In Northern New York, Broadband Expansion Faces Challenges

Despite being a modern necessity for homes and businesses, access to high-speed Internet evades some communities.

by Jake Newman, Brian Molongoski, Watertown Daily Times / October 30, 2017
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(TNS) -- An increasingly large percentage of daily life leans on Internet access, and the north country is struggling to keep up. While many of the villages and cities in Jefferson, St. Lawrence, Lewis and Franklin counties are connected, many of the places in between are left behind.

Not only does Internet access have an impact on our personal lives, it can also make or break a business. In the case of Tupper Lake Hardwood Inc., 167 Pitchfork Pond Road, Tupper Lake, lack of access was so detrimental that it almost forced the company to leave the area.

“It came to the point where if you are going to make a $1 million investment, we actually talked about this, we said ‘do we put our money into this place or do we just pick up and move?’” said General Manager Chris Dewyea. “It is real. It sounds dramatic, but that is the way it goes.”

As Tupper Lake Hardwood sought to expand, it became clear that its spotty, slow Internet was not going to make the grade. When the company was looking to upgrade its equipment about two years ago, high-speed broadband was going to be essential.

“The connectivity speed that we had with satellite Internet was not good enough, so that is when we started on our journey to get high-speed here,” Mr. Dewyea said. “This equipment needs to be updated or if there is a problem then diagnostics are done remotely from the company, which is about eight hours away. Without the high-speed Internet, it was slow at best and sometimes impossible for them to do anything.”

Enter Slic Network Solutions, a company that has been expanding high-speed access throughout the north country using fiber optics. After a period of painstaking research, Mr. Dewyea was pointed to the company by the Empire State Forest Products Association, which is when he said he finally got some answers that eventually led to Tupper Lake Hardwoods’s current access.

“Since we have had the high-speed Internet we have had updates and problems and it has gone from hours to minutes,” Mr. Dewyea said. “It has literally impacted us by thousands of dollars.”

According to Kevin Lynch, VP, Technical Operations & Chief Operations Officer of Slic Network Solutions, there are currently about 10,000 homes covered by the company’s Internet access, but that number is growing rapidly. Slic recently turned on access to customers in Belmont and near Lyon Mountain. Properties in Lake Placid have been serviced and access will be available in Schroon Lake and Titus Mountain shortly.

“In Black Lake and Oswegatchie area, we are hoping to start construction as soon as December if we get cooperation from the pole owners,” Mr. Lynch added. “We have just done a small build in Saranac Lake in the business district, passing about 300 homes and businesses.”

As was the case for Tupper Lake Hardwoods, options for broadband access were limited in these areas before Slic’s most recent expansion, which is ongoing.

“In most of the places, there really was the option of satellite. Some places had DSL but it was usually pretty marginal,” Mr. Lynch said. “There are a few areas, but very limited, that might have had Spectrum.”

The expansion for these projects is rapid, according to Mark Dzwonczyk, president and CEO of Nicholville Telephone Co., Inc., the parent company of Slic.

“In these areas where we are constructing right now, Schroon Lake and Belmont and Lyon Mountain, we are building three to five miles of fiber per week. Our next group of projects that has been funded by New York state is 300-plus miles of fiber,” he said. “And when I say three to five miles per week, that is per area.”

Although the company is building up to 10 miles of fiber optic network weekly, the process does not come without stumbling blocks.

CHALLENGES

Providing access to high-speed broadband requires access to the thousands of power poles that line the country roads in the small rural communities across the north country. According to Mr. Lynch, gaining access to the poles owned by other entities can account for up to 40 percent of Slic’s expansion costs, sometimes at a price between $10,000 and $14,000 per mile.

“We apply to National Grid or whoever the pole owner is and say, ‘We would like to attach to these 30 poles on this road,’ and do a pole application and pay a fee,” Mr. Lynch explained. “They come out, they look at each pole and they determine if there is space on the pole, do they need to rearrange the electrical wires so they are in compliance with the electrical code, do they need to move down the phone lines.”

“A lot of times these poles are jointly owned. It will be National Grid and Verizon, so they have to coordinate and then there might be a section that has Spectrum on it, so you have three or four companies that have to coordinate this effort,” he continued.

Projects within the Adirondack Park can be additionally problematic. Mr. Lynch said many of the poles Slic needs access to are more than 40 feet tall, which means a permit — or waiver to bypass the permit — is required.

Oftentimes, there are several agencies who have a say in new construction on existing poles and regulations can get tricky.

“For four projects … we have two different DOT regions, we have two different regional economic regions, we have four different pole owners, some of it is in the APA, some of it is not, we have two different DEC regions. So there are just all of these different layers,” Mr. Lynch explained. “There is just a lot of coordination that happens.”

Gaining access to desired areas is time-consuming and complicated, but financial implications can also hinder the process. Determining whether there are enough potential customers in an area can make or break a potential infrastructure expansion.

