21 Feb

Taking Issue with the City Q & A on Broadband

City says: Under the proposed agreement, network and ISP operation would be contracted out, and no staff would be added.
We respond: We sure hope there are no new staff required; but, how is billing to be handled, who will interface with the provider, who will handle citizen concerns?

City says: Fiber networks are the state of the art for high capacity bandwidth. Cell companies place limits on data usage.
We respond: Fiber may be state of the art today but will it be for the next 30 years? Just remember that 30 years ago cell phones were not an everyday thing and only voice was available. 5G cell phones are coming, probably by 2020. And DOCSIS 3.1 which Comcast is bringing to its entire network increases speed to gigabyte levels and expands bandwidth. It will be in L.O. by 2018. T-Mobile has no data charges.

City says: Phone and cable TV systems have physical limitations that limit their capacity compared to a fiber-to-the-premises system.
We respond: Phone lines are limited but the hybrid fiber/cable lines that Comcast uses in L.O. can be upgraded to DOCSIS 3.1 which will provide gigabyte speed capability and increased bandwidth that some say is comparable to fiber optic.

City says: The utility would be self-supporting and not subsidized by taxes. Only those using the service would pay for it.
We respond: Does this mean that if less than 35% sign up the charge will be raised to cover the cost? If it does mean that then the user cost may well be more than $60 a month and go up anytime more people drop the service. If the rates do not go up, then the City’s General fund has to make up the difference. Which is it City?

City Says: This service would not compete for resources with other city utilities.
We respond: This is ONLY true if the City makes users pay the full cost of the service! So, if it is true expect that as people drop the service your cost will go up, just like Comcast!

City says: Bandwidth used by all households has grown steadily at an exponential rate. This trend has held consistently since the first days of the Internet.
We respond: Certainly bandwidth usage has grown; however, fiber optic cable is not the only method of expanding bandwidth. DOCSIS 3.1 expands bandwidth for hybrid cable/fiber systems like L.O. Comcast lines.

City says: …current estimates are that the total cost for gigabit Internet service plus phone and video service would range between $80 and $146 per month
We respond: Video services like Yondoo cost about the same as Comcast because they use the same source for content. ESPN does not give a cheaper price to Yondoo. Yondoo pricing in Sherwood is similar to Comcast ($20 for 20 channels; $90 for 100). If the Internet costs $60 we do not understand how cable and phone could be only $20 per month. There are other alternatives such as Apple TV but these do not have live TV.

City says: Fiber is not like a water line that you can tap into. To provide fiber optic service to all Lake Oswego homes and businesses would take over 18,000 individual strands of fiber, as part of a network designed for a fiber broadband system. Except for Frontier’s FIOS system on the far western edge of Lake Oswego, no such network exists in the city.
We respond: Comcast already has L.O. serviced by a hybrid fiber/cable network (they need that to provide on demand services); Comcast has cable to any house that wants it. With the new DOCSIS 3.1 any house will be able to have gigabyte service if it wishes.

City says: Even if the City decides to proceed with the public-private partnership, the project would not go forward until signups (secured with a deposit) reached a threshold target to ensure the project would be financially viable.
We respond: A deposit is not a “guarantee” people will pay for 30 years or even one year. The City is going to sign a contract worth $71 million over 30 years. Shouldn’t the people who use the service sign a contract? Should the City absorb the cost if usage falls below 35% over the 30-year period? We think not. If only 20% are using the service, then it will cost the City $1,000,000 per year; yes, one million a year. The risk of technological change over the next 30 years is so great that this proposal makes it a significant financial risk for the City.

The LOCAL Board

6 thoughts on “Taking Issue with the City Q & A on Broadband

  1. A few comments:

    “City says: Under the proposed agreement, network and ISP operation would be contracted out, and no staff would be added.
    We respond: We sure hope there are no new staff required; but, how is billing to be handled, who will interface with the provider, who will handle citizen concerns?”

    As I understand the proposal, billing, and customer service are handled by the ISP. Customer service and network management are the primary reasons the end cost is $60 rather than the installation fee.

