How Google Fiber in San Antonio May Deter Internet as a Public Utility

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With all the hoopla around the possibility of Google Fiber – a super fast fiber-optic internet and television service – coming to San Antonio, there has been very little talk about a crucial aspect of this for San Antonio’s or any municipality.

Namely: is Google Fiber going to make it harder for telecommunications and Internet to become a public utility by entrenching Google’s ownership; easier to become a public utility; or is Google Fiber a neutral influence on telecommunications/Internet becoming a public utility? This also begs the question: Is it even a good idea for telecommunications and the Internet to be a public utility?

To be clear, by “public utility,” I mean a system – the telecommunications system in this case – owned by a government, such as a city, county or state, or even by the federal government. At the federal level, for example, there could be a “Department of Telecommunications” created – just as there is a Department of Agriculture, Education, Energy, and so forth.

I searched the Internet (somewhat ironically) for an expert who could provide some insight to these questions, and came across an article written by Bill Schrier called, “Why Google Fiber will never come to Seattle.”

Bill Schrier

Bill Schrier, senior policy advisor to the CIO of the State of Washington.

Bill Schrier, it turns out, is the former chief technology officer (CIO) for the City of Seattle, retired in 2012, and is now senior policy advisor to the CIO of the State of Washington. Schrier received his master’s degree in public administration from Evans School of Public Affairs at the University of Washington in Seattle. His credentials seem to qualify him as an expert, so I wrote Schrier via e-mail, and here is what he has to say:

“Google fiber will definitely make it harder for fiber to become a municipal utility,” Schrier stated, directly answering my main question.   “With Google fiber already in the ground in a place like Kansas City or Austin, there is no reason for a city to build a separate fiber to the premise network. And while you may look on Google as a savior because it offers a higher quality service and brings competition to the marketplace, there is no guarantee that will always be the case.

“Google could raise prices, could charge Netflix and NBC fees to deliver their content in a quality fashion, and could become an unregulated monopoly for Internet service. Google is in this to make money – lots of money – not to do consumers and businesses any favors.”

Regarding my other questions – i.e., is it even a good idea for telecommunications and the Internet to be a public utility, and why? – Schrier provided valuable insights in favor of it becoming a publicly-owned utility. He also writes, however, that there is some benefit to having Google Fiber, at least in our present system, though our present system seems far from ideal.

To quote Schrier’s email at length:

“In my ideal world, governments would build municipal fiber utilities to reach every home and business. This has been done in some places such as Chattanooga and Lafayette, LA. The idea is that the government owns the fiber cables, just like government owns streets. Then any private company can offer services across those fiber cables; internet access, video service (IP-TV and/or cable television), telephone service, security services (alarming) and so forth. A consumer could, then, have multiple competing internet service providers to choose from, driving quality of service higher and costs lower. This is just like a delivery service. You can choose FedEx, UPS, the Postal Service to deliver stuff to your house on the public street.

“Of course the problem with that model is that existing telecommunications and cable companies already have wires to homes and already offer most of those services. I don’t like this for two reasons: first, there is little competition – usually you only have two companies to choose from for Internet service. There is little incentive to offer faster internet service or to lower the price. Second, the company owning the wires also can own the content – that’s why you are forced to take a package of 100 cable channels when you only really want or need a few.

Map of current and potential Google Fiber cities.

Map of current and potential Google Fiber cities.

“Plus, the cable company can discriminate in favor of its own content. In the case of Comcast, which owns NBC, all NBC-related content could flow into your house faster, while any competing content would be slower (jerkier when seen on a TV) unless the other content paid Comcast a fee for quality delivery. This is exactly what Netflix agreed to do with Comcast. And, as you probably know, cable companies have the worst customer service as measured on almost every customer survey…

“Still, having three companies (Google, the local telecom and the local cable company) compete for service is definitely better than just two. So, overall, Google fiber is a positive factor for cities, consumers and businesses.”

Bill Schrier’s description of municipally-owned fiber infrastructure agrees with technology expert and author Susan P. Crawford‘s important book, “Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age.”

In interviews, Crawford describes the benefits of a publicly-owned telecommunications industry, using Seoul, South Korea as an example of a city which is able to provide the Internet for $30 a month, specifically because it’s fiber cable ring is municipally-owned.

Here she talks about how broadband as a publicly-owned utility works, which is similar to Mr. Schrier’s description.

Schrier has described cities that have no publicly-owned fiber systems in place, but San Antonio already has a municipally-owned fiber ring built into its infrastructure, ready-to-go. However, the San Antonio Area Broadband Network installed by CPS Energy cannot be used – at least not for San Antonio’s residents – because current Texas laws pushed for by private telecommunications lobbies and enacted by Texas’ conservative state legislature forbids municipalities from providing telecommunications to the public.

