COVER STORY/TECHNOLOGY

The Big Band Era

The quest for rapid and robust Internet access has cities grappling with how to bring the best of broadband to their businesses and residents.

alk to Chris O’Brien about broadband access, and the city of Chicago’s technology chief will tell you that more Internet traffic flows through Chicago than anywhere else in the world. That’s a difficult point to prove, a bit like saying that Chicago-style pizza is better than New York’s. No matter. O’Brien knows that broadband means business, and that most companies can’t survive today without superfast access to the Internet. So the Windy City has taken to selling itself as Broadband City — as much a national hub for Internet infrastructure as it’s always been for railroads, highways and airports.

That claim is an easy one to believe from the vantage point of O’Brien’s 27th-floor downtown office. Underneath the traffic-clogged streets below, private companies have buried miles of fiber-optic cable — an Internet backbone that is indeed as quick as any in the world. Here, big finance and technology firms that require huge amounts of bandwidth for the fastest Internet speeds don’t have too much trouble getting it.

But you don’t have to wander far from downtown to see how quickly Chicago’s broadband prowess breaks down. In South Side neighborhoods and industrial corridors slated for economic development, fiber is much harder to find. Business customers have fewer broadband options here, and what they do have can be prohibitively expensive. For the modest bandwidth of a T-1 line, they can pay as much as $1,000 a month — more than the rent for some of them. Or they can look into two other broadband options: DSL and cable modem. Those are more limited still and aren’t yet available in some pockets of the city.

The broadband landscape looks even more speckled over the city line. In the suburbs, researchers at federal laboratories and universities enjoy top-speed broadband at work but some can’t get the modest speeds of DSL at home. The suburbs, however, are better off than the prairie towns that lie farther out. There, most computer users are making do with pokey dial-up Internet service that moves data along at a glacial pace.

Broadband access is an essential item for business, and it is quickly becoming one at home too, as everything digital, from e-mail to phone calls to “The Sopranos,” tries to squeeze through the same Internet pipe. Yet as the Chicago region shows, the state of American broadband in 2005 ranges from Tiffany to the country store. This new digital divide — the broadband divide — leaves state and local officials facing a lot of tough questions. What’s the best way to smooth out these disparities? And what’s the proper role of the public sector? Should government build and own some of the infrastructure itself, as it does with highways? Or should broadband look more like the railroads, built and run by profit-seeking companies?

A BROAD REACH

The current situation is cause for either hope or despair, depending on how one looks at it. As of last July, 63 million Americans were connecting to the Internet via broadband at home, according to Nielsen//NetRatings. Millions more use broadband at the office — DSL, T-1 or better — making workers more efficient and innovative. Entrepreneurs can now dream up new services to sell over broadband — founding new companies that create new jobs.

The bad news is that as quickly as broadband is catching on, the U.S. is a laggard compared with other nations. South Korea, Denmark, Japan and Canada have higher rates of residential broadband penetration. In fact, the U.S. is 11th in the world, according to the International Telecommunications Union in Geneva. Part of the problem is that Americans are more spread out than, say, the South Koreans, half of whom live in apartment buildings. But public policy also plays a big role. Japan and South Korea have national broadband strategies. The U.S. doesn’t. Broadband deployment is largely up to the giant telephone and cable companies that currently compete with each other in the courtroom just as much as they slug it out in the marketplace. An upside of the American laissez-faire approach is innovation: Carriers have developed lots of technologies for delivering broadband, some using old existing wires, some requiring new lines and others using wireless. The downside is that they only deploy these products in markets where they believe they can turn a profit quickly.

There may be no national policy, but that doesn’t mean cities, suburbs and rural communities are sitting on the sidelines. In fact, localities are at the forefront of the broadband debate, stirring up controversy. For example, Philadelphia, like dozens of other cities, is looking at offering cheap broadband service by turning the whole city into a wireless “hot spot.” Opponents of the idea, led by Verizon Communications, think that cities should stay out of broadband. They persuaded the Pennsylvania legislature in November to pass a law that makes it harder for cities to offer municipal broadband. (Verizon is letting Philadelphia proceed with its plans, however.)

Politics may be the least of local officials’ worries. As they attack the broadband divide, they’re finding that it’s a terrifically complex problem, one that is only growing more complicated as technology advances and bandwidth needs grow. Realistically, they can’t hope to “solve” the divide so much as manage it over time. Moreover, there’s not just one broadband divide. There are at least four of them:

• Access. Millions of Americans still can’t get basic DSL or cable modem service, or the local provider has a monopoly on the market.

• Service. There’s lots of high-speed fiber in the ground in the U.S., but outside of dense business districts, the “last mile” problem of tapping into it is expensive to solve.

• Cost. Even where basic broadband is available, the monthly cost remains higher than many consumers are willing or able to pay.

— Don’t Need It. More than one-third of U.S. households still don’t have computers — let alone high-speed Internet. And many Internet users don’t mind using slow dial-up service.

