Back in January, I wrote an article in this very same space called "It's Time for Seattle to Become a Gigabit City." Mayor Ed Murray had just commissioned another study—the seventh in 10 years—to assess how the City of Seattle could break the local duopoly of Comcast and CenturyLink over internet service. After all, surveys show that there is widespread dissatisfaction with the two telecommunications conglomerates over soaring prices, middling speeds, lame reliability, and uneven, inequitable levels of service throughout the city. That month, President Obama announced that he would issue a new set of grants to cities around the country to develop high-speed internet networks. The future looked bright.
And this spring, as if to emphasize the need for a municipal alternative to Comcast, thousands of its customers were twice left with no service for hours at a time during sudden, large-scale outages. Meanwhile, CenturyLink, which began offering gigabit service last year in some neighborhoods, apologized to a customer on Beacon Hill for misleading him after he complained online. It turned out that a fiber-to-home connection wasn't available at his address, something he learned after 40 minutes of infuriating back-and-forth with a customer service representative.
The biggest obstacle to building a reliable, accountable municipal broadband network has always been the cost—estimates in past studies had run in the $700 million to $900 million range. But Murray recently announced plans to place a $930 million levy on the ballot to fund transportation infrastructure improvements, recognizing that expensive projects are sometimes necessary to improve our quality of life (and knowing that Seattle voters have in the past shown a willingness to tax themselves to fund important public services, a category that now arguably includes the internet).
Bill Covington, the director of the Technology Law and Public Policy Clinic at the University of Washington, sat on a city-appointed task force 10 years ago that set a goal of delivering affordable, high-speed internet service to all of Seattle by 2015. Covington told me he wanted to see if Murray would take on the two companies, who both donated heavily to his mayoral campaign. "I want to see if the Murray administration will say, 'Let's put the money on the table, and take the heat,'" he said.
Well, now we know the answer.
The answer is no. Murray will not put the money on the table and take the heat. On June 9, his Department of Information Technology released its latest study (one that cost $180,000 to compile) on building a broadband network. And even though the cost of creating the network dropped, according to this new study, to between $463 million and $630 million, depending on the configuration, the city is afraid that such an undertaking would fail.
In an interview, city budget director Ben Noble said funding the network would require taking out hundreds of millions of dollars in bonds or levying a property tax. Either way, he said, the city would be entering a market in which Comcast and CenturyLink could easily undercut an entry price point of $75 a month for one-gigabit service. (That's service that's 50 times faster than the 20-megabits-per-second average speed that a 2013 study found in Seattle.)
Noble and Michael Mattmiller, the director of information technology, offer a number of reasons to be pessimistic about municipal broadband. They say that in Chattanooga, Tennessee, a successful utility-run gigabit broadband service that's sent Comcast running for the hills had a 33 percent "take rate"—that is, the number of new subscribers out of the total identified pool of possible subscribers—last year. For the network to break even in Seattle, the city's latest study finds, it would need to achieve an even higher take rate of 43 percent of single-family homeowners.
Chattanooga took out bonds to build its network, and the service is already turning a profit. But it also benefited from a $100 million grant from the federal government in 2009. The Obama administration is said to be offering its new broadband grants to rural, not urban, areas.
"I wish the report showed different things," said Mattmiller. "I was really hopeful that costs had come down far enough and that the take rates would be reasonable enough that we saw a path with this model."
Noble added: "It would be a really cool thing to have a municipal broadband system, but wishing it doesn't make it so. We'd be entering a competitive business environment."
Both officials said they were encouraged by CenturyLink's claims to be offering gigabit broadband to 60,000 homes in select neighborhoods, and its promise to roll out the service—which comes bundled with TV and phone service for about $150 per month—to 100,000 homes by the end of the year. "I've seen the CenturyLink trucks [installing fiber] around the city," Mattmiller said. "I'm very encouraged that the market is still stepping up."
They said they would continue to look for other ways to fund and develop a city-run network—if the private sector doesn't provide high-speed, affordable, citywide levels of service. But they failed to specify a deadline for the private sector to meet these needs.
This decision is a huge disappointment to Jeff MacIsaac, the owner of the Beacon Hill tavern the Oak, who'd been excited by the prospect of a municipal competitor to the big companies.
"I'm not sure when the switch will happen, where the city's leaders will see what we all see," he said. "The internet is just like any other utility."
In February, MacIsaac said, he finally canceled his Comcast service after an unannounced evening-long outage lost the Oak almost $2,000 in business (he said he compared receipts from that night to other nights). No internet connection meant no ability to process credit card payments, plus servers and bartenders scrambling to apologize to customers who couldn't use their credit cards. "Some of our worst reviews on Yelp are from that night," he said. It was the longest, he said, in a long-running series of outages—the final straw. (Comcast was named the worst company of 2014 by the consumer-advocacy website the Consumerist.)
Even after he canceled his service, MacIsaac said Comcast kept billing the tavern. He said he had to spend hours on the phone in the following months trying to get the company to honor the cancellation. "What I feel like I witnessed," he said, "is the model behavior of a monopoly."
The latest city study differs only slightly in its assessment of the situation, suggesting Seattle suffers from an oligopoly, in which a small number of companies control the market. Whether we have monopolies or oligopolies within the city—really, what we have is monopolies in some neighborhoods and an oligopoly in others—this far-from-ideal situation is what the Murray administration is choosing to leave in place. And before the mayor tells you he's just following the recommendations of this new study, let's remember that Murray doesn't always follow long-considered recommendations on civic matters. Recently, he blatantly disregarded the consensus recommendation of a committee of labor and business representatives on who to appoint to enforce the city's wage laws, picking someone with no experience in the field instead. And in December, when his task force on homelessness offered recommendations on how to deal with street homelessness, he took some of their ideas and ignored others.
Upgrade Seattle, a group of tech workers, business owners, artists, and activists that's been pushing municipal broadband onto the agenda this election year, says it's undeterred by the conclusions officials have drawn from this new study. "We guesstimate that Comcast alone collects at least $20 million a month from Seattle customers," the group said in a statement that cast a municipal broadband network as an inevitability. "We think more of that money should stay in Seattle, and that our internet service providers should be more accountable to residents through a city-owned and operated internet utility."