Much less than a “thing” or a “place,” a Smart City is the concept of integrating technology into the public realm and built environment. The deployment of sensors or other data-generating tools, and the collection, monitoring, and processing of that data, will increasingly impact cities across multiple domains, from transportation, housing, and water to health and education. This blog series explores recent policy developments in the march towards smarter cities, with a special focus on transportation and information and communication technology (ICT).
Across the U.S., there are over 130,000 miles of bundled fiber optic cable, yet a good portion of these strands are “dark,” or unused. There are a few reasons for this. First, the cost of subterranean installation is high, therefore excess strands were added to hedge against future demand. Second, following the dot-com bubble, many early fiber providers went bankrupt, leaving behind dormant fiber. Third, dark fiber is often installed purposely in anticipation of future technologies and uses, such as smart cities developed around the internet of things.
Dark fiber is a contentious issue, as the public and private sectors struggle to find a balanced policy approach to building it and lighting it up. Both sectors face considerable regulatory constraints, yet counterintuitively, the public sector is also imposing constraints upon itself. Municipal governments are often the target of state-level legislation that limits municipal build-out of fiber. Given the potential of internet access to positively impact education, health, and economic growth, it is in the public interest to undo these restrictions and to expand existing fiber capacity in an inclusive and equitable way.
Dark fiber’s origins
The development of the laser beam enabled fiber optic networks to become a reality. Lasers, conveying pulses of light at different wavelengths along glass fibers, made fiber optic networks the gold standard in communication transmissions. One of the first experimental fiber optic cable systems was installed by AT&T in Atlanta in 1976. The following year AT&T installed a fiber optic cable system for commercial communications in Chicago. Additional commercial lines quickly followed, dramatically cutting the costs of telecommunication. At the same time, fiber optics were laid to create the “backbone of the internet” across the ocean floor and underneath countries and continents, ultimately connecting the world faster than ever before.
To connect residential and commercial buildings to the internet, fiber owners sell access to internet service providers (ISPs). ISPs then connect customers through slower but less expensive phone, cable, DSL, and wireless hookups, addressing the so-called “last mile problem.” Due to the high costs associated with connecting residences, lower-than-expected demand, and recessionary market conditions in the 2000s, much of the U.S. remains underserved by fiber — only 25 percent of consumershave direct access to a fiber optic network.
The projected data demands of the smart city have placed a spotlight on the lack of direct access to fiber networks in the U.S. Without a fiber network, the realization of a 5G next-generation mobile broadband network is near to impossible. In addition, internet connectivity is frequently being considered “critical infrastructure”by city governments. As a result, municipalities have grown hungry for access to more fiber — and dark fiber has become the object of intense policy debate.
The impact of anti-municipal broadband legislation on dark fiber
To preserve the incumbent power long enjoyed by the private sector, lobbying efforts continue to promote anti-municipal-broadband policy. According to broadbandnow.com, in 2018 there were 20 states with laws restricting municipal broadband, rising to 26 states in 2019. The failure of proposed federal legislationintended to dissolve and prevent anti-municipal-broadband policies has reinforced these lobbying efforts. Private networks in urban areas often deliver fast, reliable connections, but rural, low-density suburban, and low-income urban areas are often underserved. Limiting municipal involvement in fiber networks has thus reduced equitable access to high-speed internet.
Restrictions placed on municipalities limit existing dark fiber utilization and development of new networks. These restrictions include bureaucratic complexities, referendum requirements, population caps for public networks, the use of public monies to only fund private or public-private deals, and other forms of private sector preference. In some states, for example, if a private sector company enters the market, the public network must cease operations and sell itself to the private provider. One might think this would be beneficial, leading to better service and higher speeds. Yet in some cases, such as that of Pinetops, North Carolina, the level of service and speed decreased with the introduction of a privately controlled network.
That said, the anti-municipal legislation, while restrictive, is not the death knell for municipalities seeking to leverage existing dark fiber or build new to enable local fiber networks. Many communities have built local government fiber networks. There are now 500 municipal networks and 300 cooperativesacross the country and the number continues to grow. A few methods have proven effective for delivering service to underserved communities and preparing for the smart city despite the restrictions.
1) Regional cooperation utilizing economies of scale
Three sections of the Virginia code (VA Code § 56-265.4:4; VA Code § 56-484.7:1; VA Code § 15.2-2108.6) place bureaucratic barriers on the deployment of municipal networks. Nonetheless, five cities in Virginia have banded together to create a 100-mile open-access dark fiber connectivity ringaround Hampton Roads. These cities are purposely putting in excess capacity to accommodate future smart city demand. Funding and financing for the project has been obtained from a variety of sources, including grants, awards, and private equity and debt. Leveraging public-private partnerships and regional collaboration, a commission has engaged with academic institutions, technology companies, and state organizations to create a master plan and coordinate the network. The dark fiber network is intended to be able to connect the entire region through command centers that will coordinate the management of the data.
