Inner city Americans pay substantially more for broadband service than their neighbors in wealthy suburbs, while rural America pays the highest prices of all for broadband service, according to the results of a new study.

The Investigative Reporting Workshop at American University analyzed broadband speeds and service around the nation’s capital to learn how broadband is priced in different neighborhoods and communities.  The study covered the eighth largest metro area, which included over five million residents in the District of Columbia, Maryland, and Virginia.

Broadband providers never release specific data about their customers’ broadband service and the prices they pay for it, considering it a closely guarded business secret.  The Workshop went direct to consumers to get around this limitation, combining actual speed test results with the true cost of standalone broadband service reported by study participants.  It’s among only a handful of studies that rely on actual raw performance and pricing data — not company-provided general marketing information about speeds and pricing.

The conclusions expose a dramatic difference in broadband pricing depending on where one lives, what company they do business with, and how well each company’s network performs.

The results?  Broadband pricing was cheapest from Comcast, the region’s dominant cable company and most expensive, by far, from a wireless ISP (WISP) that serves the Culpepper, Virginia area.  Residents in wealthy suburbs in Fairfax County, Virginia and Montgomery County, Maryland enjoyed the best bang for their buck, charged nearly half the price-per-megabit that residents inside the urban District of Columbia pay.  Rural residents were stiffed with high prices for comparatively slow speed service.

Verizon, the area’s dominant phone company did poorly in the study, in part because of the substantial number of legacy DSL customers who are paying a lot for little speed.  Although Verizon’s fiber-optic FiOS service is making inroads in some parts of the study area, its high speeds don’t reach enough customers to offset Verizon’s larger base of DSL customers.

Here’s how Comcast and Verizon compared:

• Comcast, according to an average of 1,254 surveys, charged customers $5.76 per Mbps;
• Verizon, according to 1,744 surveys, charged $12.34 per Mbps — more than twice as much as Comcast.
• Verizon charged $50.86 per month on average.
• Comcast charged $52.68.
• The median, or midpoint price, is much lower, at $5.13 per Mbps for Verizon and $2.84 for Comcast.

Cox Communications, a cable company that serves Fairfax County and Fredericksburg in Northern Virginia, charges $6.60 per Mbps, according to 528 surveys. Cox’s monthly average cost was $46.77.

Rounding out the five regional providers, RCN Corp., averaged $11.06 per Mbps, or $48.57 per month, for a median price of $5.77 per Mbps, according to 126 surveys, and Clearwire Corp., according to 172 surveys, averaged $16.19 per Mbps for $42.16 per month and a median price of $12.47 per Mbps.

By far the worst values went to rural customers.  Overall, the study found rural residents pay $30.28 per Mbps (based on 431 surveys) and $53.84 per month for service, a per-megabit rate far higher than the other three regions.

Virginia Broadband LLC, a Culpeper, wireless broadband provider, offered the worst value. According to a summary of 24 surveys, the company charges a whopping $198.13 per Mbps, the most of any company that underwent more than one test. The average monthly bill was $94.07, and the average speed was less than a megabit per second.

Comcast, RCN, and Virginia Broadband did not respond or refused to comment.  Verizon said the results were unfair because it did not distinguish between FiOS fiber to the home customers and their traditional DSL service.

They also criticized the study’s price comparisons, which relied solely on standalone broadband service pricing.  Verizon, like most providers, discounts services to customers who choose to bundle their telecommunications products together.

The study arrives at the same time the federal government has released their own national broadband map, which relies to a large degree on information volunteered by broadband providers.

The study has been criticized for not accurately depicting true broadband speeds and pricing, which can distort the true picture of broadband availability across the United States.

Slaterville Springs is a hamlet in the town of Caroline, N.Y.

Frontier Communications issues press releases promoting the expansion of low speed DSL service into new areas, but for many existing customers, extended service outages ruin their broadband experience.

Just ask Stop the Cap! reader Paul from Slaterville Springs, just outside of Ithaca, N.Y.  Much of his hamlet was without Frontier’s DSL service for more than two weeks, leaving dozens of families with poor-to-non-existent access to broadband for the better part of January.

It Was Supposed to Be Restored in Two Days — But Three Weeks Was More Like It

“It was supposed to be restored in two days, but after repeated calls, they told me it was a “common cause” failure impacting a large number of subscribers,” Paul told us. “Later, we were told Frontier was waiting for parts to fix some equipment at the central office.”

