Spokane Journal of Business

Flirting with fiber in Spokane

Group zeroes in on a couple of options for municipal high-speed internet

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Members of a city-appointed working group charged with exploring options for a fiber optic network in Spokane say they’ve narrowed their focus to two possibilities: a public-private partnership or a private company.

The concept is not without its critics; one industry expert says building a fiber optic network in the city wouldn’t be a wise move, and one internet service provider agrees.   

Spokane City Councilman Breean Beggs says the group has been meeting every other week for four months, during which time members have conducted research and received presentations from a variety of companies involved in fiber optics.

“For several years, people have been coming down to the City Council open forum and asking us to look into figuring out how to upgrade our internet broadband to fiber around the city,” Beggs says. “I looked into it and found out there wasn’t a plan, so I talked with my fellow City Council members and got them to agree to approve a resolution directing me to start a work group on improving broadband access throughout the city.”

Members of the group say they’re dissatisfied by current broadband speeds and prices, particularly for underserved neighborhoods. 

“Right now, for most providers in most parts of the city, there is just a very low maximum that you can get, no matter whether you’re willing to pay more or not,” Beggs claims.

Beggs says the group expects to send a report on their findings and recommendations for further research within the next six weeks.

The group is calling one option it’s exploring the Ammon model, named for the southeastern Idaho city with a population of just over 15,000.

“The city essentially built a fiber network and then made it available to any private company that wanted to provide internet service over that network,” Beggs says. “It had the result of significantly reducing the cost to consumers, increasing the speed substantially, and then it also allowed the city to wire itself as a smart city.”

Zach Shallbetter, a member of the working group, is president and cofounder of digital studio Uxiliary and president of the Inland Northwest Technologists group. He says that if Spokane chose something like the Ammon model, consumers would be able to choose “on the fly” which internet service provider to subscribe to and for which services. While the city would handle billing, Shallbetter says it would be a public-private partnership in which the public would own the fiber and infrastructure from which private companies would lease access. 

Beggs says Ammon’s city government split broadband into three branches: one to build the network, one to maintain it, and one to provide internet service. 

Beggs says that as he understands it, Ammon homeowners and businesses pay a monthly fee for a few years to cover the cost of building the infrastructure for the network, a monthly fee for maintenance, and a fee to the internet service provider of their choice. 

“The city assisted in financing it, but the actual cost of installing the infrastructure was paid by the users of it,” he says.

Ammon installed its fiber optic network in sections. Beggs says the group’s research shows that Ammon asked residents of each neighborhood if they were interested in a fiber optic network, estimated individual prices, and presold service to the network.

“For each property where they installed it, they put essentially a utility lien on that property so the city knew they would get paid back for it over time, even if the property owner sold,” Beggs says.

The other option the group is considering is collaborating with Madison, Wis.-based TDS Telecom. Beggs says TDS Telecom would build a new fiber network to homes and businesses throughout the city. Because TDS Telecom would be building infrastructure that the company would own, no contract with the city would be necessary.

“They’ve done this in several other smaller communities, none as big as Spokane,” Beggs says. TDS Telecom has been able to build and maintain networks for less than what it would cost the city to build and maintain its own network because the faster broadband attracts new customers, Beggs claims, and is seeking cities of Spokane’s size in which to invest. 

Choosing TDS Telecom, Shallbetter claims, “won’t cost the city anything” and would be significantly faster than a network built and maintained by the city.

“We wouldn’t be hiring the contractors to run the fiber to the home,” Shallbetter says. “We wouldn’t be providing that baseline service that’s necessary to allow consumers choice; it would all be provided through a single provider. Essentially, TDS would be paying for it entirely themselves, and we wouldn’t have exclusive rights to it.”

TDS Telecom would recoup the costs of installing, maintaining, and operating the network through market share, Beggs says.

“Their goal is to get 50 percent of the broadband market share,” Beggs asserts.

He says the fact that the infrastructure would be owned by a private company would mean the city would have little control over the network.

“In the Ammon model, the benefit of that is the city owns the infrastructure just like the streets or the pipes, and then has more flexibility of what it can do with it and has more control over pricing over the long term,” Beggs says.

Some 70 miles northeast of Spokane, the city of Sandpoint, Idaho, is currently in the process of installing its own fiber optic network. Jennifer Stapleton, Sandpoint’s city administrator, said the rural community of nearly 8,000 people began considering a fiber optic network about 10 years ago due to the lack of internet service provider options. The city initially began working with private partners who would build the network and lease access.

“After many failed attempts, it was probably about 4 1/2 years ago that the city and the county got together and decided they were just going to move forward with building our own,” Stapleton says. “The vast majority of the network is in Sandpoint city limits, so over the course of a couple of years, we identified a pathway for our network, kind of what the backbone was going to be.”

Sandpoint began building empty conduits, or protective tubes, for fiber optic cables during street construction projects, and soon began building two routes of “dark fiber,” or single strands of fiber that aren’t yet providing service. One route would serve the city and county governments, while the other would be dedicated to residential and commercial use. As the network progressed, Stapleton says, the city chose to change its model to lease conduits by the foot using a system that divides the conduit into separate linear cells.

