Utility broadband plan moves ahead
February 27, 2003
The Truckee Donner Public Utility District’s proposed broadband plan has been moving right along in the last few months.
District staff has acquired access to two strands of dark fiber, which may provide connection for services in the future, two parties have shown interest in financing the project, and proposed rates have been drawn up.
However, before staff can break ground to begin installing new infrastructure, the telecommunications division must fulfill the conditions set forth by the Local Agency Formation Commission (LAFCo) of Nevada County by the January 2005 deadline.
If the district complies with LAFCo’s demands and is able to finance the project – at which point they can begin constructing the fiber-to-the-home broadband system, estimated to cost more than $10 million – customers can plan on having access to voice, video and data services as soon as December 2003.
But as district staff advances toward compliance, potential broadband customers and competitors have expressed mixed emotions about the TDPUD getting into the telecommunications business.
“We started this (in 1999) hoping to build a true information highway to enable the town as a ‘smart town,'” said TDPUD Board President Ron Hemig. “It’s a challenge for us to keep up with advances in technology. We’ve already switched from hybrid (fiber/coax) to fiber-to-home. [Technology] is like a moving target.”
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However, some question whether the public utility district, which is millions of dollars in debt, can handle the financial impact of constructing and running a broadband business.
“I think it’s overreach for the district,” said district board member Pat Sutton. “I’m still not sure that financially the district is ready to provide $10 million for the system.”
“It makes me uneasy when the district already has to raise its water and electricity rates for its customers,” she added.
Alan Harry, director of telecommunications services for the TDPUD, said loans made to the telecommunications division wouldn’t burden the water and electric sections. His division’s monetary relationship with the district includes paying rent to the electric department, administrative overhead and lending money to other departments, if necessary.
“My business plan has nothing to do with the balance of the PUD,” said Harry, business plan predicts a profit after two years of business.
As a risk mitigation measure, one of LAFCo’s conditions states the district must find an underwriter for the project so electric and water ratepayers will not be required to subsidize the debt incurred by the district for broadband services.
“We wanted [the district] to have an experienced and reliable underwriter so we knew there was going to be a safety net,” said SR Jones, the commission’s executive officer.
The district has yet to meet the condition, but earlier this month the district received letters from two interested underwriters. Once an underwriter is chosen, the district must fund an independent consultant, chosen by LAFCo, to evaluate the legal and financial adequacy of the party.
In addition, LAFCo has asked district staff to prepare a Master Services Element for the broadband business unit and to apply for and obtain franchise agreements with the Town of Truckee and Placer and Nevada counties.
Before any new infrastructure is installed, the district will have spent more than $1 million on preparation for the project.
Competing with USA Media
In addition to concerns with the district’s financial woes, some take issue with a public agency – the TDPUD – going into competition with the private sector – namely USA Media for television and Internet, and SBC for voice and Internet services.
In fact, USA Media is negotiating a settlement with the district for an undisclosed matter.
“They all (at the TDPUD) talk a good game, but what they’re offering is currently available to Truckee and the surrounding area,” said Roger Terneuzen, USA Media’s senior marketing officer and director of operations.
Harry disagreed, saying what the district might offer is not the same as cable television and dial-up Internet, and all services are unique.
Still, Terneuzen contended the district is not doing its job – offering low-cost services to regional customers.
“I’m out there for a profit, I’ll admit it. I work for the private sector,” he said. “But with everything I’ve read, their pricing is already higher than my pricing.”
USA Media’s SpeedNet costs $34.95 per month for a cable modem connection, with up to one-megabit download and 128 KB upload speeds. In its Master Services Element, the district quoted $49.95 per month for Internet access, with at least a 1.5-megabit speed, bi-directionally.
“I think [USA Media] will be out of business,” Sutton said. “But not everyone is necessarily going to make the switch right away.”
However, the district also plans to double USA Media’s Internet customer base – 500 SpeedNet users – in its first year of operation, according to district staff’s November 2002 Performa.
For Truckee Town Manager Steve Wright, another television and Internet provider is a positive prospect.
“Potentially it will provide competition in the community, so people will have a choice,” he said.
It could also be an attraction for those looking to move to town, he added.
“In the long term, more people might be interested in telecommuting from Truckee.”
According to some business owners, cable modem just isn’t fast enough, especially at high-traffic times.
“In the past I’ve heard people not locate here because service is not fast enough,” said Robert Yoder, a real estate agent with Boice Countryside Realtors. “With cable modem, too many of those users can clog the lines.”
Faster service would help his business, he said, so he can send photos of homes to clients at a higher speed.
Representatives from other larger businesses, like the Tahoe Forest Hospital District, which already has a T1 connection with Incline Village Community Hospital, said a fiber system might be useful. However, they don’t know much about what the TDPUD plans to offer, said Jay O’Hanlon, department head of information services at the hospital.
“For big businesses, it could be very advantageous, but it depends on how they present their plan,” O’Hanlon said.
Determining factors in whether businesses choose the TDPUD could be rates or service, she said. At $49.50 per month, the district’s business Internet service may not be affordable for small businesses on a smaller budget.
“I think anytime we can stay on the cutting edge, it’s great,” said Lynn Saunders, president of the Truckee Chamber of Commerce, who has a digital subscriber line (DSL) connection through the phone lines in her office. “But I have not heard a lot about [the district’s plan], to tell the truth. I think there’s a need for education.”