Post by Gray Cope on Jun 22, 2012 23:27:10 GMT -8
When is a monopoly not a good thing?
By Gray Cope
Note: This is a similar piece to the one I submitted to the Island Guardian on 6/18/12.
I was shocked to hear an OPALCO board member tell us at the community forum to discuss their wireless broadband plans (Friday Harbor Grange May 16th) that sometimes a monopoly is a good thing. It struck me because it was in response to someone saying he thought the $10 monthly surcharge to pay for OPALCO's wireless communication expansion was monopolistic and unfair. I agree it is unfair if you will be any of the following:
a) unable to afford their wireless broadband Internet access.
b) you live in 10 percent of the County OPALCO estimates can not be covered by the service.
c) you just don't want broadband Internet.
d) you already have broadband Internet from another provider and prefer the price and performance to OPALCO's.
If you are in group “a)” then the OPALCO surcharge of $10 per month will be worse than a regressive tax or charge. Electricity is an essential service if you are a metered customer, but forcing you to pay for the building of a wireless broadband Internet and cellular backhual system which are not part of that essential service is unfair.
Its easy for me to see that OPALCO has been a necessary and beneficent monopoly in terms of its stated mission of providing reliable and safe electric service in our county. Something it does well and with excellent service. However building and maintaining a wireless broadband Internet backbone and cellular towers and a fiber optic communications backhaul is not the stated mission of OPALCO nor is it essential like having reliable and safe electric service. Further, it struck me that perhaps this board member didn't understand that there was a competitive and growing market for broadband already in place. This is not like it was 75 years ago when reliable electric service was hard to come by, unless you were Robert Moran.
It may be that the broadband wireless service OPALCO is planning on creating may not even appeal to more than 30 percent of the OPALCO members once the geographical and economic considerations are taken into consideration. How could this board member think this was a case where monopolistic resource allocation and business practices would be a good thing in such an environment?
It does not make sense to double our debt over 1 or 2 years and increase our plant and equipment by over 1/3 only to serve perhaps 30 percent of the coop members who may want OPALCO's wireless broadband Internet access. I realize there is another subset who want ubiquitous cell phone access, but I'm sorry that is not the service for which our electric utility is purposed. If the members want to amend OPALCO's primary purposes in its articles of incorporation to include cellular and broadband Internet support then let us put it to a vote with all the important facts fully revealed. Actual numbers, not just angst about how frustrated many are with not having ubiquitous broadband or wireless access.
I realize some reading this might ask: “hey, wait just a second, where'd you get that 30 percent number.” Well, you got me ... I won't blow smoke where it does not belong. I admit I did not do extensive market research like sending out a postcard survey with 5 questions that focused mostly on DSL rather than all the competitive choices people have in our local broadband market. Here are two questions that could have been asked that would have provided much more valuable data than what OPALCO collected: “what type of broadband service do you currently have?” or “Would you buy OPALCO broadband wireless if the monthly cost were any of the following” (and give 3 or 4 price points to check mark).
Satellite broadband may end up being one of the fastest growing segments of our broadband market for those who cannot get cable, ADSL, or canopy radio over the next 10 years. At the OPALCO forum a local provider claimed to be able to provide 12Mb/s up and 3 Mb/s down broadband Internet speeds for $50 per month ($60 when including the equipment lease). Because of latency issues some folks like gamers may not find satellite a choice they want. This is a part of the competitive market OPALCO cannot ignore.
Being a technology advocate I've tried to step away from my social conscience and I see a lot to get excited about in what OPALCO wants to do. I agree with Jeremy Rifkin that we are in a 3rd industrial revolution where the confluence of energy control and information technology can bring about significant global changes. See www.youtube.com/watch?v=Ppw5O-Vtxcs.
I can see decades down the road where our county could be a net producer of electricity and OPALCO could create and manage a real-time trading system where automated households and the coop systems store, buy and sell electricity into the Smart Grid. Electricity may be generated in a wide variety of ways from solar to harnessing genetically engineered microbes to convert sewage into hydrogen to be later converted into electricity on demand from the Smart Grid. OPALCO with its electric grid and a wireless broadband network with fiber optic backbone could enjoy a vital role in that shift.
A very important question is whether those sorts of future Smart Grid improvements can be done over the existing power line system that our Smart meters currently operate. Do we really need a separate wireless broadband Internet to implement them? I think not. First the Internet is a public network and a hackers playground. Second, OPALCO has estimated that 10 percent of the county will not be covered by its wireless broadband towers so it fails where power line currently succeeds with its AMI (Automated Meter Infrastructure).