“We are building rural and one of the economic realities of building rural is density becomes a real challenge. Other companies have made a determination a long time ago that once the density got to a certain level, that is where the network ends and they are not going any further,” Mr. Lynch said. “We have pushed that pretty far but what happens is that we run into fixed costs we have to do when we operate independent of the number of customers.”

Some of those fixed costs can be expensive. Pole rental fees, for example, can cost Slic $400 per mile per year.

Taxes can also be detrimental to Slic’s expansion. Mr. Lynch said the company pays $465 per mile per year in St. Lawrence County, which is significantly higher than a competitor like Spectrum deals with because it is considered a cable company.

“Broadband infrastructure is considered real property, so it is taxed just like a house when it is in the right of way. So when we attach to these poles which are in the public right-of-way, we pay taxes on it and it is based on construction costs,” he said. “There are a certain number of customers we have just to break even on those two operational costs and that does not include any of the other overhead and the content, the electronics and all that.”

Mr. Lynch said Slic pays more than double the school and property taxes Spectrum pays in Potsdam, but serves fewer customers. He said the focus in the villages that are already served is the business community because he believes Slic offers a superior service.

While there is a business focus in the villages for Slic, Mr. Lynch said 80 to 90 percent of those using his company’s service are unserved by anyone else.

Westelcom, based in Watertown, is one of the north country’s principal broadband Internet providers for businesses, operating in six counties in the north country, servicing communities such as Watertown, Malone, Clayton, Elizabethtown, Ticonderoga and Plattsburgh.

Westelcom CEO Paul F. Barton said that his company has been working in conjunction with several other smaller but similar companies in the region, including Slic, to increase broadband connectivity. It has also worked extensively with the Development Authority of the North Country, which has constructed a large fiber network throughout the north country available to providers. Mr. Barton said DANC has essentially built the highway, while Westelcom builds the on-ramps.

David M. Wolf, telecom division manager for DANC, said the authority works as a “carrier’s carrier,” meaning that it does a lot of the infrastructure work so Westelcom and other companies do not have to. DANC’s network has over a dozen central offices throughout the region that feed the system. Companies can build their own lines off of DANC’s network to reach unserved and underserved areas.

Mr. Wolf said DANC can construct these last mile extensions themselves so a smaller company can save on capital costs, as long as they share a piece of the revenue with DANC.

“It’s a good way to use the fiber that we have to get the last mile built, and it saves these other companies money because they don’t have to pay that infrastructure,” he said.

While some of these smaller companies are more inclined to serve residential areas, Westelcom mostly sticks to business. That’s because, Mr. Barton said, providing for unserved or underserved areas can be a challenging business model.

Getting to a faraway area that may have a handful of homes involves installing hundreds of new poles to carry the lines, and each one must be rented from a utility company, such as National Grid, for a certain fee. Additionally, companies are also taxed on the value of the infrastructure being used. He said a mile of fiber can be taxed anywhere between $25,000 and $30,000. And if there is five miles of line serving only four or five homes, the company would pay over $100,000 in taxes that can’t be made up due to the lack of customers using the line.

“The margins are very slim,” Mr. Barton said, adding that this would be the case even with grant assistance.

But Westelcom does offer assistance to companies that do try to serve rural residential areas by providing wholesale access through wireless antennas and radio equipment.

Hybrid networks — a combination of fiber and wireless broadband infrastructure — have been on the rise in recent years, Mr. Barton said. As companies build out a wide-reaching fiber network across the north country, mobile companies will also build out its cell service companies will do the same as they move from 4G bandwidth to 5G. This will involve building smaller cell towers in what’s called a distributed antenna system. These new towers, which would be connected by the larger towers, can carry the necessary wireless equipment needed to reach coverage holes in a more cost-effective way.

“It’s interesting to see where it will all be headed in the next six to 10 years,” Mr. Barton said. “It will be hybrid networks everywhere. You’ll see little radios on telephone poles serving a community or a lot of hidden radios outside buildings that will be serving broadband.”

Mr. Wolf said that wireless networks can be slower, however, and the demand for increased bandwidth is always on the rise. But in the north country, because unserved areas are so spread out, the less a risk of the network getting clogged with traffic.

“Here, the strategy is to fill in gaps, because they don’t have that issue of lack of bandwidth because there aren’t many subscribers per mile,” he said.

DEMAND

While many new customers jump at the opportunity to connect to a reliable Internet provider, Mr. Dzwonczyk said not everyone is so eager to jump on board.

“We usually get to about 60 percent penetration, which is a little lower than the national average, but you get there eventually,” he said. “I would say the first three months there is this pent-up demand and you get 35 percent quickly. And then the next two years is the next 30 to 35 percent.” The CEO compared infiltrating rural areas with Internet to days past when electrical companies were marketing to farmers who showed initial resistance.

“We get into these communities and you have got the people who know what it is, they jump on it. And then you have the other group of the population who starts to realize ‘Oh wow, I could get stuff in two days from Amazon, my kids can do their homework,’ and it takes a little bit to get there,” he said.