If the fiber-optic network was municipally-owned, including the fiber to residents’ homes, more revenue would be raised for the city of San Antonio. This is because the competing private telecommunications companies would pay regular set fees to CPS Energy to use the fiber.

So, I ask, are the people’s of San Antonio and the city government’s hands tied to do anything about it? What is needed to overturn the state’s restrictions? San Antonio residents just added sexual orientation/identity to its non-discrimination ordinance. Perhaps the people’s access to its city’s own assets is next.

Related Stories:

San Antonio’s High Speed Network Still Untapped

San Antonio Has Google Fiber Potential

Local Startup: Pipeline for Tech-Savvy Foreign Workers

11 thoughts on “How Google Fiber in San Antonio May Deter Internet as a Public Utility

  1. This is a great piece about all things internet!

    Content providers or cable and broadcast networks have a reliable business model in place. While Netflix has shown creators can receive large contracts, iTunes and Amazon are not. Content companies want money upfront, not after a show is completed in $2 downloads. Many sports contracts are licensed for the next 10 years. Europe has great internet but they also have public media like the BBC, and import American content.

    San Antonio could be a rebel, but why? If Google paid $1 for a $39 million network why would they pay a licensing fee? The idea that we could could do it would be incredible. Imagine pension broke cities coming to San Antonio just to ask for broadband consulting. A network of large municipalities negotiating content terms to scale could accelerate innovation as a public interest.

  2. When cities have tried to provide free WiFi access in their downtown areas, the Tel-Coms raised a big stink and promptly threatened the cities with law suits. It would be interesting to see what would happen if publicly utility companies tried to install or expand high speed fiber capabilities. My prediction would be more lawsuits from telcoms based on unfair competition, even though traditional telcoms have for nearly a decade ignored the need for providing access to such a service.

  3. Related — article: “How to Build a High-Speed Broadband Network in Seattle” by Susan Crawford, author of Captive Audience, 4/5/14 — http://seattletimes.com/html/opinion/2023304248_susancrawfordopedcitybroadband06xml.html

    Crawford writes…

    “We now know from former Seattle CTO Bill Schrier… that the city’s ordinance calling for one-off property-owner approvals of fiber cabinets and its pole-rental requirements made it uneconomic for Google Fiber to show up.

    It’s just as well that Google isn’t coming. The Seattle City Council and the mayor now have the freedom to lead the rest of the country in building a world-class wholesale fiber network so as to ensure retail competition to every home and business…

    In the end, the city would have fiber access to every business and home provided by a fiercely competitive private market — just as Stockholm and Seoul have had for years.

    This will take time and careful planning; it’s the root canal of policy. But Seattle — a city that prides itself on being a center for technology development, and cares about the economic and social well-being of all its residents — must do better.”

    San Antonio, of course, already has municipally-owned fiber, making our situation different than Seattle’s. Existing state law does not allow municipally-owned fiber to be used for the public in Texas.

  4. I’m not sure what the advantage of having a government-run broadband utility would be. Generally, state-run utilities are less efficient than their privately run counterparts, if — and I emphasize “IF” — there is competition in the private sector. In this case, there is no need to insert a government-run entity because there is healthy competition.

    To wit, in the case of San Antonio, we already have AT&T, Time Warner Cable, and — in some neighborhoods — Grande Communications. Google Fiber would be a fourth and formidable competitor. The free market is actually working in this case!

    The ONLY reason government should get involved in something that is generally offered by private-sector companies is when pricing is controlled by a monopoly, and prices are not in line with what they would be in a competitive market.

    Since you are a student of public policy, I encourage you to take some business and economics classes to counterbalance your points of view. I did exactly that when I attended university, and I am thankful for the broad worldview it helped me to develop.

    • While I do agree government does a terrible job giving out drivers licenses, voter id cards, and answering phones, CPS is actually an interesting experiment. We enjoy some of the lowest rates, and some of the fewest outages. Deregulated energy in Texas actually increased prices everywhere except here in SA and Austin both city owned utilities.

      It seems that government in this case didn’t screw anything up. I have another account in Poteet and when my father passed away it took 3 days to get the power turned on, I paid an expedite fee, and I couldn’t call someone in Texas.

      You mention competition and broadband providers have no reason to compete because margins are thinning, thanks to the cost of content & retransmission fees.

      We wouldn’t have to pay the CEO $17 million if it’s a public company, and we can guarantee access throughout the city instead of portions. We can also carve out better negotiations with Hollywood because they would be asking the public to buy their shows. Wouldn’t you rather the cast of Walking Dead come to town to promote a sweet city contract for their boss, instead of some sweet 16 party for a Comcast executive’s child?

