community broadband networks

In January, Longmont Power and Communications (LPC) announced they would begin connecting businesses located within 500 feet of the existing network. As we reported, local businesses were chomping at the bit to get hooked up and enjoy the high-speed next generation network. Even without efforts at marketing or advertising, more businesses have added themselves to the queue. LPC will present the formal business plan for expanding the network to the City Council on May 14th. Tony Kindelspire recently reported on the race to get on LPC's network in the Longmont Times-Call:

"We are bringing to council a business plan to build out all of Longmont," [Vince] Jordan, [Broadband Services Manager], said. "It's the whole enchilada."

The fact that there has so far been only limited rollout is due to economics. Currently, the installations are being paid for from a reserve fund that Longmont Power has built up over the years leasing portions of its fiber-optic loop to entities such as Longmont United Hospital and a third-party provider that services the school district. Those leases bring in about $250,000 annually, Jordan said.

For 2013, the Longmont City Council authorized LPC to use $375,000 of that reserve fund to begin connecting businesses and residents to the loop.

This model works, but does not connect everyone fast enough for their liking:

To expedite the build-out, extra up-front dollars will have to be allocated, but where those dollars will come from is yet to be determined, Jordan said, adding that ultimately, the decision will lie with City Council.

Right now, Longmont will cover the initial cost of connecting subscribers except in cases of extraordinarily high cost cases. If it would cost $10,000 to install but the payback to the utility in 2.5 years is only $6,000, a customer would have to cover the $4,000 difference presently. While there are over 1,300 businesses with in 500 feet of the network, connection costs vary depending on proximity to roads, structures, and geography.

Jordan notes LPC's first priority is to boost economic development:

"We're really focused on economic development, so the ones that will put the most dollars (they save on broadband costs) back into their business, those are the ones we're working with first."

Businesses and organizations that are on the network appreciate fast symmetrical service, affordability, and the fact that they get service from the city rather than a commercial provider:

"I emailed Vince asking when I could get on," said Michael Jurey, network/telecommunication specialist for Longmont Clinic. "Luckily, the loop ran right by Longmont Clinic. On our side of the street no less."

Jurey said the city's network is three times faster than the speeds the clinic got before at a cost savings of $1,600 a month.

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"We use it for two reasons," said one of the other three owners [of the Pumphouse, a restaurant and brewpub in Longmont], Dave D'Epagnier. "No. 1 is our business functions -- we process credit cards with it ... just normal day-to-day business activities. Plus, it's a big place, and we could have 50 customers that are using the broadband all at once."

The other thing that attracted him and the other owners was that the business was finally able to tap into the city-owned network after so many years of having to buy high-speed service from a commercial provider. And that is all thanks to the voters, D'Epagnier said.

According to a Scott Rochat article in the Times-Call, the business plan for a FTTH network to anyone in town is possible within three years with a $41 million investment. That plan eliminates the usual $500 - $15,000 hook-up fee:

 "We have to be competitive," said Tom Roiniotis, director of LPC. "None of the incumbents charge an install fee, so we won't as well."

Uptown Services prepared the business plan and included residential fees from $39.95 for 10 Mbps to $99.95 for 100 Mbps for Internet. Residential Internet would be symmetrical. Business rates would range from $49.95 for 20 Mbps/5 Mbps to $499.95 for 250 Mbps symmetrical.

If LPC wants to pursue a triple play offering, Uptown estimates it would cost another $6 million. At this point, LPC does not consider triple play a good investment:

"The young generation that's active now, they don't watch TV in the conventional way," Jordan said. At a recent presentation, he said, when he asked a college student how often he watched traditional scheduled TV programming, the response was "Never."

…

According to a survey conducted for the business plan, about 68 percent of respondents said they would either definitely or probably switch to the city for Internet service if it were cheaper than existing services. Only about 20 percent said they had a "triple play" or wanted it.

Uptown's estimates were based on a take rate of 35% and the business plan estimates a broadband utility to be in the black within four years and to pay for itself in ten years.

Possible funding mechanisms include:

• Certificates of participation, using city property as collateral
• A bond issue backed by sales tax
• A bond issue backed by electrical revenue 

Here is a quick video from LPC, as technicians install connections at the Pumphouse:

Bartow, Florida, located in Polk County near the center of the state, is considering a FTTH network for the community's 17,000 residents. At a recent City Commission meeting, members decided to put city administrators on task and develop a plan to eventually offer triple play services to residents.

Suzie Schottelkotte reported on the initiative for The Ledger.com, quoting Mayor Leo Longworth, who commented, "I think the residents are ready for it and it's something that's needed."

The City has an existing 100 mile fiber network and offers connections to some local businesses. Government and schools also use the network. At the meeting, city commissioners heard from a fiber optic consulting firm that estimated an expansion to households at $3.3 million for capital costs and $2.5 million to run the network during the startup years until the network breaks even. 

