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Seattle Study Finds Muni Broadband Too Costly to Do Alone

For much of the last decade Seattle has explored the idea of building their own ultra-fast broadband network. Much of that motivation was fueled by the sub-standard service provided in the region by regional telco Qwest (now CenturyLink), which in turn resulted in regional cable operator Comcast not working very hard.

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After scrapping several fiber plans and shutting down their Wi-Fi network, Seattle (and former Mayor Mike McGinn) tried to launch another effort with broadband consultant shop Gigabit Squared. Unfortunately for Seattle residents that agreement also disappeared in a puff of hype after Gigabit Squared failed to pay the city money owed or do much of any work (something the firm was subsequently accused of in Illinois).

Undaunted, the city recently conducted a new study to conclude whether building its own broadband network was viable, and the study has concluded it isn't. A gigabit fiber network in the city would cost $480 million to $665 million, less than previous projections, but still too costly to entertain without outside financing or help. As such, the city's budget director believes it's just too risky:
quote:
“While a municipal broadband system is an exciting prospect, it would not be prudent to pursue a business model that relies solely on subscriber revenues and a pledge of the City’s full faith and credit to support the necessary debt financing,” he writes. “Such an approach would put the City’s General Fund at significant financial risk should the endeavor falter or fail."
Many city residents (and city council member Kshama Sawant) are undaunted, and are encouraging a harder grass roots push to do something about the sub-par service the city consistently says it receives from the regional duopoly.
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Skippy25
join:2000-09-13
Hazelwood, MO

1 recommendation

Skippy25

Member

Duh!

I am not sure what in the world ever made them think that it would be possible using just the revenues from the network to begin with.

There has NEVER been a question that the barriers to entry were extremely high and that the cost to build the network would need to come from a bond or a tax. What we have is a study that says it is expensive and we are not willing to take on the expense through the typical avenues one would take.

Let the city put it to a vote by their citizens as this person is not in a position to speak on behalf of everyone. Let that vote outline the cost and how the city plans to pay for it along with the obligation of said citizens. If they don't want it, then don't do it. If they do, then shut up and give them what they asked for.

tshirt
Premium Member
join:2004-07-11
Snohomish, WA

tshirt

Premium Member

Re: Duh!

said by Skippy25:

I am not sure what in the world ever made them think that it would be possible using just the revenues from the network to begin with.

It would be easy to do from revenues...but people would have to recognize the true cost AND be willing to pay more then $75 per month.

anontool
@myvzw.com

anontool to Skippy25

Anon

to Skippy25
You ever actually been to Seattle? Ever taken a walk down downtown road?? I can show you endless easements from multiple carriers where fiber is. The cost is not in the build. The city of Seattle is spending 120 million to remodel a building abandoned by the navy 50 years ago to produce low income households. By the numbers you could build 800, 000 dollars homes for less. It's not about the money in seattle. It's about the ultra liberal agenda. Hell were building the world's most expensive tunnel already years behind schedule and starting to run billions over. Just for water side views. Get someone to create a study that shows how it would benefit the poor and disenfranchised they will build it. The King county public library system has a more robust private network then Comcast does. No one bated a eye when they asked for billions to build it. Because it was for the poor underserved children. Muni fiber is a good thing Tennessee has proven it. They are profiting just not at the insane rate wallstreet expects.
jvanbrecht
join:2007-01-08
Bowie, MD

1 recommendation

jvanbrecht

Member

Let the City build the network backbone to end points (residents/business)

And then lease space to ISPs to reach those customers. Ultimately there would also be a line fee involved, but at least with a city owned network, the ISPs have a lower entry cost to the city, and we would end up with competing ISPs. When the ISPs don't own the last mile, they will have to provide quality service and innovative features to keep customers happy....

alchav
join:2002-05-17
Saint George, UT

alchav

Member

Re: Let the City build the network backbone to end points (residents/business)

said by jvanbrecht:

And then lease space to ISPs to reach those customers. Ultimately there would also be a line fee involved, but at least with a city owned network, the ISPs have a lower entry cost to the city, and we would end up with competing ISPs. When the ISPs don't own the last mile, they will have to provide quality service and innovative features to keep customers happy....