    “City says: Fiber networks are the state of the art for high capacity bandwidth. Cell companies place limits on data usage.
    We respond: Fiber may be state of the art today but will it be for the next 30 years? Just remember that 30 years ago cell phones were not an everyday thing and only voice was available. 5G cell phones are coming, probably by 2020. And DOCSIS 3.1 which Comcast is bringing to its entire network increases speed to gigabyte levels and expands bandwidth. It will be in L.O. by 2018. T-Mobile has no data charges.”

    The internet backbone is built on fiber. Comcast’s own backbone is built on fiber. All high speed reliable networks are built on fiber, because the top experts in the field believe fiber is the most expandable, future capacity wise, and efficient means of data transport available. What does fiber do? It carries light (electromagnetic radiation). Light is simply a much higher frequency and much higher bandwidth technology than cable, which carries a lower frequency form of electromagnetic radiation (radio frequency). In other words, Fiber IS the future technology that cable is afraid of.
    Secondly, regarding DOCSIS 3.1 and gigabit cable, when has your cable bill or cell bill ever gone DOWN? The proposed plan is an upgrade in internet service with a permanent REDUCTION in service cost for all residents.

    “City says: Phone and cable TV systems have physical limitations that limit their capacity compared to a fiber-to-the-premises system.
    We respond: Phone lines are limited but the hybrid fiber/cable lines that Comcast uses in L.O. can be upgraded to DOCSIS 3.1 which will provide gigabyte speed capability and increased bandwidth that some say is comparable to fiber optic.”

    Again, why rely on the worst-ranked company in consumer satisfaction for future upgrades? Via internet caps, bill increases, monopolistic peering agreements, they have already shown a reasonable alternative is needed.

    “City says: The utility would be self-supporting and not subsidized by taxes. Only those using the service would pay for it.
    We respond: Does this mean that if less than 35% sign up the charge will be raised to cover the cost? If it does mean that then the user cost may well be more than $60 a month and go up anytime more people drop the service. If the rates do not go up, then the City’s General fund has to make up the difference. Which is it City?”

    The network will not be built if less than 35% show a monetary intent to sign up. Gigabit service is being offered in rare parts by incumbents for $300/mo and $1000 up front fee. It is extremely unlikely that this will ever drop to $60 (when have your cable/internet bills ever gone down? How about going down by 80%?)

    “City Says: This service would not compete for resources with other city utilities.
    We respond: This is ONLY true if the City makes users pay the full cost of the service! So, if it is true expect that as people drop the service your cost will go up, just like Comcast!”

    Who is dropping the service, and why? A ‘future unknown’ technology or 80% drop in pricing structure? Even google fiber is more expensive than the proposed service. As other towns have shown, adoption percentage increases after rollout.

    “City says: Bandwidth used by all households has grown steadily at an exponential rate. This trend has held consistently since the first days of the Internet.
    We respond: Certainly bandwidth usage has grown; however, fiber optic cable is not the only method of expanding bandwidth. DOCSIS 3.1 expands bandwidth for hybrid cable/fiber systems like L.O. Comcast lines.”

    Many cases have been made against relying on the incumbent for our future. If one is interested in poor customer service, rising fees, data caps, etc., they are the right choice!

    “City says: …current estimates are that the total cost for gigabit Internet service plus phone and video service would range between $80 and $146 per month
    We respond: Video services like Yondoo cost about the same as Comcast because they use the same source for content. ESPN does not give a cheaper price to Yondoo. Yondoo pricing in Sherwood is similar to Comcast ($20 for 20 channels; $90 for 100). If the Internet costs $60 we do not understand how cable and phone could be only $20 per month. There are other alternatives such as Apple TV but these do not have live TV.”

    Existing cable subscribers can stay subscribed to cable, but for a growing number of people, having a hundred channels just isn’t attractive anymore with all of the internet entertainment available on demand. Why make any arguments for an equivalent cable service over the internet when cable service as it is ‘should be fine’? I think more choice for internet access is the right way to go.

