Massachusetts Broadband Institute & Incentive Fund Legislation

Public Hearing- - - Connects Testimony - - - FAQ

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Public Hearing

On Thursday, February 14, an excellent public hearing was held at the Statehouse to hear testimony on the broadband bill, House No. 4311, An Act Establishing and Funding the Massachusetts Broadband Institute.  It was standing room only as Chairman Mark Montigny recognized the western Massachusetts delegation for its diligence in bringing to the attention of the committee the broadband challenges faced by their constituents and also acknowledged the work done by Berkshire Connect and Pioneer Valley Connect.  Testimony was presented by Governor Patrick; Rep. Kulik; Rep. Guyer; Sen. Downing; Rep. Pignatelli; Rep. Bosley; Housing and Economic Development Secretary Daniel O’Connell; Telecommunications and Cable Commissioner Sharon Gillett; Administration and Finance Undersecretary Jay Gonzalez; Berkshire Connect President Don Dubendorf; and Pioneer Valley Connect Co-Chair Linda Dunlavy.  A special thanks to those western Massachusetts citizens who took time to attend the hearing and give such compelling personal testimonies.

Connects Testimony

The following letter was submitted to Senator Mark C. Montigny and Representative David L. Flynn of the Committee on Bonding, Capital Expenditures & State Assets by Berkshire Connect President Don Dubendorf; and Pioneer Valley Connect Co-Chair Linda Dunlavy at the February 14, 2008 public hearing. 

Dear Chairman Montigny and Chairman Flynn:

Berkshire Connect Inc. and Pioneer Valley Connect (the Connects) appreciate your attention to House No. 4311, An Act Establishing and Funding the Massachusetts Broadband Institute, and thank you for the opportunity to submit testimony.  We request a favorable report by the Committee and strongly encourage the swift passage of this legislation. 

The Connects, along with many legislators and community groups, have worked to draw attention to the inequity of broadband access in Western Massachusetts and the Commonwealth.  There are 32 communities without any access to commercial broadband service and another 63 with limited access, predominantly located in Western Massachusetts.  In fact, nearly one-third of the municipalities in Western Massachusetts do not have any form of broadband access.  Through this public hearing process, you will hear from many residents and businesses about how the lack of broadband access hampers the ability of the Commonwealth and its citizens to participate and compete in today’s world.  The Connects are familiar with these stories and experiences, and have been inspired by them for nearly a decade to find a solution. 

It is the mission of the Connects to have broadband access available to all areas of and to all the unserved citizens and businesses of Western Massachusetts.   Through our experiences we have had some successes and have learned a considerable amount along the way.

In the late 1990s, Berkshire Connect Inc. began an effort to aggregate the business demand for telecommunications services to attract private sector investment in infrastructure in Berkshire County.  By 2000, Berkshire Connect Inc. was able to secure a Tier 1 telecommunications service provider to invest in building infrastructure and offer T1 services to all businesses at a competitive rate.  This effort became a national model for successfully addressing the T1 market.  However, it was not enough to spur additional infrastructure investment for sub-T1 services to the unserved citizens and small businesses of Berkshire County. 

Building upon the Berkshire Connect model, Pioneer Valley Connect also conducted a demand aggregation effort in 2004.  Pioneer Valley Connect received 42 responses from hospitals, colleges, banks, manufacturers, small businesses, town governments and home-based businesses.  Businesses were asked why they joined the aggregation - 40% responded that broadband service was not available at their location; 20% responded that the cost was too high; and 12% responded that they had concerns about redundancy and reliability.  Through this effort, over $9.9 million in annual telecommunications services were aggregated.  A competitive Request for Proposal (RFP) process was conducted and Pioneer Valley Connect partnered with a local, family-owned service provider for both T1 and DSL service.  This partnership led to the expansion of DSL services in two towns, but capital costs have prohibited the service provider from fully expanding into all unserved areas of Franklin, Hampden, and Hampshire Counties.

In this environment, the Connects have learned that for large providers, the region is not attractive enough; and for small providers, the capital risk is too great.  Over the years, the Connects have been approached by dozens of companies representing networks or technologies that claim they can provide service to all of Western Massachusetts and  yet each time, when tested, the claims cannot be substantiated.  The Connects have learned that there is no single, simple, inexpensive technology that can solve this problem.     

The Connects sought to understand what kind of network design and at what cost service would be delivered to all areas of Western Massachusetts.  Skilled, experienced, technical consultants were charged to conduct network and financial modeling.  Their charge was to develop sub-regional broadband networks for the unserved areas of Western Massachusetts that resulted in maximum coverage; to differentiate the costs for network backhaul, local backbone and local distribution; and to assess capital and operating costs.

