Speaking of broadband: See what the city’s ‘municipal broadband’ feasibility study says

We were just talking about broadband options – sort of. Here’s more to consider: Could the city offer it as a municipal utility? The $180,000 study commissioned to look at that question is now out. Here’s the city announcement:

The City of Seattle today released the City of Seattle Fiber-to-the-Premises Feasibility Study, a feasibility study originally commissioned in December 2014 as part of Mayor Ed Murray’s three-part broadband internet strategy.

Read the report here.

And read toplines ahead in the rest of the news release:

“Broadband internet service is a necessity in the 21st century but many Seattle residents don’t have equal access,” said Michael Mattmiller, Chief Technology Officer for the City of Seattle. “This report builds on past studies and take a comprehensive look at whether the City could provide universal broadband service in today’s landscape that is affordable, competitive and equally accessible to everyone.”

In the study, the consultant examined the feasibility of a municipal broadband delivery model, focusing on:

· Reviewing the financial feasibility of constructing and operating a municipal broadband network in Seattle;

· Evaluating the services and applications that are most likely to be utilized over a high-capacity data network; and

· Analyzing current market conditions to gauge consumer interest in a broadband service and the current offerings in the market place.

Less than estimated in previous studies, the report estimates a fiber-to-the-premises (FTTP) build out to cost $480 – $665 million. To cover these costs, market penetration at monthly service charge of $75 would need to exceed 40 percent, higher than the take rates achieved by any other municipal broadband utility in the country.

Additional findings include:

· The study found that the most feasible approach to constructing and operating a successful municipal broadband utility would be through a joint venture, where the City would work with a partner to create a service that allows the City to maintain its status as a technology leader and provide equity to the public.

· The study looked into the impacts that service price changes, even as minimal as $5, would make on customer subscriber rate and city finances. With a smaller customer base or prices below a $75 monthly charge, financials deteriorate quickly and the City is exposed to significant potential losses. With a proposed service price increase of just $10, raising it to $85 per month, the study found customer interest fell significantly, also exposing the city to substantial risk.

· Incumbents and competitors are moving into the market, offering high-speed and gigabit service to increasing number of customers.

· More than 80 percent of respondents indicated that internet is an essential service, while 30 percent indicated that it is affordable.

Mayor Murray unveiled his three-step broadband approach in June 2014, which he has worked on continuously in that time to reduce regulatory barriers, explore public/private partnerships and examine municipal broadband. Read more here.

The City’s broadband study was performed by CTC Technology & Energy, an independent communications and engineering consulting firm with more than 25 years of experience. CTC was paid $180,000 to complete the study.

Ray June 9, 2015 (11:43 am)

So, basically this idea is a non-starter. At those prices, just for Internet service, you are exceeding the price point for many residents. Which then means subsidies paid for by other taxpayers etc. With the big companies building out infrastructure all over town, there really is no point for the city to embark on this task, especially when there are so many other more relevant and immediate demands for that kind of money.

ChefJoe June 9, 2015 (12:11 pm)

I’m only on pg 10 of the report, but it does strike me as odd that they’re highlighting the cost for gigabit service when other companies (and even McGinn’s failed plan) sell far more units at lower speed tiers to increase subscribership and help pay for the infrastructure. It’s basic price discrimination economic theory.

blaughw June 9, 2015 (12:42 pm)

Fiber to the Premises (FTTP) is much more commercially attractive because one installation site can service an entire building. This survey specifically calls out Fiber to the Home (FTTH). Note the taxonomy difference: they say FTTP, but specifically mention the feasibility study is for single-family homes.

FTTH naturally has a much higher barrier to installation. No two single family homes are the same. I’m surprised at the rather low costs conveyed in this report.

Today you would be hard pressed to get significant adoption of Gigabit Fiber internet at $75/month. I happen to think that Fiber will become the new cable, which replaced twisted pair copper (classic phone wiring).