THE GATEKEEPERS

You see a range of thinking about these issues across the Chicago region. The most controversial idea came from three cities on the western edge of the Chicago suburbs. Batavia, Geneva and St. Charles, also known as the Tri-Cities, are among the 2,000 U.S. cities that are in the electricity business. Public power has been pretty good for the Tri-Cities. Their electric rates are about 30 percent lower than neighboring towns. So it wasn’t a stretch when they proposed getting into the broadband business as well.

The idea first came up two years ago. Comcast, the dominant cable company in the Chicago region, hadn’t yet rolled out its cable modem service. The local phone company, SBC Communications, had started offering DSL — but large swaths of the Tri-Cities still couldn’t get it.

The city governments held a trump card, however. Each owned a fiber-optic network — a valuable byproduct of running an electric utility. Officials began thinking that if they could build that fiber out directly to homes and businesses, it would be a huge draw for economic development. Municipal broadband — offering superfast Internet, cable TV and telephone — would compete directly with Comcast and SBC.

The towns put the question to a referendum in April 2003. Scared by the $62 million price tag, voters turned it down decisively. The plan went before voters again this past November with a new financing scheme. It got steamrolled again. Comcast and SBC waged an overwhelming campaign against the measure. They bused in employees to knock on doors, and Comcast even sent Hallmark greeting cards to voters’ homes.

There was another factor at play. Not all residents saw the issue as a compelling one. As Jeffery Schielke, the mayor of Batavia, puts it, “When we put in sanitary sewers 100 years ago, a number of people said they’d prefer to go to the outhouse.”

Proponents of municipal broadband are still bitter about the outcome. They argue that Comcast and SBC, by fighting the referendum, are holding back technology. “They think it’s okay to give us limited bandwidth and charge us an arm and a leg for it,” says Annie Collins, whose citizens’ group was behind the second referendum. As Collins sees it, cities should view broadband as they do roads, sewers or any other essential infrastructure they provide. “Putting the infrastructure in place is just like pavement,” she says. “It’s basic infrastructure, and the cities should own it.”

Comcast and SBC share a different view: Municipal broadband is a bad idea. “It’s wrong of the government to get involved in areas where private corporations are offering choices,” says Carrie Hightman, president of SBC Illinois. What about the argument that cities should provide broadband as basic infrastructure? “These aren’t vital services,” says Bob Ryan, a Comcast lobbyist. “They’re nice services. But you’re not going to die if you don’t get video, data and telephony from the government.”

All is not lost in the Tri-Cities. By the time of the second vote, Comcast and SBC had rolled out their networks almost ubiquitously there. Just two weeks before the election, SBC held a “digital ribbon-cutting” ceremony in Batavia. Both companies deny wooing voters by bumping the Tri-Cities up their to-do lists. But many observers in Illinois think that the squeaky wheel got the grease. “All of a sudden the Tri-Cities are getting better service,” says Edward Feser, a University of Illinois professor who studies broadband. “Maybe the vote is looked at as a failure, but for the end-market consumer the whole effort has been a bonus.”

AT YOUR SERVICE

Farther west, in the prairie town of Princeton, the broadband battle is playing out somewhat differently. A couple of years ago, manufacturers in town began complaining that the T-1 lines they used for broadband weren’t fast or robust enough. Rural towns across Illinois have been hit hard lately by manufacturers going overseas. Princeton has fared pretty well so far. But officials there figured that if they could offer manufacturers more bandwidth, it might be all the more reason for companies to stay put.

Princeton officials met with the local phone company — Verizon in this part of Illinois — to see if there was something it could do to upgrade service. But as Princeton’s Jason Bird puts it, “at the end of the day, it came down to the fact that we needed to take on this endeavor ourselves.” Princeton owns its electric utility, just as the Tri-Cities do. Unlike the Tri-Cities, however, Princeton is not proposing to go into the broadband business on a retail level. Instead, Princeton will build out the broadband infrastructure and let a local company called Connecting Point sell the service to customers.

Princeton’s plan is to build fiber out to any customers who say they need it — most likely the big industrial users. Smaller customers and residential users will be handled differently. They’ll be among the first in the nation to receive broadband over the same power lines that pump electricity into peoples’ homes. This new technology is a convenient solution to the notorious “last mile” problem. Customers simply plug a box into a power outlet and plug their computers into the box. Bird thinks Princeton’s approach to broadband represents a lighter touch to government intervention. “We have a partnership here,” he says. “We didn’t want to get into the business of being the provider. We didn’t feel comfortable with that.”

But that distinction doesn’t mean much to the big telephone and cable companies. The argue that any form of municipal broadband enjoys unfair advantages, such as tax-free bond financing. Comcast, SBC and other broadband providers are expected to lobby the legislature for a law similar to Pennsylvania’s, either banning municipal broadband or severely restricting it. Similar laws have passed in 15 other states, and the U.S. Supreme Court recently found such bans constitutional. “This is an area where the powerful incumbents want to snuff out consumer option and choice,” says Illinois Lieutenant Governor Pat Quinn. “They’re snarling in Illinois. It looks like they’ll try to wipe out the municipal option for our state this year. We’ll see.”

