Tri-Cities broadband campaign gets intense

By Virginia Groark
Tribune staff reporter
Published March 26, 2003

About a century after they created municipal electric utilities because they were frustrated with commercial providers, three Fox River communities are positioning themselves to become pioneers on the latest technological frontier: broadband.

On April 1, voters in St. Charles, Geneva and Batavia will signify in advisory referendums whether they think their towns should issue $62 million in 15-year bonds to build a fiber optic network.

After studying the issue for two years, supporters say the infrastructure would pay for itself and offer cable TV, phone and Internet service at cheaper rates and with better customer service than private providers. Citing a feasibility study, they say the system could make a profit as early as the second year of operations.

"This would be a tremendous boost for our economy in the long term," said Ed Hodges, a member of the grass-roots group favoring the bond issue and the owner of a computer services company. "If the cities go on their own, it's going to give business-class connection to every business in the Tri-Cities area regardless of their location."

Not everyone agrees.

"There are certain things Batavia has to do with the money we have, which is a lot more important than going into something like this," said Batavia Ald. Norman Hagemann, who voted against sending the issue to voters.

Companies such as Comcast Corp. and SBC, which stand to lose current or potential customers to a municipal system, say it is unnecessary because the service already is available or will be soon.

"It's pretty apparent there's ample availability," said Carrie Hightman, president of SBC Illinois, who noted that 76 percent of Tri-Cities residences, on average, have access to digital subscriber line, or DSL, broadband service. "There's also the question as to what's needed as far as additional growth."

Waiting for system

Comcast, which acquired AT&T Broadband in November, has committed $50 million to upgrade systems in Kane and DuPage Counties by September, long before a municipal system would be built, said Patricia Andrews-Keenan, vice president of communications for Comcast for the greater Chicago region.

In a best-case scenario, the Tri-Cities estimate municipal broadband services could be offered to some residents in 2004.

"I don't know if [residents] are willing to wait another year just because a municipality is going to offer it," she said.

But proponents say a municipal system would be an improvement. All three municipalities have seen an increase in complaints about private providers and, in some cases, broken promises to upgrade networks and meet the increasing demand of new customers.

Andrews-Keenan acknowledged as much.

"We take a certain amount of mea culpa for that," she said. "There were promises made that weren't delivered."

But she added, "Comcast has stepped up to the plate. We have committed this money."

Yet Tri-Cities broadband proponents said their system would be superior because it would be 100 percent fiber optic, which they said is faster and more reliable than a hybrid system Comcast is installing. Such state-of-the-art infrastructure is critical to long-term economic development, they said.

The question many ask is whether the system will be able to pay for itself. In advertisements and fliers, the private companies warn residents their taxes could increase to pay off the bonds if not enough people subscribe to the municipal system.

Proponents expect to be able to provide about 75 cable channels for $33.95 a month. They say that will be attractive to customers because it is about $2 less than what AT&T charged for comparable service last summer, when a feasibility study was done.

Profit projections

The study determined the network could make a profit in anywhere from two to seven years. The latter projection assumes a conservative market penetration: roughly 25 percent of the residential market subscribed to municipal cable TV, roughly 7 percent subscribed to high-speed data services and roughly 6 percent used the phone service. On the commercial side, roughly 12 percent of the market would need to subscribe to high-speed data services and roughly 9 percent to the telephone. Proponents could not provide exact break-even numbers.

Nationally, more than 500 public power utilities have created broadband networks, including for internal communications, according to Ronald Lunt, director of broadband services for the American Public Power Association in Washington, D.C.

But in various lawsuits, private companies have claimed municipalities have an unfair advantage, according to Jim Baller, a senior principal in the Baller Herbst Law Group in Washington, D.C., which represents local governments on communications issues and has worked with the Tri-Cities.

As the referendum nears, the companies actively are campaigning against the ballot proposal, conducting telephone surveys, sending out mailings and advertising in newspapers. The campaign has offended some of the broadband proponents who say SBC and Comcast are spreading misinformation.

A grass-roots group has responded by putting up yard signs and calling voters to see if they have any questions. Recently, they held a news conference to respond to information issued by the companies.

Copyright © 2003, Chicago Tribune