    • Of note, I have taken some public policy and economics classes, but am by no means an expert. That’s why I consulted an expert on the subject. I appreciate your input, though. I would disagree, however, that the free market is working in this case (where’s the evidence that the free market in this case is providing a good service, with high freedom of choice, at the best bang for the buck, etc?).
      With municipally-owned broadband, there’s still competition amongst private cable retail companies, but their using the publicly-owned fiber makes for all of the benefits Mr Schrier describes in the article; and it fixes many of the pitfalls we’re currently seeing, which he also describes. This set-up is one of the best examples of the private sector working with the public sector I’ve heard, which truly benefits the public.
      Use of fully-municipally-owned fiber by the competing private retail cable companies would also raise badly needed revenue for the city; at the same time making the Internet and telecommunications more affordable. This is a necessity, since so many are averse to raising taxes or even implementing a progressive state income tax in Texas; and because there is a huge disparity amongst residents in San Antonio when it comes to broadband (see map — http://www.theatlanticcities.com/technology/2014/02/most-revealing-broadband-adoption-maps-weve-ever-seen/8517/ ).

      I think Allen Buck makes good a point when he writes, “We enjoy some of the lowest rates, and some of the fewest outages. Deregulated energy in Texas actually increased prices everywhere except here in SA and Austin both city owned utilities…. We wouldn’t have to pay the CEO $17 million if it’s a public company, and we can guarantee access throughout the city instead of portions.”

    • @ Page

      Actually, the free market does not work in terms of cable TV and broadband access. Due to legal, municipal monopolies, the company that lays the cable/fiber/etc. does not have to allow a competitor access to those lines. Therefore, you do not have the choice of Time Warner or Grande. You are stuck with whichever provider wired your neighborhood.

      In my section of King William, I have Time Warner (Ultimate/50 Mbps service). My only other internet option is AT&T DSL which tops out around 8 Mbps – not much of a broadband option. If Time Warner implements a policy I don’t like (say, bandwidth caps or poor Netflix service since I’m a “cord-cutter”), I have no competitor at the speed I need in my neighborhood.

      Broadband Internet, like telephone service and unlike TV, should be considered as a common carrier and thus regulated (i.e. net-neutrality laws) and allow for more open competition or it should be treated as a public utility like power or water.

  5. I believe you are wrong about the free market. The free market is constantly under attack from all sides by numerous foes.

    The biggest problem in this case is the telecommunications industry. AT&T and others are granted eminent domain to scoop up rights of way for their cooper and fiber connections leaving out any other competition. There is a level of coercion based on the use of eminent domain to secure those rights to property that would not have existed because of government intervention.

    How can the free market work?

    People should be able to pick and choose who provides their services however intervention by way of regulation and laws such as eminent domain are keeping the power in the hands of a few. The state is not helping.

    An example of a the free market working is the choice of a large group of people to boycott a particular service towards a particular end. This has happened with the Firefox controversy. People from both sides of the spectrum have voiced their concerns and have chosen to either support or defend the company behind the browser.

    To be clear, there is no choice with a publicly owned utility. I have no say on what CPS does. I cannot boycott CPS and choose another provider of electricity.

    It would be the same with an Internet provider.

    I had the idea where a non-profit owns all the lines. Any one company would have the ability to work with the non-profit and start Virtual Internet Service Providers. This way, no one company has control over the infrastructure. The problem with Google Fiber is that we’re helping them create a monopoly in that area. Taxes and Fees paid to create that infrastructure will be used to create that monopoly. Now that’s horrendous.

    https://www.princeton.edu/~achaney/tmve/wiki100k/docs/Free_market.html

  6. Google Fiber in SA is a “threat” to SA municipal networking? LOL

    The Republican TX govt’s LAW is FATAL to any TX city’s municipal networks as “taxpayer-owned, operated socialism”.

    Yet another report about how Americans are getting their wealth sucked down by BigCorps, protected and enabled by “business friendly” (aka, “consumer unfriendly”) Republicans:

    http://www.nytimes.com/2014/10/31/upshot/why-the-us-has-fallen-behind-in-internet-speed-and-affordability.html?_r=0&abt=0002&abg=0

    Essentially the same holds true for the cell phone business.

  7. @Len Conrad,

    Hi, I’m not sure of the point you’re making (i.e., are you saying Google owning the cable fiber is not a hindrance to having municipally-owned cable fiber for its residents, but rather, it’s “Republican TX govt’s LAW [that are] FATAL to any TX city’s municipal networks”?). I think both are true. That is, I think Google (or any privately-owned broadband infrastructure) and the current Texas laws are hindrances to municipally-owned fiber for SA’s residents, by definition.

    The article makes both points, the bulk of the article being about Google Fiber, and then towards the end where it talks about Texas law and the conservative leg., when it says, “…because current Texas laws pushed for by private telecommunications lobbies and enacted by Texas’ conservative state legislature forbids municipalities from providing telecommunications to the public.”

    I think that law should to be overturned.

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