Broadband -- at Any Price

Wilson, North Carolina, population 50,000, is now in the vanguard of fast Internet connections. Darn fast. The town, founded in 1849, was built on the tobacco and textile trades, neither of which is serving it well today. So, Wilson made a big play for high-speed broadband. Fast Internet access is a utility now, "not a luxury anymore," says Brian Bowman, a city spokesman. "It's something businesses need to have."

When the city's private Internet provider didn't see the value in boosting online speed and bringing broadband to every home in town, Wilson's city leaders decided to do it themselves. Out of desperation and aspiration, Wilson became Time Warner Cable's competitor. The city borrowed $28 million from the North Carolina Local Government Commission, and last summer it launched Greenlight, a program that makes fast fiber-optic lines available for all businesses and residents.

Other localities are considering similar moves, hoping to finance them by tapping into the $4.7 billion set aside for broadband in the federal stimulus package. The money in the Broadband Technology Opportunities Program will be distributed by an agency of the U.S. Commerce Department known as the NTIA. Grants will tilt toward high-speed service for children, education and health care delivery. Applicants must provide 20 percent matching funds and guarantee that projects will be completed in two years.

Another $2.5 billion in grants, loans and loan guarantees sits in a broadband category for distance learning and telemedicine. The U.S. Department of Agriculture will administer that program under the Rural Electrification Act.

The availability of federal money for broadband raises a question. Should Wilson's Greenlight be something other cities emulate? Not every locality could easily replicate what Wilson has done. The city is already a municipal electric provider, meaning that it owns most of the poles that it used to put up fiber-optic lines. That saved it a huge expense. Private providers call it an unfair advantage.

There are challenges within the Greenlight effort. Under its business plan, the program needs 30 percent of the city's 19,000 homes to sign up for the service within three years. So far, the "take" rate has reached 12 percent, which is ahead of goal. Customers are being offered minimum Internet speeds of 10 megabytes per second, which is roughly twice as fast as the typical speed the private provider offers. Businesses can buy higher speeds, up to one gigabyte per second--and that is really, really fast.

The network is supported with subscription fees only--not tax money. But--and it's a "but" that Time Warner is quick to jump on--if the fiber-optic project doesn't perform as expected, the city will have to raise taxes or electricity rates or both. Time Warner also charges that localities shouldn't be in the business of developing services that duplicate those available in the private sector. "That doesn't mean we don't embrace the competition," says Melissa Buscher, a Time Warner spokeswoman. In fact, the competition seems to be benefiting Wilson residents. Time Warner did not raise its prices in the city this year, although it hiked them as much as 30 percent in nearby localities.

Bowman advises a thick skin for cities attempting something similar. "If you're in city government, being criticized is nothing new," he says. "But this is different. You've got to be prepared to be attacked."