Paul heard the same excuse a week later, as he and other local residents remained cut off from the Internet.

Paul has been underwhelmed by the attention Frontier has given to the town of Caroline, which includes Slaterville Springs.  He has complained to the town supervisor and the New York Public Service Commission.  Frontier has already offered him a refund for the extended interruption in service, but Paul would really like a stable Internet connection that performs well with today’s bandwidth-intensive Internet.

“Before the outage, I got about two-thirds of the promised 3Mbps speed from Frontier, which means any interactive applications can be difficult, and YouTube videos require lengthy buffering before one can watch,” Paul says.  “I think being able to watch YouTube without painful slowdowns should be a key metric for today’s broadband.”

At the end of January, Paul reached out to Ann Burr, Frontier’s regional president of operations.  She called up Claudia Maroney,  the general manager of Frontier’s Central New York division.

“I was told right away that I’d get a service credit for two months and that the problem would be dealt with quickly,” Paul said. “The technician in the central office contacted us and said the solution was to further reduce my speed, because he thought we were too far away from the central office to sustain even the slow speed we had before.”

That turned out not to solve the problem either.

Finally, Frontier brought Paul a new DSL modem which, in concert with repairs in the central office, finally resolved his problems.

Frontier claims it will also increase capacity in his area, which apparently also suffers from evening congestion.

Poor Internet service is not just limited to Caroline.  The entire Southern Tier region between Corning and Binghamton is hard-pressed to access high-speed service.

Eleven towns in Tompkins and Cayuga County have jointly applied for a federal grant to create the infrastructure needed to make high speed wireless or fiber optic-to-the-home service available throughout the area.

The Case of Proctor Creek and Coffield Ridge, W.V.

Wetzel County, W.V.

One of the most challenging areas to provide DSL service is in the Panhandle section of West Virginia.  Hilly terrain and large distances between neighbors assure a challenging broadband environment.  Cable television is out of the question in many areas, and Verizon’s legacy network was in decrepit condition before selling operations to Frontier and fleeing the state.

So it was with great excitement Frontier announced incremental progress in expanding DSL service to two small sections of Wetzel County.  Proctor Creek, close to the West Virginia-Ohio state line, and the relentlessly hilly Coffield Ridge area was finally getting DSL from Frontier — three years after Verizon promised to make the service available.

Wetzel County EMS President Jim Colvin and Del. Dave Pethtel joined Frontier’s Bill Moon at the Grandview EMS Squad station on Jan. 4, to learn more about Frontier’s expansion plans, as the Wetzel Chronicle reported.

Moon informed customers that DSL was now available in both areas and it’s only the beginning of Frontier’s plans to deliver expanded broadband service across West Virginia.  He said Frontier aims to “do things right the first time,” taking more time to establish service in efforts to prevent customers from dealing with the inconveniences of repeat visits from technicians.

“We want to bring the feel of a local company with the advantages of a big company,” Moon said. He went on to say that being a manager specifically for one region meant day-to-day decisions could be made at the local and personal level. “A lot of the red tape is gone,” he told the Chronicle. “We can make things happen directly and get things resolved quickly.”

“There is nothing quick or personal about Frontier Communications,” Shirley tells Stop the Cap! from her home in Proctor.  Her sister signed up for Frontier’s broadband service Jan. 15, and it has worked for exactly three days.  “She has never dealt with a more disorganized company.”

Shirley says nobody from Frontier ever marketed DSL to her sister’s family.

“I read the story in the Chronicle and called her right away, because they have been waiting for broadband for at least 10 years,” Shirley says.  “Calling Frontier was the first mistake — the company couldn’t bring up her account for 15 minutes.”

Shirley says her sister finally succeeded in ordering the service after her line was “qualified.”  She specifically told Frontier “no thanks” to a heavily pushed big package of services from the company, and she did not want to get into a term contract.  But Frontier signed her to one anyway.

“Installation turned out to take almost two weeks because the installer never showed up and she actually got her first bill with DSL charges on it before they installed the service,” Shirley says.  “She called me right away — they signed her up for a calling plan she didn’t want, a hard drive backup service she never ordered, and a one year contract she won’t accept.”

Frontier took all of the extra services off her bill without a fight, even as she still waited for the installer to show up.

