Articles

Rochester, Minn., Considers $50 Million Broadband Plan

The Rochester City Council and Rochester Public Utility Board have each heard conceptual presentations from private companies about the possibility of adding broadband service as a utility.

by Andrew Setterholm, Post-Bulletin / July 27, 2016

(TNS) -- The city of Rochester, Minn., could implement broadband internet access as a public utility, but it would come with a capital cost estimated at more than $50 million to install the needed infrastructure, including fiber optic cables.

The Rochester City Council and Rochester Public Utility (RPU) Board have each heard conceptual presentations from private companies about the possibility of adding broadband service as a utility. Phone and cable television services could be added, as well.

Peter Hogan, RPU director of corporate services, on Monday gave the city council an updated report on the costs for implementation and early looks at customer fees, should the city decide to pursue the concept. Hogan presented the information on behalf of Alcatel-Lucent, a private company that had compiled the research based on local information and meetings in December last year, Hogan said.

The report included a capital investment of about $53 million on the city's behalf, a cost that would have to be issued in bonds, raising the total investment to near $67 million.

The broadband picture

What is it?

Broadband, or high-speed Internet, offers data transmission rates higher than 25 megabits per second (Mbps) for downloads, and 3 Mbps for uploads, based on current FCC benchmarks.

What does Rochester have?

Charter Communications advertises download speeds "starting at" 60 Mbps. Another provider, CenturyLink, which offers DSL service, advertises speeds up to 40 Mbps. Actual speeds will vary by location, equipment, and traffic on the network. (https://www.inconsistentbabble.com/isp/)

What level of service would the city offer?

Rochester City Council member Michael Wojcik, a proponent of a city-based service, says the service would "easily" offer 1 gigabit — that's 1,000 megabits — per second for both uploads and downloads. That would be 40 times faster than the FCC's benchmark for downloads (and more than 300 times faster than the upload benchmark) and 16 times faster than the current available levels of service in Rochester.

Do other cities offer broadband Internet?

More than 450 communities do, according to the Institute for Local Self-Reliance. Longmont, Colo., offers a service similar to the one being considered in Rochester. — Post-Bulletin staff

Alcatel-Lucent's assumptions were also based on the new public utility securing a 30 percent market share of internet customers. While a low-cost and lower service option would see customers pay about $10 per month for broadband internet service, the study showed about 58 percent of customers paying $50 or more per month for service.

Given a 30 percent market share, Alcatel-Lucent projected the utility would be cash-flow positive within about four years, depending on whether phone and cable services were included.

The benefits of improved service and competitive costs was a prospect Council Member Michael Wojcik saw as very positive, given reports from customers of incumbent services in Rochester.

"Right now the core neighborhoods, the places that need good broadband access, just aren't getting it from any incumbents," he said.

A more detailed market study would give more accurate information on the potential market share a Rochester utility could capture, as well as more detailed cost information, Hogan said. That study would be paid for by the city and conducted by a third party.

Wojcik had contacted another municipality that he called a model example of public utility broadband, Longmont, Colo. He requested the council take three actions to move forward: ask city or RPU staff to work with Longmont staff to analyze similarities between the cities; fund the market study; and research any questions related to bonding for the capital costs.

Hogan estimated it would cost near $1 million to advance the city's plans to the point of selling bonds, including the market study.

Council Member Mark Hickey asked for more information before the city committed to any more costs. Other Minnesota municipalities, including Monticello, had attempted to implement broadband utilities, with mixed results, Hickey noted.

"I'd like to know what a ballpark (cost) is on a market study before we commit to that step, because I assume that's going to be a rather expensive next step," Hickey said. "So far I've got a lot more questions than anything else, even before I'm willing to take that step of the marketing study."

The council has more work to do before it could authorize a market study and that includes consulting with the RPU Board of Directors. RPU, due to its charters, cannot fund study of broadband as a utility. To commit further staff time to studying broadband would require the board's support, said RPU General Manager Mark Kotschevar.

The council agreed to seek the RPU board's input on moving forward with a market study. The board's next meeting is today, but it would likely defer the topic to its August meeting, Kotschevar said.

©2016 the Post-Bulletin. Distributed by Tribune Content Agency, LLC.