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What's Traverse City's Best Fiber Option?

February 15, 2017
What's Traverse City's Best Fiber Option?

Should Traverse City Light & Power (TCL&P) operate its own high-speed fiber Internet service, or should TCL&P open up access to its fiber network to other companies and potentially increase customer choice? TCL&P board members Tuesday considered three possible scenarios for bringing high-speed fiber Internet to town and, though each scenario offers different funding models and risks, all three hinge on that basic question.

TCL&P hired consulting firm Conexon to conduct a feasibility study on offering fiber to the home (FTTH) to Traverse City customers. TCL&P owns a citywide fiber-optic network already, but is looking at expanding the system to provide high-speed Internet – and potentially cable television and phone service – to homes and businesses throughout the city.

Conexon partners Randy Klindt and Jonathan Chambers presented two recommended options to TCL&P Tuesday: construct the fiber network and directly provide Internet/cable/phone service to customers, or construct the network and lease exclusive access to an outside company to provide services.

Conexon estimated the first scenario will cost TCL&P nearly $16.2 million, building 184 miles of fiber reaching nearly 10,800 customers over a two-year period. TCL&P would break even in year 11 of the project, Conexon estimated. In the second scenario – hiring an outside company to provide services – TCL&P’s cost is estimated at just over $10 million, with a projected break-even in year 2 (the lower cost and faster break-even accounts for the outside company assuming the service equipment costs and operational risks for the project). Both models describe charging customers $50/month for 100 megabit-per-second service or $80/month for 1-gigabit-per-second service.

While TCL&P becoming an Internet service provider (ISP) would cost more upfront and take longer to break even, it would also generate more revenue long-term, according to Conexon. “The ISP side of this business makes money,” said Chambers. “It’s a profitable business.”

But local tech groups encouraged TCL&P to consider a third option: opening up the fiber network to multiple Internet providers. “If TCL&P operates it, or you have another single-source ISP, either way you have a monopoly, in my opinion,” says Russell Schindler of TCNewTech, a local networking group of tech professionals. “Every company in this town uses the Internet to do business. So it’s important that if fiber comes, it’s well-maintained and fair and competitive. If you keep it single-source, you have one company controlling the destiny of every company in Traverse City, which is unsettling.”

Schindler describes fiber as a type of public infrastructure similar to roads, saying that while government maintains roads in order to facilitate commerce, it “doesn’t run the trucking companies. This is the exact same thing. I’d prefer to see Light & Power maintain the infrastructure and not be an ISP themselves. We’re going to advocate for as many providers as possible.”

Other tech companies also advocate for competition and access, with one stating affordable fiber Internet could be operational in Traverse City as soon as this spring if TCL&P opened up access to its utility poles and conduits. East Lansing-based LightSpeed recently attempted to negotiate an agreement with TCL&P to bring gigabit fiber to Traverse City, according to CEO Jason Schreiber. The company sought to run its own fiber lines using TCL&P utility poles and conduits under an access agreement similar to those in place with AT&T, Charter and other telecommunication providers.

But Schreiber says after a promising first round of negotiations, TCL&P and city staff went back and added new restrictions to the fiber agreement not applied to other providers, limiting LightSpeed’s access to conduits and giving TCL&P the right to reserve poles for its own fiber use, even with enough capacity on the poles for multiple providers.

“(TCL&P) wants to do fiber themselves, that’s pretty clear, and they were not going to make it easy for us,” says Schreiber, who says the restrictions were added once TCL&P "realized how fast we were going to come to market." He notes LightSpeed was able to negotiate access agreements in Lansing, Detroit, Grand Rapids and soon Southfield to lay fiber, for which the company charges $49/month for 1 gigabit-per-second service. LightSpeed runs its own lines in order to retain control over maintenance, product delivery and customer experience, Schrieber says.

“When a community is unwelcoming and a difficult climate to do business, it makes sense to look elsewhere,” Schreiber says. “There’s legal recourse, but we don’t want a fight. We just want to compete. If we could get a fair playing field…we’re ready to hit the ground running.”

TCL&P Executive Director Tim Arends acknowledges the negotiations with LightSpeed, but says the other company chose to walk away from the agreement and that TCL&P "isn’t blocking them” from coming into the market. “There are applications we need reserved pole space for,” Arends says. “I also think you have to look at it visually as a community. While competition is great, if you have five companies running fiber and those are all running overhead, it’s going to look messed up. If the government is willing to run that infrastructure and (other ISPs) can still provide the services they want to offer…it can eliminate duplication.”

While competition could potentially bring more consumer options into the marketplace, Conexon also cautioned TCL&P board members Tuesday that "being first to market with FFTH is important." Being the first one out of the gate with fiber will be key to signing up subscribers and recouping investment costs for infrastructure, according to the consultants.

For now, TCL&P will next need to determine which of the three scenarios reviewed Tuesday it wants to pursue, with the goal of potentially adding a fiber network to its six-year capital improvmenet plan. TCL&P staff plan to analyze the three scenarios and hold a study session with board members soon to further review the utility’s options. “What we have right now is simply a feasibility study,” says Arends. “We need to put together a business plan.”


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