Featured, Greeley, Municipal Broadband, Original Report, Sherrie Peif

Municipal broadband capability already behind industry giants; Fiber not future-proof

Editors Note: Complete Colorado has been investigating issues around municipal broadband debate for the past year. Those stories can be found here.

GREELEY, COLO — As the Northern Colorado city of Greeley considers entering the municipal broadband business, a Comcast representative recently told a public citizens’ advisory board why it isn’t necessary, as his company is investing millions of dollars into new infrastructure, working to shrink the digital divide among low-income residents and investing in the community to keep up with the growing technology.

“We want to be ahead of where the customer demand is,” said Jon Lehmann, who added that the company is preparing to offer faster and faster speeds.

Lehmann is the senior director of government and regulatory affairs for the mountain west region of Comcast. He recently spoke to the small group of Greeley residents who will make a recommendation to the Greeley City Council in March. They will help determine whether the city should move forward in asking Greeley voters to approve bonding to compete against the half-century-old Comcast and other industry leaders such as Century Link and Charter Communications (Spectrum).

That infrastructure could cost for as much as $180 million at a time when Greeley has three of the state’s top-five most dangerous intersections and a call for parking garages in its downtown.

Additionally, the city is expected to ask voters — also in 2020 — to renew a 3.45 percent food tax, renew a .65 of one percent road tax and add a new open space tax, all on the heels of a $395 million bond for Greeley-Evans School District 6.

Comcast’s investment may not be enough, however, as Greeley wants to be the latest to join communities such as Longmont, Fort Collins and Loveland in moving into an industry that has traditionally been reserved for private investors.

“What I’m trying to understand is there are sections in town that don’t have the structure, what sort of motivation is there to upgrade that equipment,” asked advisory board member Bret Naber, who is also the chief information officer for Internet Management and Technology at the University of Northern Colorado.

Municipal broadband has been all the rage along the front range for the past several years and continues to gain traction, in part due to an unproven, public perception that municipalities can supply a superior service at a lesser cost. Voters have approved millions in new debt to take on a decades-old private industry based on the idea that government-run internet service will be faster, more reliable and cheaper. Voters are told the economic development of the city will improve, and that the city will be able to partner with its anchor institutions to offer super-fast speeds and improve their services.

For some communities, such as Fort Collins, Loveland and Longmont —  where “NextLight” is celebrating its fifth year — the answer has been to go it alone by developing, installing and operating a new utility all on their own, using other city-run utilities to back the multi-million dollar investments. Those communities all operate their own electric utility, so their municipal broadband bonds are guaranteed against their electric enterprise revenues. If the broadband venture fails, electric customers will see their rates increase.

For Greeley, it’s different. Without a city-run utility to back the bonds, Greeley’s investment could be the riskiest of all the communities if it chooses to do it on its own. Even laying the infrastructure in a private-public partnership could cost more than $150 million.

Although city leaders, such as Mayor John Gates, have said they will not take the route Loveland City Council did and bond the money without asking voters (enterprise funds are exempt from voter approval requirements under the Taxpayer’s Bill of Rights), the decision on whether to forgo the plan altogether is the bigger decision, as opponents argue its not a proper role of government and the subject is too complicated to educate voters.

Much of Lehmann’s presentation centered around one of the biggest reasons cities say they believe they need their own municipal broadband — closing the digital divide.

Internet Essentials:

Lehmann explained at length Comcast’s “Internet Essentials” program, which supplies internet service at a reduced cost to residents who are below the federal poverty standards.

During the 2019 Greeley City Council election race, candidates used the promise of municipal broadband as a platform, other city officials have used closing the digital divide as an excuse for municipal broadband and some on the citizen committee continued that rhetoric despite Comcast numbers that showed Greeley is the fifth largest benefactor in Colorado of Internet Essentials.