Chicago is more hesitant to use a heavy hand when it comes to broadband. Of course, the city also enjoys two luxuries: a dense downtown and a wealthy mix of corporations that broadband providers are hungry to serve. During the dot-com boom, lots of telecom companies trenched fiber-optic lines under downtown streets. It was a gold rush fueled by the exuberant Internet dreams of the age. Many of those companies later went bankrupt. But their fiber is still there, waiting to be used.

In the Loop, Chicago’s busy downtown business section, the biggest broadband problem is figuring out where all the fiber is — and who owns it. That’s an economic development issue: Businesses looking to tap into that fiber don’t know whom to call. But it’s increasingly a homeland security issue, too. After 9/11, many big corporations are queasy about locating critical operations such as data banks in big cities, fearing a terror attack. They want some assurance that their Internet traffic has redundant routes should disaster strike. “Corporate boards are asking whether it’s dangerous to locate in a big city,” Chris O’Brien says. “We have to prove to them that it’s not.”

Chicago’s neighborhoods are a different story. Back in 2000, Chicago announced a big idea to wire the whole city for broadband. The plan was called CivicNet, and the idea was to aggregate all the public schools, firehouses and city offices into one massive telecom contract. In exchange for a 10-year deal, Chicago expected the winning bidder to lay broadband infrastructure to some 1,600 city facilities. It wouldn’t wire the whole city, but since there’s a police station, library or some city building in nearly every neighborhood, it would come pretty close.

CivicNet never happened. The telecom bust killed the industry’s interest. And Chicago’s budget bust killed the city’s interest. The silver lining, as O’Brien sees it, is that Comcast and SBC have since pumped millions of dollars of their own into rolling out cable modem and DSL service across nearly all of Chicago. “The residential issue is not solved,” O’Brien says. “But we’re a lot closer to eliminating access as a problem because of cable modem and DSL.” Of all the broadband divides, the one that now concerns O’Brien the most is level of access for small businesses that require more bandwidth than Comcast and SBC are offering. To target this problem, Chicago is considering a CivicNet Lite: a stripped-down version of the original broadband plan, targeted solely at six or seven underserved industrial corridors.

WIRE WORKS

Others are more concerned about another of the broadband divides: cost. Comcast charges between $43 and $58 a month for cable Internet in Chicago. SBC charges between $27 and $37 a month for the most basic residential DSL. Bob Lieberman thinks that wireless broadband might be a cheaper alternative. Lieberman heads the Center for Neighborhood Technology in Chicago, and is experimenting with wireless projects in three neighborhoods in the region. One is Lawndale, a predominantly African-American neighborhood west of the Loop. “The median household income in Lawndale is $22,000, so $600 a year for broadband is a big chunk,” Lieberman says. “That’s a lot of money for what is arguably entertainment.”

The tallest building in Lawndale is an historic brick tower that rises 260 feet above an old Sears distribution center. “It’s the first Sears Tower,” Lieberman says. Just as the namesake skyscraper downtown is crowned with radio antennae, Lieberman has placed a small, barely visible antenna in the Lawndale tower. The antenna is wired to the Internet and beams a signal out to “nodes” scattered atop row houses in the neighborhood, which relay the signal back and forth to computers in peoples’ homes. An unusual feature of this so-called “mesh” network is that the system actually becomes stronger and more reliable as more people use it.

The Lawndale project is up to 100 users, who for the time being are getting the service for free (the Center hooks people up with used computers, too). Lieberman thinks it could serve as a prototype for small cities or neighborhoods. He estimates the municipal cost of providing such a service would ring in at about $8 to $10 per month, per household. “Wireless really gives you the opportunity, on a relatively low-cost basis, to put technology into neighborhoods that could never afford it before,” Lieberman says.

A lot of other cities are having exactly the same thought. The technology is cheap enough that Philadelphia thinks it could fill the air with a cloud of Internet signals for just about $10 million. And wireless technology is advancing quickly. A new generation of wireless broadband, called WiMax, is due out in the next year or so. WiMax will offer greater bandwidth than the current Wi-Fi does and work to a range of 30 miles. In other words, a single antenna could blanket entire cities, or large swaths of countryside, with broadband coverage.

A lot of people in city government around the country are very excited about wireless. Chicago has created Wi-Fi hot spots at all its city libraries, and in places where business travelers congregate, such as the airport and convention center. Yet Chris O’Brien is skeptical of taking on a broader, city-wide wireless project. Simply put, Chicago doesn’t want to step on the private sector’s turf. “Government needs to tread a very fine line,” O’Brien says. “We could create a wireless network for the entire city if we wanted to. We own enough fiber that we could get into the telecom business, too. Figuring out where our leverage ends and where we leave it to the private sector is the tough issue.”

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