Farmington and Farmington Hills city officials got a look Monday at how a municipal broadband system could bring high-speed internet to residents and businesses.
Aaron Paluzzi, who chairs a task force appointed in 2018 to examine the concept, said they’ve found “encouraging information for the future.”
Paluzzi said that AT&T no longer sells U-Verse, its DSL product, leaving Spectrum, a cable provider, with “a virtual monopoly”. Current offerings put businesses and residents at a disadvantage, he added.
“I strongly believe that the internet is not a luxury, but a basic utility no different from water, sewer, electricity and gas,” he said, urging the cities to “work toward creating a fiberoptic broadband network by the end of 2021.”
Outages, inconsistent performance complaints
Doug Dawson, owner and president of CCG Consulting, said a “statistically valid” resident survey showed more than 40 percent are dissatisfied with their home broadband speeds.
“People talked about outages, inconsistent performances and problems with streaming,” he said. “There have been two major outages in the last two weeks.”
Nearly half of those surveyed said they would switch to a provider offering the same price, 78 percent to one with lower prices, and 24 percent would switch for better customer service. Many said they would prefer the cities to own and operate the system.
“That tells us that folks trust the cities, and that’s kind of refreshing,” Dawson said.
Broadband demand exploding
The demand for broadband internet service has exploded due to the COVID-19 pandemic. Dawson said 39 percent of residents surveyed work from home; business owners surveyed said they’re not happy with the internet connections employees have at home.
Dean Mischke of Finley Engineering, a partner in the broadband study, said installing the fiber optic network would be the most expensive and disruptive part of building a municipal system. However, once the system is in place, it could grow significantly with “very little investment.”
The system cost, including fiber, connections to users, and business assets like vehicles, computers, and software, is estimated at more than $107 million for both cities. Consultants also assumed 24 new employees would be required to run the system.
In addition to fast internet and phone service, the cities could offer “managed WiFi” with networked routers, and other products. Suggested pricing is a three-tiered system, based on speeds and starting at $60 per month.
Financing methods discussed include general obligation bonds, a $3,500 “buy in” from each new customer (financed over as long as 10 years), or forming a co-op with a $500 investment from each member. Cash generated could eventually be used to lower rates.
Other options considered in the study would have the cities building a network and allowing open access, building and leasing to a partner, or building and hiring an operator.
Dawson said the larger the system, the better. Building a Farmington-only system didn’t look feasible, he said. About 70 percent of the community would have to subscribe to make it break even. By contrast, a system for both cities would break even at 46 percent.
“You’d want to do more market research,” Dawson said. “You want some proof that you’re going to get customers. If you build it and nobody signs up, this thing could get ugly.”
Next steps, questions
The cities would also have to work out how to serve apartment buildings, he said. If officials want to move forward, suggested next steps include:
- Choosing an operating model
- Reaching out to the public
- Considering partnership options
- Finding a local champion, such as the Municipal Broadband Task Force
- Figure out funding
- Push existing providers to do better.
- Investigate the Michigan METRO Act, state legislation that “makes it a little extra hard for cities to get into the broadband business.”
Farmington Hills Mayor Vicki Barnett said she hoped to have a network that would eliminate the “broadband divide” and provide low cost or free products to people who meet certain income levels. But city attorney Steve Joppich said “free” could raise some issues with bonding the project.
“I like the term low income product, because that shows a product with a lower cost,” he said.
Hills city council member Valerie Knol asked, in the buy-in scenario, what would happen to the $3,500 obligation if the resident moves out of the city.
Dawson said a large consortium of Utah communities put a lien on houses that has to be paid when the home is sold, or the new homeowner can take on the debt.
“Their argument is having fiber in your home is increasing the value of your home,” he said. “You definitely need a mechanism to guarantee the $3,500.”
Officials made no decisions, but agreed to discuss municipal broadband at a future joint study session.