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

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.

Obama’s Broadband Stimulus

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.

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.

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.

Invest or die.  That succinctly explains the current state of the landline telephone business and the companies providing service to a decreasing number of Americans.  Some companies, like AT&T and Verizon have heavily diversified their business into wireless, fiber, IPTV and broadband.  Others, like Frontier are hoping their presence in uncompetitive rural markets will keep them in business, as long as their dividends keep stockholders happy.

CenturyLink, which is in the process of absorbing the last remaining Baby Bell — Qwest, has decided to invest in their business to stay competitive with their biggest nemesis — the cable company.  CenturyLink is still hanging on to ADSL broadband service in many rural areas, but the company sees the promise of future relevance with bonded DSL, which is delivering 25/2Mbps broadband service to an increasing number of their customers.  Where distances allow, CenturyLink is at least temporarily providing the fastest residential broadband service available in areas like southwest Florida.  They are holding their own against local cable competitors like Comcast.

Now the company is following AT&T in introducing a new IPTV service to many of its customers.  Dubbed Prism, the U-verse like service delivers a true triple play package to customers who thought they would be stuck with their local cable company or satellite dish provider for TV programming.

Prism offers more than 200 channels, a multi-room DVR capable of recording up to four shows at the same time, and an interactive program guide that doesn’t need an instruction manual to navigate.

[flv width=”640″ height=”390″]http://www.phillipdampier.com/video/Introducing CenturyLink Prism.flv[/flv]

This promotional video introduces CenturyLink’s Prism service and its television features.  (4 minutes)

Prism has been introduced in larger CenturyLink areas ranging from southern Nevada, southwestern Florida, and North Carolina, where EMBARQ used to provide telephone service.

The service works through a hybrid fiber-copper wire IPTV network.  Fiber optic cable reduces the distance data needs to travel over ordinary copper phone wires.  The less copper, the faster the potential speed.  With a 25-30Mbps broadband platform, Prism can divide up available bandwidth to support television, phone, and up to 10Mbps broadband service.  It’s all delivered over the same digital network.  While not as advanced as Verizon FiOS and other fiber to the home networks, IPTV services like Prism and U-verse are cheaper to provide, and that can mean faster deployment in areas not well served by competition.

Reaction to Prism has been generally positive among Stop the Cap! readers who have shared their stories with us.  Among the positives:

• The interactive program guide is light years ahead of Comcast, Cox, and Time Warner Cable;
• Broadband speeds are generally better than the original DSL service CenturyLink used to provide;
• The picture quality is excellent where the telephone network has been upgraded the most;
• Competitive introductory and retention offers mean consumers can pay less for service, at least initially.

But there are some problems, too:

• Bandwidth varies depending on how far away you are from the nearest fiber node.  This affects what you can do with the service.  If you are further out, you can only watch one HD television channel at a time, and may not be able to record more than one HD channel at the same time;
• The DVR box has issues — readers report shows disappear, don’t get recorded, or show poor results when line quality drops;
• Broadband speeds with Prism officially max out at 10Mbps;
• If you are watching a number of televisions at the same time, your broadband speeds could drop;
• Variability in service quality comes largely as a result of inferior copper wire phone networks CenturyLink chose to stick with.  If your phone line is prone to static or hum, or deliver poor results when the weather is bad, Prism might not work well for you.

Some subscribers found they initially loved the service, but when bad weather arrived, it all fell apart.

“Our phone lines are decades old, so this comes as no surprise,” says Manny who writes from Naples, Fla.  “I was also disappointed some of the channels in HD I had with Comcast are not available from Prism.”

In parts of Raleigh, N.C., Prism just launched a few weeks ago.  But some of our readers are sticking with Time Warner Cable.

“After looking over their pricing and packages, Time Warner has more HD channels and doesn’t charge $12 a month extra for them,” writes Ralph.  “CenturyLink also only bundles 3Mbps broadband service with most of their packages, and you have to pay extra for 10Mbps service.”

Ralph thinks Road Runner from the cable company will provide a more consistent broadband experience for his family.

“There is only so much you can push through a phone line at the same time; I like the fact they are competing, but they will not be able to keep up if they rely on copper phone wiring forever,” Ralph says.

Despite some of the negatives, CenturyLink may deliver formidable competition where cable companies haven’t kept up.  Some other markets where Prism will offer service: Jefferson City, and Columbia, Mo., and La Crosse, Wis.  Cox Cable in southern Nevada is now competing with Prism, and believes it has the superior network.

“The way our system is constructed, we have services equally distributed everywhere in the valley,” Juergen Barbusca, Cox manager of communications, public and government affairs in Las Vegas said. “Everybody in our footprint can get our highest advertised speeds.”

Cable broadband is less susceptible to distance degradation that can make Prism a no-go in neighborhoods at the far end of a phone company’s central office.

Also equally distributed is the price.  Outside of new customer promotions, nobody will save any money here.  Cox and CenturyLink are both selling their respective triple-play packages of TV, Internet, and phone for exactly the same price: $143 a month.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/KTNV Las Vegas CenturyLink Prism 2-8-11 WFTX Cape Coral CenturyLink in SW Florida 12-7-10.flv[/flv]

KTNV-TV in Las Vegas introduces viewers to CenturyLink’s Prism service and WFTX-TV in Cape Coral, Florida talks with CenturyLink about their new 25Mbps broadband service in two exceptionally company-friendly pieces from the stations’ respective news shows.  (13 minutes)

While big cable and phone companies tell you that you don’t need fiber optic broadband speeds, EPB, a publicly-owned utility in Chattanooga, Tenn., thinks otherwise.

