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

Greeley focus group: Municipal Broadband costly and risky; not likely to recommend

GREELEY— It appears Greeley is on its way to saying no to becoming its own Internet Service Provider (ISP). But whether the fastest-growing community in Northern Colorado finds another way to enter the municipal broadband market remains to be seen.

The eight-member focus group made up of Greeley residents and business owners have made it clear they will not recommend a stand-alone ISP enterprise venture to the Greeley City Council when it makes its presentation in March.

In fact, it’s likely they may not make any recommendation at all for a 2020 ballot question, as the committee continues to have ongoing questions about the viability of the city entering into what some experts say is a highly volatile market.

“The tenor and tone of the entire conversation this group has had has been very conservative in the amount of financial risk we are willing to undertake,” said Trent Howell, a teacher at Aims Community College. “We have looked at some packages, looked at each other across the table, laughed and said, ‘that is not going to work, so let’s move on.’”

The Greeley residents who make up the focus group appear to be taking a different stance on the topic as more and more information on the subject becomes available.

The number of communities taking on municipal broadband using an enterprise fund continues to grow along the Front Range and across Colorado.  Communities saying yes to getting in competition with private sector giants such as Comcast and Century Link do so in part due to an unproven public perception that municipalities can supply a superior service at a lesser cost.

Fort Collins, Loveland and Longmont have all taken on the challenge by going it alone to develop, install and operate a new utility. They’ve used other city-run utilities, such as electricity, to back the multi-million dollar investments. Their municipal broadband bonds are guaranteed against those other enterprise revenues. If the broadband venture fails, electric customers will see their rates increase.

Longmont continues to boast success; however, most would argue Longmont’s circumstances were much different. It got in during a low-cost period and with a minimal amount of infrastructure costs because most of it was in place.  Moreover, Comcast and Century Link left the city alone in the beginning, so it was able to supply residents with 1 Gigabyte (1 GB) service far less than any other company. However, those companies have since stepped up their competition, and Longmont no longer offers the service at below-market rates. It’s yet to be seen how long they remain successful.

In fact, at a recent Greeley meeting former Longmont councilman Gabe Santos, who is now with Summit Strategies, said putting a future price on the internet is not simple. 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 at the meeting. “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.”

Fort Collins has yet to launch its service and is already taking heat from residents in the local media. Residents still don’t know when it will launch or how much it will cost.

The Greeley group that has been meeting monthly for nearly a year was asked to consider five options for Greeley City Council to consider:

  • Become its own ISP.
  • Partner with a private service provider.
  • Continue to work with existing providers to get them to do more than what they are doing now.
  • Establishing a grant program model to help with business connectivity.
  • Do nothing.

PARTNER WITH A PRIVATE SERVICE PROVIDER —

One other option for the group to explore is a set up similar to Fort Morgan and Centennial, which have entered into public/private partnerships with internet providers.

The task force has one proposal to consider the merits of, Allo Communications out of Nebraska. The company is 17 years old and currently serves 10 communities in Nebraska and two in Colorado.

Allo has met with both Greeley staff and the focus group. On Jan. 18, the company submitted a letter of interest outlining an initial proposal for Greeley, with the understanding it believes the cost of buildout is $80 million. Greeley has estimated that to be closer to $120 million.

While the company has specialized in bringing 1 GB fiber internet to the communities it serves, all are rural where there are limited options for competition and none offering 1 Gig service. It’s 1 GB service in Lincoln, NE, which is more than two times the size of Greeley is $99 a month.

Greeley, with 105,000 residents would be the first urban center for the company that currently has high-speed broadband competition among several private entities.  Additionally, of the 12 communities Allo services, only Lincoln (284,000) is over 25,000 residents, two are between 20,000 and 25,000, two are between 10,000 and 20,000 and seven are below 8,500, with five of those below 5,000.

Allo outlined several unknowns including:

  • Permitting costs, which it asks for minimal costs and ease in the process.
  • Availability to backyard easements.
  • Relationships with Xcel Energy.
  • Availability of public space for structures.

Allo outlined three financial options:

  • Allo finances the project.
  • Allo and Greeley share the financing.
  • Greeley finances the project.

