TCL&P Eyes Fiber Partner, June Construction Start Date
By Beth Milligan | Jan. 22, 2019
Traverse City Light & Power (TCL&P) board members will vote today (Tuesday) to approve a contract with a vendor for the utility’s planned citywide high-speed fiber Internet network – a step that could lead to a June construction start date and potential service availability as soon as late summer.
TCL&P staff will recommend hiring global information technology firm Fujitsu from among 10 vendors that responded to a request-for-proposals (RFP) for contractors for the fiber project. TCL&P is planning a phased approach to deploying a community fiber network that could bring 1 gigabit-per-second Internet service to Traverse City homes and businesses over the next two years. Phase one of the project will offer network connectivity to approximately 2,200 commercial and residential customers throughout most of downtown, including Central and Boardman neighborhoods, Eighth Street, and Woodmere Avenue. If successful, the rollout would be followed by a buildout expanding the fiber network to the rest of TCL&P’s service area.
The initial contract with Fujitsu is for a not-to-exceed amount of $25,000 and covers engineering and design plans, a detailed business plan, an operational plan, and a networking architecture plan for phase one. TCL&P Executive Director Tim Arends says the price represents an “incredibly reduced rate” – citing an estimate from another company to create a business plan without engineering services at $90,000 – because Fujitsu hopes to continue partnering with TCL&P throughout the entire project. “This (price) is by design to allow both entities, TCL&P and Fujitsu, to have stake and incentive to move forward in the best possible approach,” Arends wrote in a memo to board members.
Arends tells The Ticker that staff chose Fujitsu after reviewing each vendor’s track record, marketing strategies, support systems, and longevity in the tech industry, as well as conducting site visits. “We were looking for companies that had successful deployments of municipal fiber and were going to have reliable and operable support systems…that’s why this company rose to the top of the pack,” he said. Fujitsu is the third-largest information and communications technology (ICT) firm in the world with over $40 billion in net sales and 159,000 employees worldwide. Among other projects, the company oversaw a municipal fiber project in Fairlawn, Ohio, that has garnered a nearly 50 percent take rate – or sign-up rate – among customers and is expanding to Akron and other surrounding communities. Early TCL&P estimates projected needing at least a 22 percent take rate to pay off the network construction, Arends says.
If board members approve the Fujitsu contract, the firm will have 90 days to deliver its phase-one engineering and business plans. With board approval, TCL&P would then put the project out for bid, ideally seeking out “local contractors” to help build the actual network with Fujitsu’s oversight, according to Arends. Phase one could cost in the $3.6 million range, Arends says.
“It will be more expensive than future deployments because a lot of downtown is underground, so there would be an awful lot of boring that would have to occur to accommodate those businesses,” Arends says. “Whereas outlying areas would be overhead construction, which is not as expensive.” Network construction would involve building fiber optic cables into every neighborhood as a base infrastructure, with additional fiber cable drops running only to those homes and businesses that sign up for service. Should phase-one construction begin in June, as Arends hopes, service could be available to the first customers as soon as late summer.
The contract arrangement with Fujitsu calls for a “managed takeover” that has the firm running all aspects of the fiber project under TCL&P’s oversight, but allows for the “gradual and complete takeover of operations” by TCL&P. TCL&P would be the sole Internet service provider (ISP) for phase one of the fiber project. Board members could decide in the future whether to allow other ISPs to access the utility’s fiber infrastructure, Arends says. Phase one will also be crucial in gauging customer demand for services. While TCL&P only plans to offer high-speed Internet to start, the utility could expand to offering television and phone services in the future if customer demand warranted it.
The fiber network is intended to be paid off through subscriber revenue – a fact TCL&P is emphasizing more as robocalls, mailers, and emails have begun circulating in Traverse City from outside groups encouraging residents to oppose the project. One mailer distributed by the Center for Individual Freedom (CFIF) – a conservative policy advocacy organization located in Alexandria, Virginia – warns Traverse City residents that taxypayers will be “on the hook” for a “risky fiber optic project that could cost up to $15 million” and “take away resources from priorities like schools and roads.” It encourages residents to contact city commissioners to ask them to oppose the project. The Americans for Tax Reform, another conservative advocacy group, has also contacted city officials opposing the project. “The thing I find ironic is that they’re appealing to the wrong audience…the city commission already approved this in a prior year capital improvement plan,” Arends says. “They don’t have a vote on this project."
Board members at a Traverse City Downtown Development Authority (DDA) meeting Friday discussed receiving the mailers and speculated that the campaigns were being conducted on behalf of competing Internet providers. Arends declined to speculate as to the cause behind the campaign, but says representatives from other municipalities that have built public fiber projects cautioned him “that this was a strategy deployed in their areas." He says the utility anticipated pushback accordingly.
TCL&P has since added a new FAQ section to the homepage of its website addressing questions about the fiber project, particularly regarding funding. Arends say that as with city sewer, water, and electric services, the fiber network will be paid for through an enterprise fund funded by Internet ratepayers. Initial construction could be paid for through either bonding and/or an interfund loan, meaning TCL&P could use some of its electric revenues to pay for the buildout. However, that loan must eventually be repaid with interest from the fiber fund. “(The mailers) are making this claim your taxes are going to go up, but the general taxpayer isn’t going to pay for this,” Arends says. “It’s going to be paid for by those taking advantage of the service.”
While some municipalities have faced financial challenges and/or failed in launching their own fiber networks, others have found success – particularly those who took time to plan out a thoughtful business model, Arends says. “We’ve had complaints that we’ve dragged our feet on this and taken too long, that we’ve studied it to death,” he says. “My view is that the board has done its due diligence, and thoroughly investigated making these decisions, in order to protect the interests of ratepayers and the City of Traverse City.”