Revised County Ordinance:
On June 26th the County Council is ready to place into law the revised ordinance that will now allow cell towers up to 150 feet tall. That seems like a done deal. Public comment was closed last month. Every single Council member is on board and in favor. Somehow 4 issues were conflated for the purpose of persuading this ordinance change.
1) Improving emergency response communications.
2) Reducing cellular dead zones.
3) Widening the reach of broadband Internet access.
4) Supporting future Smart Grid enhancements to our electric distribution system.
Only “4)” is currently part of OPALCO's explicit mission statement and probably can be achieved using our existing poles. When the current ordinance limiting cellular towers was enacted some envisioned filling the gap in emergency response communications with whip repeater antennas mounted on existing OPALCO utility poles. Is that still an option for satisfying item “1)”? In terms of item “2)” the pending changes in the County ordinance to allow communications towers will allow the cellular industry to achieve improved cell service if it makes financial sense for them to do so.
Just because we can does not mean we should:
Monopolies can do things that private industry would never do. Building a cellular and broadband tower and fiber optic backhaul may not make sense to private industry in our rural area. Not the way OPALCO is planning on doing it. So instead of having towers up to 150 feet tall every 4 or 6 miles a large cellular utility could build 8 to 10 larger towers to serve the entire county. For rural aesthetic reasons I'm not for either, but it seems to me that most people don't understand what our county will look like with towers located all along OPALCO's power line routes. Remember those towers will have to be serviced by the fiber optic and electric cables coming off of the current utility poles OPALCO owns and maintains. So most of the towers will probably be near our roadways creating a visual change.
It is important to realize that OPALCO's maintenance costs will increase significantly to maintain the new towers. That just comes with increasing your plant assets by 36+ percent. I don't believe those ongoing costs are reflected in OPALCO's $18 million estimate to build out the tower and fiber backhaul.
Even if we come to grips with the $18 million expansion being outside OPALCO's primary purposes for existing does it mean we should do it?
I think there is a looming mountain of a reason why we should not make this $18 million extra-curricular expansion. That mountain is in the shape of the world-wide peak in fossil fuel supply curve for which we are on the downward side. This will likely increase plug-in vehicle demands and PNW regional use of coal-fired electric power plants will be reduced as countries like China import our coal reserves and our carbon taxes increase the cost of electricity produced this way. Oregon has roughly 40 percent of its electricity produced from coal-fired plants.
Even though most of our electricity in Washington State comes from “renewable” hydroelectric generation we can not ignore the likelihood that regional hydroelectric dams will be under increased demand stress as industry and utilities shift away from ever more costly hydrocarbon based electricity production. This will likely cause dramatically increased prices charged by BPA and our hydroelectric sources over the next 50 years.
So there is no better time than the present for us to be investing toward our future in an effort to turn our county from being a net consumer of electricity into a net producer of electricity. That is a far better way to invest that $18 million and it is directly on track with our co-op's primary purposes for existing.
Show me the money:
What will be the revenues? OPALCO or whomever is first to build the towers will have an advantage over other communication providers. OPALCO with an extended fiber optic backbone and connections to the mainland will potentially enjoy revenues from collocation leasing of our towers for antennas and related equipment and the use of our fiber optic bandwidth to the mainland. But we don't know what the actual revenues will be from that.
What we can do is ask the question what is it worth to a cellular provider to execute a master lease agreement with OPALCO. If a cell provider can service 500 more customers is it worth leasing from OPALCO at say $800 per month per tower? These are all difficult numbers to estimate, but OPALCO must do so in order to understand the revenue proposition.
I believe the decision to proceed with OPALCO's estimated $18 million dollar communications expansion is not something that should be left to 7 board members. It should be voted on by the entire membership after seeing the business plan with all numbers estimated and backed by copious research pertinent to our local market. This is particularly true when most of what is intended to be achieved with that expansion has nothing to do with OPALCO's explicit purposes of providing safe and reliable electrical services. Having every member pay $1,241 (follow the link below to see the calculation) for every meter for which they are billed is not fair to so many that are struggling financially to make our beautiful county their home.
I think this is a topic that needs community discussion so I have created a forum for us to do so in a respectful manner. I believe broadband Internet is crucial to our county, but OPALCO's plan may be hugely flawed. I am a 40+ year resident of San Juan Island and am saddened wireless towers will soon be marring our beautiful islands. Please read and add to the discussion online at opalcowireless.boards.net.
