SHARE Click to enlarge

By of the

Wisconsin schools and libraries rely on Internet service that's often inadequate and overpriced, with the true cost obscured by millions of dollars in government subsidies, according to research by a University of Wisconsin Extension professor that has pitted him against the state's telecommunications industry.

Andy Lewis, a professor and community development specialist at the UW Extension in Madison, says the issue is twofold: Schools and libraries aren't getting the broadband service they need to keep pace with increasing demands of technology and learning, and taxpayers could be paying up to 10 times too much for the service through a telecommunications network called BadgerNet.

Broadband speeds are measured in megabits per second. Higher broadband levels can accommodate more Internet users at the same time, which is important to schools and libraries and data-intensive services such as video presentations.

"It's hard to believe, but schools and libraries in Wisconsin — or should I say the taxpayers — are often paying about the same amount of money for a 5-megabit-per-second circuit that other school districts across the country are paying for 1,000 megabits per second," Lewis said.

The cost of the service at most Wisconsin schools and libraries is much higher than the national average when state and federal subsidies are factored in, according to Lewis, who said he compared BadgerNet rates with data gathered from 11,000 school districts in 45 states by an organization called EducationSuperHighway.

About 80% of eligible schools and libraries in Wisconsin are part of the BadgerNet system, which operates in all 72 counties of the state.

Under the system, schools, libraries and other public institutions can get Internet services at a low price, such as $250 a month for a 100-megabit-per-second connection. But the actual cost to taxpayers — the amount paid to the Internet service provider — is $2,480 a month when federal E-rate subsidies are included, according to Lewis.

"My point is that it's all taxpayer-funded. These important community anchor institutions are currently underserved and overcharged," he said.

The $2,480 monthly charge also is much higher than the national average price of $1,272 per month for a much faster, 1,000-megabit-per-second connection, Lewis said.

Telecommunication providers contend that Lewis in some cases is making unfair comparisons when he uses maximum, "not to exceed" prices that are listed in the BadgerNet contract, when in fact the cost often is well below those maximums. In addition, they say the national averages don't necessarily include all of the same services and don't represent a statewide system.

"It's like comparing grapes with grapefruit," said Bill Esbeck, executive director of the Wisconsin State Telecommunications Association, which represents telephone companies.

The most expensive prices under BadgerNet would be for service in a remote area, such as a national forest, rather than a typical school district, Esbeck said.

Prices also can vary based on factors such as whether fiber-optic cable has to be laid beneath a river or through difficult terrain, said Mark Weller, president and CEO of Access Wisconsin, which represents BadgerNet's independent telecom providers. In addition, subscribers' desired Internet speed and their need for other telecom services must be taken into account.

"Once we get beyond 200-megabits-per-second service, then the local service provider and AT&T, the prime contractor, figure up what it would cost to add more bandwidth. That price is shared with the Department of Administration, who then charges the appropriate amount to the end user," Weller said.

The average cost for one unnamed state agency, with 26 sites, was $3,600 per month for 1,000-megabit service, Esbeck said — much less than the $11,652 maximum rate allowed under the BadgerNet contract.

The discount does not appear to be uncommon. Based on preliminary data, the average discount for a broadband connection above 200 megabits per second is 53% off the maximum rate allowed under the contract, according to the Department of Administration.

Regardless, Lewis argues that the published rates are too high.

"The published BadgerNet rate of $11,652 should likely be renegotiated down to $1,300 so that in fact all schools and libraries are paying that rate and to better reflect the national average," he said.

He also contends that the substantial federal E-rate subsidies reduce the incentive for schools and libraries to be prudent in purchasing broadband service. "They only know that they pay $100 to $250 a month," he said, because the rest of the money does not come from their budget.

Next contract will change

State officials are contemplating how to shape the next BadgerNet contract — an agreement between the Department of Administration and telecommunications companies across the state — when the deal expires in two years.

"The Department of Administration is expected to rebid the BadgerNet network in early 2015. The assumption is that any contract resulting from the bidding will have broadband prices considerably lower than the current BadgerNet contract," said Bob Bocher, state E-rate and broadband support manager with the Department of Public Instruction.

"Nationwide broadband prices have been steadily falling for the past number of years. Any new BadgerNet contract will very likely reflect this fact," Bocher said.

David Cagigal, the Department of Administration's chief information officer, agrees there is room for improvement.

"Our goal is to wire the state for less money and faster speeds. The rates that were previously established may have made sense at the time (2005), but we believe services can be provided at a lower cost in the future as the telecommunications industry makes technological advances — and we're already taking steps in that direction," Cagigal said in a statement.

