Rochester considers city-operated broadband

Vocal dissatisfaction from constituents regarding Charter Communications' services have led members of the Rochester City Council to consider alternatives to the current system, including the possibility of a municipally run broadband network.

"We get a little bit of a sense for how frustrated the public is when you're on the city council based on the number of notes that we receive on an issue," said 2nd Ward council representative Michael Wojcik, "This issue is just off the charts. We had an almost 7 percent levy increase this year, and I can tell you I've had 20 times the number of notes with frustrations on broadband than I did with that 7 percent increase."

Charter Communications operates its cable TV and Internet services under a franchise agreement with the city. That agreement is up for a renewal on March 31.

Nick Campion, city council representative for Ward 3, said he heard plenty of grumbling about Charter from his constituents during last summer's campaign when he visited about 5,000 households in northwest Rochester.

Wojcik said his constituents have been angered over issues such as digital box fees, but most of the complaints are about broadband service, which Wojcik said is essential. He said Charter's recent price increase for stand-alone broadband from $55 to $60 per month makes the service unobtainable for a percentage of area families with children in school.

"Broadband is key for information for a lot of people, particularly younger generations, and going forward, it becomes more and more critical," he said.

One way to ensure broadband is available is for the city to invest in its own network. Wojcik said he has talked with people around the country about municipally owned and operated broadband networks and plans to bring industry experts in front of the council in February to discuss possibilities in Rochester.

"When the franchise expires, we don't have another agreement in place, so it'll be interesting to see how those negotiations go," Wojcik said. "I believe that Charter is going to have a tough time getting through the franchise renegotiations with us just because there is so much pent up anger toward Charter Communications."

Kimberly Noetzel, senior manager of communications for Charter, said "Charter made a proposal to the city, and we look forward to continuing negotiations."

Not much competition

While companies such as Dish Network and DirecTV compete with Charter for cable customers, Wojcik said broadband is an area without much competition, though CenturyLink does offer services to the city of Rochester.

"Ultimately, we are in a weak position because we have no way to deliver what I view as a necessary service for our community without Charter at this point," Wojcik said.

"Ultimately, if the city of Rochester, if the citizens of Rochester, are not willing to invest in broadband themselves, nobody else is going to invest in it for us," Wojcik said. "There are more than 30 cities around the country now that have jumped in and are positively cash-flowing broadband for their citizens. Typically, they have better service, better speeds and better pricing than Rochester gets."

Competing with governments is a challenge for cable companies, said Mike Martin, executive director of the Minnesota Cable Communications Association.

"Obviously, the industry, whether it's cable companies or telephone companies or even wireless companies are always concerned about competing with the government. It's hard to compete with the government because they have a different way of financing," Martin said.

But Martin said a municipal broadband system is a risky, expensive venture for cities. Cost overruns are common, as are difficulties reaching subscription goals.

"The biggest difficulty is they find themselves competing with companies that have been in the business for many years and are very experienced and very agile and competitive," Martin said.

Noetzel said one of Charter's advantages in the marketplace is it continues to invest in its network and improve its services.

"We are confident in our ability to compete on a level playing field and in our ability to serve our customers," she said. "Charter operates in a competitive marketplace and often has deals in the marketplace to attract new customers."

'Huge capital cost'

Campion said that while he is not interested in having the city act as an Internet service provider, he wants to keep his options open.

"I will say that my research shows it to be a very costly investment. It's not necessarily one that isn't worthwhile, but it is a huge capital cost," he said. "I would be ecstatic if we were able to draw additional competition in kind of an organic way."

"In an ideal world, I'd like to see two or more competitive providers of Internet services," said Nate Nordstrom, founder of Brandhoot, a local company specializing in strategic digital engagement.

"I believe Charter in Rochester is somewhat more expensive than similar service options available in my hometown of Omaha, Neb. Like many large organizations, for me, their customer service is generally awful," he said, adding that customer service in government agencies, such as the postal service, can be just as bad.

Omaha's largest Internet provider is CenturyLink.

Nordstrom said he feels that government-run broadband systems will become increasingly common, but he would prefer a free market solution to a government-run one.

"Government solutions are generally inefficient — more taxes, more debt, lack of competition, thus lack of drive to innovate, slow, poor, customer service, etc.," he said.

Investing in broadband as a city does not necessarily mean that Rochester would become an Internet Service Provider itself.

"Even if we don't deliver our services ourself, we can certainly offer that network to additional providers at low cost to bring competition into the community," Wojcik said.

"What I can tell people is that for every $30 million that we invest in a broadband network, it would cost each household in Rochester about a dollar a month. You factor in the fact that we're probably paying $40 a month too much for broadband, there are some good business models that are far better for our citizens looking at creating the ability for us to deliver critical services on our own," he said.