“It worked for three days — three days,” Shirley reports.  “Ever since the last heavy rain, the modem lights just blink and Frontier tells her it must be a line problem, but she’s still waiting for someone to come fix it.”

Frontier is charging Shirley, and her neighbors, nearly $40 a month for 1.5Mbps DSL service.  It was supposed to be 3Mbps, but Moon admitted to residents the farther a customer is from a hub, the slower the connection will be.

Common Congestion Symptoms?  Frontier Promises Relief

National Radio Astronomy Observatory in Green Bank

Meanwhile, residents in Pocahontas and Webster counties in eastern West Virginia have DSL service, but intolerable congestion has made it practically unusable since last Thanksgiving.

Nate in Marlinton has had DSL service since Verizon ran it, and believes Frontier has successfully run DSL straight into the ground in the state.

“Frontier actually managed to achieve slower speeds than my neighbor’s satellite Internet service, which is simply amazing,” Nate tells Stop the Cap! “He had Frontier DSL as well, but he went back to the satellite because it was actually better in the evenings.”

Nate’s in a good position to know he has a good quality line to Frontier’s central office — he can see the building from his house.

“When Verizon ran DSL, I actually got better speeds than they promised because you can count the line length between me and the central office in yards, not tens of thousands of feet,” Nate says.  “Now the problem is with Frontier’s own pipeline to the rest of the Internet, which has become hopelessly congested.”

Nate criticizes Frontier for claiming their network has loads of fiber optics for their broadband service.

“Not for ordinary West Virginians they sure don’t,” Nate says.

The Pocahontas Times covered Frontier’s molasses-slow broadband speeds, getting promises that better broadband was on the way late last week.

“But you have to read further down in the story to find the company is spending its time, attention, and money on a fiber network connecting the National Radio Astronomy Observatory in Green Bank with West Virginia University in Morgantown,” Nate complains. “Although that fiber travels down the same phone poles and streets our phone lines do, that sure doesn’t mean we’ll be able to access it.”

Reed Nelson, Frontier’s Director of Engineering for West Virginia, vaguely offered the $5.9 million, 66-mile fiber project will indirectly benefit consumers through fiber loops installed along the way.  He was joined by an apologetic Dana Waldo, Frontier’s senior vice president for West Virginia.

“We know we’ve had some bumps in the road,” Waldo said at the outset of the meeting.

“This is very much like being on the Interstate highway at rush-hour,” he said. “It gets congested. What we’re trying to do is look for paths where we can reduce that congestion. That’s the short-term fix.”

Nate remains unimpressed.

“This is a residential broadband improvement project through osmosis — somehow Frontier’s congested network problems in the area will be resolved by an institutional network we cannot access,” Nate says. “The fact the company turned up at the Observatory to make these announcements before an audience of NRAO technical and executive staff, Pocahontas County Commissioners and representatives of the local schools and libraries, tells you all you need to know — this is an institutional, not residential network.”

Pocahontas County's Cranberry Glades: Go for Nature's Mountain Playground, but don't stay for Frontier's broadband.

Our regular reader DJ, also in the affected area, says speeds have been downright terrible since Thanksgiving, and despite Frontier’s “new capacity” coming online last week, his service is as slow as ever.

“I’m getting anywhere between 0.5Mbps – 2Mbps if I’m lucky,” he shares.

For most customers in eastern West Virginia, Frontier’s ironically-named High Speed Max service delivers a whopping 1Mbps broadband experience.

“Customers have been paying for value not received,” Pocahontas County Commissioner Martin Saffer told Nelson.

Constituents in both counties regularly complain to elected officials about the dreadful broadband service Frontier delivers.

“This company got more than one hundred million in broadband stimulus funding and it sure isn’t helping people in eastern West Virginia,” Nate says.

Another part of Frontier’s problems is an overcongested access point in Bluefield, where Frontier exchanges traffic with the Internet’s national backbone.  Sending the majority of the state’s traffic through one data center has proved untenable, so the company plans additional access points in Charles Town, Charleston, and Clarksburg.

Frontier promises speed boosts are forthcoming, bringing 5Mbps service in the days ahead, according to the Times.

John Mutscheller, Frontier’s Technical Supervisor in Marlinton, told the Times local crews are working to increase capacity whenever they go out to service equipment in Pocahontas County.

“When we put in a new site or we augment an existing site, if they’re at one meg–we have some at three–we’re jumping them up to 5 megs,” he said. “That’s the company policy.”