By Gray Cope
Note: This is a similar piece to the one I submitted to the Island Guardian on 6/18/12.
I was shocked to hear an OPALCO board member tell us at the community forum to discuss their wireless broadband plans (Friday Harbor Grange May 16th) that sometimes a monopoly is a good thing. It struck me because it was in response to someone saying he thought the $10 monthly surcharge to pay for OPALCO's wireless communication expansion was monopolistic and unfair. I agree it is unfair if you will be any of the following:
a) unable to afford their wireless broadband Internet access.
b) you live in 10 percent of the County OPALCO estimates can not be covered by the service.
c) you just don't want broadband Internet.
d) you already have broadband Internet from another provider and prefer the price and performance to OPALCO's.
If you are in group “a)” then the OPALCO surcharge of $10 per month will be worse than a regressive tax or charge. Electricity is an essential service if you are a metered customer, but forcing you to pay for the building of a wireless broadband Internet and cellular backhual system which are not part of that essential service is unfair.
Its easy for me to see that OPALCO has been a necessary and beneficent monopoly in terms of its stated mission of providing reliable and safe electric service in our county. Something it does well and with excellent service. However building and maintaining a wireless broadband Internet backbone and cellular towers and a fiber optic communications backhaul is not the stated mission of OPALCO nor is it essential like having reliable and safe electric service. Further, it struck me that perhaps this board member didn't understand that there was a competitive and growing market for broadband already in place. This is not like it was 75 years ago when reliable electric service was hard to come by, unless you were Robert Moran.
It may be that the broadband wireless service OPALCO is planning on creating may not even appeal to more than 30 percent of the OPALCO members once the geographical and economic considerations are taken into consideration. How could this board member think this was a case where monopolistic resource allocation and business practices would be a good thing in such an environment?
It does not make sense to double our debt over 1 or 2 years and increase our plant and equipment by over 1/3 only to serve perhaps 30 percent of the coop members who may want OPALCO's wireless broadband Internet access. I realize there is another subset who want ubiquitous cell phone access, but I'm sorry that is not the service for which our electric utility is purposed. If the members want to amend OPALCO's primary purposes in its articles of incorporation to include cellular and broadband Internet support then let us put it to a vote with all the important facts fully revealed. Actual numbers, not just angst about how frustrated many are with not having ubiquitous broadband or wireless access.
I realize some reading this might ask: “hey, wait just a second, where'd you get that 30 percent number.” Well, you got me ... I won't blow smoke where it does not belong. I admit I did not do extensive market research like sending out a postcard survey with 5 questions that focused mostly on DSL rather than all the competitive choices people have in our local broadband market. Here are two questions that could have been asked that would have provided much more valuable data than what OPALCO collected: “what type of broadband service do you currently have?” or “Would you buy OPALCO broadband wireless if the monthly cost were any of the following” (and give 3 or 4 price points to check mark).
Satellite broadband may end up being one of the fastest growing segments of our broadband market for those who cannot get cable, ADSL, or canopy radio over the next 10 years. At the OPALCO forum a local provider claimed to be able to provide 12Mb/s up and 3 Mb/s down broadband Internet speeds for $50 per month ($60 when including the equipment lease). Because of latency issues some folks like gamers may not find satellite a choice they want. This is a part of the competitive market OPALCO cannot ignore.
Being a technology advocate I've tried to step away from my social conscience and I see a lot to get excited about in what OPALCO wants to do. I agree with Jeremy Rifkin that we are in a 3rd industrial revolution where the confluence of energy control and information technology can bring about significant global changes. See www.youtube.com/watch?v=Ppw5O-Vtxcs.
I can see decades down the road where our county could be a net producer of electricity and OPALCO could create and manage a real-time trading system where automated households and the coop systems store, buy and sell electricity into the Smart Grid. Electricity may be generated in a wide variety of ways from solar to harnessing genetically engineered microbes to convert sewage into hydrogen to be later converted into electricity on demand from the Smart Grid. OPALCO with its electric grid and a wireless broadband network with fiber optic backbone could enjoy a vital role in that shift.
A very important question is whether those sorts of future Smart Grid improvements can be done over the existing power line system that our Smart meters currently operate. Do we really need a separate wireless broadband Internet to implement them? I think not. First the Internet is a public network and a hackers playground. Second, OPALCO has estimated that 10 percent of the county will not be covered by its wireless broadband towers so it fails where power line currently succeeds with its AMI (Automated Meter Infrastructure).