“We then lease out a cell, which allows a provider to pull their own fiber through that cell and have a lower cost lease through us for use of that conduit,” Stapleton says. “That was kind of the favored model by the providers who were looking at entering our market at the time, and we’re continuing to find that that tends to be the preferred route by our providers. The benefit of that is it’s also cheaper for the city in terms of initial up-front costs with building a network that way.”

Stapleton says Sandpoint’s system is a hybrid of the internet service model the city initially envisioned. 

In practice, Sandpoint’s fiber optic network operates much like Ammon’s.  

As Sandpoint continued building conduits, it began attracting attention from internet service providers, including Starkville, Miss.-based Ting Inc.

“Their business model was bringing fiber directly to the home and 1 gig fiber service, so extremely fast fiber service at very low rates, and they’re one of a very few providers around the country that their target market is that residential internet market,” Stapleton says. “Most of the providers, their target is the commercial market. That’s their business plan. That’s where they see the growth.”

Stapleton says Sandpoint has right-of-use agreements with Ting Inc., and with Fatbeam LLC and Intermax Networks Inc., both based in Coeur d’Alene.

“The rate that our residences are getting here in Sandpoint is $80 a month for full gigabit service to the home,” Stapleton says.

She says Ting has hired a dozen employees, the majority of whom are from the Sandpoint area. The company also hires local contractors. She says Ting plans to expand service from Sandpoint to the neighboring cities of Ponderay, Kootenai, and Dover within the next few years.

“I would say that this is, over several decades, probably the most important economic development project that the city of Sandpoint has ever undertaken, particularly for a more rural community like ours, that has all of the amenities that we have,” Stapleton says.

In Spokane, however, at least one internet service provider doesn’t think municipal internet is necessary. 

Andy Colley, external affairs communications director for Comcast’s Washington region, says Comcast already offers gigabit-speed internet to residential and business customers throughout Spokane, and claims Spokane is among the best cities in Washington in terms of internet access and speed. 

“There is not a sensible argument for why another broadband network is needed in Spokane, particularly at the expense of taxpayers,” Colley said in an email. “Other cities in the Pacific Northwest have investigated this same concept and concluded that it wasn’t viable, and internet access and speeds have significantly increased since that time.”

Members of the working group say they understand that there are challenges to providing Spokane with a city-wide fiber optic network.

“The biggest issue is that it costs so much money to do if you’re trying to do your whole city,” Beggs says. “I don’t know what the cost would be, but it would be a lot.”

Some of the cost could be offset by the fact that, like Sandpoint, Spokane has been installing conduits during road construction projects for several years.

“When we first started, we thought, ‘Hey, the city’s already got the conduits,’” Beggs says. “That’s a part of the cost, but the real expense is what I would call dropping it to each individual business and house. You might have three miles of conduit on Sprague, but then you’ve got to hook that fiber to each location.”

Shallbetter says a representative from Avista Corp. has informed the group about new technologies that could decrease the cost of providing access to the network, including one approach called microtrenching.

“The concept is that we dig a shallow groove and put the (fiber optic cables) into the ground, either along the streets or we lift the sidewalks—all the sidewalks in the city need to be improved anyway—and dig these thin trenches that you lay a flat pack of conduit into, and from there it can be utilized in whatever way you want,” Shallbetter says. “It’s a way to save us from having to do really complicated work, like digging up entire streets all over the city.”

Greg Green, CEO of Fatbeam, says the cost could be more than people realize.

“I’d guess that you’re looking at $100 million to get fiber to everyone’s home, maybe more,” Green says. “How do you get it back at $32 per month per user?”

Green says the cost of installing a fiber optic network could be higher than it was just a few years ago because several companies—including CenturyLink, Comcast, Verizon Wireless, and others—already have fiber optic networks running under Spokane’s streets.

“It’s not just the fact that it’s expensive. It becomes more expensive when you’re the seventh or eighth provider in a market like Spokane,” Green says.

Creating and owning its own network would be a risky move for the city, Green says. Other cities that have attempted to do so, especially larger cities, have struggled or failed, he contends.

“I’ve built 10 different companies on fiber optics—not all of them in Spokane—but I just think that there’s a great deal of risk,” Green says.

Green also says that the city should focus on other priorities.

“Are you so good at picking up garbage and fixing the roads and cleaning the streets, and do you have all the police officers you need for a safe city? I think those are the sort of things you have to ask in terms of priorities before you think about taking on a $100 million fiber optic network,” Green says.

Beggs, however, counters that the working group’s main principle is that either a private company will take on the project, or the fiber optic network’s users would pay for it.

“In today’s financial situation, for the general taxpayers to pay for it, that’s not an option,” Beggs says. “The other principle is, as much as possible, we’re simply trying to open up the infrastructure so that private companies will provide the actual service and the competition of the free market will take care of pricing.”

Shallbetter says cost is just one aspect of a fiber optic network that the working group is considering.

“We’re looking at the model that we think is going to have the biggest bang for its buck in the end, is going to provide all of the requirements that we need and will have the longest life. We want something that will essentially last into the indefinite future,” Shallbetter says. 

Beggs says he’s pleased that Spokane is “seizing the day” when it comes to considering technological advances.

“Our work as city is to try to figure out, ‘Okay, nationally this market is in flux, what can we do to leverage it to the benefit of our community members?’ That’s really what the work group is,” Beggs says. “It’s figuring out how to be smarter given the market conditions and leveraging our position to increase service and lower cost with better competition.”

Virginia Thomas
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