None of the options had specifics but did say it would begin construction in the spring.

BECOME ITS OWN ISP —

Consultants working on Greeley’s project estimated Greeley would have to charge $100 per month for the same service and need nearly 30 percent of the homes to take that package to even come close to breaking even on the investment in 10 years. By that time, there is likely to be something newer and bigger, leaving Greeley behind, other experts say.

It appears that after meeting with the professionals who would handle the bond sales and getting all the options for how the money could be raised, including borrowing against Greeley’s water, stormwater and wastewater enterprise funds, a stand-alone ISP is no longer on the table.

“I don’t’ want my water bill to go up any higher than it already is,” said longtime Greeley resident and focus group member Lavonna Longwell, referring to the burden on water customers if the rate of return on the investment fails. “We just can’t take that risk. To me, it’s not even an option anymore.”

Voters across Colorado 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 or that the economic development of the city will improve.

Focus group members didn’t fully agree with those assessments either, choosing to not make economic development a determining factor in whether any of the models were right for Greeley.

Rod Esch, President of the University of Northern Colorado Foundation, said he doesn’t believe economic development and offering broadband go together.

“If we have a problem there, it’s a problem of marketing and perception, and not reality,” Esch said. “I don’t think it’s a problem that can be solved by investing capital or bringing broadband in.”

Amy Dugan, the Visit Greeley Director for the Greeley Chamber of Commerce, agreed with Esch, but added broadband might prepare the city for future technologies, which could lead to different types of economic development.

“We know we’re going to grow,” Dugan said. “Is economic development going to stop, or are we just going to get a different kind of economic development if we don’t invest in broadband?”

They also debated just how much better the internet could be with Greeley’s involvement.

“We really don’t know if it’s going to increase reliability and customer service,” Howell said. “I firmly believe no citizen is ever going to be truly happy. They are always going to want it to be faster and cheaper, even if the problem is in their own walls.”

Howell, also said the idea that municipal broadband is a surefire way to promote competition wasn’t a good argument.

“If we create competition and lower pricing, Trent Howell the informed consumer loves it,” he said. “Trent Howell looking at this presentation says if we create competition and lower pricing, Xfinity is going to price us out of the market and we are not going to be able to pay our bonds back.”

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, or TABOR), consultants hired by the city offered the use of Certificates of Participation (COPs) as a way to fund the venture without needing voter approval.

COPs allow a third party, to use existing city-owned structures as collateral on the bond debt that is then repaid by “leasing” the property back to the government using existing revenues. It is often used as a way to finance construction projects without asking voters to approve a regular bond issue, as is required under TABOR.

However, also because of TABOR, the lease cannot last for more than one year. Instead, it must be reviewed annually until the bonds are paid off. In practice, this means that a future board could vote against renewal, which could force the district into years of legal battles trying to determine who owns the building and who’s responsible for the debt.

The city used COPs to fund its new city center without asking voters a few years ago. It also is using COPs to fund a new fire station, However, the city asked voters in 2018 for the tax increase that will pay the fire station COPs back.

Esch said in his mind there is not a financing mechanism that makes him comfortable and none of the proposed tax increases would feasibly make it past the voters. Dugan, agreed, adding not asking the voters is also not the answer.

“Not going to the voters may not be very transparent, and then (residents are upset),” Dugan said. “So, you kind of want to go to a ballot anyway. In some way, you have to get the buy-in from the city.”

WHAT’S NEXT-

The focus group will discuss the private/public partnership more at its next meeting Feb. 13.

If the focus group decides against recommending either the stand-alone ISP or the public/private partnership model for the 2020 ballot, it will likely continue its work examine the other options, including working with existing providers, establishing a grant program to help with business connectivity or remain status quo and do nothing. The group will make its recommendations to Greeley City Council at its March 10 work session, which could range from do nothing and allow the focus group to continue to explore options to put a funding question on the ballot.

The group will determine how each of the following factors will effect each model.

  • Position Greeley for future technologies.
  • Create competition and lower pricing to close the digital divide.
  • Has low financial risk.
  • Enhance service delivery and reliable customer service.
  • Is it a core service under the guise of Greeley city government?

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