WHAT IS FIBER OPTIC INTERNET?

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1 FU FACT BRIEF Fiber Optic Internet WHAT IS FIBER OPTIC INTERNET? Internet connections are typically provided by using existing infrastructure, such as cable and phone lines, to give people access to the internet (commonly referred to broadband, DSL, or cable internet). Fiber optic internet is a newer method of connecting computers and networks to the internet using state-of-the-art technology that converts electrical signals carrying information into light, which is sent through transparent glass fibers, bound together in a large cable, at significantly higher speeds than traditional methods. This delivery method requires large changes to a community s infrastructure. Typically, main lines are laid throughout the region, followed by smaller fiber cable lines that are installed throughout a community (referred to as the middle mile ), and from there residents and businesses can pay for the installation of that last mile of fiber cable(s) which connects directly to the property. i This method of delivering fiber internet is called a fiber-to-the-premise (FTTP) network, and FTTP networks are how most Utah residents and businesses gain access to fiber internet. The networks you have likely seen or heard about before include the UTOPIA and Google Fiber networks, located in only a few cities along the Wasatch Front. This new type of infrastructure significantly increases how fast data can be transmitted, with internet download speeds ranging from 100 Mbps to 1,000 Mbps. ii Currently, properties in Sandy City have limited access to fiber optic internet services and most residents still rely on traditional technologies like DSL and cable lines to access broadband internet. These common methods provide internet download speeds between 15 Mbps to 400 Mbps, based on factors like where people live and how much they are willing to pay for internet services. Fiber Optic Internet Updated: November 5,

2 WHY DIDN T SANDY CITY PARTICIPATE IN UTOPIA FIBER? Beginning in 2002, the Utah Telecommunications Open Infrastructure Agency (UTOPIA) was formed in response to complaints about slow, inaccessible internet connectivity from citizens and businesses along the Wasatch Front. UTOPIA has attempted to provide the necessary infrastructure for fiber optic internet and allowed private companies to provide the actual internet services, hoping to promote competition between internet service providers that would reduce prices for consumers. iii Sandy City originally joined UTOPIA, but decided not to participate due to the uncertainty, risks, and costs of creating the network. The number of households and businesses projected to participate based on an initial feasibility study done by UTOPIA was overestimated, allegedly based on participation rates from other cities, but when Sandy City consulted with these cities we found that participation rates were much lower. It was unclear when Sandy City would even receive fiber internet services, and it seemed likely that access would have been delayed by several years. UTOPIA also didn t consider other approaches to connecting residents to the lines laid by cities, like using wireless networks to connect homes at the last mile instead of fiber cables (which could have helped cut costs). UTOPIA originally received some federal funding (about $21 million dollars), but member cities that chose to participate have issued $185 million in bonds between 2004 and 2018 to cover the costs of installing fiber optic cables. These costs were expected to be recovered by charges from both installation and the internet services provided. However, in the event that the fees and charges didn t cover the bond and operating costs, member cities were also required to pledge their sales tax revenues to cover their share of the debt. iv The sustainability of the project turned out to be unrealistic, and UTOPIA ran into serious complications and delays. The cost of these complications, along with the lost revenues because people couldn t access fiber internet services, made UTOPIA unable to service the debt, expand infrastructure, and even cover operating expenses. Of the original bond ($185 Fiber Optic Internet Updated: November 5,

