet access 40 years ago didn’t exist. What will it look like 40 years from now? The technology is changing so rapidly. The apps, the content that’s delivered are changing so rapidly and cities aren’t very good in a situation where there is a lot of innovation and change.
Todd: So, that gets to the core issue, because the fundamental question here is: should broadband Internet be a public utility, like water and sewer and electricity?
Schrier: Well, theoretically and ideally, yes. In other words, just like streets, you have one street that goes by every house. You have one set of electric wires that goes to every house. You should really have one fiber optic cable that goes to every house. That’s the cheapest, most efficient way to do it. The trouble is there already are multiple wires that go in that are owned by private companies. So, in a greenfield situation, where there was nothing, a municipal utility would make sense, like Cedar Falls, Iowa. In a situation where there is already a lot of fiber optic cable built and competitive providers, it doesn’t make much sense.
Todd: When you look at what’s coming out of CenturyLink, in terms of their gigabit rollout, and Comcast, in terms of their broadband generally to the city, are we well-served here in the city of Seattle by our existing broadband providers?
Schrier: Well, as long as you don’t count price, I think we are getting to be much better served. So, I’ve got to give kudos to Mayor Murray and I’ve got to give kudos to the CTO, Michael Mattmiller, because they’ve removed a lot of the regulatory obstacles. That has allowed an explosion of buildout by CenturyLink, for example. Century Link might have 100,000 homes passed with gigabit (by the end of the year). Full disclosure, I have CenturyLink gigabit at home, but I also have Comcast Cable TV. Comcast, under competitive pressure, is now offering a two-gigabit service to 1 million residents of Washington. So, yes I think the service is getting there, but not necessarily the price.
Todd: Century Link is touting something just under $80 a month for Gigabit broadband. But they make you bundle it with something like telephone service, so you are going to end up paying upwards of a $130-140 to get gigabit. Is that true competition? If the city were to roll out its own network, would that go away, that kind of bundling?
Schrier: So, what have you got against plain old telephone service, Todd?
John: He doesn’t use it!
Schrier: Say I just want pure Internet. That is a problem, yes. It’s bundled just like cable TV is bundled. You get 500 channels, when, maybe, you really only want three channels. I am not sure how the city could do anything directly about that, except encourage more competition. So, for example, one of the things that city just did, the City Council just passed, is that they removed restrictions on cable TV franchises. So, that means Wave Broadband, which used to just be restricted to places like Beacon Hill, can now overbuild where Comcast is located and vice versa. Wave just got $130 million in financing specifically to build out their fiber network. So, I think more competition will eventually drive the unbundling and will drive lower cost.
Todd: So, one of the more twisted things that came out of this report, though, is the recognition that one of the risks for the City of Seattle would be price wars from Comcast and CenturyLink. In other words, if the city rolled out its municipal broadband network and it was relying on subscriber fees to pay back the bonds for the buildout, all it would take is a slight reduction in Comcast and CenturyLink’s fees to make people choose the commercial providers instead, and basically sink the broadband network.
John: So, they would undercut the pricing of the city network.
Todd: Which seems really twisted, doesn’t it?
Schrier: Oh, no. Actually, it makes a lot of sense. It’s competition.
John: That’s competition. That’s fine.
Schrier: The report actually says that 43% of eligible Seattle residents would have to buy the city’s service at $75 a pop to make it work. Well, Comcast and CenturyLink have national networks. They could easily afford to cut their prices in Seattle to $70 or $65 to starve the financial model of the city network.
John: 43% is a big bar to get over. I don’t think that would happen. Do you?
Schrier: It is huge, especially considering there are at least three competitors in this market.
Todd: From your perspective, what’s next? Where can the city go from here, and is a municipal broadband network even feasible in a city the size of Seattle?
Schrier: Well, I don’t think it’s feasible in a city the size of Seattle specifically because of the competition that I cited earlier.
But that’s a great question: What do we do next? And I have a couple suggestions. This city has been great about funding a complete rebuild of our library system, our fire stations. Gee, we’re funding universal preschool. That was a levy we passed last year. We fund a families and education levy to put tutors in schools. So perhaps we can have a Seattle Technology Opportunity Levy or Seattle Technology Opportunity Fund, funded by sales tax or property tax to do a number of things. First of all, we might declare Internet access a basic human right for residents in the City of Seattle. We could, using those funds, put Internet access in every subsidized housing unit; we could put tablet computers and smartphones in the hands of every student, we could put tutors in schools to help them learn how to code. There are a ton of things we can do in Seattle, with funding, to bridge the digital divide, get to digital equity, and actually make universal broadband a reality.