An installation at Thornwood will be the first 5 Mbps site to come online in Pocahontas County, Mutscheller said. Eventually, all sites in the county will be upgraded to that level, he said.

But as the newspaper points out, not everyone will get those speeds. Generally, with the copper lines that connect customers to Frontier’s equipment, connection speeds drop off as the distance from the equipment increases. Nelson said advances in modems, like those Frontier provides customers for connecting to its network, could fix that in coming years.

Frontier continues to navigate political minefields in the state with the help of employees hired from county governments. Reta Griffith, a former county commissioner today is Frontier’s General Manager for the territory that includes Pocahontas County.

Reporters pressed Griffith on the question of refunds for beleaguered customers experiencing very un-broadband speeds from Frontier:

“We will take those concerns into consideration,” Griffith responded.

Frontier’s service agreements with customers state that speeds received are not guaranteed, but rather will be ‘up to’ the specified speed, she added.

Frontier’s own marketing materials have added to the billing headaches of the company and its customers.

“‘High Speed Max’ doesn’t mean the same thing every place,” Griffith explained.

The National Telecommunications and Information Administration unveiled America’s broadband map early this morning, showing broadband availability, speeds, and coverage areas across all 50 states.

“A state-of-the-art communications infrastructure is essential to America’s competitiveness in the global digital economy,” said Acting Commerce Deputy Secretary Rebecca Blank. “But as Congress recognized, we need better data on America’s broadband Internet capabilities in order to improve them. The National Broadband Map, along with today’s broadband Internet usage study, will inform efforts to enhance broadband Internet access and adoption — spurring greater innovation, economic opportunities, and advancements in health care, education, and public safety.”

The map, searchable by street address or zip code, delivers data largely volunteered by service providers themselves.  Some of the data, particularly for broadband speeds, represent best-case scenarios, not actual results.  Regardless, looking at the nation as a whole, there are some dramatic gaps in coverage.  Large areas west of the Mississippi are without broadband, which can be understandable in the sparsely populated region.  To the east, the biggest problem by far as in the Appalachians, especially in West Virginia, western Virginia, and the western Carolinas.  West Virginia in particular stands out as the state with the least amount of coverage in the east, perhaps only rivaled by Maine.  In the southern U.S., Alabama, Mississippi, Louisiana, and northern Florida are problem areas.  East Texas outside of major cities is as well.  In rural areas, the coverage map fills in the most when rural wireless mobile providers are introduced, but their broadband plans are hardly suitable as a replacement for wired, unlimited access service.

“The National Broadband Map shows there are still too many people and community institutions lacking the level of broadband service needed to fully participate in the Internet economy. We are pleased to see the increase in broadband adoption last year, particularly in light of the difficult economic environment, but a digital divide remains,” said Assistant Secretary for Communications and Information and NTIA Administrator Lawrence E. Strickling. “Through NTIA’s Broadband Technology Opportunities Program, digital literacy activities, and other initiatives, including the tools we are releasing today, the Obama Administration is working to address these challenges.”

Reviewing the map for Stop the Cap!‘s headquarters — Rochester, N.Y., shows a correct list of providers, but the data about their products is more fantasy than reality:

• Time Warner Cable does not deliver 25/1.5Mbps service to residential customers in Rochester at this time, but its PowerBoost temporary speed gimmick might, for around 30 seconds.  Currently, Time Warner Cable maxes out at 15/1Mbps in the Rochester area;
• Frontier’s claim of 10Mbps is a theoretical maximum.  Most DSL customers don’t come close.  In our area (Brighton, N.Y.) Frontier couldn’t deliver more than 3.1Mbps.
• Wireless carrier data is simply wrong.  Sprint-Nextel is beaten down to a maximum 1.5Mbps, despite the arrival of its 4G network, which can manage better than that.  Verizon’s 3-6Mbps service is in their dreams, considering this data came from last June — before the introduction of LTE service in Rochester.  Clearwire is also guilty of boasting speeds they will never deliver on their increasingly throttled network.

The NTIA touts their map will be verifiable using “crowdsourcing,” but we found visitors are only able to confirm if a provider serves an area, but not how well and at what speeds.

Price data is also missing.  Strickling blames that on fast-changing industry practices.  We blame it on the fact providers refused to disclose that information, along with more specific details about their broadband networks.  Large providers claimed releasing proprietary, confidential business information could harm them competitively.