When the original five-year contract was signed between the telecoms and the Department of Administration, in 2006, the value was $116.8 million, according to state officials. A five-year extension signed in 2011 had a value of $133.8 million, officials said.

The telecoms say they saved taxpayers $70 million when they outbid the cable television industry for the contract in 2005. They also say the network provides more services than just a bare-bones broadband connection, and that it provides Internet security for some of the state's most sensitive data such as police, state agency and student records.

"All of that gets wrapped into the price. There's an enormous amount of behind-the-curtain activity that goes on to make sure we have a very robust, safe, secure network ... as opposed to just getting a link to the Internet," Weller said.

BadgerNet can now carry voice traffic, data and video services used by schools for distance education, according to Esbeck.

"The networks have been combined to substantially reduce overall costs for the state," he said.

National subsidy program

Funding for schools and libraries through the national E-rate program is capped at $2.4 billion. The money is used to lower the out-of-pocket costs for schools and libraries to get Internet access or other broadband services. Higher-poverty or rural institutions get bigger subsidies.

In July, the Federal Communications Commission announced plans to modernize the E-rate program by shifting funding previously used to subsidize landline phone services to broadband.

Now, educational institutions around the country — including in Wisconsin — are asking the FCC to increase funding for E-rate, as well as to address the needs of rural school districts that don't have as many options for fast Internet speeds.

Carol Hughes, director of technology at Carmen Schools of Science & Technology charter schools in Milwaukee, has negotiated contracts with Internet providers for other school districts as a consultant. She says it has been difficult to compare prices between districts for similar bandwidth.

"I always felt like I was getting ripped off," Hughes said. "They lure you in with an initial deal and then increase the rate. Or when you say you need different speeds to different buildings, they might say, 'Well, you can only buy it in this package.'"

Hughes said the amount of negotiation required is akin to haggling with a car dealership.

"It's never, 'This amount of megabits will cost you exactly this much,'" Hughes said.

Donald Childs, superintendent of the Unified School District of Antigo, said his district pays $5,435 a month for broadband under BadgerNet, of which about $4,130 is subsidized.

Antigo has a 100-megabit-per-second connection to its schools in the city and 50-megabit-per-second wireless service to four rural elementary schools. The 50-megabit service is "totally inadequate," Childs said.

"E-rate subsidizes us at 76% because of the poverty level in our district," Childs said. "The cost is excessive, there's no question about it. But we don't have a whole lot of choice in the present regulatory environment."

Under a BadgerNet contract, the charge forone 100-megabit circuit would be $2,480 a month. By comparison, the national average price for the same circuit would be $899, according to Lewis.

Other options

One system that appears to be getting a good broadband deal is the Waukesha School District. It does not use BadgerNet.

Steve Schlomann, chief information and technology officer, said the district uses WiscNet for Internet service. WiscNet is a membership-based nonprofit in Madison that provides high-speed Internet access and other network services to schools, libraries and local governments.

This year, Schlomann said the district bumped up to a 10-gigabit connection from a 1-gigabit connection. Waukesha's rates for service with WiscNet are based on student enrollment, not bandwidth, so its rate did not jump significantly even though service is essentially 10 times faster.

Schlomann said Waukesha's cost for a 1-gigabit connection was $2,200 per month before the E-rate subsidy. For a similar connection, Time Warner charges $3,360 per month, he said.

The 10-gigabit connection this year costs the district $2,500 per month. According to Schlomann, a similar connection with Time Warner would be a whopping $12,188 per month.

The district's E-rate discount is 56%, so the district pays 44% of the cost of the Internet service it's getting now, or $1,100 per month.

More bandwidth makes a big difference in what schools can do with the Internet, according to Schlomann.

"Last spring we were pushing close to our 1-gigabit limit and we were seeing slowdowns at times," he said. "Lost instructional time is a big deal for us."

If students have to wait even 30 seconds for a website or application to work, he said, that adds up to 108 hours of lost instruction time per day for 13,000 students.

Waukesha and other urban or suburban districts have more options for Internet service providers than districts in remote locations. There, BadgerNet may be the only option.

"One of the difficulties is that not everyone has the same choices," said Kurt Kiefer, assistant state superintendent for libraries and technology at the Department of Public Instruction.

Still, given the size of the BadgerNet system, it ought to get more economies of scale from the telecoms and offer schools and libraries better prices, said Evan Marwell, founder and CEO of EducationSuperHighway, a San Francisco-based organization that helps school districts with broadband issues.

BadgerNet's subsidized rates "are a good deal for the schools but not for the taxpayers," Marwell said.