Todd: So in that scenario, would the city be doing this on its own, or is there the potential to bring in a partner? Google is rolling gigabit Internet around the country. Is that kind of potential to partner available in Seattle, to build a municipal broadband network?
Schrier: I don’t think so at this point. Google has chosen its cities it’s going to go to, and Seattle is not one of them. One of the reasons Google didn’t chose Seattle is because we have the Seattle process. We have lots of process that we make them jump through. And, I don’t see any other potential partners on the horizon that would help build a broadband network here.
John: So, step back for a second, let’s just put the broadband in the U.S. in perspective. Where do we stand related to some other countries?
Schrier: Well, Australia is building a national broadband network. In other words, they’re actually working with their local provider, Telestra, and contributing public funds to build a nationwide fiber network. The city of Amsterdam, the city actually worked with the owners of apartment buildings to build a combination city-private network that is now used by the cable companies. South Korea is building an extensive fiber network. Again, the government working with providers, so we’re behind in that sense. But, what you are seeing here in Seattle is a rapid catchup.
Todd: You mentioned the Seattle process earlier, which would be one reason that somebody like Google would not come in and partner. Do you think that there’s the appetite or the interest among the citizens of Seattle to do something like a property tax to fund a broadband Internet service?
Schrier: Well, if you read the residential survey results in the latest study, residents really do want something. They want cheaper broadband service. They want broadband service for low income and diverse neighborhoods. They do want action on behalf of the city. So, I think there is an appetite for a tax increase or something similar to create like the technology opportunity fund I discussed.
Todd: And, it is interesting as part of the report they mentioned that if you did the property tax approach, one benefit for the citizens would be that you wouldn’t need the $75 a month fee to make it work. You could actually have a lower fee, something in the range of $45 a month. So, you could see it being pitched that way. “Hey, your property taxes might go up, but looking at this screaming deal you would get every month if you went with the municipal broadband.” And, then it would make it much tougher for CenturyLink and Comcast to compete. It might feel like they’re taxing us each month, but in fact they’re not. So it seems to me that the property tax, if there is an appetite for it, is one way the city could go forward.
Schrier: Exactly. As a matter of fact, the advantage of what you just described is that the city would work with the providers, would work with Comcast and CenturyLink, which already have low income programs, and actually give them money or subsidize them to build the network to specific homes and businesses, serve low income residents, for example. So, there is great advantage to actually partnering with the providers, rather than legally opposing them.
John: So, how untapped is that “dark fiber” that is sitting under the city streets here in Seattle. I mean, is there a lot of capacity there, or is it a missed opportunity by not tapping into that?
Schrier: There is a lot of capacity, but it is bureaucratically difficult to tap into it. So, again there are “dark fibers” that are owned by Seattle public schools, Seattle community colleges, or Seattle Colleges, the University Washington, Seattle City Light. And, you would have to pull those together, pay those individual utilities and entities to use their fiber to actually string together a fiber network. Then, it only runs into neighborhoods, it doesn’t run the last mile into individual homes of premises.
John: You still have to dig a trench to the home or get that Internet into the home.
Schrier: Exactly.
John: You know the other thing that strikes me with this issue, in doing some research on it, I went back and found the original commission’s report in 2005, so this has been going on for ten years. Are we at the end now of this debate and we’re going to move on? Or, is it just gonna be stuck in Seattle process for another ten years, and we’re going be debating in the same place where we are in 2025 on this issue?
Schrier:: It’s amazing that you bring up that report. So, I was actually on that commission back in 2003-2005.
John: Yeah, Greg Maffei, there were some notable folks on it…
Todd: John’s been doing his research.
Schrier: There, you go! You can actually read, John. This is great! … That report set a goal: that by 2015, this year, Seattle would have fiber in every home and business. And frankly, we’re getting there with private companies. So, I think to a great extent, that goal has been accomplished, thanks to deregulation on the part of the city and lots of competition coming in from the private sector.
Follow Bill Schrier on Twitter and also check out his blog. Listen to the show below or via this MP3 file. The interview with Schrier starts in the second segment.
