Greeley officials are studying the possibility of a municipally owned broadband network. If pursued, the proposal would have to go before voters in a ballot initiative.
In building its “gigabit city,” Longmont is amassing up to $67 million in debt. Its NextLight service has driven its growth since 2014 with a charter membership price of $49.95 per month, attracting 10,631 subscribers as of January.
But will Longmont be able to sustain its growth rate and pricing amid fierce private-sector competition? Fiber-to-the-home will not “future proof” a network. Any provider, private sector or municipality, must continue to invest in its network.
And just when a municipality may intend to harvest the cash flow, it may face intense competition from existing and new providers.
Comcast, for example, offers gigabit service in Colorado, with Century Link offering it in certain markets. On the horizon nationally are deep-pocketed competitors pursuing gigabit wireless ventures that may target higher-revenue customers.
Google’s Fiber Web pass is coming to Denver. Verizon will test its 5G wireless broadband service in Denver and 10 other markets. Dish Network is pursuing a wireless 5G offering.
The financing of municipal broadband shows the vulnerability. In 2011, when Longmont was considering municipal broadband, it asked and answered a point-blank question: “Will telecommunications services provided by the city be cross-subsidized by our tax dollars or money collected by other city departments?”
The answer given was “no.” But, clearly, electric ratepayers of Longmont Power and Communications are the financial backstop, even if they never become NextLight customers.
“If revenues from commercial and residential customers fall short, LPC’s electric service revenues will be used to make up the shortfall, LPC staffers have told the Longmont City Council,” the Longmont Times-Call reported when voters approved the bond issue in 2013.
Will NextLight’s future revenues cover its mounting debt? It’s too early to say.
In some other markets, the verdict is troubling.
“Of the 20 municipal fiber projects that reported the results of their municipal fiber operations separately, 11 generated negative cash flow,” according to a recent study on “Municipal Fiber in the United States: An Empirical Assessment of Financial Performance” from researchers at the University of Pennsylvania Law School. “Unless operations improve substantially, these projects cannot continue to operate over the long haul, let alone cover the capital costs needed to establish operations. Of the others, five are projected to take more than 100 years to recover their costs, and two others are projected to take over 60 years.”
To the citizens and ratepayers of Greeley who may be asked to support municipal broadband, the best advice is to do the research, ask tough questions and buyer beware.