Tribune staff reporter
Published March 26, 2003
About a century after they created municipal electric utilities
because they were frustrated with commercial providers, three Fox
River communities are positioning themselves to become pioneers
on the latest technological frontier: broadband.
On April 1, voters in St. Charles, Geneva and Batavia will signify
in advisory referendums whether they think their towns should issue
$62 million in 15-year bonds to build a fiber optic network.
After studying the issue for two years, supporters say the infrastructure
would pay for itself and offer cable TV, phone and Internet service
at cheaper rates and with better customer service than private providers.
Citing a feasibility study, they say the system could make a profit
as early as the second year of operations.
"This would be a tremendous boost for our economy in the long
term," said Ed Hodges, a member of the grass-roots group favoring
the bond issue and the owner of a computer services company. "If
the cities go on their own, it's going to give business-class connection
to every business in the Tri-Cities area regardless of their location."
Not everyone agrees.
"There are certain things Batavia has to do with the money
we have, which is a lot more important than going into something
like this," said Batavia Ald. Norman Hagemann, who voted against
sending the issue to voters.
Companies such as Comcast Corp. and SBC, which stand to lose current
or potential customers to a municipal system, say it is unnecessary
because the service already is available or will be soon.
"It's pretty apparent there's ample availability," said
Carrie Hightman, president of SBC Illinois, who noted that 76 percent
of Tri-Cities residences, on average, have access to digital subscriber
line, or DSL, broadband service. "There's also the question
as to what's needed as far as additional growth."
Waiting for system
Comcast, which acquired AT&T Broadband in November, has committed
$50 million to upgrade systems in Kane and DuPage Counties by September,
long before a municipal system would be built, said Patricia Andrews-Keenan,
vice president of communications for Comcast for the greater Chicago
In a best-case scenario, the Tri-Cities estimate municipal broadband
services could be offered to some residents in 2004.
"I don't know if [residents] are willing to wait another year
just because a municipality is going to offer it," she said.
But proponents say a municipal system would be an improvement.
All three municipalities have seen an increase in complaints about
private providers and, in some cases, broken promises to upgrade
networks and meet the increasing demand of new customers.
Andrews-Keenan acknowledged as much.
"We take a certain amount of mea culpa for that," she
said. "There were promises made that weren't delivered."
But she added, "Comcast has stepped up to the plate. We have
committed this money."
Yet Tri-Cities broadband proponents said their system would be
superior because it would be 100 percent fiber optic, which they
said is faster and more reliable than a hybrid system Comcast is
installing. Such state-of-the-art infrastructure is critical to
long-term economic development, they said.
The question many ask is whether the system will be able to pay
for itself. In advertisements and fliers, the private companies
warn residents their taxes could increase to pay off the bonds if
not enough people subscribe to the municipal system.
Proponents expect to be able to provide about 75 cable channels
for $33.95 a month. They say that will be attractive to customers
because it is about $2 less than what AT&T charged for comparable
service last summer, when a feasibility study was done.
The study determined the network could make a profit in anywhere
from two to seven years. The latter projection assumes a conservative
market penetration: roughly 25 percent of the residential market
subscribed to municipal cable TV, roughly 7 percent subscribed to
high-speed data services and roughly 6 percent used the phone service.
On the commercial side, roughly 12 percent of the market would need
to subscribe to high-speed data services and roughly 9 percent to
the telephone. Proponents could not provide exact break-even numbers.
Nationally, more than 500 public power utilities have created broadband
networks, including for internal communications, according to Ronald
Lunt, director of broadband services for the American Public Power
Association in Washington, D.C.
But in various lawsuits, private companies have claimed municipalities
have an unfair advantage, according to Jim Baller, a senior principal
in the Baller Herbst Law Group in Washington, D.C., which represents
local governments on communications issues and has worked with the
As the referendum nears, the companies actively are campaigning
against the ballot proposal, conducting telephone surveys, sending
out mailings and advertising in newspapers. The campaign has offended
some of the broadband proponents who say SBC and Comcast are spreading
A grass-roots group has responded by putting up yard signs and
calling voters to see if they have any questions. Recently, they
held a news conference to respond to information issued by the companies.
Copyright © 2003, Chicago Tribune