Internet Essentials offers service to anyone who is on any kind of federal assistance such as free or reduced school lunches, Medicaid, housing vouchers, SNAP or veteran’s assistance, to name a few. In contrast, Longmont’s NextLight is free, but only to students in the Saint Vrain School District on free or reduced lunches. Fort Collins Connexion is available to anyone who qualifies for heating assistance through the state’s LEAP program, but the cost is $19.95. No programs for Loveland could be found.

The U.S. Census Bureau population estimates for 2019 for Greeley are 107,000. The 2018 American Community Survey, put out by the U.S. Census Bureau, reports that about 17.1 percent of Greeley residents (18,300) are living in poverty.

Lehmann said Comcast has nearly 14,000 residents (more than 3,000 homes) — more than 75 percent of those eligible — signed up for the $10 per month service. The company also sells computers to those eligible for less than $150 and offers multiple free educational training about internet safety and security. They plan to work with census partners in 2020 to increase the number of homes taking advantage of the service.

“Our participation increases every single year as more people are aware of the program,” (this year to last year participation was up 140 percent) Lehmann said. “The more there is education about safety online, about the relevancy of why internet is relevant to your life.”

In Colorado, Internet Essentials connects more than 300,000 residents.

“The strategy is to collapse that divide,” Lehmann said. “We are the only company that has connected 8 million Americans that were not connected before. So long-term strategy? Connect everybody. It’s not just about a line into the house. It’s not just about connecting to the internet.”

Lehmann’s presentation was in contrast to most of the reasons city officials across Colorado have used to justify government involvement in private industry.

Economic enhancement:

For Greeley, Lehmann said Comcast is working to increase business opportunities but admitted it has been troublesome in the past for a couple of reasons.

“There are businesses that we may not get to right now,” Lehmann said. “If there are railroads or other right-of-way issues, that can be very expensive and very problematic.”

The businesses in Greeley that have complained most about their services to the city are near the railroad in downtown Greeley.

“But we have changed the way we look at building out for businesses,” Lehmann said, adding the company is open to partnerships with the city and business districts along with streamlining the permitting with cities.

“Maybe there’s a partnership way that we can open up the trench and all of us drop in at the same time versus us not communicating, and you open the trench and (only one company goes in) and then you close the trench and now we have to open it back up. Anyway that would save everybody money, we are open to partnering in that way.”

Lehmann also pointed out that Comcast has begun offering internet service to non-profits at a 30 percent discount.

Longmont officials have yet to point to one business that has moved into Longmont specifically because NextLight is available. In fact, business rates for NextLight are much higher than residential rates for lesser speeds, and for its 1 gigabyte service, much higher than their private competitors in many cases.

Cheaper and more stable residential rates:

Currently, Comcast offers 1-gigabyte download with 30-megabyte upload to everyone serviceable in Greeley for $70 a month internet-only, Lehmann said. That does not include modem rental, but it does include a free tv box that will allow customers to access other apps such as Netflix and YouTube on their television.

Committee members questioned the company’s marketing of low prices that increase after the contract period is up, but the industry insiders said guaranteed pricing in the highly complicated and competitive business is not possible.

“Video increases have a lot to do with nothing we can control, FOX, CBS, ESPN, they renegotiate what we call carriage agreements in that they want more money,” Lehmann said. “So if we want to put them on our system then we need to pay them more money and that is where the packages go up or there is an annual price increase.”

Gabe Santos from Summit Strategies, who was at the meeting representing Comcast, said putting a future price on the internet is not simple either. Santos’ perspective came as a former Longmont city council member. Santos was on the Longmont council when NextLight was started. He pointed out that residents who got in on the start-up pricing will not get to stay at that price forever.

“If you’re talking internet, it’s hard to say it’s going to be this price at this point,” Santos said. “Having had to raise utility rates — seems like every year in Longmont with the government — it is like with any business, there are costs dealing with infrastructure that increase over time. So of course, rates are going to increase. There can’t be just a set price of $49.99 for internet. Eventually, that price will go up for charter members. And right now, if you didn’t get in on that charter rate, it’s almost $70. And that’s just internet.”