Multifamily installations have the benefit of spreading the high cost of initial installation across multiple subscribers in a single building, and therefore can also offer different pricing tiers for different levels of service. This can lead to higher overall adoption if the pricing is appropriate to the market.

One downside in the fiber market is volatility: A while back we had an entity, Gigabit Squared, announce viability of fiber projects in Seattle with a timeline and lots of marketing. It turns out they hadn’t even paid the city for consulting work on the matter, so there is no telling whether the idea ever had any actual initiative behind it. A local FTTP provider, ReallyFast.net was also just bought by Wave, a transition that customers are going through now.

Sorry that’s so long, I wanted to fill some gaps I saw (no offense, WSB!).

WSB June 9, 2015 (12:46 pm)

Blaugh, I appreciate the expert analysis. This is one of those cases where we did little but cut and paste the news release as we do with some citywide topics that seem to be of extensive interest, write a quick intro, and throw it out there for people to consider or not (hopefully the intro and the blue background signifying “this is all a quote” make that clear) – aside from the call I have out to the Wave people related to the commercial-shoot story, I have no time today to research anything here further, so comments from those with more to add are VERY much appreciated! – TR

captain Dave June 9, 2015 (12:52 pm)

Oh look! Another worthless study commissioned by civic leaders who should have been competent enough to know.

Next up… “Mayor to propose a new $180,000 study to determine the feasibility of a municipal laundry service.”

I propose that the City be limited to spending no more than .001% of it’s budget per year on studies. Maybe this will inspire a higher level of competence.

Ray June 9, 2015 (1:02 pm)

Good write-up on geekwire:
http://www.geekwire.com/2015/seattle-officials-municipal-broadband-too-risky-and-expensive-for-city-to-build-alone/

ChefJoe June 9, 2015 (1:12 pm)

blaughw, Gigabit Squared was McGinn’s follow-through on his campaign promise for municipal broadband, which probably helped spur that pricing announcement ahead of the 2nd-term primary vote. It was to leverage the city’s “dark fiber” but I’ve read the documentation and mapping of said “dark fiber” was pretty lacking and made the project very uncertain.
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What’s interesting is that the survey also asked about 100 mbit internet and 72% of those surveyed (with home internet now?) would be 5-very likely to switch at a $55 price point. Another 8% rated that as level 4 likely. If you go up to $65, 5-very likely and 4 still add up to 62%. I think that means people would be willing to subscribe above the rate suggested based on gigabit service being $75.

blaughw June 9, 2015 (1:18 pm)

captain Dave,

$180,000 is a lot of money to spend, but the report seems pretty well done, with a lot of work put into it. I admit I am only ~1/5 of the way through.

However, the benefit of doing these studies is finding the right time to invest in infrastructure this city will need in the future. I have not got down to the financials yet, but the WSB summary says the projected costs are going down. City planning is doing their job here.

Internet service (of some kind) has a 96% adoption rate per household, per the study. Copper PSTN is at 36%. Clearly this is a valid path forward. Knowing if, when and how to invest is the purpose of the studies, and in my opinion they’re worth the money.

ChefJoe June 9, 2015 (1:55 pm)

What I haven’t found is any follow-up on combining city light smart meter roll-out with this sort of fiber. The smart meters need to communicate back to city light and it seems like riding back on city infrastructure would be desirable and perhaps less costly than cellular-based technologies. Charging city light a few bucks a month for each household using that feed vs sending out a meter reader would be another way to leverage city light that’s not just “use their space on the poles”.

Jon Wright June 9, 2015 (2:07 pm)

I really feel bad for people who work in government. You try to exhibit a little vision (“Does the public utility model work for Internet connectivity?”) and people complain that you’re wasting resources on that. I’m guessing that if they hadn’t looked into the viability of municipal broadband, people would complain that government wasn’t doing its job.

Jon Wright June 9, 2015 (2:13 pm)

ChefJoe, City Light using fiber to remotely read meters is total overkill. Even if city-owned fiber was available throughout their service area, it would cost a fortune to interface every single meter to it. They’ll probably use something low-speed like a carrier current signal over the power lines or some sort of wireless packet data network (get your tinfoil hats ready, folks).

