Survey To Gauge Public’s Interest In A City-owned Fiber Network

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31th, December 2015 –  The Review

Would enough customers sign up for the super-fast broadband service to make it self-sustaining?

Scott Lazenby

City officials have hired a Portland-based market research company to gauge public demand for a city-owned-and-operated broadband Internet network.
The phone survey — targeting 400 households and 100 businesses in Lake Oswego over the next several weeks — will be conducted by Pivot Group. It follows an online survey conducted by the city in December, which sought open-ended comments and advice from Lake Oswego residents about their interest in a gigabit-speed, fiber-based broadband network.

The big question, City Manager Scott Lazenby said, is whether enough local households and businesses would use the service to make it self-supporting.

“The phone survey will probably be most helpful in gauging interest,” said Lazenby, who hopes to have the results and information from both surveys available ahead of a Jan. 26 City Council work session.

Earlier this year, city councilors directed staff to explore various models for financing, building and operating a city-owned broadband fiber network that would offer super-high-speed Internet to every residence and business in Lake Oswego.

Fiber-based gigabit broadband networks offer Internet services up to 100 times faster than current cable- and DSL-based broadband networks. “Gig” fiber networks promise better, faster functionality in uploading, downloading, streaming or sharing content and greater capacity and connectivity for multiple users — whether in a residential, business or municipal setting.

By operating its own fiber broadband network as a utility, the city would be able to set and control consumer costs and services while giving citizens a voice in pricing and content. That wouldn’t be the case if the city offered no alternative to for-profit companies such as CenturyLink, Comcast or Frontier, which currently operate broadband networks in the area, or Google Fiber, which is considering moving into the market.

Although Lake Oswego was identified in 2014 as a potential “fiberhood” — an area that could receive Google Fiber’s high-speed Internet service — the timeline has been vague. In March, Lazenby suggested to the council that the city didn’t have to wait for Google to make up its mind; instead, the city could build out a fiber-optic infrastructure through a public-private partnership, ultimately creating a city-owned utility.

A similar program was introduced in Sandy while Lazenby was city manager there.

In June, the city issued a fairly open-ended request for proposals and received two: SiFi Networks’ proposal for a largely underground infrastructure, and Lake Oswego-based Sunstone Business Finance’s largely aerial design. The proposals were reviewed by five city staff members and an eight-member advisory group, and city staff ultimately recommended the council approve Sunstone’s proposal, noting it had a lower lifetime cost over a 30-year period.

Sunstone would build and own the fiber-to-the-premises network and then lease it to the city.

But in giving the go-ahead to negotiate a formal agreement with Sunstone, councilors expressed the need for a scientifically valid survey of local residents and businesses to make sure demand for the service would make it viable and cost-effective.

Lazenby said long-term costs associated with building and operating the network would require an estimated 35-percent initial “take rate” among local residences and businesses to make the project work. In other words, at least 35 percent of local broadband Internet users would have to switch to the city-owned network to make it self-supporting.

Lazenby described that estimate as conservative and similar to the target set by city leaders in Sandy when they voted to finance and install a similar broadband fiber network there.

Upon installation, Sandy quickly reached and exceeded that targeted take rate. In fact, Mayor Bill King said that number is now up to 60 percent, allowing the city to reduce its service rates considerably in the next year.

But King said that before the city could launch its conversion to fiber, it needed the input of citizens to gauge the demand for a gigabit broadband network.

“The preparation was huge,” King said. “Without public involvement and public education, I don’t think we would have gone forward with it. We needed to be sure the public was going to want it and ready to adopt it. We did a lot of community outreach and it ended up being very well received.”

Lake Oswego City Councilor Jeff Gudman opposed the creation of a city-owned network in October and cast the lone dissenting vote on moving forward with Sunstone. In his argument against the idea, he cited several concerns, including the pricing response of competitors, the lack of market research, the solid footing of current service options and the increased staffing requirements for the city.

“Do we really want to get into the utility business?” he asked. “I don’t want to go there, particularly when we have the service that’s already available.”

Gudman and fellow Councilor Jackie Manz also said they had not sensed a great demand for fiber-based service from Lake Oswego residents.

“This has not been a burning issue,” Gudman said. “I’m not receiving comments or being stopped in the grocery store by people saying, ‘You’ve got to do this,’ or ‘You don’t have to do this.’”

Councilor Joe Buck agreed, though he pointed out that issues related to the City Council aren’t often at the forefront of the minds of local residents.

“So very few citizens know what’s going on in the council world that it doesn’t surprise me that we don’t have people coming out of the woodwork one way or another,” he said. “I think it’s a chance for us to exercise a little bit of leadership here.

“For me, the market research is critical,” Buck said. “If the market is there, then we can move forward. But if there’s no market to begin with, we’re kind of wasting our time.”

Lake Oswego’s online survey for citizens featured 18 questions designed to gauge people’s knowledge about the service providers, costs and speeds of their home-based Internet. Specifically, it sought answers about the probability that an individual would subscribe to a service that offered gigabit Internet at a price of $59.95 per month.

The survey acknowledged that some folks already could be satisfied with their current service, might not want the hassle of making a change or are locked into a contract that could prevent them from making the switch right away.

Down the road, Lazenby said, the city could pursue a model that solicits a modest deposit — “say, $50” — in an attempt to guarantee the targeted 35 percent take rate that would make the project work financially.

“In my experience, surveys only go so far,” Lazenby said. “I find it better to seek more serious commitments from folks and gauge where that is.”

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