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Charles City fiber utilities board OKs resolutions; checking off more boxes on way to broadband network

By Bob Steenson,

The Charles City Telecommunications Utility Board of Trustees gave preliminary approval to issuing up to $22 million in revenue bonds to finance a fiber optic broadband system in the community, and approved plans and specifications of the system, including potential costs for the services.

Consultants to the city utility board pointed out that these are required legal steps in the process of financing the project, but do not commit the board to issuing the bonds.

Brad Sloter, who is the city attorney for Charles City, said the resolutions passed by the utility board after the public hearings Tuesday afternoon are “procedural steps.”

“They’re not obligating the board to anything at this time,” Sloter said.

Michael Maloney, senior vice president with D.A. Davidson & Co. of Des Moines, one of the utility board’s financial consultants, said the resolutions are “simply providing for future action.”

All three resolutions — approving plans, specifications and estimated costs for the fiber-to-the-premise project; approving rates for services; and approving borrowing up to $22 million — were approved by the board members on 5-0 votes.

It was noted during discussion of the resolutions that the service price schedule included with the board agenda packet was incorrect and was an earlier version. That price schedule was the basis for an article published in the Tuesday Press.

The correct version had a lower price for some residential services, but significantly higher prices for commercial internet services.

Commercial broadband services in the updated price list are proposed as:

• $125 per month for up to 100 megabits per second (Mbps) download and upload. This was originally listed as $80 per month.
• $225 per month for up to 250 Mbps download and upload. This was originally listed as $110 per month.
• $325 per month for up to 1,000 Mbps (1 gigabit per second) download and upload. This was originally listed as $200 per month.

The plan proposes these costs for residential internet service:

• $70 per month for up to 100 Mbps download and upload speed.
• $90 per month for up to 250 Mbps download and upload.
• $110 per month for 1000 Mbps (1 Gbps) download and upload. This was originally listed as $130 per month.

It proposes these costs for residential TV service:

• $48 per month for local TV channels.
• $90 per month for local plus “basic plus” channels.
• $98 per month for local, “basic plus” and either “family plus” or “sports plus” channels.
• $106 per month for local, “basic plus,” “family plus” and “sports plus channels.

Residential telephone service is listed at $19.95 per month plus an additional 7 cents per minute for long-distance calls in the United States, or $29.95 per month for service with unlimited long distance calling in the U.S.

No one from the Charles City community commented on the plans or the financing during the public hearings held Tuesday afternoon by Zoom teleconference.

Two people from outside advocacy groups commented on the project.

Christopher Mitchell, the director of the Institute for Local Self-Reliance in Minneapolis, said his group tracks local broadband networks around the nation.

“We strongly support communities making these decisions for themselves, making locally-informed decisions,” he said.

“Hundreds of communities have built their own networks, and in our research most have succeeded on the goals of helping local businesses be more competitive. They’ve lowered prices for residents and in general made the broadband market more competitive,” Mitchell said.

Chip Baltimore, a senior fellow with the Taxpayers Protection Alliance of Washington, D.C., said his group was concerned with what appeared to be a large increase in costs to build the Charles City system from earlier estimates, and he questioned whether early low “take rate” estimates — the percentage of people eligible for services who actually sign up for them — would be sufficient to pay for the system.

Eric Lampland, president of Lookout Point Communications of St. Paul, Minnesota, one of the utility board’s consultants, said he wasn’t sure where Baltimore was getting his figures, but early numbers used when the project was being discussed were based on feasibility studies, not actual business models.

Still, he said, “I don’t think the models that we did present to the final business case are substantially greater than that.”

Lampland also said that the take rate estimate of 44% used in one of the early feasibility studies was a highly conservative figure, used to avoid overestimating potential revenue.

“In the area that we’re dealing with, in other municipalities in this particular region, the average take rate is in the area of 72%,” Lampland said. “So the upside potential for this project is substantial. But it is still sustainable at the lower take rates.”