North St. Paul hoped to be a suburban trailblazer when it drafted a plan to become the first metro community with a city-owned fiber-optic network that would give residents the fastest available cable, Internet and telephone services. But it was taken aback by the reaction from Internet and cable leaders, who launched an aggressive opposition campaign charging "unfair competition'' and predicting failure.
Opponents spent $40,000 in the past two weeks alone to shape a Tuesday city referendum on an issue being watched by cities across the metro area.
"Why would a company like Comcast, with millions of subscribers, be so concerned about its maybe 2,000 subscribers in North St. Paul?'' asked North St. Paul Mayor Mike Kuehn.
North St. Paul has found itself in the middle of a state -- and national -- debate over who controls the nation's information highways. The telecommunications industry says that cities have an unfair advantage when owning the networks, and that being owner and part regulator is a conflict of interest. Only one Minnesota city, Windom, has a city-owned fiber-to-home network.
"We're very concerned when cities want to get into the business and add to the competitive mix with a subsidy,'' said Mike Martin, executive director of the Minnesota Cable Communications Association, which contributed $15,500 to the referendum campaign this month. "And there is no service the city has proposed that is not available now or could be in the future.''
Leaders in North St. Paul, which has owned and operated its own electrical utility for more than 100 years, said it has no problem letting private industry manage the so-called PolarNet. But it wants to own the infrastructure and tap any future profits for the city's economic development.
"Comcast is interested in selling cable: We're interested in developing a town,'' said city manager Wally Wysopal. "This [fiber-optic network] could be a factor in where a person decides to live, stay or open a business.''
This aging suburb has lost nearly 900 jobs, or 25 percent of its workforce, since 2000, city leaders said. It's also losing $810,000 in local government aid in the next two years. Having a state-of-the-art fiber-optic network could give the city a competitive edge over its more affluent suburban neighbors.
Kuehn made his remarks at a recent community forum at a local church, where a statue of the Virgin Mary gazed serenely at the crowd. Supporters admit they could use some heavenly intervention to get the 65 percent "yes" vote on the project, which is required by state law.
Here's how PolarNet would work, city officials told the group:
The city would take out an $18.5 million general obligation bond, payable over the next 25 years, to build the network. Loan payments for the first three years are wrapped into the $18.5 million. After that, the project would fund itself if 27 percent of the city's 4,000 households purchase the service.
Citizens had plenty of questions. Will it cost more money for subscribers? they asked. For most services, the cost is likely to be lower, speakers said.
Will it increase property taxes? The possibility exists, but only if fewer than 27 percent of the households subscribe within the first four years, they said.
Is PolarNet just duplicating services? No, said Kuehn. While most networks contain some fiber optics, this plan calls for all fiber and fiber to the home.
However Comcast, which campaign finance reports show donated $25,000 to the opposition campaign this month, insists it can deliver comparable speeds using the fiber in its services.
"North St. Paul residents already have access to the same kind of product ... and they're provided without risk to taxpayers,'' said Mary Beth Schubert, vice president for corporate affairs at Comcast.
North St. Paul leaders, however, say they're talking about more than high-speed Internet. Having a city-owned system would allow them to offer local programs "on demand," such as high school sports or city government meetings. It would allow residents to telecommute to their jobs using the fastest networks in the nation. It could accommodate future waves of technology, such as telemedicine and education.
But critics charge that the plan is too risky and that taxpayers will be left holding the bill. It's also unnecessary, said Qwest spokeswoman Joanna Hjelmeland, because North St. Paul already has the fastest speeds available from both Comcast and Qwest.
The dueling campaigns have created an aura of suspicion in the community. Volunteers for the Vote Yes campaign, led by resident Connie Hoye, say that misinformation is being spread about the project and that their opponents rely mainly on paid workers. Schubert said, however, the opposition coalition has 1,000 North St. Paul members.
Dan Olsen, who oversees Windomnet, the only city-owned fiber-optic network in the state, said his city faced similar opposition when it got into the fiber-optic business four years ago. But today 85 percent of city residents have subscribed to either cable, telephone or Internet service -- so many that the city had to take out another loan to buy more equipment to keep up with demand, he said.
The city is meeting its bond payments and has exceeded its project earnings, Olsen said.
Andrea Casselton, the technology director for St. Paul, said cities across the metro are monitoring North St. Paul's efforts. "This is a hugely important area,'' Casselton said. "We're in a period of seeing what works, what doesn't. Every community has a unique situation. You have to figure out the right path.''
Jean Hopfensperger • 612-673-4511