After a decade of serving local businesses, the city is releasing business operation of its gigabit network to a private company.
After 10 years of private operation, North Kansas City, Mo., is opening its fiber network to the public.
Through the formation of a partnership with server farm company DataShack, the city of 4,300 will offer its residents a chance to purchase high-speed Internet rivaling services offered by Google just a short drive south.
Users of the service will see their Internet speeds accelerate to gigabit speeds and their monthly bills of $25 to $35 disappear, according to the city.
Constructed from 2004 to 2006, the network was identified by the city’s managing agency, liNKCity, as a financial burden. Mellissa Hopkins, marketing and sales manager for the city, explained that the deal with DataShack was made possible only after the city improved the business by leasing dark fiber to several outside carriers.
“In 2011, they brought the former director and myself in because it was losing money, and we kind of worked through it -- and ’13 and ’14, it broke even," she said. "The operational expenses and revenue were even, and because it broke even, the city thought that would be a good time to put the utility on the market, so they did.”
The city received several offers, Hopkins said, but instead of a sale, opted to retain ownership of the infrastructure and allow DataShack to manage the business. DataShack, she said, can offer more services and at cheaper rates, through partnerships that the city was not able to afford.
“It’s great way to give back, because we are offering free Internet service to residential customers starting [in] 2015, and it’s great way to give back to taxpayers that have backed liNKCity for so many years,” Hopkins said. “It’s a great benefit in the aspect that it will bring people to North Kansas City. I’ve had a lot of people outside our city limits interested in the free service, so bringing residents in will support local businesses, as well.”
The initial cost of the network totaled $8.5 million and was funded by proceeds from Harrah’s Casino, through an arrangement with the Missouri Gaming Commission, said City Clerk Tishia Powell. The 2013 fiscal operating costs for the network were $261,000, contributing to a total $11.1 million over the life of the network, Powell said.
Deals like this are uncommon, said Christopher Mitchell, director of the Telecommunications as Commons Initiative at the Institute for Local Self-Reliance. “I don’t think I’ve seen anything like this, in fact,” Mitchell said, adding that he guesses DataShack intends to boost profits by gaining more local businesses as customers, and will do so by offering additional services like cloud-based storage -- services the city did not offer.
The only similar case Mitchell said he knows of is a recent partnership between the city of Monticello, Minn., and a private company, where the city maintains operation of the public network, but business customers work with the partner to solicit additional services.
“I think this may be something that’s just starting to happen -- where companies that have a specialty in cloud services, rather than marketing to companies that may or may not have the capacity to take full advantage, make up partnerships with fiber networks to deliver those services,” he said.