Broadband could be $125M effort for Fort Collins

Fort Collins residents love their internet. And like technology consumers everywhere, they want their connection to be fast, cheap and reliable.

City officials are well aware of those desires as they study various business models for providing municipal broadband telecommunication services. But they have other factors to consider, especially with potential costs hovering around $100 million.

At this point, city officials are “agnostic” about how high-speed internet service is brought to Fort Collins, said Mike Beckstead, the city’s chief financial officer, during a recent City Council meeting.

But they want to understand what they are getting into before making a formal recommendation to City Council and potentially city voters.

“We want to do that with an informed decision that fairly evaluates the risks because there are some significant risks in this,” Beckstead said.

After months of research, the city is looking at three business models — retail, wholesale and franchise — for providing high-speed internet. Municipalities across the country have pursued variations of the models.

LARIMER COUNTY: Let us help with broadband access

Designing, building and operating a city-owned system capable of handling information at a speed of 1 gigabit per second, or gbps, would require a $125 million capital investment spread over several years.

The “retail” model would operate the system as a municipal utility, eventually employing up to 33 workers. Creating the utility would require voter approval.

Building out the system, including running fiber optic lines to individual buildings, would take about five years. The targeted cost to consumers for internet would be $70 per month.

Another option would be for the city to build the system but have services provided by a private vendor through the partnership. The “wholesale” model would have a capital cost of about $88 million to build and maintain.

A third option would be to franchise broadband services through a designated private vendor, similar to the way cable television service currently is franchised to Comcast. The city would set standards for the service but leave operations and customer service to a vendor.

A factor to consider in developing a system is the potential for competing with Comcast and other established providers, Beckstead said. Some companies are less interested in building physical systems than being internet service providers, “because that’s where the value is.”

GAITER: Broadband no longer a luxury

Comcast is rolling out 1-gigabit service in markets across the country on a trial basis. The service is expected to be offered in Colorado, although when is not clear.

The service, which goes by the name DOCSIS 3.1, uses the communication company’s network of fiber optic and coaxial cables to deliver information at dramatically higher speeds than have been available to residential customers.

The service has been offered in Atlanta and other test markets at $70 a month with a three-year contract.

A key component of the service is a modem engineered to compress digital information and handle it at high speeds.

Comcast has about 57 percent of the internet market in Fort Collins, according to the city. If the company were to offer 1-gigabit service, its share would likely increase to 62 percent.

Based on a market survey, the anticipated “take rate” for municipal high-speed internet service would fall from 38.8 percent to 30.2 percent if Comcast offers high-speed service before the city does, Beckstead said.

Beckstead said Comcast officials have indicated the service would be in Fort Collins by the end of 2017.

However, Comcast spokesperson Leslie Oliver said in an interview the timeline for DOCSIS 3.1 service in Colorado or where it will be available has not been determined.

TRAINS: Fort Collins council brakes on train track overpasses

During a recent work session, council members expressed mixed views on the models and how what would work best for Fort Collins.

Councilmember Ross Cunniff said he favors the retail model, which as a utility would give the city more control over services as technologies evolve. The wholesale model was viewed the least favorably.

“It seems like all of the risks and none of the rewards,” said Councilmember Kristin Stephens. “From what you’ve presented, it doesn’t seem like an option at all.”

Stephens said the franchise model sounded “intriguing,”’ but wondered about what would be lost by having a vendor provide customer service.

Councilmember Ray Martinez said a franchise might be the best model for the city to pursue given how fast technology changes.

“Can we keep up with that?” he said.

Comcast plans to continue adding fiber optics lines to its system in the years to come to shore up its speed and reliability, Oliver said. Fiber is already being brought in to new developments.

The company wants to continue providing information to the city about broadband services even though it potentially could become a competitor, Oliver said.

The company’s plans to build a customer service center in Fort Collins that would employ 600 people is evidence of its commitment to Northern Colorado, she said.

“It means a lot to us to be involved in Fort Collins,” she said.

Kevin Duggan is a Coloradoan senior reporter covering local government. Follow him on Twitter, @coloradoan_dugg, and on Facebook at Coloradoan Kevin Duggan.

By the numbers

For the city of Fort Collins providing broadband services, including high-speed internet:

1 gigabit per second, or gbps — targeted speed

$70 or less — targeted monthly cost to consumers

$125 million — estimated capital cost for the city to build and operate a system as a municipal utility

15 years — time needed for the system to recoup its capital cost

38.8 percent — projected “take rate” for 1-gigabit service if offered by city utility

30.2 percent — projected take rate if Comcast offers 1-gigabit before the city does

$88 million — estimated capital cost to the city if it were to build a network but have it operated by an internet service provider

$0 — city capital cost if service were provided through a franchise agreement

What’s next

Fort Collins officials plan to conduct extensive public outreach on the city’s options for providing broadband services during the coming months through meetings and online surveys. A recommendation for City Council is expected to be developed by Dec. 13.

Information: fcgov.com/broadband