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Broadband discussion highlights risks and benefits

BY JENNIFER CABRERA / JULY 8, 2019

On June 20th, the Gainesville City Commission heard the results of the Broadband Study and listened to citizen comments on the issue. This article will highlight some of the arguments that were made for and against the proposal. It will not get into the details of the Broadband Study or the consultant’s presentation, which are linked here for those who want more details.

The operational and marketing challenges were clearly spelled out by the consultant during the presentation, but these challenges were generally ignored during the discussion of the issue. Although the financial cost alone is a challenge (the plan would require borrowing $113-$213 million dollars, and GRU is already facing a credit rating downgrade due to its current debt load), the velocity at which GRU would need to sign up customers is perhaps a bigger hurdle. Doug Dawson, the president of CCG Consulting, which did the study, said, “GRUCom would have to sell 540 new customers a month for 5 years in order to make this work. That’s a really big challenge. I can’t stress to you how much of a challenge that is… I think [GRU Chief Business Services Officer Lewis Walton] turned white when I first told him that number. And if you did the whole county, that’s 850 new customers a month. That’s month after month after month after month – that’s just really hard to do. Very few people have ever done that before. You look around the country, you don’t get these giant fiber networks built very often, so nobody’s ever really done something that huge before. Just the idea of every day, you’re hooking up dozens and dozens of customers, every single day of the week, is just… you can never slow down, you can never fail to sell. That’s probably the biggest challenge of this, is the operational stuff.”

Dawson said there is an “intriguing possibility” to attract some private funding through the new Opportunity Zones. This idea was echoed by several of the commissioners, but they don’t appear to understand how the Opportunity Zone program works. This new program allows private investors to take unrealized capital gains, invest them into geographic areas that have been designated as Opportunity Zones (much of the area east of 13th St in Alachua County has been designated as an Opportunity Zone), and defer, eliminate, or greatly reduce the tax due on the earnings. It’s not a source of free money; the investors will be looking to make a profit, so that would require charging higher prices for the services so the investor will get a piece of the revenue. Dawson called it a “very complicated financing.”

Dawson also mentioned the fact that many people in the community currently have a negative perception of the city and GRU: “The survey – the dissatisfaction with the city in the survey – I don’t entirely know what it means, but it can’t be good. I think you have a branding issue to overcome for people to trust you, to buy it from you.” In the survey, respondents were asked about their perception of the quality of service provided by Cox, AT&T, and the city. 31% were somewhat or extremely satisfied with Cox; 26% were satisfied with AT&T; only 17% were satisfied with the city. The presentation stated, “We’ve never seen a City rated lower than ISPs.”

The big question is whether there is an unmet need for affordable broadband, and the answer is unclear. Families with children in K-12 who meet certain income standards are eligible for a Cox program, Connect2Compete, that provides a wireless modem and broadband service for $9.95/month. However, Cox does not provide service everywhere in the county (Cox does, however, provide service to 99% of Gainesville residents, along with Alachua, Newberry, and other areas of the county, according to Cox spokesman Cam Johnson). 

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During the city commission meeting, Commissioner Adrian Hayes-Santos argued that children don’t have access to the internet: “Children who don’t have access, and a lot of people who don’t have access, don’t have access to—they can’t afford it.”

Mayor Lauren Poe make a similar argument: “We already know at the public school level that our students that don’t have access to broadband internet are at a serious disadvantage, and it’s an exponential negative growth curve with the amount of retention loss and their likelihood for achievement and graduation by the time they – IF they reach 12th grade. So I teach at a zero-barrier school at Santa Fe… What that means is that many of our students are what are called non-traditional, and they come in with significant barriers that folks even at the university might… so we, as an institution there, have a serious interest in how might we eliminate at least one of those barriers and making sure that they have access to affordable broadband.”

However, Commissioner Gail Johnson said she was “not 100% sure of the need for it,” and several citizens from the east side of Gainesville spoke against the broadband initiative. Carla Lewis-Miles, representing the Greater Duval Neighborhood Association, said, “In our neighborhood, we’ve made better use of our libraries to help our children… Greater Duval gave away 35 computers, we write grants to try to get computers in every home, and then Cox does the Connect2Compete for ten bucks. And so it gives them access to be able to do their homework at home. A lot of times, some of the schools have time set aside for them, so that’s become less of an issue… In some of our communities, we don’t even have computers… People that have computers have internet services.”

Evelyn Foxx, President of the Alachua County branch of the NAACP, said, “I worked with the digital divide when I was on the Gainesville Housing Authority, and we put systems in every public housing, we put computers labs in there, and we did it with partnerships with businesses in town… Every public housing in Gainesville and all of the community centers have a computer lab… Most children have an iPhone. Regardless of how poor we are, most of our kids have an iPhone… Please let this go for now… don’t waste any more of our taxpayer money.”