FARM CONNECTION

Broadband connectivity for one of the region’s biggest industries — agriculture — is an ongoing struggle as technology becomes increasingly vital for farmers. Because farms are in such remote locations, Internet companies have difficulties justifying the high cost of building miles of broadband lines in order to reach them.

Ronald C. Robbins, owner of North Harbor Dairy in the town of Hounsfield, uses a wide range of technology for his operations, from wireless data transfers between farm operations to monitoring the status of farm vehicles on the ground.

But Mr. Robbins said he relies mostly on satellite connections in order to use this technology, and these connections are not always the fastest.

“It’s really slow,” he said, “and we struggle with it.”

He said bad weather conditions can interfere with his Internet connection while, for instance, he is working out in the middle of his crop fields. But he said he runs into slow speeds even on clear days.

He added that he has not had any discussions with local Internet companies about getting a fiber line connected directly to his farm.

“From what I’ve gathered, they have no willingness to do it,” he said. “At the same time, we’re constantly embracing more technology.”

To help mitigate this, U.S. Rep. Elise M. Stefanik, R-Willsboro, introduced legislation that would help companies reach businesses in unserved areas. Ms. Stefanik’s legislation, the Precision Farming Act of 2016, would offer financial incentives for broadband providers and farms. Service providers would receive a one-time $15,000 reimbursement for each line installed for a qualifying precision farming operation. Additionally, farmers who apply for loans to cover installation costs will have their applications prioritized per the Rural Electrification Act.

CHANGING RULES

The changing landscape in the Watertown area is also spurring changes to Westelcom business.

A couple of years ago, Westelcom hit turbulence when the Federal Communications Commission decided it could no longer provide Westelcom with benefits given to companies that serve rural areas.

The classification was instituted after the U.S. Census Bureau said Fort Drum and Watertown represent a single, urbanized area. Even with the Census Bureau’s designation, Fort Drum is unable to use Westelcom’s services, per Army policy.

U.S. Sens. Charles E. Schumer and Kirsten E. Gillibrand, D-N.Y., led the charge in reversing the urban designation for the area for three years, allowing Westelcom to continue expanding its services to the area while it phases out its reliance on its rural rates as well as ensure it still receives the same funding as its competitors.

Without the rural designation, Westelcom would have lost nearly 96 percent of its anticipated revenue.

Over the last year, FCC has also been considering lowering its broadband standard from 20 megabits per second to 10 megabits per second.

FCC has considered the move because of increased use of smartphones and mobile technology for Internet connectivity, rather than using home-based Internet through a broadband service.

Sen. Schumer has also spoken out against this, having recently submitted a letter to FCC officials demanding they keep the standard where it is now.

Aija E. Leiponen, a professor at the Dyson School in Cornell University’s College of Agriculture and Life Sciences, said lowering the standard would do nothing to help more remote regions of the state, including the north country, become economically competitive.

With the nation’s economy now more reliant on entrepreneurial activity, which has become especially attractive to younger generations, she said Internet connectivity is vital, and areas that are lacking are in trouble if they do not catch up soon.

To help these areas, she said it’s up to the state and federal government to set new policies that give unserved and underserved areas more attention.

FINANCIAL HELP

Slic has been rapidly expanding for several years, but it would not be possible without the help of government aid, according to Mr. Dzwonczyk.

“We started this build-out under a federal grant from the rural utility services,” he said. “That was 2009 or 2010 where that was awarded. That got us from 250 customers to 4,000 customers.”

Mr. Dzwonczyk said the initial build-out was part of a $30 million project, of which the government paid $24 million as part of a 80 percent matching grant program. Much of the federal funding has since dried up, but Gov. Andrew M. Cuomo has been progressive in his efforts to continue broadband expansion, according to the CEO. Mr. Dzwonczyk said the state Broadband Office has been responsive and helpful in securing another $18 million under a similar 80 percent match program to help the company continue its build outs, and the funding has been essential.

“Once we are established, it is a sustainable and profitable business, but without that aid from the state, the payback period for us would be so long. It would take us 10 years before we would actually begin to see some sign of uptick on it,” he added.

Once the fiber connections are in place, Mr. Dzwonczyk said the possibilities for upgrade are virtually limitless.

“Fiber is a long term infrastructure. It is projected to have a 35-year lifespan, but no one really knows because it has not been 35 years since people have been employing this technology,” he said, noting that coaxial cable and other such infrastructure is more limited. “The other advantage is that once it is out there, it is truly infinitely upgradeable.”

In 2015, Gov. Cuomo launched the New NY Broadband program, which seeks to have nearly the entire state under broadband coverage within the next few years. The goal is to have 100 mbps speeds in most places and a minimum of 25 mbps in more remote places.

The $500 million program is dispersing the money in grants to communities and Internet providers who apply. The rollout is being done in three phases, two of which have already been completed. The third round of grant awardees is set to be unveiled later this year.

Dozens of municipalities and local Internet companies have received millions of dollars from the program in its first two rounds, helping them build out a wider network.

©2017 Watertown Daily Times (Watertown, N.Y.) Distributed by Tribune Content Agency, LLC.