Another glaring example of questionable accuracy is the compelled-to-report top and bottom 10 cities in the country for service.  According to the NTIA, America’s number one city for broadband availability at speeds greater than 3Mbps is… Cleveland, Ohio.

Cleveland?

The worst?  Terre Haute, Indiana.

Really?

Here we go again.

You always know when a new year has arrived when another North Carolina legislator files a Big Telecom industry-written bill attacking community-owned broadband.

This year, the laughably-named “Act to Protect Jobs and Investment by Regulating Local Government Competition With Private Business” comes courtesy of Rep. Marilyn Avila (R-Wake County), a former manager of the conservative think tank John Locke Foundation.

H.129 is remarkable for its legislative micro-management, coming from someone who claims to oppose big government meddling.

Among its requirements:

• Demands a public accounting for every community broadband network;
• Limitations on service to strict city boundaries;
• Prohibits contractual agreements with apartment and condo building owners that mandate municipal service for individual residents;
• Bans advertising and “promotion” of community-owned broadband networks on Public, Education, and Government access channels;
• Shall not price any component of its service below cost;
• Requires payment of a special tax equal to the amount of local property taxes and/or fees normally exempted for local government enterprises;
• Requires permission through an extended hearing process to win permission before delivering service to any area deemed “unserved”;
• Demands a laundry list of pre-conditions before obtaining permission to shop for financing.

Avila

Avila doesn’t mind putting government all over the backs of community-owned networks if they happen to compete with her friends at AT&T, Time Warner, and CenturyLink.

Let’s review this exceptionally provider-friendly piece of protectionist legislation.

First, Avila’s demand for an open accounting of community broadband projects provides a treasure trove of business intelligence for any competitor.  They can demand to open the books and gain critical subscriber information — what residents pay for service, who gets the service, and how much it costs to provide.  That’s pure gold for targeted marketing campaigns to win back customers with special offers municipal providers are banned from offering.

We’re calling a foul ball because Avila’s “fair and level playing field” doesn’t have room for fair play.  Private providers get to keep the secrets community-owned network are forced to reveal.  That, by design, puts municipalities at a competitive disadvantage and could help drive them out of business.  Remember, these networks are financed by privately obtained bonds, not taxpayer dollars.  Shouldn’t any such provider have the right to keep its business strategies secret?

Second, if banning mandatory service for renters and condo owners is such a great idea, why does Avila only limit it to community-owned networks?  The record is clear — private providers are increasingly signing agreements with property owners mandating cable television fees for residents.  Apparently Avila’s concept of fairness doesn’t include the actual companies found guilty of raising the rent.

Third, Avila bends over backwards for her cable and phone friends by tying the hands of municipal providers who want their networks to be commercially successful.  Time Warner has no problem injecting endless promotions for its own services not just on a handful of channels, but on virtually every channel on the lineup, often during nearly every commercial break.  Can municipal networks ban advertising from AT&T and Time Warner?  Of course not.  And the definition of “promotion” specified in Avila’s ad ban is vague.  If a town government meeting talks up the success of a community-owned network, has Avila’s law been broken?  Apparently censorship by government mandate is a-OK as long as it doesn’t target her Big Telecom friends.

Avila’s ban on setting pricing below cost is another giveaway to Time Warner and AT&T, who routinely deliver retention and new customer promotions that could be temporarily priced below cost to secure or maintain a customer relationship for a limited period of time.  Of course, Avila doesn’t require either company to open their books to find out exactly what it costs companies to provide these special pricing packages.  No municipal provider seeks to price service at a rate that puts the project out of business.  Time Warner Cable has been accused of delivering below-cost retention pricing to departing customers in Wilson, where GreenLight has been poaching the cable company’s customers for more than a year.  Avila’s hand-tying provision allows some companies in the marketplace to keep pricing flexibility while the municipal provider is forced to price service according to a state-dictated formula.  John Locke would be turning over in his grave if he heard about this planned economy-pricing.

Rep. Avila can certainly no longer claim to be for low taxes, because her bill would effectively raise them for community-owned networks.  Again, since these projects are almost always funded from private bond markets, not public tax dollars, slapping complicated tax formulas on municipal providers while continuing to permit special tax break deals for private companies (such as “payment in lieu of taxes” or special tax breaks/grants for Time Warner in return for job creation) shouldn’t work for most small government conservatives.  Shouldn’t they support lower taxes for everyone?  Instead, Avila seeks to hamper community network business models by punitively sticking them with taxes she would otherwise oppose for commercial providers.

