Energy, Utilities & Water  August 20, 2014

More cities eye broadband bandwagon

High-speed networks would compete with private-sector offerings

Local governments in the Boulder Valley and Northern Colorado are looking at going head-to-head with private Internet service providers to build super-fast broadband networks they say are critical to their communities’ economic health and that private companies aren’t providing.

But these governments’ efforts may do even more, spurring private companies to offer faster service at lower prices in places where cities also are in the game.

Comcast, for instance, promotes lower pricing for its fastest tier of Internet service in cities around the nation, such as Chattanooga, Tenn., and Burlington, Vt., where it competes against municipal broadband networks.

SPONSORED CONTENT

Business Cares: March 2024

WomenGive, a program of United Way of Larimer County, was started in Larimer County in 2006 as an opportunity for women in our community to come together to help other women.

Longmont is building out its own fiber-based broadband network that will offer 1-gigabit data speeds to every home and business in town. Fort Collins is exploring the value of such a publicly owned network. Boulder will ask voters in November to remove legislative barriers put in place by the state that keep municipalities from offering telecommunications services without special approval from voters.

Detractors of municipal broadband say launching such a network in hopes of disrupting the market is a gamble given the risks involved for local taxpayers if the new utility doesn’t end up supporting itself. Still, the idea of injecting more competition into the marketplace is a difficult one to ignore for many cities, especially when they believe they can bring faster speeds and lower prices to their communities sooner rather than later.

Based on prices for unbundled Internet services on Comcast’s website, the company’s highest tier of service offered locally in such cities as Longmont, Fort Collins and Denver is 105 megabits per second for $115 per month. But in Chattanooga, where a successful municipal broadband network offering 1-gig speeds was launched five years ago, Comcast offers that 105-MB service for $90 per month. In Burlington, where the municipal broadband utility has been plagued by mismanagement and growing debt, Comcast touts its 105-MB service for $60 per month.

Municipal broadband advocates admit that finding a cause-and-effect relationship between private ISPs’ location and pricing can be difficult to track. Cindy Parsons, vice president for public relations for Comcast in Denver, cautions that promotional rates for new customers often change from city to city. In Colorado, where the idea of municipal broadband is just starting to gain traction, Parsons said Comcast has increased speeds 13 times in the past 12 years, doubling the capacity of its network every 18 months.

“Regarding our investment in broadband specifically, we have fiber at the core of our network,” Parsons said, “and for the past decade we have been extending it deeper into neighborhoods and closer to homes.”

For a growing number of cities, however, those changes haven’t come fast enough.

Tom Roiniotis, general manager for Longmont’s electric and communications utility, said that aside from faster speeds and lower prices, the city’s push to build out its own fiber network also has been driven by the desire to attract and retain primary employers in an area where several growing communities are competing to lure businesses.

Roiniotis said Longmont talked with Comcast and CenturyLink about when they might provide similar service to the city. He said the city never got the impression that such service for the city was a high priority for the ISPs. Instead, Longmont voters last fall authorized the city to issue up to $45 million in revenue bonds to fund the new network. 

The city ultimately issued $40.3 million in bonds, which it plans to pay back with broadband revenues over the next 15 years. The network is being built out in six stages, with the entire city expected to have access to the service by 2017. Residents who sign up for the service as soon as it becomes available in their area will be able to buy 1-gig service –10 times faster than Comcast’s 105-MB service and 25 times faster than CenturyLink’s 40-MB service – at a charter members rate of $50 per month.

“If Comcast and CenturyLink were going to build a network like this here in the city, we wouldn’t have done it,” Roiniotis said.

CenturyLink made a splash earlier this month by announcing plans to start offering 1-gig speeds in much of Denver as well as the “majority” of new developments as they’re built along the Front Range. A CenturyLink spokesperson said The Trails at Timberline and Buckinghorse Townhomes neighborhoods in Fort Collins, as well as the Solana 3100 Pearl apartments in Boulder, are examples of local areas that would have access to the 1-gig service, for which CenturyLink will charge about $150 per month unbundled or about $80 per month if bundled with other services such as phone or DirecTV.

However, Scott Russell, CenturyLink general manager for the Denver metro area, said he couldn’t say when that type of service would be available in older areas. Major infrastructure investment, he said, is easier to provide for new construction than for established neighborhoods.