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/EPB Network Feature 2-15-11.flv[/flv]

While you plod along with 3-10Mbps, learn more about Chattanooga’s 1Gbps broadband network delivering truly lightning-fast speeds today — right now — at an affordable price.  What has your broadband provider done for you lately?  (6 minutes)

(Thanks, as always, to Community Broadband Networks for another great video find.)

I spent the better part of today finding, assembling, and finally uploading the audio and video content covering Canada’s ongoing hearings about Internet Overcharging.  Locating and editing the content took about two hours, writing the piece to accompany it took another hour, and then everything  s   l   o   w   e   d  down from there.

Uploading several hundred megabytes of audio and video, included in today’s articles, was by far the most cumbersome part of the operation.  In all, it took nearly four hours to upload a handful of video and audio files, and that saturated our cable modem to the brink of un-usability.

While most providers concentrate upgrades on boosting download speeds, upload speeds have remained remarkably consistent — and painfully slow, for several years now.

Time Warner Cable, which provides our Internet connection, tops out at just 1Mbps for uploads locally, and it is slower during peak usage times.  Contrast that with 2Mbps in more competitive cities (with 5Mbps now common wherever DOCSIS 3 technology has been deployed).  Still, at least it is better than the 384kbps residents in upstate New York contended with for a decade earlier.

Cable modem technology is built on the premise that you will download far more than you will need to upload, and speeds are provided accordingly.  DSL service from some phone companies has managed to keep up with upload speeds… barely, if only because many cable providers have largely ignored the upstream component.

But as the Internet and social media become a more interactive part of our lives, we increasingly need to give as much as we get, and our Internet Service Providers continue to let us down in too many cases.

The one exception is fiber-to-the-home service, which can deliver synchronous (identical upload and download) speeds to their customers.  Community-owned fiber networks continue to be the kindest to their customers, thinking of speed equality as an advantage, not a marketing option that commands a high price.  Many of these networks are owned and operated by local governments — you know, the people we’re told never do anything right.

Yet in many instances they alone have the prescience to recognize broadband speeds have a direct impact on efficiency — at home and at work.  Many are building networks that leverage as many megabits per second they can get.  Why?  Because they can.  Such a response is scoffed at by many cable and phone companies, most of whom claim you don’t need that kind of speed.

For those of us without access to such state-of-the-art networks, we’ll have to continue setting our sights considerably lower.  Time Warner will finally bring 50/5Mbps service to Rochester early this year.  As far as they’re concerned, we should be glad to have it.  It will cost just shy of $100 per month on a standalone basis.  If we lived in Chattanooga, Tenn., home of EPB, the municipal broadband provider would sell us 50/50Mbps service for nearly $20 a month less — $79.99 per month.

How do you cushion the blow of a 46-percent rate increase for your fiber-optic television service that will cause consumers to flee?  Don’t tell them about it.

Regulators in the Pacific Northwest are beside themselves over news that their new local phone company, Frontier Communications, is going to raise rates $30 or more for its FiOS cable television service.  The company earlier promised no rate increases as a result of its purchase of landlines from Verizon.

But the only way customers in Oregon know about the impending rate hike is from The Oregonian newspaper; Frontier has yet to formally notify subscribers of the dramatic price hike.

The newspaper reports the higher rates were supposed to take effect at the beginning of the year for new customers, and Feb. 18 for current customers with expiring contracts.

But Frontier has not yet notified its customers of the rate increases.  Spokeswoman Stephanie Beasly told the paper the company was working on “specific messaging.”  Namely, how does Frontier tell customers their bills are going up $30 and still have them as customers after that.

Until the deck chairs can be re-arranged, the rate increase will not take effect.  But Beasly emphasized it eventually will.

Washington County regulators (in Oregon state) are questioning Frontier’s justification for the rate hikes, namely “increased programming costs,” noting their competitors are charging far less for the same type of service:

Bend Broadband, an Oregon system providing a similar level of programming and services as Frontier, is able to manage its costs and keep subscriber rates at or below the range of large cable operators and significantly below those that Frontier has announced.

Some regulators are wondering if they were deceived by the company’s earlier promises to deliver “competitive prices” in the region.  Metropolitan Area Communications Commission administrator Bruce Crest wrote the company suggesting they are not living up to their end of the deal:

However, Frontier’s recent decision to place a significant and unjustified rate increase on its customers, along with the incongruity of Frontier’s justification for that increase against the statements made in 2009 and 2010, makes us question whether Frontier has, or ever had, a good faith commitment to fulfill the terms of the franchise.

Frontier responded to the Commission’s inquiry by essentially telling them to bug off — they have no authority to question Frontier’s prices. Company vice-president Steven Crosby waved-off MACC’s concerns:

While Frontier recognizes that the MACC is interested in any Frontier FiOS video price increases and alternative offerings Frontier provides to its customers, Frontier respectfully notes that the MACC does not have authority to regulate the rates Frontier may charge for FiOS video service, nor does the MACC have authority to regulate Frontier’s commercial relationships with content providers. Accordingly, Frontier reserves the right to decline to respond to inquiries directed to topics that are beyond the MACC’s jurisdiction and may be competitively sensitive. Furthermore, Frontier objects to the MACC’s letter of January 20th to the extent that it contains characterizations and questions that misstate facts and conclusions or are otherwise misleading.

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MACC Letter to Frontier FiOS