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

6 thoughts on “Is A City Fiber Optic Network a good idea?

  1. Gerry, Thanks for the article on the LO fiber optic option. A couple thoughts below.

    1) It is VERY concerning that a local Lake Oswego LLC is even in the discussion as a contractor for the project, especially when they have not done a project like this before. Too much opportunity for possible nepotism, favoritism and corruption, all at the risk of the citizens of LO, and too much potential for bad will on a project like this. Think about the “$14 mm purchase of the LO community center property on Kruse Way” – a major LO debacle that is still talked about with scorn.

    2) Wiring small towns like LO with fiber optic cable is NOT something new, it has been done before. And it’s been done by companies that have no link to any LLC with ties to individuals in Lake Oswego. Charlottesville VA, Holly Springs NC, Westminster MD, and other small cities have already done this. Their experience in connecting their entire cities with fiber optic cable is something LO can and SHOULD study and learn from BEFORE spending a single cent on this project. See “Ting Internet” at https://ting.com/internet for more info on wiring small cities with fiber optic cable. Ting is the Fiber Optic division of Tucows Inc., an Internet Services and Telecommunications company that serves North America and Europe, which is listed and publicly traded on the NASDAQ. http://www.tucows.com

    FYI, Dave Pyle, LO Resident for 50+ years

  2. What a disaster in the making! Why should the city provide a service that commercial companies can and will provide for the city if this is a valid, money-making proposal. My feeling is the possibility exists for the citizens of LO to be on the hook for millions of dollars. Another writer mentioned the West Side Building debacle: have we learned nothing. Before the council goes off on another half-baked idea let us, at least, put this idea before the voters. The largest percentage of home owners in Lake Oswego are over 55 and many are retired. Is this another expense for people over which they have no control? We already have huge water bills, our roads are in terrible shape, even after the resurfacing projects of last year we have a big backlog, the schools always need more money, we have increasing PERS obligations, and council is resurrecting the North Anchor Project (Dear God). Are we back to the “Carmel of the North” idea espoused by our former Mayor? I can only speak for myself when I say this household would not be subscribing to a fiber optic network at $60 to$65 per month. Council often talks about “low income housing” and how we need this. If too many new money projects keep getting added to my property tax bill I may be looking for “low income housing” my self.

  3. Why would I pay that much for a dark line? It isn’t much less than Comcast and after buying everything else in piecework, it would probably cost more.

  4. This post deserves a reply on a number of points. While it contains many accurate statements, there are some inaccuracies, and some points worthy of further discussion, to provide a balanced view.

    The article states:
    “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.”

    This is an inaccurate statement. Dark fiber [1] is, literally, unused/unlit fiber which carries nothing. What is provided in the proposal to the city is LIT fiber carrying internet access. Because video, music, phone service and much more is all offered over the internet, it would be just as easy (and just as biased) to say “What will be provided through the fiber optic network? Basically, EVERYTHING.” The truth is, What is offered over the internet is whatever you want. You will have the choice of where you get your entertainment, phone (if desired), and any other service. Gigabit fiber is an entertainment monopoly BREAKING proposal, because there will be no data caps[2,3,4] which punish you from getting your entertainment outside of cable.

    “Can I get our local free TV stations?”
    First of all, the Lake O fiber system isn’t intending to be a cable TV service. It is an internet service. You can still keep your existing TV subscription. That said, more and more often, users are finding that they can save $ by obtaining their entertainment from the internet. Local free TV stations generally are available[5] via streaming over the internet, and more are coming online all the time, as content providers realize that cable TV Lock-in is no longer the case for a growing number of citizens[6].

    “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. ”
    This is true, however also expressed in this article is the worry that TOO MANY people will sign up, and any potential profit due to the large number of subscriptions will not be captured by the city. (See “Who is going to “profit” from this? “) Which is it, then, and should we do nothing out of fear of the extremes? Let’s focus on one worry at a time. Will too few sign up? It’s unlikely. Lake O survey[6] found that 50% of 384 respondents ‘Definitely Would’ subscribe to $60/mo gigabit internet access, if given the chance, while 19% ‘Probably would’. Given this, it’s unlikely that 35% adoption rate (across businesses and homes) would not be reached. In addition, if 35% of Lake O do not show an initial intent to sign up, the network will not be built, so again the risk is very low.
    Will too many sign up and too much profit be made? This is an interesting argument, because it assumes that the need for this network is GO GREAT that there will be a groundswell of interest from Lake O citizens signing up. Think about that for a minute. A reason for not going forward is proposed – that assumes an incredible need for the very thing being argued against. That laid out clearly, ‘no one’ wants a company signing a contract with the city and walking away with huge profits serving a need (except maybe for the incumbent cable providers[8,9,10]), so let’s look closely at the numbers, when the proposal is out. I think you’ll find it is a good balance. Why? Because the incumbent in some areas offers similar service, but for $300/mo[11]. There’s profit, folks.

    “Should we do this?”
    “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).”
    Technology is changing, however one thing remains constant. Fiber has been and continues to be the best medium for high speed data transfer, period. The backbone of the internet isn’t built on wimax, or any other wireless technology, it’s built on fiber. The backbone of your current internet provider is also not built on wireless, but on fiber. Do you think that multi-billion dollar companies would invest in a technology that will soon be outdated? I don’t. WiMax has been tried years ago, and failed[12,13,14]. Citing wireless technologies as potential future competition for fiber internet is a red herring, and big businesses (and most geeks) know that. Fiber is the best choice.