Russell said the potential presence of municipal broadband wouldn’t likely have a big effect on CenturyLink’s pricing or services. Because of the high fixed costs involved, though, economies of scale absolutely would affect which areas are upgraded first, meaning much of the company’s focus will be on Denver in the near term.

“Based on how the market responds, we’re going to continue to evaluate where we go from here,” Russell said. “Our strategy is always about going where we believe the customer demand is at. For this first big step, we believe in the center part of Denver there is opportunity to deploy at scale.”

Comcast likewise is taking a market-demand approach to upgrades.

As with Longmont, Fort Collins and Boulder aren’t sure what that means for them. While Boulder is waiting to see what voters decide in November before it does any in-depth study into the costs and benefits of providing municipal broadband, Fort Collins is planning to employ such studies next year before moving forward with a vote.

Fort Collins city manager Darin Atteberry will present his recommended 2015 budget to the city council next month. That budget includes $300,000 that would go toward evaluating case studies of other municipal broadband utilities, gathering feedback from the community, weighing different models and exploring what types of public-private partnerships might be available with such providers as Comcast and CenturyLink.

Once all of the information is gathered, Atteberry said, if it seems municipal broadband would be beneficial, Fort Collins then would ask its voters for permission to provide such services. That vote, he said, could come in 2015 but would be more likely in 2016.

“We think it’s going to be important to go out and see what others have done and learn from those lessons,” Atteberry said.

Close to 100 communities nationwide have publicly owned fiber-to-the-home networks reaching most or all of their communities, according the Minneapolis-based Institute for Local Self-Reliance. Those networks have had varying degrees of success.

Private providers question how fair it is for municipalities to be in competition with them, particularly when cities can charge the ISPs for rights of way and have say over some of the regulation that goes into such franchise agreements. If municipalities get into the business, they say, it should be limited to areas not served by private providers.

Charles Davidson and Michael Santorelli, directors at The Advanced Communications Law & Policy Institute at New York Law School, published a paper in June outlining many of the risks involved with municipal broadband.

Besides putting taxpayers and cities’ credit ratings at risk if the efforts go south as some have, they also assert that a wide variety of factors such as tax breaks have much more influence on businesses’ decisions about where to locate than access to ultra-fast Internet does. They write that publicly owned broadband utilities could upset the free market.

“Introducing a ‘competitor’ with a perceived (or actual) competitive advantage because of its affiliation with government could chill or drive away investment, slow innovation, and undermine the very market forces that have fostered a vibrantly competitive environment in this space,” Davidson and Santorelli wrote. 

But Danna Bailey, a spokesperson for Chattanooga’s broadband utility, said the private ISPs in town – Comcast and AT&T – did the opposite when the city launched its broadband services. 

When Comcast launched its new Xfinity platform in 2010, Chattanooga was one of the initial 10 cities to get the new bells and whistles alongside markets such as Boston, Philadelphia, Chicago, Washington and Seattle. Bailey said price increases from the private ISPs also suddenly halted about the time of Chattanooga’s municipal launch.

“They did step up their game,” Bailey said.

Of 170,000 total possible customers in the utility’s service area, Chattanooga has about 57,000 residential and 4,500 business customers.

Longmont is hoping it can snare a similar proportion of the market. Roiniotis said the city’s goal is to have 34 percent market share within five years, a figure that would generate millions per year in revenue.

As for competition, Longmont will provide phone service but not cable television, giving the ISPs an advantage in that regard. But in addition to the costs it would have added for the city, Roiniotis said one reason Longmont decided not to provide television service was because it sees it as a declining industry, with many viewers now watching their favorite shows over the Internet. Before it decided what services to offer, the city did a survey of the community about residents’ willingness to buy standalone Internet service.

“Based upon the data we got,” Roiniotis said, “we feel pretty confident that the business plan will work here.”

Joshua Lindenstein can be reached at 303-630-1943, 970-416-7343 or jlindenstein@bizwestmedia.com. Follow him on Twitter at @joshlindenstein.

High-speed networks would compete with private-sector offerings

Local governments in the Boulder Valley and Northern Colorado are looking at going head-to-head with private Internet service providers to build super-fast broadband networks they say are critical to their communities’ economic health and that private companies aren’t providing.

But these governments’ efforts may do even more, spurring private companies to offer faster service at lower prices in places where cities also are in the game.

Comcast, for instance, promotes lower pricing for its fastest tier of Internet service in cities around the nation, such as Chattanooga, Tenn., and…

Sign up for BizWest Daily Alerts