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MINNESOTA TELEPHONE ASSOCIATION Telecommunications Guide February 27, 2002
A Broadband Update Consider the following four items: 1.) Most Americans have or will soon have access to broadband through their local phone or cable TV companies (or both), but are not standing in line to buy what can ultimately be an interactive, simultaneous high-speed Internet/voice/data/video service. 2.) A NECA (National Exchange Carrier Association*) “Middle Mile” report finds that rural telcos will lose money on broadband over digital subscriber lines (DSL) and actually lose more as the number of people adopting the technology increases. 3.) A new Silicon Valley advocacy group that represents high-tech companies like Microsoft, Intel, Palm and Cisco has called on the Bush administration to make broadband a national priority, with regulations changed at all levels of government, to spur deployment of the high-speed Internet technology. 4.) The Minnesota Telephone Association has called for a rural “summit” on the Internet and also laid out its thoughts on the Ventura administration’s plan, called the Minnesota Rural Internet Initiative, that wants to make affordable high-speed Internet access available throughout the state within three years. Taken together, what do they all mean? If nothing else, they illustrate the interest level in broadband technology and the different approaches that exist to encourage broadband deployment. An Ambitious Goal TechNet, the Silicon Valley association, supports a commitment to broadband because the U.S. is one of only two G7 countries without a national broadband policy. The group also understands broadband’s potential economic benefits. A Brookings Institution report estimates that widespread adoption of high-speed Internet could generate $500 billion in savings and economic growth. TechNet wants the government to set a goal of 100 million homes and businesses with 100 Mbps high-speed Internet access by 2010. This is ambitious, given the fact that a maximum of only 9 million customers now subscribe to high-speed Internet, and at much slower speeds (400 Kbps and lower). To reach the goal, the group supports tax credits to recover the costs of rolling out broadband to rural and low-income areas, transferring military spectrum to the private sector, streamlining the government approval process and exempting Bell company broadband investments from federal regulation. None of these is expected to become federal law this year. Richard Roscitt, CEO at ADC, agreed with the basic thrust of TechNet’s recommendations in a recent speech locally, though he also emphasized the need to develop content – numerous medical, educational, professional and other applications – that can fully utilize broadband’s capacity. Lack of Content, High Rural Costs For the moment, there’s the broadband “rub.” Many American households could sign up for high-speed Internet access – approximately 47 to 51 million households have access to DSL from telephone companies and somewhere between 70 and 81 million can get broadband through cable TV operators. Less than 10 percent subscribe, however. Why? They lack a compelling reason to pay around $50 per month for the service. Most people are satisfied that their 56 Kbps connection is fine for what they do – e-mail and a little web surfing. Without Napster or other “killer apps,” they’ll stick with slow speeds and lower prices – for now. One forecaster still predicts 31 million households will have broadband by 2005, when 70 to 80 percent of households will have access. Although a recent report by the U.S. Department of Commerce found that the percentage of Internet users in rural areas (53%) is now almost even with the national average (54%), most rural Internet customers are not yet interested in the faster technology. But that will probably change when content is developed that fills the current void. That’s why NECA’s report is so disturbing. It found that the total cost of the average rural high-speed circuit – $63.50 – was well above the $50 maximum rate generally charged consumers. Hence, as the number of subscribers increases, so does the company’s losses. The Minnesota Landscape Low demand for high-speed Internet and the kind of unsustainable outcome described by NECA are two reasons that MTA’s Rural Internet Work Group sent its letter to David Fisher, Commissioner of the Department of Administration. The letter, which disputes the administration’s premise that everyone wants, needs or will pay for broadband, also says that the risks and responsibilities for the type of network envisioned by the state should not be borne exclusively by – or forced upon – incumbent and competitive carriers, especially when others also provide high-speed telecom services. The letter, which notes the importance that education and training will play in increasing the demand for and use of high-speed Internet, also calls for a rural Internet summit. Such a meeting would find out what rural communities want from the Internet, what they will do with it, what benefits it will bring and what kind of commitments they will make toward bringing high-speed services to their areas. *NECA was formed in 1983 by the Federal Communications Commission (FCC) as a not-for-profit membership corporation to administer the FCC’s access charge plan that helps ensure that telephone service remains available and affordable in all parts of the country.
MTA Member Profile: Lakedale Communications In 1946, when Lakedale Telephone was incorporated, switchboard operators had to wear gloves during thunderstorms to avoid shocks when they connected the circuits of that era. Today, Lakedale Communications offers its customers the latest in custom-calling and CLASS features through five state-of-the-art digital central offices and 100 miles of fiber optic cable. “Many think the digital divide is in rural areas,” said Gene South, CEO and general manager, “but it’s in the metro area. Rural independent telcos are deploying high-tech capacity faster than in metro areas.” Based in Annandale, Lakedale provides local service to that community and five others (Maple Lake, Montrose, Waverly, South Haven and Painesville). The company also has competitive local exchange carriers (CLECs) in Willmar and the west metro suburbs. Lakedale’s services also include long distance, wireless, cable TV, Internet and security In addition to sponsoring things like high school graduation parties and helping groups like the Boy Scouts, Lakedale’s community service efforts include the donation of a computer and Internet access to a senior care center. Each resident can access e-mail just by touching a personal icon on the monitor’s screen. Lakedale employees are dedicated in many ways. The Minnesota Telephone Association honored all Lakedale employees with its 2001 Leadership Award when they provided in-home care for six weeks (at company expense) for a terminally ill fellow employee who wanted to spend her last days at home. “Our philosophy is to provide quality service first, service that’s second to none,” said South. “Our biggest asset is our employees because they take care of our customers.”
More information about the Minnesota Telephone Association can be found online at www.mnta.org.
(c) 2002 Minnesota Telephone Association
Published by the Minnesota Telephone
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