Comcast now serves the community through its cable television franchise agreement and is a source of constituent discontent:

"Without discrediting anybody, we just don't have the quality," [Mayor Longworth] said.

The Polk County Democrat also covered the discussion. Steve Steiner referred to the Mayor's comments about the private sector:

[Mayor] Long reminded commissioners that they as well as city staffers and the general public present, are familiar with the problems experienced with the current broadband provider. Long also expressed the doubt another provider would be willing to come to Bartow to install and upgrade the current system in place. The number of businesses and the size of the population does not provide any true incentive.

The Florida Cable Telecommunications Association (lobbyists for the cable industry) responded to the initiative in a predictable fashion. From the Ledger article:

"Before the city fathers take the taxpayers' money and move in this direction, they had better understand what they're getting into," he said. "It's going to be a long time before they're making money. How long do they want to lose money? — that's the real question."

The network generated about $155,000 in revenue for the city in 2012 and both stories indicate the desire to generate revenue as the main impetus. Currently, net income from the city electric department account for about half of Bartow's general fund. Community leaders hope entering the telecommunications industry will diversify the revenue source.

While potential revenue can be a factor, communities tend to primarily focus on expanding connectivity for quality of life, affordability, educational, and economic development. 

Bartow has an advantage because it already possesses an existing network that contributes to local economic development. Students are already connected with city resources, and local government is taking advantage of the network. The leaders and staff at Bartow have a higher level of expertise than communities who start from scratch.

While the commission seemed positive about the plan, both reporters describe a healthy dose of caution when moving forward. From the Ledger article:

"This can be done," [City Manager George Long] told commissioners during Wednesday's workshop. "There are very few negatives here. We can do it, but it has to be done properly."

Mount Vernon, Washington, started building their own fiber optic network in 1995 and over the past 18 years have continued to add incrementally. While the network started as a way to connect a few municipal facilities, it has since expanded to nearby Burlington and the Port of Skagit. The network now serves government, schools, hospitals and clinics, and a broad range of businesses in the area.

We spoke with community leaders from Mount Vernon for our 38th episode of the Broadband Bits podcast. Mount Vernon owns the network and operates it out of the Information Systems office.

The network required no borrowing or bonding because initial funding came from a state Community and Economic Revitalization Board (CERB) grant. Since then, Mount Vernon has used revenue from the network and creative cost sharing with partners to expand throughout the city. When expanding into Burlington and the Port of Skagit in 2008, city leaders received a county sales tax grant to fund deployment.

The Mount Vernon School District became a partner early in the evolution of the network. According to Kim Kleppe, Information Services Director, K-12 schools do not pay a monthly fee to receive up to 1 gig of capacity for their 10 facilities. He estimates the current costs of a dark fiber connection for one facility at $700 per month. Total savings are astronomical, allowing the schools to dedicate significant dollars toward other expenses.

Mount Vernon city government saves over $100,000 per year and nearby Burlington saves over $52,000. The network has never been in debt and maintains a reserve.

Mount Vernon's network is an open access model on which ISPs serve customers via the city's infrastructure. Subscribers pay a one time fee to the city to be connected. Onging revenue comes from the ISPs, who pay to the city a percentage of what they collect in customer connectivity fees. Currently, eight different providers offer services via the Mount Vernon network, providing ample competition.

Like other communities we see that choose the open access model, Mount Vernon acknowledges that they could take the next step and provide retail services but they choose not to. Kleppe tells us that Mount Vernon wants to let the private sector do what it does best - provide retail services - while the city offers the infrastructure.

Healthcare, aerospace, engineering, banking, technology, and legal data services are a few high bandwidth industries with locations on the network. Jana Hansen, Community and Economic Devlopment Director, believes the fiber optic network is a key element in bringing new companies to Mount Vernon. Hansen decribes the network in the Port of Skagit as a "tremendous success" and notes that businesses have re-located from Seattle to the Skagit Valley. While those businesses often cite quality of life as a driving factor, Hansen believes Mount Vernon, Burlington, or the Valley would not have been considered without the fiber network.

Jana Hansen shared these thoughts from a business that moved to Mount Vernon from Seattle:

As a Seattle law firm with an integrated information security business for the past twelve years, our Pioneer Square office lease term was ending, and we needed new, larger, space. As we began the process of evaluating our options, we came to realize the significance of the fact that our customers are national, or international, and that less than ten percent of our revenues for the past three years came from Washington. This meant that as far as our customers were concerned, we could relocate our offices anywhere, provided that our new location met three important criteria: (1) access to tech-savvy workforce pool; (2) dependable high-speed business-quality internet; and (3) reasonable proximity to air transportation.