Avila’s support for smaller, less regulatory-minded government must also be called into question with this bill’s ridiculously complicated regulations for serving unserved areas of the state (which also grants a special window to private providers to protest, which they will certainly do in just about any area of the state even partially suitable for a future project).  Her bill even demands 60-day delays, custom-tailored to allow industry lobbyists to gin up opposition and demagogue projects.  Since a commission will be involved in the decision making process and has to take into account opposition from private providers, all of the benefits of Avila’s legislation flow to the cable and phone industry, none to community-owned networks or individual consumers that will ultimately benefit from better service at lower prices.

Avila's idea of a level-playing field.

Avila destroys her own “level playing field” argument in language within her own bill:

“The city or joint agency making the application to the Commission shall bear the burden of persuasion.”

In other words, Avila offers a “level playing field” with an 11-foot electrified barbed wire fence surrounding it.  Unfortunately, municipalities won’t be the only ones shocked by Avila’s cable and phone company protectionism.

Ordinary consumers in communities like Wilson, exempted from the relentless annual rate hikes from Time Warner because of the presence of a municipal competitor won’t get to keep the savings if Avila has anything to say about it.  She wants you to pay full price for your cable service, and pay higher prices year after year.

Her claim that the legislation will somehow “protect jobs and investment” is specious at best.  Time Warner has not exited Wilson or Salisbury — two cities with a community-owned competitor.  In fact, Time Warner is on record welcoming competition.  In reality, these companies simply don’t welcome new choices from those providers that will actually deliver savings and better service to customers.

This anti consumer legislation brought to you by Time Warner Cable...

The cable industry’s flagellation against projects like GreenLight and Fibrant flips between calling them financial boondoggles not worth bothering about to unfair competition that will harm private investment.  AT&T’s protests, in particular, ring the most hollow.  This is the same company that wants deregulation to make it easier for new players like themselves to enter the marketplace.  Their U-verse service enjoys the benefits of statewide video franchising, which removes accountability to local governments.  Yet this same company lobbies for increased bureaucracy and regulation for some of their potential competitors.  Avila is only too happy to oblige.

As with every other piece of legislation we’ve seen on this subject from North Carolina, it’s yet another custom-written favor to big cable and phone companies and an attack on consumer interests across the state.  Generous campaign contributions from the telecom industry pay off only too well when state legislators allow these companies to write the bills designed to protect their turf.

For Time Warner Cable, the costs associated with sending selected legislators and their families to a recent delicious BBQ event in sunny San Diego to attend a sham “conference” sponsored by a corporate front group shows there are plenty of favors to be had all around, just as long as you support the company’s legislative agenda.

...and AT&T

Fighting this year’s anti-consumer legislation will be tougher than ever.  For the first time in 112 years, the corporate friendly North Carolina Republican party won control of the General Assembly.  For many members, the free market can do no wrong and anything government touches is bad news.  Many will reflexively support Avila’s legislation.  But any underserved county in the state knows the truth about today’s broadband in rural North Carolina — if local communities can’t step up and deliver the service, nobody will.  For these representatives, Democrat or Republican, concern should run high that Avila’s bill assures these areas of years of high prices, poor or no service, and status quo protection designed to keep the market exactly as it is today.  Considering how poorly North Carolina stands in national broadband rankings, standing still should never be an option.

For the first time, a state has announced it is returning stimulus funding made available by the Obama Administration to improve broadband service.

Wisconsin governor Scott Walker said thanks, but no thanks to the U.S. Department of Congress, returning $23 million in broadband stimulus funds allocated to build a fiber-optic “middle mile” network to 380 Wisconsin communities — including 385 libraries. 82 schools, and numerous public safety offices in rural areas.

The decision to reject the money came in concert with a public relations push by Republicans in Washington this week calling on governors to curtail “wasteful spending” and reject stimulus projects.  Walker’s timing of the rejection has political watchers suspicious of an orchestrated campaign by state and national Republicans to call out the president’s economic programs.  Critics of the Walker administration are also accusing the governor of doing AT&T’s bidding in rejecting the public money.

