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FEATURE: With little competitive options and slow speed, City and County governments consider Fiber Optics investment

By Lou Phelps, Savannah Business Journal

May 26, 2017 –  Try to make a cell phone call on a Thursday in Savannah’s Historic District, once the tourists have arrived for the weekend:  service gets spotty with calls often dropped.    

Try to download data in the City’s business core, or run a transaction on an online cash register, and spend your time waiting for an upload. 

Both residents and businesses are frustrated with slow internet speeds, and the City of Savannah has been working on solutions, according to City Manager Rob Hernandez.

Greg Waterman from Magellan Advisors led off a presentation to the Savannah City Council on Thursday, outlining the firm’s findings and recommendations about the critical broadband infrastructure issues that are currently affecting the local economy, municipal operations and the quality of life of residents.   

Today, the Chatham County Commissioners held at noon workshop to hear a similar presentation. 

Magellan looked at various business models to bring in fiber optic capital investment to increase bandwidth speeds within the city and across Chatham County.

As an overview, “You have a young population, which is in the city’s favor,” said Waterman, with a growing level of those with Associate’s and Bachelor’s degrees, and a strong service industry, bringing capital into the community – all elements that many cities do not have.”   

“But, their earnings are significantly lower than the rest of the country,” which affects what they can pay for internet services, he said.  “Jobs are affected by broadband access and entrepreneurial development,” as well, he added. 

A broad range of strategies have been on the table, said the firm. including the City going on its own to build a fiber optic network.  That can be approached as addressing only its own needs, in building a network that also meets the needs of the County government, the schools and the hospitals, and a model that also sells fiber optic services to homes and businesses that are on the lines that have been built – Magellan’s recommendation.  

Key Finding by Magellen Within the City Limits

The current supply of broadband within the city limits includes “nominally strong,  but inconsistent residential offerings for internet connectivity,  including fiber-based services.  The median for speed they found was “up to” 300 Mbps/25 Mbps, available for  $150/mo, with the lowest level of broadband service speeds to homes available at speeds of 1.5 Mbps/.768 Mbps for $30/mo.  Mbps is megabits per second.

Significantly, 75% of locations surveyed had no competitive options, and there were even fewer retail offerings for business. For what was termed a Medium level of service for a business, with speeds of “up to” 150 Mbps/25 Mbps, the cost is now running  $264/month.

Even restaurants have need for connectivity, and they face challenges often times,” in processing transactions, explained another Magellan representative.

There are some independent providers that offer services on an individual case basis, but that can be a very expensive option, such as dedicated service that has been installed to a plant in the area, such as Gulfstream. 

Joint City/County partnership with a group of vendors is now on the table for consideration, Magellan explained, with strong interest from private companies to help build fiber optic capability.   

82% of homes within the city have access, but only 80% of those subscribe to cable because  the services are too expensive, reported Magellan, hampering their ability to look for jobs on a desktop computer, etc. 

There are three or more devices in the average household within the city limits, and  83.6% of households have five or more devices. 

There are also significant problems with the cable in the ground now – primarily Comcast, “which is reaching the end of its life,” Magellen said.  “There are more homes in an area, as well, now that affects speeds.”

Two-thirds of residents surveyed said the current connections available to them do not meet their needs for speed and reliability, and cost and customer service were top areas of concerns. “More are dissatisfied than satisfied,” explained the Magellan presenter, with many complains about Comcast due to lack of competition.

They found that 97.7% of businesses in the city limits have internet access, and that  91.3% of businesses consider it a utility now, just as important as electricity.  

Of serious concern, 20% of businesses said they would definitely move from Savannah if internet connectivity speed does not improve, and 10% would consider leaving.  “Thirty percent is troubling,” Magellan stated. 

And, only 5% of businesses in the city limits with under 20 employees – the vast majority of the city’s business community - have fiber access; everyone else is relying on slower cable service for internet access to conduct business.

Fiber infrastructure provides a region with enhanced economic development opportunity, improves public efficiency; reduces communication costs, and supports reliability and performance, it was explained.

Options to bring fiber connectivity, an investment in the future, takes “all the stakeholders to come together,” said Waterman, urging the Council to consider public/private partnerships. “Start with critical city facilities, add health facilities, then public and private schools to build the network,” he said, recommending that services to homes and businesses along the line be handled by the private partner or partners.  Different companies could be partners in different areas of the city and county. 

Comcast controls the Savannah market, and they “have very little incentive to overbuild their market that they already own and control,” said another Magellan speaker. 

A Joint ownership with one to two private fiber optic partners, and the use of SPLOST funding for the initial $6.6 million investment  to build the service, was recommended.  With no revenue bond costs, the city would save $136,000 a year that they are paying Comcast, and start generating free cash flow almost immediately. 

“In the past carriers did not want to share their fiber optic networks,” explained Magellen, “but people are getting TV off the internet, and consumers are fleeing the bundled cable market, and we have companies interested,” she explained.   And by partnership with a city, it will cost them 50% less to build a fiber optic network in a market with a municipality paying its half to build the fiber network. The firm even said that it is possible that private partners would pay more than 50% of the costs to build. 

Hargray is one of the parties interested, according to Bret Bell, Deputy City Manager, in an interview about the session. 

Alderman Tony Thomse said that he is concerned about a reliance on SPLOST VII.  “What if it doesn’t pass,” he said, pointing out that the City has wanted to do this for a long time .

And Mayor Deloach said that they need to move the process forward, “to get to a decision we can make.  We’re not concerned about where the money is going to come from at this point. We need to get to an understanding of whether we’re going to do this,” referring to the public/private partnership .

And, Durrence said that he was concerned that thirty percent of the businesses will leave if they city doesn’t increate its speeds. 

The city will now wait for the County Commissioners to decide on their level of interest in working together on a plan. 

The County Commissioner’s Workshop on Broadband

Magellen did a separate review of broadband access, speeds and cost across the balance of Chatham County, presented today at a workshop to the County Commissioners. 

Editor’s Note: An article will be published at the completion of that session.

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