3 million), only $110 million when towards fiber network expansion $48 million was used to service the debt itself, and $27 million was used to cover operating deficits. v The member cities were obligated to pay their share using taxes, and in 2010 created another entity, the Utah Infrastructure Agency (UIA), to issue an additional $65 million in bonds. These bonds were used to expand fiber internet services more rapidly so the revenues from user and connection fees would increase to make the network financially solvent and, in a similar fashion, used franchise taxes as a backstop. Estimates in recent years have suggested that the total cost to pay off existing debts and other obligations could likely total around $500 million by the year 2040 when the debts are to be retired. vi While the network has become more financially stable because of these efforts, every member city is still paying $1-4 million dollars each year from sales tax revenues to pay off the original bonds. Member cities haven t had to use any franchise taxes yet to cover the additional bonds issued, but some have financially assisted UIA with their operating expenses in recent years. The costs are steep, considering that a large number of residents in these cities do not even have access to fiber internet services because connections have not been built out fully or they simply haven t chosen to participate. vii Low participation rates have largely been attributed to high connection fees or a lack of awareness that the option is available to them by the private internet service providers. Because of the costs and limited benefits from fiber internet services, Sandy City instead opted not to participate in the UTOPIA network, so taxpayer dollars would be spent on core services benefitting everybody (like roads and police services). viii The estimated cost for Sandy City to build out the UTOPIA network would have cost over $60 million dollars during the initial development phases in the mid-2000s. Adjusting the costs for inflation would push that amount well beyond $60 million dollars if Sandy City were to consider joining the network. Fiber Optic Internet Updated: November 5,

4 WHY DOESN T SANDY CITY HAVE ACCESS TO PRIVATE OPTIONS LIKE GOOGLE FIBER? Google Fiber is a private company that develops FTTP networks in select cities throughout the United States. A key difference between Google Fiber and UTOPIA, however, is that Google did not require cities to pay or pledge taxpayer dollars to build out the infrastructure Google Fiber stated they would put in the needed fiber optic lines at their own expense (again, since it is a completely private company). Google Fiber applications were competitive and required a certain number of pledges from citizens, demonstrating that the demand for fiber optic internet services was high enough for Google to reasonably expand to a particular city. ix Cities like Provo and Salt Lake City applied and were selected based on that, along with other factors that made those cities more favorable. For example, Provo City had pre-existing fiber optic cable from iprovo (which was the city s attempt to provide fiber internet services) that Google Fiber likely utilized to provide their services more cost-effectively. Provo City is still liable for servicing the debt they originally incurred, which was advantageous for Google Fiber because they didn t have to pay for many of the fiber cables and lines. Despite the differences between private and public fiber networks, even private options such as Google Fiber have experienced the issues with delayed expansion and limited network access. The massive costs of building out a network like that have resulted in residents of these cities seeing limited access to fiber internet services. In fact, Google Fiber has significantly slowed down its expansion efforts and, years later, many residents in communities various Salt Lake City neighborhoods are still waiting to see promised fiber internet services from Google. Fiber Optic Internet Updated: November 5,

5 WHAT DOES THIS MEAN FOR YOUR INTERNET SPEEDS? Although fiber internet access is limited and Sandy has seen limited fiber infrastructure development, residents of the city still have access to high internet speeds using cable and DSL service providers like Comcast and CenturyLink (among others). Many experts in the telecommunications industry agree that although fiber internet networks like UTOPIA and Google Fiber have not lived up to consumer expectations, the competition has accelerated innovation and development in cable and other broadband services. x Utah residents who have fiber internet pay for 100 Mbps internet speeds at around $50/month (the standard internet package offered by Google Fiber). To put that into context, you could have over 5 devices streaming 4K videos at the same time, all while your family or household is using their phones to browse websites and social media. xi While unprecedented internet speeds can be impressive, everyday users simply wouldn t use most of that, and many computer, modems, and routers can t even utilize all the speed that is provided when you go above 100 Mbps. xii TABLE 1. INTERNET PROVIDERS, PRICES, AND DOWNLOAD SPEEDS IN UTAH Provider Price Speed Comcast Xfinity $ Mbps CenturyLink $ Mbps CenturyLink $ Mbps Comcast Xfinity $ Mbps Google Fiber* $ Mbps Comcast Xfinity $ Mbps Comcast Xfinity $ Mbps Beehive Broadband $34.95* 250 Mbps Xmission* $37.00* 250 Mbps Comcast Xfinity $ Mbps Google Fiber* $70.00* 1000 Mbps XMission* $250.00* 2500 Mbps *These providers, part of fiber networks, typically require connection/installation fees typically $30+ each month or an up-front, one-time purchase for the connection of $2,750. xiii Google Fiber s construction fees are much less, at $300 ($25 for one year) for the entire installation to property if necessary xiv. Additional costs can also apply for speeds above 100 Mbps, because most consumer hardware/equipment cannot handle the volume of data received and either needs to be purchased or leased from the service provider. Prices are based off quotes directly from respective internet service providers (either listed on their websites or through a sample of quoted prices at various Sandy residences) as of October 19 th, Prices are subject to change and may differ from what is listed in the table. Fiber Optic Internet Updated: November 5,

