Citywide Fiber Network Takes Key Step Forward

After years of study, Traverse City Light & Power has decided to seek bids for the first phase of construction of a high-speed fiber Internet network – a move that could bring 1 gigabit Internet service to thousands of city residents over the next two years. In the wake of that decision, a new set of questions must be answered.

TCL&P board members agreed Tuesday to take a phased approach to deploying a community fiber network. The board voted to use a request-for-proposal (RFP) process to solicit bids from companies to design, construct, operate, and maintain an expanded fiber system for TCL&P. Phase one of the project would bring high-speed Internet access to commercial and residential customers throughout almost all of downtown, including Central Neighborhood, Eighth Street, and Woodmere Avenue. Construction is slated to begin in 2019 and be completed by 2020, with customers able to sign up throughout that period as soon as their particular neighborhood is online.

TCL&P Executive Director Tim Arends told board members the areas chosen for phase one – all of which are served by the utility’s Hall Street substation – “would probably be the best deployment start because of the potential for success and the impact on economic development in these key areas.” Using a “circuit by circuit” approach to gradually roll out the network to the rest of the city would allow TCL&P to measure sign-up rates, staffing demands, and the utility’s ability to manage the system before expanding into a full community deployment, Arends said.

“We do believe it’s going to be successful but I would rather hold off on…the entire project if there’s a fatal flaw where we just don’t want to go forward,” he said.

While TCL&P has $11 million budgeted in its capital improvement plan for the project, Arends said the utility wouldn’t have a true gauge on costs until bids come back for phase one. Those figures will allow TCL&P to determine how it wants to finance building the fiber network, he continued. “When we get the bids back and get the actual dollar amount, then we can decide,” Arends said. “Do we want to do short-term borrowing…do we want to do just an inter-fund loan from Light and Power to the fiber fund, or is it so much that we’re actually going to have to initiate bonding?”

Several other key questions will also needed to be answered by board members as the project moves forward, including whether TCL&P will serve as the Internet Service Provider (ISP) that brings Internet service to customers or if the utility will simply own the fiber network infrastructure and contract with one or more outside ISPs to provide Internet service. Phone and television services are also options on the table that could be provided through the new network.

Arends is recommending TCL&P serve as the ISP for at least phase one to test out the arrangement; the utility would set rates for services based on construction costs. “By doing that phased approach, I think what it would do is test some of those questions about can TCL&P effectively and efficiently operate this system,” he said. Noting that determining whether the utility is the ISP or one or more other companies serve in that role will affect cost and revenue projections for the fiber project, Arends said utility board members and staff seemed to at least all be in agreement “that if we (build the network), we run it like a business. It’s got to be profitable. It’s got to pay for itself.”

TCL&P board member Patrick McGuire was the sole ‘no’ vote against going out for construction bids Tuesday, citing a range of “unanswered” questions about staffing, competition, rates, and marketing he believed comprised a lack of a “robust business plan” for the venture. “This is all really dragging on, I know that,” he said. “I know people are frustrated, they’re impatient (to have fiber). But I think we’ve got a lot of questions that have to be answered, and I’d hate to make a mistake and to stick our ratepayers with a failed project. And I think that’s a possibility.”

While board members instructed utility staff to talk to consultants about the possibility of providing further business plan analysis for the project, several members said they felt comfortable with the research done to date and were ready to move forward. “There’s a very good chance something will be less than optimal, but that’s why it’s a phased approach,” said board member and City Commissioner Tim Werner. “And hopefully we, the community, learn from it – we improve and then following phases are closer to optimal.”

Board member Ross Hammersley said seeking construction bids was a “reasonable step forward” in the effort to expand the utility’s fiber network. “I think it’s important for the utility and for the community,” he said. “I’m a little concerned we’re not moving fast enough. But be that as it may, we’ll move as fast as we can, and I think this is the right way to do that.”

Board member and City Commissioner Amy Shamroe agreed. “While I appreciate and I think we’ve all been leaning towards being more cautious and proceeding cautiously, this is an asset that we have that we’re not utilizing,” she said. “Figuring out how we’re going to build it out is a logical step next to me…this is an asset to our community for economic development, for the businesses that have already made their homes here, that are looking to bring their homes here, and for the people who make their homes here.”

Several members of the tech and business community spoke during public comment Tuesday to encourage the board to continue pursuing citywide fiber deployment.

“I run multiple software companies, and my focus in getting involved in the community here in Traverse City was partly based on that it’s a tech-focused community and that you would be able to support my needs, both working at home and throughout the community,” said Dan Mastromonaco, a tech entrepreneur who recently relocated to the area. “So I’m very excited about this project.”

TC New Tech founder Russell Schindler told board members “the cost of not doing this project is way higher than any possible risk or cost” of pursuing a fiber network.

“Everyone’s in favor of it,” Schindler said. “All the business people in town and all the people who are of working age are in favor of it…the only bad decision is to not do it."