There's a big push for this in many Cities, Muni-Broadband/Fiber, but it's not as easy as it sounds. It's not just the cost of the Infrastructure, you need someone to maintain and run it too. You guys think all it takes is to string Fiber from Poles to Residents and Business run it back to Competing ISP's and you have a Network. If a City is going to build a Muni-Broadband, there has to be a lot of planning in order for a successful outcome.

battleop
join:2005-09-28
00000

battleop to jvanbrecht

Member

to jvanbrecht
That's how it should be done and that method is what leads to the most competition. That model is some what similar to how things worked in the mid to late 90s with dial up.
ohreally
join:2014-11-21

ohreally

Member

Re: Let the City build the network backbone to end points (residents/business)

And it is how it works in many countries - though the infrastructure owner (typically a telco) is normally itself one of the ISPs on the network, and some countries are better than others at ensuring that the telco does not favour itself (the UK is pretty good at it, Australia does okay, Canada seems a bit hit and miss)

Can't complain at having a choice of 20+ providers in a fairly rural area, most of which provide a better service than either of the telco's two ISPs
PariahInIowa
join:2011-07-14

PariahInIowa to battleop

Member

to battleop
I disagree. It's stupid for the city to finance the entire project only to hand it over to a bunch of useless small ISPs as a money-making opportunity. These small ISPs want a slice, they can help fund the build-out. Better to trunk up to whatever backbone provider they already have a relationship with for their statewide networks.
ohreally
join:2014-11-21

ohreally

Member

Re: Let the City build the network backbone to end points (residents/business)

said by PariahInIowa:

I disagree. It's stupid for the city to finance the entire project only to hand it over to a bunch of useless small ISPs as a money-making opportunity. These small ISPs want a slice, they can help fund the build-out. Better to trunk up to whatever backbone provider they already have a relationship with for their statewide networks.

The wholesale charges that the city would charge for access to the network would be high enough to repay the initial investment, maybe even with a small profit too. That is how it works elsewhere.

There's no freeloading about it.
PariahInIowa
join:2011-07-14

PariahInIowa

Member

Re: Let the City build the network backbone to end points (residents/business)

said by ohreally:

said by PariahInIowa:

I disagree. It's stupid for the city to finance the entire project only to hand it over to a bunch of useless small ISPs as a money-making opportunity. These small ISPs want a slice, they can help fund the build-out. Better to trunk up to whatever backbone provider they already have a relationship with for their statewide networks.

The wholesale charges that the city would charge for access to the network would be high enough to repay the initial investment, maybe even with a small profit too. That is how it works elsewhere.

Just because everyone makes money in a tiered distribution system doesn't mean that it's ideal. Quite the contrary, introducing extra (and quite unnecessary) middle-men always hurts consumers. Especially for a service like raw IP connectivity to a backbone provider, there isn't even any room for value-adding or whatnot. It's just an extra 10% on your bill. No thanks.
ohreally
join:2014-11-21

ohreally

Member

Re: Let the City build the network backbone to end points (residents/business)

said by PariahInIowa:

Just because everyone makes money in a tiered distribution system doesn't mean that it's ideal. Quite the contrary, introducing extra (and quite unnecessary) middle-men always hurts consumers. Especially for a service like raw IP connectivity to a backbone provider, there isn't even any room for value-adding or whatnot. It's just an extra 10% on your bill. No thanks.

In the country I live in, competition has led to lower prices. The wholesale cost for network access is much lower than any retail cost. This would be true anywhere. Network access is not internet access, it is access to an individual customer.

Being able to only get one ISP is exactly why the US is in the situation it's in, with regards to prices, anti-competitive behaviour, peering disputes and so on. Over here, this has never been a problem. With a single, government owned ISP you have additional risks in terms of privacy and censorship.

Of course there's room for "value-adding". Some consumers want the absolute cheapest and nastiest service, others will pay more for superior service, additional features, etc.

You can deny reality if you want, but this model is highly successful in other countries.
PariahInIowa
join:2011-07-14

PariahInIowa

Member

Re: Let the City build the network backbone to end points (residents/business)

said by ohreally:

Just because everyone makes money in a tiered distribution system doesn't mean that it's ideal. Quite the contrary, introducing extra (and quite unnecessary) middle-men always hurts consumers. Especially for a service like raw IP connectivity to a backbone provider, there isn't even any room for value-adding or whatnot. It's just an extra 10% on your bill. No thanks.

In the country I live in, competition has led to lower prices. The wholesale cost for network access is much lower than any retail cost. This would be true anywhere. Network access is not internet access, it is access to an individual customer.

Being able to only get one ISP is exactly why the US is in the situation it's in, with regards to prices, anti-competitive behaviour, peering disputes and so on. Over here, this has never been a problem. With a single, government owned ISP you have additional risks in terms of privacy and censorship.

Of course there's room for "value-adding". Some consumers want the absolute cheapest and nastiest service, others will pay more for superior service, additional features, etc.

You can deny reality if you want, but this model is highly successful in other countries.