6 Internet and networking experts suggest that a family of four that streams videos, browses social media, plays online video games, and frequently downloads/upload files from the internet could achieve smooth, reliable internet speeds with download speeds around 40 Mbps. Sandy City residents are already able to receive internet speeds comparable to that, and even some of those advertised by FTTP networks, for similar pricing through private providers. People can also improve the connectivity on their devices by buying newer hardware (like better modems, routers, and wireless extenders) to make the most of the internet speeds they pay for currently. HOW IS THE CITY IMPROVING INTERNET SERVICES AND ENCOURAGING INNOVATION? Sandy City is working hard to stay informed on the latest innovations, trends, and issues surrounding telecommunications and identify ways it can responsibly and sustainably improve internet services for our citizens. One developing technology that is predicted to rival fiber networks is 5G wireless internet. This new technology has started rolling out to several cities in the U.S. through Verizon, and expected speeds will rival that of fiber networks. This new generation of wireless networking works by improving existing cell towers, creating a vast network of smaller towers to carry signals farther and stronger, and implementing technology to transmit those signals between the towers much more efficiently. By attaching a small satellite or tower to your home, these up-and-coming networks could deliver internet speeds upwards of 20 Gbps (20,480 Mbps) much farther and cost-effectively than networks like UTOPIA and Google Fiber have. Sandy City continues to work with industry leaders as we explore the possibilities of 5G technology coming to our area. i Although the term last mile is used often, the distance between the fiber cable lines running through the community/city and the properties themselves is typically much smaller than an actual mile. Usually this consists of smaller fiber optic cables connecting a property to a central line several blocks or streets over. Fiber Optic Internet Updated: November 5,

7 ii Types of Broadband Connections, Federal Communications Commission, last modified June 23, 2014 Accessed from iii UTOPIA Historical Overview, Lindon City, last modified October 2015.Accessed from iv Answers to Frequently Asked Questions about UTOPIA and UIA, Murray City, Accessed from v A Performance Audit of Utah Telecommunication Open Infrastructure Agency, Report No , State of Utah Office of the Legislative Auditor General. August 1, Accessed from vi Charles M. Davidson and Michael J. Santorelli, Understand The Debate Over Government-Owned Broadband Networks: Context, Lessons Learned, and a Way Forward for Policy Makers UTOPIA Case Study. Advanced Communications law & Policy Institute at New York Law School. June, Accessed from vii City Availability Maps, UTOPIA Fiber. October 9, Accessed from viii In some cases, some elected officials and private companies have suggested imposing additional fees (added onto resident s monthly utility bills, for example) to more rapidly expand the network, but to the best of our knowledge fees like that haven t been put into place by any cities. Regardless, debt payments or efforts to expand infrastructure are being paid for by the general public but only benefiting certain residents. See also Genelle Pugmire, The saga continues: Orem vs. UTOPIA, Daily Herald. January 29, 2018: Provo, UT. Accessed from ix Jack Nicas, Google s High-Speed Web Plans Hit Snags, Wall Street Journal. August 15, Accessed from x Blair Levin and Larry Downes, Why Google Fiber Is High Speed Internet s Most Successful Failure, Harvard Business Review. September 7, Accessed from xi Internet Plans and Pricing, Google Fiber, October 25, Accessed from xii Art Raymond, UTOPIA to offer fastest internet service in the country, Desert News. January 10, Accessed from xiii Residential Pricing, UTOPIA Fiber. October 25, Accessed from xiv Google Fiber Fee Schedule, Google Fiber. October 17, Accessed from Fiber Optic Internet Updated: November 5,