    “City says: Fiber is not like a water line that you can tap into. To provide fiber optic service to all Lake Oswego homes and businesses would take over 18,000 individual strands of fiber, as part of a network designed for a fiber broadband system. Except for Frontier’s FIOS system on the far western edge of Lake Oswego, no such network exists in the city.
    We respond: Comcast already has L.O. serviced by a hybrid fiber/cable network (they need that to provide on demand services); Comcast has cable to any house that wants it. With the new DOCSIS 3.1 any house will be able to have gigabyte service if it wishes.”

    Again, we need an alternative to Comcast. All of the sole references to DOCSIS and Comcast are telling… that they are and will be a high speed monopoly without this fiber project, and will charge whatever they wish! That will benefit the few and sacrifice the wallets of the citizens of Lake O.

    “City says: Even if the City decides to proceed with the public-private partnership, the project would not go forward until signups (secured with a deposit) reached a threshold target to ensure the project would be financially viable.
    We respond: A deposit is not a “guarantee” people will pay for 30 years or even one year. The City is going to sign a contract worth $71 million over 30 years. Shouldn’t the people who use the service sign a contract? Should the City absorb the cost if usage falls below 35% over the 30-year period? We think not. If only 20% are using the service, then it will cost the City $1,000,000 per year; yes, one million a year. The risk of technological change over the next 30 years is so great that this proposal makes it a significant financial risk for the City.”

    Fiber is the best, most expandable, future-proof option, the experts realize that. With a fiber provider charging low prices, there will be no incentive to leave. The question is.. what is the most efficient and cost effective way to roll it out? A Public-private partnership, by most experts opinion, is the answer.

    Please see my other responses and citations to this post (after it is accepted through moderation):
    http://locitizens.com/2016/01/24/is-a-city-fiber-optic-network-a-good-idea

  2. Thanks for your thoughtful and informative post. We appreciate you clarifying certain things. Sorry, about some of the unclear statements. I am not an engineer and rely on the internet for information which is not always correct.
    Where you and I are “at odds” is mainly about the financial risk to the City. The market research conducted by the City indicated a likely 34.7% of households might sign up for the service. Further the market research firm indicated in their commentary that it would take extensive promotion to reach 34.7%. That based on my experience as a marketer is a very significant “warning”.
    Making a small deposit is not a 30 year commitment; it is not even a 1 year commitment or for that matter any commitment.
    The City has used “double speak” with respect to the costs. On the one hand it says that the cost will be $60 per month. On the other hand it says “there will be no cost to the City”. Both cannot be true. If there is truly to be no cost to the City, then the monthly charge MUST go up to cover the cost of the network. If only 20% of households are using the service the cost will be about $90 per month. The cost would escalate just like Comcast’s. If the cost does not escalate then the City will be paying out $1 million per year at a 20% subscription rate.
    As a former marketing guy, I know people who do not make commitments (such as a contract) are less likely to stay with something if there is any “discomfort”. Based on the market research, I believe people have no idea what is really involved. If you have a full bundle from Comcast you will now be dealing with 4 vendors instead of one (internet, entertainment, phone, security). Some will see that as a major issue.
    Finally, I’d say that based on research by myself and others, municipal internet systems where there is competition do NOT make it economically. You need to look no further than Sherwood for proof of that. Where there is no high speed (100 mbps) competition, the systems succeed (a la Sandy).
    The financial risk is too big for the City to enter into a “new” business, particularly where there are established competitors.
    I write this as an individual, not on behalf of LOCAL.

  3. Hi Gerry, thank you for your reply and discussion. I tend to look at the risk to the city as being low, and here’s why:
    You say “The market research conducted by the City indicated a likely 34.7% of households might sign up for the service.”
    Looking at the survey[1], 61.1% said they were at least ‘Very likely’ to subscribe. An overstatement factor was applied to this, resulting in a MINIMUM take rate of 34.7% within the first years (based on survey results and with NO marketing thus far), and an ESTIMATED take rate of 37-42%. So, the way I would describe the the survey numbers is: as much as 61.1% of households might sign up right away, but about 39% likely will sign up, and at least 34.7% will, even with very little marketing, and even if they don’t save any money switching. These numbers are based on a survey where many responders had barely even heard of the benefits of gigabit, so in my opinion the estimate is likely low. Furthermore, Sandy’s representative comments in the council workshop meeting showed that as fiber was being deployed, the bandwagon and word of mouth effect significantly increased adoption well beyond their survey estimates.

