24 Jan

Is A City Fiber Optic Network a good idea?

On Tuesday, January 26th at 5:30 PM the City Council will hold a study session on establishing a City Fiber Optic Network. We thought you might need some information to understand the topic better.

What is a fiber optic network? It is a “cable” of sorts to connect to the internet. Because fiber optic uses light it is super-fast compared to “wires”. Once connected the entire internet is yours. The fiber optic lines operate at gigabyte speeds, very fast compared to most current cable wire lines. In addition, fiber optic also has more “bandwidth” which allows multiple users to operate at fast speeds concurrently.

What is involved in “building” a fiber optic network? Building the network requires “laying” a special fiber optic line throughout the City and straight to your house or business. This is a new and separate connection from your current “cable” line. The City will need to contract with a firm to build this new network. Currently, the thinking is that some of the lines will be below ground and some above. City code requires all new utility lines to be underground; this approach is not consistent with code.

What will be provided through the fiber optic network?
Basically, NOTHING. Yes, that is correct, nothing. Users will get what is referred to as a “dark” line. Users will have to make arrangements to get “content”. Content is all the things a user gets from a cable provider today – cable TV channels, phone service, and home security, for example.

Can I get rid of my cable company? Yes, you can but then you will need to set up your own arrangements for “content” because you will not have any content just a “dark” line to the internet. There are many ways to get content. For example, if you use Netflix that can be provided over the internet as it is now. But if you want HBO, you will have to sign up and pay for that to receive it. There are services such as Apple TV and Slingbox that will provide content but that device must be purchased, hooked up and paid for monthly. The current practice is for content “pieces” to be priced separately as they are now such as when you pay for HBO.

What will fiber optic cost? Currently, a price of $59.99 per month is being discussed. That price is for the “dark” cable only. What you would pay in total per month depends on what you choose to do to obtain “content” and how you do it. But you will certainly pay more than $59.99 per month if you want content or other services such as phone.

Can I get our local free TV stations? The local stations generally do not broadcast over the internet. To receive NBC, CBS, etc. you probably would need an antenna (remember those things on the roof?) to receive the signals over the air.

Can I keep my cable company? Certainly, you are not required to connect to the new fiber optic network. You could connect to the fiber optic network for internet access and keep the cable company for everything else. You would then have two “lines” coming to your house – one for internet and one for everything else. How this would work in your house depends on your home. You may need additional wiring, etc. Each situation will be different.

What are the benefits to the City? The City’s cost for network services will decline about $40,000 per year. The installation will be “free” to the City; currently the City pays for these services.

What are the risks to the City? The biggest risk is financial. While the contract has not been negotiated yet, it will very likely include a minimum payment to the provider if enough people do not sign up. Depending on what the contract says and how many people sign up the risk could be millions of dollars.

Is the city going to build and operate the fiber network? No, current plan is for the City to contract with a firm to build and operate the network. A new firm has been selected to do this for the City; it is an LLC based in Lake Oswego. The participants in the LLC have not been identified. This firm has never done this before but indicates they will contract with an experienced firm to build the network and operate it. We find it a bit unusual to have a middleman between the City and the contractor.

Who is going to “profit” from this? If enough people sign up there will certainly be profits made. City staff has indicated the profit will not be “excessive”. How do citizens know that? And who will the profits go to? We do not know but we should. Shouldn’t the City share in any profits?

Will the City have to hire more people to do this? The current approach calls for no new City employees.

Should the City be doing this? The answer is a matter of opinion. There are several levels of consideration.
• The technology is constantly changing. Fiber optic cable sounds good today but what is coming in the future that might supplant it? Who knows as there is discussion of all manner of things such as Wi Max (using a sort of Wi-Fi instead of cables).
• This is a competitive business. There are all types and forms of competition. Current cable companies are upgrading (Comcast will rollout gigabyte service to all customers by 2018). Satellite companies are innovating. Who knows what new competitors will emerge. Google is a potential competitor.
• The service provider chosen has never done this before. The provider has aligned with an experienced installation company but multimillion dollar financing is also needed and it is not clear how that will be obtained. The service provider is an LLC and the participants are unknown. All members of the LLC should be identified.
• The City has some challenges ahead and this could become a distraction. PERS is an upcoming financial issue, for example. Our streets need attention. There is no shortage of current issues.

Have other cities done this? Yes, other cities have done this with varying degrees of success and costs. Some states have passed laws to prevent cities from doing this. No clear listing of cities that have done this has been shared as of now. It has not been identified how cities that have done this recently approached it and with what results. The biggest example cited is Sandy, Oregon which did it 10 years ago. More current information is needed.

What is LOCAL’s position on this? Our role at LOCAL is mainly to provide you with information so you can make your own decision on matters like this. But, we are concerned that the financial risk to the City has not been clearly identified. One element sure to change if this is successful is franchise fees earned by the City (about $700,000 in 2015-16 for cable companies); they will likely decrease but how much is not clear at this time. We are concerned that the members of the LLC are unknown. Who will benefit from this? And we are concerned about the City entering into competitive arenas where it may not have the skills to compete. We believe it is in everyone’s best interest to take a careful approach and gather much more information before proceeding. The City Council should make a fully informed and wise decision, not a fast, ill-advised one.

City staff report available here: http://lakeoswego.granicus.com/MetaViewer.php?view_id=2&event_id=405&meta_id=18810