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March 19, 2008 4:36 PM

Seattle broadband update: Bids out in fall, but tension over approach

Posted by Brier Dudley

Seattle will formally ask companies in September for proposals to construct a fiber-to-the-home broadband network, a project that would challenge the Comcast-Qwest lock on the market.

But at least one City Council member today questioned whether Seattle should give more consideration to managing the system itself, rather than simply offering its assets to subsidize the $450 million project.

Twenty years down the road, Seattle could end up in the same situation it's in now, said Bruce Harrell, chairman of the city's Energy and Technology Committee, which was briefed on the project today.

"I was wondering if we would have created another another monopoly ... and we're not going to be the ones that own it,'' Harrell said.

He also asked what transpired between 2005, when the general idea of a city-backed broadband network was endorsed, and 2008, when the mayor's office had decided that the city's objective should be helping a private company create the system.

During that time, the city solicited interest from companies, then did market feasibility research. It estimated that a $450 million network financed with 18-year bonds would be successful even if the system was used by only 24 percent of homes and businesses. At the end of the bond period, consumers would have saved more than a $1 billion in rates and the city would have $129 million in cash from operations.

The system envisioned would offer speeds of 25 megabits per second residential broadband service, which is fast enough for multiple streams of high-definition video and more than double the speed of Comcast's best service.

Despite Harrell's politely worded questions, it sounds as though the matter is out of the council's hands and the mayor's office is moving ahead with the privately owned approach. Among the companies that have expressed interest in the project is Paul Allen's investment company, so perhaps someone else is really pulling the strings.

It also emerged today that the mayor asked City Light to explore the possibility of providing broadband service, but nobody in the room could say exactly when that study will begin, what bearing it will have on the proposal process and whether it will be done before the city partners with a private company.

The head of City Light gave the previous presentation, but left before the broadband discussion. The city's chief technology officer, Bill Schrier, characterized the City Light study as a "parallel effort."

In response to a question about the city's experiments with municipal Wi-Fi service, Schrier said they won't be expanded because there is so much privately owned Wi-Fi service being developed.

"We saw no reason for the city to expand those because the private sector is fundamentally taking over that market,'' he said.

It didn't come up in the meeting, but Harrell's comments echoed the concerns of Tim Nulty, who developed a publicly owned broadband system for the city of Burlington, Vt. Nulty set up a financing deal comparable to a mortgage, where the system was privately financed.

In a January story in Vermont's Business People magazine, Nulty said fiber-to-the-home networks are a "natural monopoly" that should be government owned or regulated. An excerpt:

He likens his fiber-optic superhighway to a more commonly understood network. "Nobody thinks twice about the roads being in the hands of the public," says Nulty. "The thought that a private company could own the roads and charge whatever they pleased to anybody who goes on them is ludicrous anywhere in the world. That's what this is: the public roads."

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