    Based on these survey numbers, there will be no cost to the city, only to subscribers.. There is also pent up demand for decent internet service as demonstrated by the highly negative net promoter score given by Lake O’s residents about their current providers[1], and the fact that 79% !! of those surveyed said they would like to see the City offer a fiber network and gigabit service[1]. That is a huge positive response, and with no marketing at all. If that were a vote, the proposal would easily pass.

    “Based on the market research, I believe people have no idea what is really involved. If you have a full bundle from Comcast you will now be dealing with 4 vendors instead of one (internet, entertainment, phone, security). Some will see that as a major issue.”
    I think the citizens are smarter than credit is given. The Lake O survey found that 62% of all residents have either bare internet, or internet only bundled with one service[1]. Because of this, it’s simply going from one to two vendors, and users are used to historically paying for separate phone and internet, or internet and TV service (before bundles existed), so I do not believe it is as big a hurdle as you think.

    Sherwood is not a good example of a well-thought out strategy. At the time the project was called a ‘failure’ only a small fraction of homes had the service even available. The mayor believes that it will be profitable in a few years, and reap rewards expected. In addition, the network itself can be thought of as a valuable asset to Sherwood.
    There are many success stories that came from better publicized/executed efforts in areas where there was existing competition. Google fiber is adopted by as much as 75% of homes it passes in Kansas city[2]. A take rate of 83% is seen in ‘more affluent neighborhoods'[3]. These are even with a $70 gigabit rate, more expensive than the one proposed for Lake O.

    The established provider has shown their intentions for pricing of high speed internet, and it’s many times what we are talking about here.[4] Now is our chance as a community to decide we will not stand for poor customer service, high costs, data caps, paltry upload speeds, and bills that constantly increase as they see how much more can be squeezed from our wallets.

    [1]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=1457223328980
    [2]http://www.videonuze.com/article/analyst-google-fiber-adopted-by-as-much-as-75-of-homes-passed-in-kc-neighborhoods
    [3]http://www.dslreports.com/shownews/Survey-Google-Fiber-Seeing-Great-Uptake-Rate-128852
    [4]http://www.extremetech.com/extreme/220025-comcast-begins-rolling-out-docsis-3-1-based-gigabit-home-internet

    1. As I stated in my previous post, the warning by the market research firm that it will require a lot of promotion is a red flag to me as a marketing professional. If you look at the video of the market research presentation, you will see the presenter saying that.
      The results that say people only have internet and one service is probably weak responses. Later most people say they have cable TV. I think they did not understand the question based on my experience. I believe the market researcher saw that and it is why he gave a big red flag on promotion.
      Comcast has not yet announced pricing for its’ DOCSIS 3.1 product so it is an unknown. In markets where Comcast has FTTH its’ prices are high but it is mainly a business service. Since there is very little additional infrastructure for DOCSIS 3.1 the prices will likely be lower.
      As to the low ratings for Comcast, if you look at the market research you will find the product is good but customers do not like the “service”. Based on my experience that likely means wait times on the phone, etc. If you look at the verbatim answers in the market research you will see the type of complaints people have. One person said they would not add more childrens programs despite her calls. Another wanted them to price channels individually. Such people will have the same problems with Yondoo the likely entertainment offering on the City proposed system. And the prices on Yondoo will be subject to the same increases as Comcast as these are driven by the content providers such as ESPN.
      Finally, I believe it would be highly unlikely for Google or any other FTTH provider to come into any market where DOCSIS 3.1 is already in place. They simply would have no advantage on speed. Yes, Google is working where there is no competition for high speed internet. I already have 250 mbps which is quite enough for an average home. The gigabyte need is highly over rated. It sounds neat but is it really necessary? Most tech reports say no but many will sign up just because it sounds neat.

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