Exclusives, Featured, Longmont, Municipal Broadband, Sherrie Peif

Municipal broadband success rate still questionable nearly five years after Longmont set the stage

LONGMONT — Nearly five years after Longmont launched NextLight, its own municipal broadband utility enterprise, the numbers continue to create questions about whether local governments should risk millions of dollars of taxpayer money on ever-changing internet technology.

NextLight has been lauded by many as the best example of what municipal broadband should look like, and compared to other cities around Colorado, it does have the least risk to taxpayers. However, in the fast-paced changing world of technology, successfully paying off its large debt to build a fiber optic network that brought up to 1-gigabyte internet service to residents and businesses, remains to be seen.

NextLight launched in 2014 as a utility enterprise, funded by $45 million in bonds with a guarantee for payback through the city’s electricity utility. Longmont was able to minimize the cost because much of its 49 square miles of infrastructure was already in place since the 1990s, and costs to lay fiber-optic network lines were much cheaper five years ago.

By comparison, in 2017, Fort Collins voters (46.5 square miles) approved $145 million in electric utility-backed funding, while last year, Loveland City Council (74 square miles) approved $95 million in bonds without voter approval.

However, in all cases, if the broadband utility fails, electric customers in these cities would see an immediate increase in their rates, regardless of whether they were broadband subscribers. In the case of Longmont, it didn’t take long to have to borrow more money because it quickly went over the budget it took to voters by about $7 million.

Complete Colorado has been following the NextLight experiment and recently posed more than a dozen questions to the city to determine how well the utility is doing.

NextLight public relations and marketing specialist, Scott Rochat, boasts that the utility’s residential subscription rate to date is at 18,700 residential subscribers out of a potential market of 37,000 residential customers. Of those residential customers, 16,500 signed up as charter members, paying just $49.95 per month.

Anyone who didn’t get in on the initial charter member offering doesn’t see a price difference when compared to private sector giants Comcast and Century Link.

To become a charter member, residents must sign up in the first three months of service to their existing neighborhood or the first month in a new development. That charter member cost is marketed as never increasing if there is continuous service. However, the agreement says Longmont reserves the right to change the qualifications, restrictions and pricing at any time.

Additionally, the agreement allows Longmont full discretion to arbitrarily determine what is excessive internet use. There is no contract required for internet service, but contracts may be signed for telephone service to lock in lower prices.

New residents to an already established area do not qualify for the charter member price unless they buy the property and immediately transfer service.

A much smaller fraction of subscribers (2,500) are paying either $59.95 per month or $69.95 per month, dependent on how they signed up and how long they’ve had the service. When asked if the city is concerned about subscription rate at the higher cost being less appealing, and if the utility would remain sustainable long-term with the majority of customers signed up under the charter member pricing of $49.95, Rochat did not respond.

Instead, he referred Complete Colorado to a public document that describes how the charter program works.

Although Longmont marketed its service as more affordable to its residents than private sector prices, the standard $70 monthly cost is similar to subscriptions through Century Link or Comcast. But unlike Comcast, NextLight does nforot offer television services.  This makes switching for some who don’t qualify for the lower price more of a hassle that provides no benefit, soon-to-be Longmont resident Mindy McBride said.

McBride who is relocating to Longmont from Denver said she thought about switching service, but when she called the utility, she was told she didn’t qualify.

“I looked into it,” she said. “But after I talked to them, the question for me was, why would I switch and pay Longmont $70 per month for Internet, when I can just move my Xfinity service? I pay them $100 a month, but that comes with television. I can’t subscribe though Xfinity or all the other services I would need to make up for the lack of television for less than $30, and I’d be paying multiple bills.”

For more on “cutting the cord” from a cable provider click here

Rochat was vague about the number of “serviceable” homes in Longmont. There are approximately 37,000 residences on the electric utility, and 35,000 of those are serviceable for Internet, Rochat said.

Although Longmont marketed the ability to deliver 1 gig service to all residents, and Rochat says the service is citywide, many apartment dwellings are still without access.

“This does not adjust for master meters, where the data cannot be easily estimated,” Rochat said, adding subscription rates are not based on actual serviceable residences, but residences where access has been granted.

Rochat said the total number of actual apartment units (not complexes) in Longmont was not available, but said about 8,400 individual apartment units have access to the service. He also said NextLight does not have exclusive authority to act as a preferred provider for any complex to date.

“Because of the need for access agreements, not all of these are serviceable,” Rochat said. “This is important because, per industry standard, ISP take rates are calculated based on the total number of serviceable homes/businesses in an area.”

Businesses were a big part of the marketing efforts to sell the bonds to voters. To date, Rochat says 1,000 of 2,600 commercial customers are signed on to business service with the city.

Rochat wouldn’t address directly the average costs for business signed up on the service, but again supplied a link to a rate card. That card shows monthly costs for 1 gigabyte of business service are near $1,100.

One of the city’s main selling points to voters to approve the bond was an economic boost by businesses relocating to the city specifically to access NextLight.

However, it is unknown if businesses other than small, locally owned shops are subscribing to NextLight. Larger, corporate and chain-owned businesses usually have company-wide contracts with larger, nationwide providers to maintain consistency.

When asked if any businesses had relocated to Longmont based on the availability of municipal broadband, Rochat could only point to one report of a business moving to Longmont. The main reason for that move, the owner told another media outlet, was because it was closer to where employees lived and they “needed the space, and I wanted that fiber.”

NextLight will continue to be watched closely by everyone in the industry as more and more communities look at whether to make the same investment, and the retention rate will play a big role in that.

As of now, NextLight reports a large cancelation rate. Over the first four and a half years, it has lost 20 percent of its residential customers (3,700) and 11 percent of its business customers (110).

Rochat says most of those (3,400 and 100, respectively) are moves out of the service area.  Although he admits that the reason for leaving is simply a question asked at the time of disconnect and is dependent on self-reporting.

He does not appear to be bothered by it, however.

“Like many communities, Longmont sees a steady influx and outgo of businesses, especially in the small business community,” Rochat said. “NextLight has approximately 19,700 subscribers and continues to climb.”

 

 

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