2) Cooperatives
Cooperativesare popular options for rural areas restricted by municipal broadband laws. The need for one such network in Cook County, Minnesotaresulted in the formation of a co-op between Arrowhead Electric Company (AEC) and True North Broadband. The county supported the project through grants, along with federal grants and loans. As a result, by linking into existing dark fiber and expanding the network, the co-op has connected around 5,500 households and businesses that previously relied on satellite or cellular data for connectivity. In addition to creating the co-op, AEC recognized that as a primarily electric company, it has broadband technical deficiencies and partnered with the Consolidated Telecommunications Company to handle service calls AEC cannot handle itself. Unfortunately, the biggest protection these communities have against the regulations are that they are simply too small for large telecoms to invest in. It would seem these would be the communities most vulnerable to cost overruns and mismanagement, and yet they are leveraging local assets and knowledge to effectively building out rural networks.
3) Buyback of private networks for government-only use
Some states, such as Pennsylvania, flatly bar municipalities from selling fiber optic service to consumers. This means a local municipality can build its own network for government use only. Philadelphia attempted to build a public broadband network in the early 2000swith the intent of providing public Wi-Fi. Though it sought private partners to build the network, the city faced considerable pushback from incumbent companies. The telecom companies, rather than place a bid, elected to campaign against the project. This has led to a legacy of private incumbent companies pushing for greater restrictions on public service. Philadelphia ultimately did build its own network, but had to sell it to the private sector once restrictive legislation was passed in 2005. Recently, the city was able to buy the network back from the private sector and it is now using previously dark fiber to connect government services.
Lighting up dark fiber without restrictive legislation: The case of Maryland
Maryland is a state without restrictive legislation and offers a model for states not burdened under excessive regulation. Maryland has developed a 1,294-mile broadband networkby connecting three existing networks: networkMaryland, Inter-County Broadband Network (ICBN), and Maryland Broadband Cooperative (MDBC). The network first connects government and anchor institutions to offer service to underserved and unserved areas alongside privately delivered networks. The connection of the three networks evolved out of a $115 million federal stimulus award to construct new fiber and connect existing lines across the state. Much of the network is now complete, but at first it remained largely in the dark as anticipated private demand was slow to materialize. As the market begins to heat up, a few different deal structures involving the private sector are becoming clear.
First,lease dealsare emerging. The Baltimore County Optical Networkconnects many of the county’s schools and public services. The network is also connected to Harford, Carroll, and Howard counties and Baltimore City. The city of Westminster, Maryland entered into a dealwith Ting. Ting leases the city’s fiber in order to offer internet service to the community. The network is actively engaged in pursuing additional lease deals with the private sector to deliver broadband access to unserved areas.
Second, fiber connections are being sold to private developers. In Baltimore City, Caves Valley Partners, a real estate firm, paid to extend the public fiber network to a new development. Boasting the city’s fastest network connection, the development is quickly attracting tech companies as tenants. Indeed, high-speed internet has become a business necessity. If private telecom remains complacent in certain markets, private companies like Caves Valley will seek out further business with public networks to deliver the service they need at a reasonable price.
Third, the public sector is offering traditional design-bid-build contracts for network expansion. Anne Arundel County entered into such a contract with Broadstripeto service rural and low-density areas using the public network as a backbone. To fulfill the contract, Broadstripe is responsible for delivering and installing the necessary equipment to build out the fiber network. The contract opportunity was passed over by larger companies.
And fourth, public-private partnerships are enabling fiber roll-out to under- and unserved communities. Leveraging the ICBN, Howard County has partnered with Freedom Broadbandto deliver high-speed internet with no data caps to 15,000 residences and businesses. The public-private partnership allows Freedom Broadband to loop into the publicly owned fiber network to then continue to connect local residences and commercial buildings on a private network.
In Maryland, public investment in network infrastructure is complimenting the private sector’s objectives and facilitating economic development. High-speed internet that does not discriminate based on income, location, or density is welcomed by residents and business owners alike.
To light it up let’s be smart about policy
Dark fiber is a key component for creating a network able to support smart cities and the internet of things, but there are roadblocks to utilization. Even so, the public sector is finding innovative ways to expand fiber networks and light up the dark fiber strands lurking beneath streets and sidewalks.
Continued limitations on the ability of municipal governments to invest in innovative technology, especially an inclusive, ubiquitous fiber-enabled network, will pose problems for future smart cities. Regulation often stymies innovation. This is thought of as one-directional: regulations impose restrictions upon the private sector, limiting incentives and the pathway toward growth. In this case, the effect is in the other direction: regulations are preventing public sectoradoption and innovation.
While the private sector is leading the technical push toward smart cities, the broader public policy goals of improvements in standards of living and economic growth need to be considered. The argument made against public networks is that limiting public sector involvement will protect taxpayers from high costs of building and from mismanagement of the network. Proponents of these restrictions overlook the ability of the public sector to bring in external expertise, however. It is also argued that the public sector entering the market is unfair competition, as government is not profit-motivated. Even though a recent study analyzing municipal fibercash flows found only 2 out of 20 networks to be profitable, the study suggests municipal networks have the potential to indeed be profitable.
Failing to encourage the innovativeness of the public sector will be detrimental to the future of smart cities. For the purpose of unlocking dark fiber, all options should be on the table, including municipal broadband and networks delivered through public-private partnerships. How these networks will evolve over time is difficult to predict. Nonetheless, artificial restrictions on public sector involvement in fiber prevent new models from even being tested, keeping consumers quite literally in the dark.