AT&T has plenty of good friends in the state government, which has historically granted most of AT&T’s legislative checklist in the past ten years.  Wisconsin has taken a “hands-off” approach to cable and phone companies.  Statewide video franchising makes AT&T’s efforts to expand its U-verse IPTV system easy, without having to answer to local communities.  Rural commitments to landline phone service have also been eased for AT&T, thanks to a large lobbying effort.  Publicly-owned municipal broadband networks open to ordinary consumers are few and far between in the state, thanks to heavy opposition from the phone giant.

Walker’s track record of being extremely pro-business, and the fact he accepted more than $20,000 in campaign contributions from AT&T made it easy to claim Walker was delivering another favor to the state’s largest phone company.

But is Walker’s rejection of the state’s broadband stimulus money a help or a hindrance to AT&T?  Is Wisconsin’s governor correct when he says federal government bureaucracy was at fault?

Stop the Cap! decided to investigate.

BadgerNet: An Introduction

Governor Walker

Wisconsin’s institutional broadband network, which delivers broadband connections to large educational facilities, public libraries, and government users, is named BadgerNet — which makes perfect sense for the Badger State.  State law limits who can utilize the service — ordinary residential customers cannot — so the network is not well known outside of the circle of groups authorized to access it.

Currently BadgerNet largely exists as an extension of AT&T’s network in Wisconsin.  That is a critical point.  Had BadgerNet initially been created as an independent entity, today’s stimulus rejection might never have happened.  Wisconsin, no doubt at the behest of AT&T, built its network with a leasing arrangement, signing five-year term contracts to rent space on AT&T’s fiber-copper wire facilities.  That kept initial construction costs down, and allows the state to theoretically “walk away” from part of the network if something better comes along — a highly unlikely proposition in a state like Wisconsin.  It’s not an economic leader and has large numbers of rural counties competitors would be unlikely to serve.

Wisconsin Republicans call this arrangement with AT&T a “public-private partnership.”  Democrats call it a giveaway to AT&T, and BadgerNet officials call it one big fat headache.

Wisconsin's BadgerNet

Obama’s Broadband Stimulus

President Obama

When the Obama Administration unveiled its broadband stimulus program, it not only promised to deliver new broadband projects, but also the employment prospects for an army of consultants hired to navigate through the terms and conditions that always accompany money from Washington.

The control measures established by the Department of Commerce, which administers the money from the federal government, are designed to protect against waste, fraud, and abuse.  Unfortunately, they are often more impenetrable than software licensing agreements.  If you want the money, you must follow every requirement, or risk forfeiting it back to the government.

Wisconsin’s proposal to expand BadgerNet with broadband stimulus funding would mean discarding slower speed data connections for super-fast fiber optics.  Some 203 new miles of optical fiber were to be laid, serving 385 school districts, 74 libraries, and eight community colleges.

The federal government liked what it saw and awarded nearly $24 million in funds to launch the “middle-mile” project.  Along with the virtual check came pages of fine print — rules about how the money could and could not be spent.

As state officials and BadgerNet 2.0’s planners poured over the documents, they began reaching for the Tylenol.  AT&T’s ownership interests in the existing network turned out to be a major problem.

The ‘AT&T Problem’

“We, as a state, do not own our network. We purchase a managed service through the BadgerNet contract,” Diane Kohn, acting administrator for the Division of Enterprise Technology in the Department of Administration told the Milwaukee Journal Sentinel.

Most grant recipients either plan to build a new network from the ground up or build on an existing non-profit network.  Neither is the case in Wisconsin because of AT&T’s involvement.

“From a federal perspective, it was like we were some kind of unknown start-up firm with all of these risks attached to it,” said Robert Bocher, an information technology consultant for the Department of Public Instruction. “In fact, our network has been around since the mid-1990s.”

But it got even more difficult when BadgerNet discovered the federal government requires new fiber networks built with stimulus funds to be utilized for at least 20 years.  This important control measure protects taxpayers from fronting the costs to build state of the art fiber networks, only to be later sold off to private interests or discarded as a budget cutting move.

Wisconsin’s agreement with AT&T runs for five years, not 20.  Additionally, since AT&T largely administers the infrastructure, much of the $23 million could have ended up going straight to AT&T to cover construction costs.  BadgerNet lacks sufficient funding to completely sever ties with AT&T and build its own network, and Gov. Walker isn’t about the deliver the money required to start a new network from scratch.