    “This is a competitive business. ”
    This is a claim that most incumbents like to make, but let’s look at the numbers. This is getting very long, so if you, as a user, think internet access to your home is a competitive business, please see [15,16,17,18,19]. If you still think internet access is competitive, think about this: encumbent service providers rank lowest in customer satisfaction of ALL companies according to the american consumer satisfaction index[20]. If there’s healthy competition, why don’t dissatisfied people switch away to the competition?

    Finally,
    “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.”
    This is an interesting one. Franchise fees are essentially a tax on citizens (the costs are transferred through). In fact, sometimes these fees are adjusted as a way to increase taxes without a city vote[21]. The cable and phone franchise fees are intended to apply to cable television and telephone service, which, this internet service may provide access for competitors to reach customers, but is not a competitor itself. Since when was access, choice, and potentially lower taxes a bad thing?

    In the end, the survey results from citizens have been overwhelmingly positive, yet a few outspoken citizens have cast cold water on Lake O owning its own fiber. Think whom a low-cost fiber internet access utility would benefit most, and ‘whom’ a low cost fiber internet access utility would hurt most, and decide for yourself to speak up for your own interests and not let an outspoken few kill this for us.

    Disclosure: I am in no way connected, nor have interests with Symmetric Networks (the broadband winning bidder), I am an interested resident who was invited to join the Lake O citizens broadband proposal review committee due to my technical background. In case you haven’t guessed, it is my opinion that, if Lake O does not seize the opportunity to acquire its own fiber internet backbone, it is the current and future citizens whom will stand to lose the most.

    [1]http://www.interoute.com/what-is-dark-fibre
    [2]http://time.com/money/4143682/comcast-data-caps-internet/
    [3]http://arstechnica.com/business/2016/03/comcast-accused-of-violating-nbc-merger-commitment-and-net-neutrality-rule/
    [4]http://www.extremetech.com/internet/219638-customer-fcc-complaints-signal-huge-problems-with-comcasts-data-cap-meter
    [5]http://www.digitaltrends.com/home-theater/how-to-quit-cable-for-online-streaming-video/
    [6]http://www.nbcnews.com/tech/tech-news/tvs-cord-cutting-trend-picking-steam-survey-n429976
    [7]https://www.ci.oswego.or.us/sites/default/files/fileattachments/citymanager/webpage/22859/lake_oswego_gigabit_demand_estimate_final_report_feb_10_2016.pdf?t=1457159932562
    [8]https://en.wikipedia.org/wiki/Cable_television_franchise_fee
    [9]http://www.cmcsa.com/earnings.cfm
    [10]http://www.verizon.com/about/investors/quarterly-reports
    [11]http://www.oregonlive.com/silicon-forest/index.ssf/2016/02/oregon_created_a_tax_break_for.html
    [12]http://www.theregister.co.uk/2010/12/09/clearwire_sprint_wimax/
    [13]http://oogleideasfactory.blogspot.com/2012/03/why-wimax-failed-to-take-off-in.html
    [14]https://gigaom.com/2010/06/25/intels-bad-bet-on-wimax-pays-off-for-td-lte/
    [15]http://www.newyorker.com/news/daily-comment/we-need-real-competition-not-a-cable-internet-monopoly
    [16]http://theweek.com/articles/449919/why-american-internet-slow
    [17]http://www.nytimes.com/2014/10/31/upshot/why-the-us-has-fallen-behind-in-internet-speed-and-affordability.html?_r=0
    [18]http://www.theverge.com/2014/2/25/5431382/the-internet-is-fucked
    [19]https://backchannel.com/jammed-e474fc4925e4#.xzj5sjh5r
    [20]http://www.nbcnews.com/business/consumer/survey-internet-cable-companies-disappoint-consumers-n368356
    [21]http://www.oregonlive.com/lake-oswego/index.ssf/2011/05/lake_oswego_city_council_approves_one-year_franchise_fee_increases_for_school_district_aid.html

  5. Lol, WiMax! Comcast wants to charge you twice the construction cost over two years for gigabit service. And just offering that raw deal qualified them to save millions of Oregon taxes. Fiber is not risky. It’s been used for decades, it keeps getting faster. Customers are screwed on price and service by monopolistic private carriers. Own, don’t rent. Be the landlord, and save big bucks.

  6. I’m thankful to see this getting the scrutiny and cautious skepticism it deservers. After reading the RFP issued by Sunstone Business Finance, the construction timeline of 3 years is definitely concerning along with the payout time table of 19 years. A lot of technology advancements will happen in 3 years time…. let alone 19 years.

    The percentage of individuals who want this type of speed is certainly high (who wouldn’t want fast internet?). However, in 3 years when this is rolled out who’s to say there won’t be faster, cheaper options available? What happens if we don’t hit that minimal sign up? Worse, what happens when the numbers start to drop due to other options available? How long does the city need to sustain that number? When it falls below, the taxpayer will be on the hook for the shortfall.

    Technology like this will quickly become outdated within the next few years as wireless services such as 5G and other wireless options (Google, Facebook, ATT, Verizon, Open Mesh networks, etc) come into place.

    The city is proposing to lay cable across LO for 1GB per second speed… 5G wireless will be here within 2 years and offer the same (if not faster) service. Cable companies have also just announced the capability to offer 1GB/second speeds over existing cable lines!

    Why would a company pay to lay cable across LO and leave the the taxpayers on the hook should not enough individuals sign up for this service? I also find it unfortunate to be discussing this as a “30 year” benefit. Can you imagine what we’ll have in 30 years related to technology advancement? This service will be outdated within 2-5 years. By the time this “utility” is rolled out, the technology will already be reaching irrelevancy.

    Thank you to those who are changing the mindset on this decision.

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