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Northern Colorado Broadband

Roger Ison Editorial

September, 2016

 Loveland has launched a citywide online survey to learn how many people and businesses would subscribe to a City-operated broadband Internet utility. The service can be self-supporting only if enough customers buy it, so the “take rate” or customer demand for this service, compared to other service providers at different possible prices, is a key aspect of the project’s risk. Each respondent answers a randomized questionnaire, and the combined responses will “map” the take rate under various conditions of price and competition.
Please respond to this important survey. Having many respondents will greatly increase confidence in the results and update City Council on the public’s views.
In 2015, more than 82% of voters approved a ballot question authorizing the City to provide advanced broadband service citywide, directly or indirectly, without raising taxes so the service would pay for itself. Longmont’s network is now essentially complete with a take rate greater than 50%. Fort Collins will vote on their plan in November.
Loveland is still undecided. City staff and consultants have been doing a good job researching and comparing various alternatives. Two Loveland Councilors are ideologically opposed to creating a municipal utility. Several are concerned about incurring so much debt and financial risk, and feel that they don’t yet have enough information to make a responsible decision. The take-rate survey is a key missing piece, although it’s impossible to achieve complete certainty and eliminate all risk.
Broadband access became an issue because Loveland has a dominant primary provider and a patchwork of smaller ones. Comcast reaches enough Lovelanders to set the market price for
​ high-speed service here. Competition and citywide access are inadequate because no other competitor has deployed a modern, high-performance network that reaches most potential subscribers.
In locales across the nation where a second provider enters the market with sufficient investment to reach most potential subscribers, prices have dropped substantially for subscribers to both services.

​​A late-2016 study of the 100 largest broadband market areas in the U.S. found dramatic price reductions when a competitor with reach enters a market that previously had a single dominant provider. The price of network service in the 100 megabits per second range dropped an average of $27/month. Gigabit-speed prices dropped approximately $57 - $62/month. Even low-speed plans dropped $13-$18/month. ( http://tinyurl.com/yax92brk )
In other words, everyone who subscribes to any Internet service in Loveland (other than cell phone networks) is likely to save money if Loveland creates a successful, citywide network. If the average price drop occurs here, Lovelanders could save six to eight million dollars annually. Over ten years, that would roughly equal the project’s construction cost. Meanwhile, subscriber revenues would pay down construction debt and operate the network.
Comcast will compete by reducing its Loveland prices if the City builds its network, and that’s good. If a second commercial provider were to build a network with sufficient reach to force prices down, there’d be no need for a municipal network.
But that price drop is what deters potential competitors from investing. A municipal utility can tolerate a low (but still positive) rate of return, whereas commercial providers like Comcast prefer to invest where they can earn a net profit around 10%. They ordinarily enter a market only if its population density is high enough to meet their profit goals, but Loveland is small and spread out. That is why, in 2015, voters authorized the City to step in on their behalf. Adequate competition is the missing element.
Few families presently “need” more than 100 megabits of data per second, but demand will grow as speeds increase nationwide and applications begin to exploit it. The challenge of delivering high-speed service lies in sharing a network’s capacity among users with steadily growing needs.
The copper cable that feeds a residential TV and Internet service is limited to about 1 gigabit per second, shared among all users on that network branch. A few heavy users can degrade performance for everyone. So, the high price of fast service over a TV cable is not just for profit – it rations the cable’s limited capacity. Eventually, cable companies will add new, high-speed circuits that extend nearer to each home. They naturally want to postpone that expense, which affects their entire network, and invest where the payoff is greatest.Small, low-density markets like Loveland will always be a lower priority. A fiber-optic network solves this problem. Its enormous capacity would eliminate speed and reliability problems for the foreseeable future.
The case for a municipal fiber-optic utility is more complex than just access, competition and speed. But the best price Loveland could offer will depend on the number of subscribers and what they’re willing to pay, so take that survey! The City’s web site has good information about the survey and the broadband investigation.