BadgerNet learned a lesson most grant recipients discover after winning the money — spending it comes with plenty of wires attached, and none of them transport data.

The Davis-Bacon Act

A Depression-era law is also being blamed for supposedly creating major hurdles for broadband network construction.  The 1931 Davis-Bacon Act was enacted to require public works projects be built at local prevailing wages.  The Act became law after contractors began importing cheap labor (typically underpaid African-Americans from southern states) to work competitively bid public construction projects during the Roosevelt Administration.

Mikonowicz

Republicans currently suspect the Act of being little more than a union protection law, raising labor costs artificially and helping to bust budgets.  Wisconsin Republican senator Ron Johnson used complications in a Sauk County broadband project to bash the Act, accusing it of being responsible for wasting taxpayer dollars.

David Mikonowicz, the utility superintendent for Reedsburg, complained the Act would require him to pay more than double his anticipated labor costs for a fiber project in the community.  Mikonowicz claimed the Act didn’t provide a prevailing wage for fiber contractors, so he was forced to bid out the project at wages suitable for high voltage wiring projects — $40 an hour.

That false premise made it to the pages of the Journal Sentinel in an earlier piece — a bit of political theater to bash unions, the federal government, and play up local communities as the innocent victims of both.

Stop the Cap! had no problems finding a prevailing Davis-Bacon Act wage covering Sauk County fiber installers, so we are unsure why Mikonowicz could not:

Teledata System Installer/Technician $11.70-21.26/hr

Low voltage construction, installation, maintenance and removal of teledata facilities (voice, data, and video) including outside plant, telephone and data inside wire, interconnect, terminal equipment, central offices, PABX, fiber optic cable and equipment, micro waves, V-SAT, bypass, CATV, WAN (wide area networks), LAN (local area networks), and ISDN (integrated systems digital network)

The Loyal Opposition & Everyone Else

The loss of nearly two dozen million dollars in federal government money was catnip for the loyal opposition.

Rep. Pocan

State Rep. Mark Pocan (D-Madison) said Walker’s broadband money giveback was hurting the state.

“Not only is he turning away construction jobs that would have come with the federal grant to expand broadband fiber to schools and libraries across Wisconsin, but he’s closing off potential to business growth that comes with bridging the digital divide,” Pocan said. “What’s worse, the root of his decision wasn’t what was in the best interest of Wisconsin, rather the best interest of his big telecommunications campaign donors.”

Gov. Walker used the occasion to blame the federal government for unnecessary bureaucracy. Mike Huebsch, appointed by the governor to serve as secretary of the state Department of Administration, issued a memo warning if they didn’t return the money, state taxpayers could be on the hook for the entire amount if the federal government found the state didn’t comply with grant requirements.

Ordinary Wisconsin residents would never see improved broadband in their homes from the middle mile project, so much of their reaction comes from a reflexive dislike of the governor, taxes and spending, AT&T, or a combination of all three.

AT&T has kept quiet through the entire affair, only stating it wasn’t interested in becoming a formal grant recipient stuck with the federal government’s rules.

Republicans and “tea party” members are thrilled Wisconsin is a leader in throwing federal money for broadband, railways, and other public works projects back to Washington, in hopes it will set an example for the federal government to follow.

What Happens Next

The state says it is negotiating an extension of the existing AT&T contract for another five years, and points to advances in copper wire-delivered bandwidth and the fact AT&T already provides fiber connectivity for certain parts of BadgerNet.

While AT&T has been labeled the ultimate culprit for the broadband stimulus debacle, it’s not as guilty as some might think for these reasons:

1. The initial failure of the state to own and operate its own network, instead of leasing access from AT&T;
2. AT&T gets the money whether Wisconsin leases another five years of service from AT&T, or stimulus funding gets diverted to AT&T to bolster BadgerNet’s existing network;
3. AT&T is sitting pretty whether it has a five year lease or a 20-year stimulus-mandated contract.  In fact, AT&T could set its rates at today’s relatively high prices for network connectivity that Wisconsin would still be paying two decades from now.

That doesn’t mean AT&T is a good actor in Wisconsin.  While the company has steered clear of this debate, its lobbyists continue to fight off any potential competition from community-owned networks that threaten to deliver service to residential and business customers.  Few Big Telecom providers complain about institutional networks like BadgerNet, because heavy lobbying on their part several years ago won state laws that forever prohibit ordinary consumers from ever buying service from them.