The consultants considered three network designs.  They first analyzed a Fiber to the Home (FTTH) solution.  FTTH is an enduring asset with high capacity but an expensive solution, estimated at $3,000/home.  The consultants also assessed a completely wireless design.  This network design has far lower costs at approximately $1,100 per home and could be quickly deployed but has limited capacity and risks technology obsolescence.  The third design was a hybrid solution with a combination of technologies – fiber, licensed and unlicensed wireless.  This solution is relatively economical ($1,500/home), includes enduring assets (fiber), and is easily adaptable as wireless technology improves or FTTH becomes more affordable.  This network design was used for the financial modeling.  It was determined that private companies can recoup the expenses of operating a hybrid, wireless-fiber network and can earn enough to reinvest in their assets (assuming a competitive cost structure and a reasonable ‘take rate’ of customers).  However, it will be difficult for them to fully recoup the initial capital expense necessary to build the network.  Through this work, the Connects believe that a viable solution requires public sector investment and will result in a Commonwealth that is innovation-oriented with broadband available to all areas of Massachusetts.

The filing of the legislation has attracted the attention of telecommunications providers.  The pre-registration list for our upcoming Broadband Forum for Western Massachusetts on March 1, 2008, shows one-third of the participants registered are providers.  The Connects are contacted by large and small providers daily asking about the status of the legislation and the current thinking on implementation.  The Connects have a track record of successfully attracting both Tier One Providers and CLECs to the region through demand aggregation efforts.  We are confident that the provider community is ready to work with the state to reach this unserved market. 

From the demand side, the Connects continue to communicate with residents, businesses, town officials and other local partners.  The Connects are conducting a Regional Broadband Survey that will help us better estimate the market potential and define the geography of the unserved citizens of this region.  To date, nearly 3,000 surveys have been submitted.  While we have not begun formal analysis of the responses, early indications show expected results.  Many, many survey respondents do not have access to broadband but believe it to be vital to their every day lives.  

The Connects recognize that in this de-regulated industry, there are no state or federal mandates to require broadband service.  As the Connects have demonstrated through their modeling studies, the only path forward is a public-private partnership that would be catalyzed with public investment. 

The Commonwealth must have broadband access for its economic health, both now and in the future.  We need the State Legislature and Patrick Administration to assist in bringing private investment to the region.  We need your support for this legislation.  Thank you for conducting this public hearing and for your attention to this critical issue. 

Sincerely,

 

Donald R. Dubendorf, President                                                    Linda Dunlavy, Co-Chair

Berkshire Connect, Inc.                                                                Pioneer Valley Connect

FAQ to the Connects about the MBI:

1.  What does the legislation say? 

To view an Executive Summary or the full legislation titled “An Act Establishing and Funding the Massachusetts Broadband Institute” filed by Governor Patrick’s Administration on October 18, 2007 go to www.masstech.org/broadband/legislation/packet.html.

2. What is the status of the legislation?

For an update on the status of the bill, go to www.mass.gov/legis/ltsform.htm and search “House No. 4311” or enter “Massachusetts Broadband Institute” in the keyword search function. 

3. What can I do to encourage this legislation be passed?  

Many residents have expressed an interest supporting the passage of the Patrick Administration’s proposed Massachusetts Broadband Institute bill.  The Western Massachusetts legislative delegation have been tremendous advocates for broadband equity in the region.  Please let your legislators know that you support House No. 4311, and you appreciate their support for public investment in broadband infrastructure in Western Massachusetts. 

4. Has a public hearing date been held for the legislation?  

Yes.  An excellent public hearing was held on Thursday, February 14, 2008 in the Massachusetts State House before the Joint Committee on Bonding, Capital Expenditures, and State Assets to hear testimony on the broadband bill, House No. 4311, An Act Establishing and Funding the Massachusetts Broadband Institute.  It was standing room only as Chairman Mark Montigny recognized the western Massachusetts delegation for its diligence in bringing to the attention of the committee the broadband challenges faced by their constituents and also acknowledged the work done by Berkshire Connect and Pioneer Valley Connect.  Testimony was presented by Governor Patrick; Rep. Kulik; Rep. Guyer; Sen. Downing; Rep. Pignatelli; Rep. Bosley; Housing and Economic Development Secretary Daniel O’Connell; Telecommunications and Cable Commissioner Sharon Gillett; Administration and Finance Undersecretary Jay Gonzalez; Berkshire Connect President Don Dubendorf; and Pioneer Valley Connect Co-Chair Linda Dunlavy.  A special thanks to those western Massachusetts citizens who took time to attend the hearing and give such compelling personal testimonies.

5. What can be done to put this legislation at the top of the agenda? 

The MBI legislation is a priority of Governor Patrick and his administration, and remains at the top of his agenda.  As an example, the Governor recently specifically mentioned the need for greater access to broadband in his annual State of the Commonwealth Address in January 2008.  In addition, the Western Massachusetts delegation of State Representatives and State Senators has continued to stress the importance of this legislation to the leadership of their respective branches.  The Connects greatly appreciate the support and commitment of the region’s state and federal legislative delegation to encourage broadband equity for Western Massachusetts.  Those interested in supporting this legislation are encouraged to stay in contact with the Connects, their legislators, the Patrick Administration, and state partners to reinforce the importance of this legislation.

6. What is the timeframe for the legislation?  For implementation?  For broadband access? 

The letter from Governor Patrick submitted with the legislation stated, “this bill will create and fund the Massachusetts Broadband Institute, which will make strategic and targeted public investments with the objective of providing high-speed Internet, or broadband, service to all currently un-served communities by 2010.”  However, any timeframe is contingent upon several important factors; in particular, when the legislation is passed and when the bond funds are made available. 