You seem to misunderstand me. I am not in any way, shape, or form arguing against competition between service providers. But I do think it's much better for the people to make their bargains as a collective. Cut some deal (at wholesale prices) directly with a backbone provider for the 15k customers, or whatever the penetration rate is. There is absolutely no advantage (for anyone except the middle-man growing fat) to instead broker individually through a handful of third-party intermediaries.

With respect to value-adding, you're just wrong. Nobody employs the kind of grass-roots political power this city is exerting to have "cheap and nasty" service. A MB is a MB is a MB - either service is acceptable or it is not. It's a race to the bottom and there is no prestige to be had by being a customer of company X.

With respect to privacy and censorship, wake up. There is no provider in the nation exempt from government snooping. And if the US government wants to take down a website, they just yank it at the domain level. Your choice of ISP isn't going to matter one iota.

battleop
join:2005-09-28
00000

battleop to PariahInIowa

Member

to PariahInIowa
I guess they should rip up the roads as well?

Municipality owned services should NEVER be in the business of running business out of business. One of their roles is to encourage and foster economic growth. It's not to be in business, ISP, Hotel, FBO, etc.
PariahInIowa
join:2011-07-14

PariahInIowa

Member

Re: Let the City build the network backbone to end points (residents/business)

said by battleop:

I guess they should rip up the roads as well?

Municipality owned services should NEVER be in the business of running business out of business. One of their roles is to encourage and foster economic growth. It's not to be in business, ISP, Hotel, FBO, etc.

When the existing businesses cannot provide adequate service for a critical utility, then it is absolutely within the purview of governments to step in and take over. It's why we enjoy superior mail service, workable highways, etc. The last thing we need is to allow corruption to enrich a few while diverting money from what's important - the services that existing businesses are absolutely failing to provide.

battleop
join:2005-09-28
00000

battleop

Member

Re: Let the City build the network backbone to end points (residents/business)

"It's why we enjoy superior mail service, workable highways,"

Yea, uhm. The Postal Service is barely keeping it's head above water and we have thousands of bridges and other road ways on the verge of collapse. Yea, some fine examples there.
PariahInIowa
join:2011-07-14

PariahInIowa

Member

Re: Let the City build the network backbone to end points (residents/business)

said by battleop:

Yea, uhm. The Postal Service is barely keeping it's head above water and we have thousands of bridges and other road ways on the verge of collapse. Yea, some fine examples there.

I send and receive mail daily via US Post, delivered via public roads. I don't have to worry about being unable to drive from A to B or being unable to send and receive mail. I DO, however, have daily Internet service outages. My ISP, Windstream, is screwing me over beyond belief and have been for many years. If a government entity rolled up their sleeves and pushed nationwide broadband (like they did for power, phone, etc) and in so doing pushed Windstream out of business it would absolutely be a good thing. It would certainly be better than continuing to give Windstream money, easements, and tax breaks in the name of serving me.

Flyonthewall
@teksavvy.com

Flyonthewall to PariahInIowa

Anon

to PariahInIowa
Actually competition over the last mile can work if properly regulated, but that word is four letters long to some people.

alchav
join:2002-05-17
Saint George, UT

alchav

Member

Re: Let the City build the network backbone to end points (residents/business)

said by Flyonthewall :

Actually competition over the last mile can work if properly regulated, but that word is four letters long to some people.

CHEAP, oh that's five, but I'm sure you guys will get the point!

tshirt
Premium Member
join:2004-07-11
Snohomish, WA

tshirt to jvanbrecht

Premium Member

to jvanbrecht
said by jvanbrecht:

And then lease space to ISPs to reach those customers. Ultimately there would also be a line fee involved, but at least with a city owned network, the ISPs have a lower entry cost to the city, and we would end up with competing ISPs. When the ISPs don't own the last mile, they will have to provide quality service and innovative features to keep customers happy....

Except in this case the city is considering soliciting bids for a private partner to build and own it, because the city doesn't have the funding, and the study clearly shows would likely not only not break even on the operating costs let alone even repay the capital cost.
Why would any company finance it if the terms required sharing?, and how would the principal and interest EVER be repaid?
dispite the city saying Comcast is not competive, they only charge about $3 more /($68.95 for 105/10 service to virtually all hmoes and businesses in the franchise area) that residents in the study were willing to pay $65 a month for and the $75 for gig service showed people will pay no more then $10 above the 100/10 price can never reach the 43% plus take rate required for operational breakeven. (still ZERO capital paydown) ie this study confirms all the previous non vendor funded studies (GB2's study is fully debunked by now)
THE CITY CAN'T AFFORD THIS PIPE DREAM
They can't afford to run it and they can't afford to build it.
Both centurylink and Comcast are working on full gig service to virtually everywhere.

wesm
Premium Member
join:1999-07-29
Seattle, WA

1 recommendation

wesm

Premium Member

Re: Let the City build the network backbone to end points (residents/business)

said by tshirt:

THE CITY CAN'T AFFORD THIS PIPE DREAM
They can't afford to run it and they can't afford to build it.
Both centurylink and Comcast are working on full gig service to virtually everywhere.