Revised County Ordinance:
On June 26th the County Council is ready to place into law the revised ordinance that will now allow cell towers up to 150 feet tall. That seems like a done deal. Public comment was closed last month. Every single Council member is on board and in favor. Somehow 4 issues were conflated for the purpose of persuading this ordinance change.
1) Improving emergency response communications.
2) Reducing cellular dead zones.
3) Widening the reach of broadband Internet access.
4) Supporting future Smart Grid enhancements to our electric distribution system.
Only “4)” is currently part of OPALCO's explicit mission statement and probably can be achieved using our existing poles. When the current ordinance limiting cellular towers was enacted some envisioned filling the gap in emergency response communications with whip repeater antennas mounted on existing OPALCO utility poles. Is that still an option for satisfying item “1)”? In terms of item “2)” the pending changes in the County ordinance to allow communications towers will allow the cellular industry to achieve improved cell service if it makes financial sense for them to do so.
Just because we can does not mean we should:
Monopolies can do things that private industry would never do. Building a cellular and broadband tower and fiber optic backhaul may not make sense to private industry in our rural area. Not the way OPALCO is planning on doing it. So instead of having towers up to 150 feet tall every 4 or 6 miles a large cellular utility could build 8 to 10 larger towers to serve the entire county. For rural aesthetic reasons I'm not for either, but it seems to me that most people don't understand what our county will look like with towers located all along OPALCO's power line routes. Remember those towers will have to be serviced by the fiber optic and electric cables coming off of the current utility poles OPALCO owns and maintains. So most of the towers will probably be near our roadways creating a visual change.
It is important to realize that OPALCO's maintenance costs will increase significantly to maintain the new towers. That just comes with increasing your plant assets by 36+ percent. I don't believe those ongoing costs are reflected in OPALCO's $18 million estimate to build out the tower and fiber backhaul.
Even if we come to grips with the $18 million expansion being outside OPALCO's primary purposes for existing does it mean we should do it?
I think there is a looming mountain of a reason why we should not make this $18 million extra-curricular expansion. That mountain is in the shape of the world-wide peak in fossil fuel supply curve for which we are on the downward side. This will likely increase plug-in vehicle demands and PNW regional use of coal-fired electric power plants will be reduced as countries like China import our coal reserves and our carbon taxes increase the cost of electricity produced this way. Oregon has roughly 40 percent of its electricity produced from coal-fired plants.
Even though most of our electricity in Washington State comes from “renewable” hydroelectric generation we can not ignore the likelihood that regional hydroelectric dams will be under increased demand stress as industry and utilities shift away from ever more costly hydrocarbon based electricity production. This will likely cause dramatically increased prices charged by BPA and our hydroelectric sources over the next 50 years.
So there is no better time than the present for us to be investing toward our future in an effort to turn our county from being a net consumer of electricity into a net producer of electricity. That is a far better way to invest that $18 million and it is directly on track with our co-op's primary purposes for existing.
Show me the money:
What will be the revenues? OPALCO or whomever is first to build the towers will have an advantage over other communication providers. OPALCO with an extended fiber optic backbone and connections to the mainland will potentially enjoy revenues from collocation leasing of our towers for antennas and related equipment and the use of our fiber optic bandwidth to the mainland. But we don't know what the actual revenues will be from that.
What we can do is ask the question what is it worth to a cellular provider to execute a master lease agreement with OPALCO. If a cell provider can service 500 more customers is it worth leasing from OPALCO at say $800 per month per tower? These are all difficult numbers to estimate, but OPALCO must do so in order to understand the revenue proposition.
I believe the decision to proceed with OPALCO's estimated $18 million dollar communications expansion is not something that should be left to 7 board members. It should be voted on by the entire membership after seeing the business plan with all numbers estimated and backed by copious research pertinent to our local market. This is particularly true when most of what is intended to be achieved with that expansion has nothing to do with OPALCO's explicit purposes of providing safe and reliable electrical services. Having every member pay $1,241 (follow the link below to see the calculation) for every meter for which they are billed is not fair to so many that are struggling financially to make our beautiful county their home.
I think this is a topic that needs community discussion so I have created a forum for us to do so in a respectful manner. I believe broadband Internet is crucial to our county, but OPALCO's plan may be hugely flawed. I am a 40+ year resident of San Juan Island and am saddened wireless towers will soon be marring our beautiful islands. Please read and add to the discussion online at opalcowireless.boards.net.