While the Connects cannot give a firm timeframe, it is important to know that the Connects, the Executive Office of Housing and Economic Development, and the Massachusetts Technology Collaborative are all working today to be prepared to move forward immediately once the legislation is passed.  Efforts, such as the Regional Broadband Survey, are being conducted to do the necessary groundwork to make this happen.  While a firm timeframe for broadband access through this proposed legislation is not available, please do not be discouraged.  The Connects and their partners are committed to the mission of broadband access for all in Western Massachusetts.  Short-term solutions are being explored, as well as other potential alternatives to address this issue.  The Connects are optimistic about the legislation as it represents not only an acknowledgement of the issue, but a plan of action to achieve broadband equity in the Commonwealth.  This is an exciting opportunity which is gaining momentum and has considerable support from many levels of government, as well as residents, businesses and the private broadband provider community.  The Connects invite you to share this optimism. 

7.   Why aren’t “underserved” towns included in the legislation?

The letter from Governor Patrick submitted with the legislation stated, “this bill will create and fund the Massachusetts Broadband Institute, which will make strategic and targeted public investments with the objective of providing high-speed Internet, or broadband, service to all currently un-served communities by 2010.”

We know from the June 2007 data collected by the John Adams Innovation Institute (JAII), that there are 32 unserved towns in the Commonwealth, and another 63 underserved municipalities in the Commonwealth.  There is also anecdotal evidence of areas in the urban and suburban areas that do not have broadband access. 

The Connects would like to see all unserved and underserved municipalities in the Commonwealth have equal access to broadband.  However, the Connects agree that the Incentive Fund should first prioritize funds for infrastructure targeted to achieve regional scale solutions which focus on bringing broadband to the unserved municipalities first.  Without this public-private investment, the Commonwealth’s most vulnerable communities will be, once again, without any form of broadband access. 

It is the goal of the Connects that underserved municipalities in the Commonwealth will also benefit through the implementation of the proposed MBI.  The Incentive Fund will seed public-private partnerships to create a robust regional and statewide broadband infrastructure.  This infrastructure should not stop at the boundaries of single, individual towns.  The Connects support the implementation of the MBI and its efforts to pursue access to high-speed internet and a robust telecommunications infrastructure for all citizens regardless of town boundaries. 

8. Who will get the MBI Incentive Fund money?  Will Towns receive the money?

A public process will be conducted to select a provider or providers to enter into public-private partnerships with the Commonwealth of Massachusetts to build out necessary infrastructure.  Providers will need to go through a process that requires them to submit a response to a Request for Information (RFI) and Request for Proposal (RFP) before they are considered for these partnerships. 

The intent is to use these funds cost effectively and efficiently.  Towns will not receive the money or own the infrastructure.  Infrastructure built with public funds will not be owned by the awarded providers.  The infrastructure will be publicly owned by the Commonwealth and leased or licensed to the private sector.  This will ensure that there is redress should a winning bidder(s) fail to meet contractual requirements. 

9. Which providers will get the MBI Incentive Fund?  Are only large providers going to win the award?

First, it is important to note that there will not be “awards” given to providers; this legislation does not envision a grant or award program, but rather creates a fund to seed public-private partnerships.  Additionally, there is no language in the bill that supports investments (a) in specific technologies unique only to large providers, (b) drives the MBI to partner with larger providers, or (c) that limits the ability of the MBI to partner with smaller providers.  Through the RFI/FRP process mentioned in Question 8, the MBI will make strategic, targeted investments in partnerships with any firm(s) or partnership of firms that are capable of providing the Commonwealth’s unserved (and underserved) communities with the most long-term, sustainable, solution that impacts service to the greatest number of the Commonwealth’s unserved citizens. 

In addition, it is important to note that the Governor’s Administration and the Massachusetts Technology Collaborative have been contacted by many firms, both large and small, requesting information about the legislation, and those firms include incumbent providers and potential new market entrants.  Through the implementation of this legislation, competition will be encouraged as a driving force for both quality of service and affordability.

10. How would the proposed backbone infrastructure relate to an existing system, such as a cable system in an underserved town? 

One goal is that the public procurement process will encourage providers to leverage existing assets throughout the region.

11. Why doesn’t the federal or state government mandate service providers to make broadband access available everywhere? 

The current de-regulated environment cannot mandate service providers to deploy broadband to unserved areas.  The market dictates deployment, which is driven by customer density per mile.  This situation leaves rural areas at a disadvantage.  The proposed MBI legislation would fund backbone/backhaul infrastructure to be built in areas that would make the business case for providers serving rural areas.  The MBI proposal allows the government to solve the current market failure for serving rural areas, and make this an attractive market for private investment.

12. What is the economic impact of having broadband?  Or conversely, what is the economic opportunity lost by not having broadband? 

http://www.eda.gov/ImageCache/EDAPublic/documents/pdfdocs2006/mitcmubbimpactreport_2epdf/v1/mitcmubbimpactreport.pdf

Webpage last updated on July 1, 2008 .