Except that's not what the report said at all. Seattle can afford to build it, thought property tax bonds, and can afford to run it. The open question is whether it will be competitive enough as a standalone, separate provider to not have to rely on taxpayers to fund ongoing operations after it is built. Which wouldn't be a problem if the network was carrier neutral and competitive providers could connect to it to serve customers, like is done with Tacoma's Click! network.

Also, Comcast and Centurylink are nowhere near having "full gig service to virtually everywhere." I live in a Centurylink gigabit area and going around the corner from my house results in 7Mbps DSL and that's all. My house is only served because it is next to a side street that happens to have an optical splitter that is in place because the city requires pole lessees to serve educational buildings. Comcast is a whole other bag of fish, and there are areas "inside" Comcast's territory in Seattle that aren't serviced because Comcast doesn't want to pay the money to bring any kind of copper to that location.

Finally, I don't know what it is with the suburbs and having this obsession with what Seattle can or can't do, afford, or implement. If having a voice in those kinds of decisions is so important to you, become a taxpaying, voting resident of the City of Seattle. Otherwise, it's all armchair quarterbacking while those of us who do live here will ask our elected officials to make the best decision they can.

tshirt
Premium Member
join:2004-07-11
Snohomish, WA

tshirt

Premium Member

Re: Let the City build the network backbone to end points (residents/business)

said by wesm:

Except that's not what the report said at all.

You see something there nobody else has
»www.seattle.gov/Document ··· inal.pdf

The author said not affordable, the council staff said not affordable, the city budget director said Too high a risk, not affordable and Karl headlined the article
"Seattle Study Finds Muni Broadband Too Costly to Do Alone"
said by wesm:

If having a voice in those kinds of decisions is so important to you, become a taxpaying, voting resident of the City of Seattle.

I was for many years, and eventually moved away to unincorporated Snohomish County partially to avoid the costs(direct and indirect) of the city politics.

wesm
Premium Member
join:1999-07-29
Seattle, WA

1 recommendation

wesm

Premium Member

Re: Let the City build the network backbone to end points (residents/business)

said by tshirt:

You see something there nobody else has

Well, there's this part, right there in the Executive Summary:
said by The Report :

If the City were to focus its efforts on delivering a data-only service over ubiquitous fiber infrastructure that supports at least 1 Gigabit per second (Gbps) speeds, it would now conceivably be able to address both the lack of fiber and, indirectly, the market structure.

And then in Executive Summary section 2.2:
said by More Of The Report :

The property tax funded utility model assumes a $45 monthly service fee. This is lower than the other models because residents are essentially subsidizing their own service fee through the property tax revenues used to fund the Broadband Utility in this model. The likelihood of residents subscribing to the City’s service increases if the monthly service fee is $45.
Based on our projections, the City of Seattle’s Broadband Utility could potentially be a breakeven business, but not a revenue generator—and the breakeven point will come after several years of operation. ...

While under some assumptions a Broadband Utility could break even or make
money, under others the system could lose substantial sums of money and potentially force reductions in existing government functions.

And then, in section 3.1.5:
said by Even More Of The Report :

This analysis indicates that the City is in a favorable position because of its ability to focus on long-term goals in its pursuit of FTTP. Fiber tends to be a capital-intensive endeavor with a somewhat slow return on investment (ROI). The City is at an advantage because of its bonding power and ability to prioritize goals other than only a bottom line (unlike most private companies). If the City is able to partner with SCL and build fiber in the power space as well as seek cooperation internally, it has a better chance at succeeding.

(Why Seattle would need to be "able to partner with SCL" is beyond me, since Seattle City Light is a department the City of Seattle. The Mayor and Council could simply decree said "partnership" to be so.)

My point still stands: Seattle could finance and build the network if the voters approve. The risks are exactly the same as they are with a privately-built network, namely that revenue could be less than expenses if the take rate is not sufficient. But if Seattle started building now, and undercut CenturyLink by $60-80/month (CenturyLink gigabit service is $109 to $124, depending on what is bundled, and is not available in every corner of the city) to do it, the take rate could be considerable.
said by tshirt:

I was for many years, and eventually moved away to unincorporated Snohomish County partially to avoid the costs(direct and indirect) of the city politics.