Also, as Commissioner Helen Warren pointed out, “Anywhere there’s a library, you can get onto the internet.”

County Commissioner Ken Cornell, speaking as a private citizen, said, “On the survey… the question was asked, ‘Do you not have internet?’, which could kind of address the digital divide question… and that number was 3%—really, really low.”

Many on the city commission seemed uncomfortable with the idea of taking this on by themselves, but they were generally eager to see whether the county, school board, the other municipalities, UF, and Santa Fe would pitch in money to make it happen. Poe said, “there is the economy of scale of partnering with the county and the other 8 municipalities. In many ways, their residents are more in need than ours for this, and in doing so, if they become funding partners, that that completely changes the pressure on us and those… revenue models.” 

Gail Johnson added, “The only way that I can see this working is if we have incredibly solid partnerships with UF, Santa Fe, the business community, the county, the outlying counties [sic – we’re pretty sure she meant to say “cities”] going forward. Other than that… there’s no way I can see myself supporting this if it was something that just the city was financially responsible for… I personally am not comfortable with the level of risk there is.”

Chattanooga was often mentioned as a city that has successfully implemented municipal broadband, but Chattanooga took advantage of a federal subsidy grant of $111.7 million for smart metering, which is no longer available. During citizen comment, Nathan Skop said, “This is… a recipe for bankruptcy. GRUCom is practically on the brink of insolvency; it can barely cover its debt service obligation… This is the same thinking and risk that got us into the biomass contract fiasco… Dunnellon, right down the road, they defaulted on their broadband, didn’t make it work. FPL Fibernet had fiber all over the state; they couldn’t make it work. If FPL can’t make it work, I don’t think Gainesville’s going to be able to make it work.”

Hayes-Santos argued that adding municipal broadband would increase competition, causing Cox and AT&T to reduce their rates. He said that the money saved by residents on their broadband would offset their property taxes and would “be like if we’d lowered their electric bills by 30%.” He did not offer the data that was used to calculate these savings. 

Bryan Eastman, during citizen comment, was also enthusiastic: “I was extremely excited about the report. It made very clear that there is a credible way to go forward, that the most likely outcome is making a transformational change in our city… while at the same time making revenue… Very rarely do you get a trade-off like what we’re looking at here.”

Most of the other attendees, however, were cautious about spending more money, given that the city commission is still trying to figure out how to overcome a $4 million deficit in next year’s budget. Commissioner Warren said, “What’s gonna be the cap on how much research, at what point do we keep putting money into the study?… I would love to see this get done sometime while I’m still alive, but I don’t see it happening real soon with some of the other priorities that we have, with all the things that we want to do that come down to a… dollar sign. I kind of feel like a curmudgeon, but I do feel prudence is a good thing, too, and we’ve got to make sure that we take this on right.” 

During citizen comment, Lewis-Miles added, “right now we’re trying to figure out how do we get… lower, better-cost energy. Right now, we’ve got people sleeping at Depot Park and that are on our streets… we have a housing crisis… This right here, this is cute. This is cute. But not for a city like Gainesville, not when we have no resources, not when we have no revenue, not when we’re putting strain on our already strained, already stressed-out… utility company… The threat is greater than what the benefit would be… We should not be here talking about internet for everybody when everybody don’t have a decent place to live.”

Also during citizen comment, Debbie Martinez said, “You just spent $100,000 on this broadband study for something we do not need,” and Brian O’Brien added, “I don’t have an objection to aspirational goals… but we have to live within a fiscal responsibility that the taxpayers can afford.”

Commissioner David Arreola said citizens should stop comparing the broadband initiative with the biomass plant:  “I wanted to put into perspective… the numbers are completely disproportionate. The original GREC contract was $2.1 billion over 30 years. In the event that we were to expand to the most expensive possible construction, for all of our small cities for this, we’re talking $220 million. So do the math: you can divide the GREC contract by 10 with that figure, and if we were to do city limits, we’re talking $100 million, you could divide it by 20. So let’s just drop that because they’re not even comparable.”

In the end, the city commission voted unanimously for this motion:

  • Send a Mayor’s letter to local municipalities, BOCC [Board of County Commissioners], school board, Santa Fe College, UF, that we are considering focusing on the Gainesville city limits area to expand broadband for financial reasons, however, if they are interested in having service in their area, have them reach out to discuss partnership options.
  • Direct GG [General Government] and GRU staff to look at different funding options and sources and to consult bond counsel. Come back to the City Commission within 4 months with those options. 
  • Conduct a digital divide survey to see what price points would be most effective to achieve the greatest reach. Come back to the City Commission within 4 months with those options. 
  • Conduct market research to better define a pricing structure for broadband internet service. Come back to the City Commission within 4 months with those options.
  • Have city attorney staff look deeper into Florida laws concerning the expansion of broadband by the city.

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