Santos also pointed out that municipal broadband subscribers still have to pay the other costs that are common in the industry such as modem rentals, and increased prices are out of the hands of the internet/video provider, using recent issues with Altitude Sports Network and its broadcast of the Colorado Avalanche as an example.

“Jon’s right. It’s not Comcast’s fault,” Santos said. “They want more money. And unfortunately, when they want more money it’s passed on to the consumer.”

Lori Sherwood, project manager for Greeley’s broadband venture also agreed with pricing issues.

“I can tell you, I have negotiated some of those retransmission agreements and that is 100 percent right,” Sherwood said. “You have no leverage in rate negotiation, and they go up exponentially every year.”

Increased service area:

“I think there is also the idea that we assume there is a challenge where there are places – physical locations in Greeley — that maybe don’t have the infrastructure that they need,” Naber said. “We’re trying to chase this down because part of our initiative is to make sure everyone has the infrastructure they need.”

Lehmann said Comcast is available to nearly 99 percent of all Greeley addresses already. All those addresses are also capable of the 1 gigabyte service and will be capable of getting any upgrades in the future.

The only addresses Lehmann said may not be eligible for service are in new developments on the north end of Greeley where the developer laid his own conduit and fiber with the hopes of leasing that out to Comcast.

The city has similar plans to use leasing as a revenue source to pay back the bonds and to save the city from ripping up the streets multiple times for every company when they are ready to expand.

Lehmann said that is not a possibility.

“We use our own system,” Lehmann said. “And there are very good reasons for that. So, we won’t lease that line. So, when they close up all the trench, pave the roads, sell the houses, and residents come in and they are (unable to get Comcast).”

Lehmann said Comcast wants control over security and safety.

“In an open access system, if there are seven providers using the same line, and one provider gets 8,000 or 500 new customers overnight and drops it on the line, everybody slows down, we’ll get complaints, and we don’t know what happened, and we don’t know how to fix it,” he said. “On the privacy side, there are thousands and thousands of hackers, when we own our own line our own system, we have tens of thousands of employees focused on security, protecting our network, protecting people’s data. We do not sell our customer’s information. We don’t track what a customer does online. We don’t even have that information.”

Comcast’s business model for owning its own lines is similar to Verizon Wireless. At a recent 5G information session in Denver, Verizon officials told Complete Colorado that it will not lease municipal-owned fiber lines either. Verizon is investing billions in new conduit and fiber infrastructure across the country to be able to launch 5G, which will be in direct competition with fiber.

“We are constantly investing in our network,” Lehmann said. “Our system is ubiquitous, there aren’t portions of our system where you can (only get slower speeds). Our entire system is 1G down to every single resident. … Anywhere that anyone can get Comcast you can get a Gig.”

Lehmann added that homes that are within a half-mile of a Comcast fiber line are also eligible for 2-gigabyte up and down — already exceeding what municipal broadband communities are offering — and Comcast’s system is capable of as much as 6-gigabyte up and down, Comcast is just not offering the service yet.

“We are looking at 10-gigabyte (up and down) to all residences in the near future,” he said. “We double our network capacity about every 18-24 months.”

Overall, Lehmann pointed out that Comcast pumps a lot of money into the Greeley economy — to the tune of more than $1 million yearly in franchise fees and more than $600,000 year in other fees and taxes — taxes and fees that would diminish with municipal broadband.

The bottom line, he said, is no one knows what the future hold, but Comcast has weathered the technology changes because of the hundreds of thousands of employees it has dedicated to the industry.

“There is this perception that fiber is futureproof,” Lehmann, “It’s unclear to me what the future is. Did anybody see this happening 10 years ago? Who knows where everything is going? But we’ve been around 50 years, our goal is to be around another 50.”

Comments

comments

Comments are closed.