That's fine, but leave us down here in "the big city" to tend to our own knitting. When SnoPUD starts rolling out its own fiber network to prod Comcast or Fronter into doing anything, I'll be thrilled (except that it can't, RCW prohibits it).

tshirt
Premium Member
join:2004-07-11
Snohomish, WA

2 edits

tshirt

Premium Member

Let the City build the network backbone to end points (residents/business)

said by wesm:

When SnoPUD starts rolling out its own fiber network )...

it has been considered first as bb over powerline, and then fiber but both times the PUD usage (eliminating meter readers) could not justify the cost.
said by wesm:

that it can't, RCW prohibits it

the law says they can't subsidize broadband or other projects off the electrical/gas provider revenue, not that the can't do so as a separate venture... so the electric side would have to charge the broadband side the same pole fees as everyone else, it's the same reason that SCL can't offer preferential treatment to a muni fiber build over a private one.
and why Click! is in the process of being handed over to a private operator, because Tacoma power can't justify or afford the $9 million a year subsidy (grandfathered).
Comcast is serving most of the county well, and frontier is slowly adding capacity

Why should everyone take on property tax burden, just to knock the monthly price down to $45?
shouldn't the actual user pay the whole $109 rather than paying $45 to the city broadband and the other $65 (plus overhead) wrapped into property taxes? (and renters do pay property tax as part of their rent, jacked up by whatever % safety margin the landlord can feels he needs/can get away with)
That's just shifting/hiding really the costs from the end user. and roads and transportation issues, even City light's long put off pole replacement are going to eat most of the available bonding authority in seattle for the forseeable future.
If they really want to take on a city responsibility, how about a real solution for the homeless, instead of a series of rotating tent cities?
How about not driving residents (owners and renters) from their homes with excess taxes and development policies that drive the upscale gentrification rather than stability of the lower wage earners.
said by wesm:

That's fine, but leave us down here in "the big city" to tend to our own knitting.

I would but I now have 4 elderly relatives living downtown in very nice $$$ continuing care homes, and numerous friends struggling with property tax costs and Seattle's actions greatly effect the surrounding areas, sometimes beneficial but often pushing the problems they should be paying for on outlying communities.

milnoc
join:2001-03-05
Ottawa

milnoc

Member

Seattle is home to Boeing and Microsoft.

Boeing and Microsoft should be able to help Seattle out.

Isn't Seattle also home to Starbucks?

sk1939
Premium Member
join:2010-10-23
Frederick, MD

sk1939

Premium Member

Re: Seattle is home to Boeing and Microsoft.

Yes, no and yes, and Amazon also (who is building several large buildings downtown). You would think there would be some interest from these companies. Microsoft's headquarters and most of their offices are outside of Seattle proper.

Flyonthewall
@teksavvy.com

Flyonthewall

Anon

Re: Seattle is home to Boeing and Microsoft.

Large corporations normally pay for the install of T1 or higher to their premises, the line is already in the ground in some areas to connect others up, the problem is no one wants to do it. That would lead to direct competition for customers on both speeds and price, and we all know they've already quietly agreed not to do that so they can keep squeezing as much as they can for as little as they can spend to keep shareholders happy.

Some would say that offering faster services at a higher price would make them money so they would do it if they could, but the bigger picture is the invisible lines drawn on the map, those take precedence.
lawpdx
join:2014-04-16
Portland, OR

lawpdx to milnoc

Member

to milnoc
Boeing's corporate offices are now in Chicago.

milnoc
join:2001-03-05
Ottawa

milnoc

Member

Re: Seattle is home to Boeing and Microsoft.

Right. They merged with McDonnell Douglas, the company that manufactured lemons.

tshirt
Premium Member
join:2004-07-11
Snohomish, WA

1 edit

1 recommendation

tshirt to milnoc

Premium Member

to milnoc
said by milnoc:

Boeing

headquarters moved to Chicago in 2001 one of several moves against the highly skilled union workers that ended up costing them even more in business disorganization during a difficult time for the aerospace industry.

Microsoft is actually based in Bellevue/Redmond just across Lake Washington, but a world away in culture, finance and infrastructure.

yes starbucks/seattles best/tully's and a dozen others have at least one store/latte stand per block where if you consume enough caffine everything becomes a speedy blur even without fiber.

You have selected 3 companies that are highly unlikely to pay one thin dime toward public works beyond any value they can extract for themselves. (throw Amazon in there too.)