ChefJoe June 9, 2015 (2:48 pm)

Jon Wright, fiber to the home is total overkill for most people, but we’re trying to get a bit ahead of the technology curve.
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I’m just suggesting that city light is already interested in neighborhood access points that can transmit data securely. Upstream of the RF mesh-tech, it’s all something that could piggyback on neighborhood-level fiber deployment cabinets.
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http://www.pge.com/en/myhome/customerservice/smartmeter/howitworks/index.page
“Each RF mesh-enabled device (meters, relays) is connected to several other mesh-enabled devices, which function as signal repeaters, relaying the data to an access point. The access point device aggregates, encrypts, and sends the data back to PG&E over a secure commercial third-party network.”

jimh June 9, 2015 (4:05 pm)

Love it that the city council is proposing $1 billion to take yet more car lanes out to put in a dedicated streetcar. Yet that plan gets all the studies to show that we need it even though the current streetcar has a little over 2,000 riders PER DAY!

But actually pay for something (Internet) that can be used by everyone? – no way we’d rather have bike lanes that benefit a single digit percent of the population and streetcars that will benefit the same or less amount of people. Classic

Nadoka June 9, 2015 (6:29 pm)

How City Hall loves to crank out very expensive position papers that restate the obvious and add a few gee!maybe we could do this or that.
Our Busses bounce and bunch, our streets are like the Martian surface, right near the West Seattle Bridge we’ve got a bright yellow four legged thing that looks like it just was detached from the Death Star, our neighborhoods are steadily being chewed up by the moneyed minions egged on by DPD urbanites, our schools are and will continue to burst at the seams, and the term ‘getting over Bridge’ needs to be restated as ‘getting on the Bridge and good luck getting off anytime soon’.
But, on the bright side; my Comcast speed has doubled, hiking around West Seattle gets us forests and fields, beaches and canyons, The Sunsets, and lots of stairways on our Hills.
So, would West Seattle be better off as an independent city? – we’d get to keep the good we’ve got and not have to pick up the bill from City Hall for the stuff that we don’t either get or need.

Greg June 10, 2015 (2:38 am)

The study was money well spent, even if the results aren’t what we had hoped.

I wonder if the survey participants are aware of the full value of fiber over cable modem service provided by Comcast, or similar. In particular, upload speeds are drastically higher, and neighborhood traffic can’t slow down your own connection. Non-technical survey participants might be more interested in fiber if this is laid out in plain terms.

Collin June 10, 2015 (10:25 am)

I am in the middle of just trying to secure high speed internet period from my house in Highland Park (near Westcrest Park)- where Comcast is trying to charge me $17,000 to bring cable in- even though we are within Comcast’s service district. Currently the only option we have is super slow 1.5 mps DSL.

I’m about ready to “get Jesse” at this point- has anyone else had issues/ resolutions with Comcast in similar situations? Any lawyers want to go after Comcast with me? :)

Kevin June 10, 2015 (9:38 pm)

I’m pretty sure the current state laws won’t allow the city to operate as an ISP. Obama can say whatever he wants about making the FCC ignore state laws but it won’t stop Comcast and other providers from demolishing this idea in court. The city shouldn’t have blown money on this report. State law here: http://app.leg.wa.gov/rcw/default.aspx?cite=54.16.330

bolo June 11, 2015 (11:40 am)

@Kevin, after looking at that I didn’t see what could have led you to make your claim “current state laws won’t allow the city to operate as an ISP.” Did I miss something?

Kevin June 11, 2015 (2:25 pm)

@bolo: There’s a reason the report recommends that the City partner with a third party. Washington state authorizes municipalities to provide communications services but prohibits them from providing communications services directly to customers. RCW 54.16.330 defines what is allowed. The key phrase: “Nothing in this subsection shall be construed to authorize public utility districts to provide telecommunications services to end users.”

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