Skagit County, and Mount Vernon in particular, meet and exceed all of these. MV’s location astride I-5 means that our employees can live from Bellingham to Everett and still face a much shorter, and more comfortable, commute than if they lived in Bellevue and travelled to downtown Seattle during rush hour. This huge area is filled with energetic, technically sophisticated potential employees who appreciate the opportunity to avoid the morning grind. Secondly, Mount Vernon’s ahead-of-its-time fiber ring means affordable, dependable internet access of the highest quality. We are accustomed to paying thousands of dollars per month for bandwidth. Not only will we pay less in MV (for more capacity), but fiber optic circuits are more reliable and flexible than the older data lines we have been required to use in Seattle. Finally, the improvements to conveniently located Bellingham’s airport over the past few years have opened up routes all over the country, and more are on the way.

I suppose there are other places that would also meet these three criteria, but none of them match the most important reason of all that we are moving to Mount Vernon: quality of life. No traffic concerns, affordable cost of living and housing, great schools, proximity to major metropolitan areas (Seattle and Vancouver) without the negative points, equal proximity to all that outdoors and nature offer, and, of course, friendly and helpful people who are a pleasure to interact with. We couldn’t imagine moving anywhere else.

For these reasons, we’ll be opening our offices in Mount Vernon this Spring.

Update: Some have asked (rightfully so) for more information about the grants involved in building this network. IS Director Kim Kleppe sent this to Christopher to explain more about the financing:

We had two grants helping to fund various parts of the project. The first one was actually 2001 for $500,000 and the second one in 2005 we received $367,506. Other than that we had a lot of partnerships to help extend and push out various demarcation points and this would be hard to calculate. A lot of the areas we built around were built based on where are facilities were - for example our wastewater pump stations which really covered a lot of area which was partially funded by that utility and where other partners like the Schools, County and Hospital sites were located sharing costs for the build. It was built based on both vision for needs for both public and private needs and is still a growing process, but no debt was incurred and not much of a budget to work with.

The lesson we take away from this is that most communities have many opportunities to make investments like this. Local officials need to be creative and determined. Opportunities rarely surface themselves, they are created by building relationships and coordinating infrastructure efforts.

As we monitored Georgia's HB 282, a bill to limit the capacity of local governments to invest in Internet networks that spur economic development, we learned of many existing networks that have helped communities to thrive.

Brian Thompson, Director of Electric and Telecommunications in Monroe took some time to tell us a little about their city network.  Located in the north central section of Georgia, with a population of 13,000, the network now offers triple play services to residents and businesses. Its network started in the 1970s with a municipal cable tv network. Today, the network is a hybrid with fiber having been added as an expansion to its cable network.

Monroe's investment in its fiber began as a way to improve connections for education. The Walton County School District could not find a private provider willing to collaborate on an affordable network between school facilities. The city took on the challenge and built a point-to-point network which the School District paid for in 10 years. In the mean time, the city expanded its network in other areas. Now, the Walton County Schools have gig service between facilities and to the Internet. The District pays only $500 per month for a service that would cost five times more from a private provider.

Thompson also confirmed what we hear from other communities with publicly owned networks - prices for business and residential services are very competitive and service is superior. He notes that customers often express appreciation for local representatives, rather than dealing with a huge bureaucracy like those at Verizon or AT&T. New connections can be created in a matter of hours or days instead of weeks.

Residential service for Internet access from MonroeAccess.Net includes affordable basic service (1 Mbps / 256 Kbps) for $21.95 per month. Two faster tiers include $34.95 (6 Mbps / 512 Kbps) and $44.95 (15 Mbps / 1 Mbps). Cable tv rates vary from $15.50 to $62.95 per month and residential phone service starts at $29.95 per month. Thompson notes that, when Monroe added phone service, rates dropped for every one regardless of carrier. 

There are over 100 fiber customers and the network has been critical for economic security. T1 connections for businesses used to go for $1,000 per month; now higher capacity connections cost $250. Notable customers include Minerva, a beauty salon supplier with a large showroom and distribution center in Minerva. The multi-million dollar salon equipment company has headquarters in China but has nearly 30,000 customers in the U.S. Company owners required a fiber connection to communicate with the facility in real time. Monroe was happy to oblige.

Monroe is also home to a Hitachi plant that makes parts for several auto companies. The fiber network allows the plant to communicate efficiently with the Hitachi headquarters located in Harrodsburg, Kentucky. The plant employs about 250 people.

Monroe never borrowed or bonded to build out its network. Thompson tells us the network has always progressed slowly and community leaders leverage partnerships with local interests along the way. The city used its capital investment fund for initial construction and continues to expand slowly with revenue obtained from offering services. Thompson tells us that their approach works for Monroe and shudders at the thought of legislators in Atlanta claiming otherwise.

Monroe's network travels well outside the city limits, over a nine county area, and HB 282 could have put an end to its expansion. Fortunately the bill was defeated on the House floor and for at least one more year, this community does not have to worry that the state will revoke its power to encourage economic development locally.