Symmetrical Networks (SN) has seen a lot of questions regarding our proposal for a Lake Oswego municipal fiber network, and unfortunately a lot of misinformation. Questions are great; misinformation less so. If you have any other questions, please contact us - we may add them to the list! The City of Lake Oswego has also written up their own fantastic FAQ section regarding the proposal here: https://www.ci.oswego.or.us/citymanager/lake-oswego-broadband-frequently-asked-questions
Do we really need faster internet?
Fast Internet speed is not “speed for speed’s sake.” It wasn’t that long ago that one megabit per second was considered “fast enough.” Since 1997 speeds have grown at the annual compound rate of 50% and show no signs of slowing. By this trend speeds 30 years from now will be almost 200,000 times what they are today. Many residents and businesses can already make use of 1Gbps today. The existing copper cable infrastructure can support speeds only so fast, and we are quickly reaching that limit. Paradigm-shifting innovations in healthcare, education, business and Smart City technologies are occurring but require much faster speeds than current infrastructure supports. Fiber to the premises infrastructure can support virtually unlimited speeds into the future as the equipment on both ends is upgraded.
why should lake oswego provide this service?
The Broadband Opportunity Council stated the following in a report released by the White House on September 21, 2015: “Broadband has steadily shifted from an optional amenity to a core utility for households, businesses and community institutions. Today, broadband is taking its place alongside water, sewer, and electricity as essential infrastructure for communities.”
Water, sewer, and electricity, when not offered by public utilities, are specially regulated. Due to the high costs to enter the market and little differentiation in product offerings, incumbent Internet service providers enjoy a monopolistic position that results in high prices, poor customer service and minimal network upgrades. A public-private partnership can leverage the strengths of both parties, while choosing which risks each partner is willing to take. This allows for low pricing - $59.95 per month would be one of the lowest rates for 1 Gbps in the nation - as well as ubiquitous service, and city control of future pricing and service levels. High-speed Internet is an essential service, now and even more so in the future. Cities should have more control over how these services are offered to their citizens.
What are the economic benefits of a fiber network?
The economic benefits of a fiber network have been proven and are significant. The following list includes some of the key benefits:
Won’t new technologies put a fiber Network At risk?
Let us start without getting too technical. Google has access to the best technologists in the world. If Google thought that a technology other than fiber would cause a fiber network to become obsolete, you can rest assured that Google would not be deploying fiber networks with their own money (and announcing plans for more fiber networks).
Optical fiber, bendable glass strands through which light is transmitted, is already a highly relied upon medium for data transmission. Virtually all of the Internet backbone is made up of fiber - it is the “last mile” portion that connects individual premises that is still primarily copper cable, a medium that has been around for more than a century. Once a full fiber to the premises network is in place, the only limits to speeds are the electronics on both ends, which will change a handful of times in the next 30 years to allow for increased speeds. Under our proposal, these upgrades would be our responsibility as operator, at no cost to Lake Oswego.
but what about wireless 5g?
Even the biggest proponents of wireless technologies acknowledge that they are “complementary” to wired technologies, such as a fiber network, and are not designed to replace wired technologies. 5G, which is years away, depends on “micro cells” connected entirely by fiber and these cells will have to be deployed about every 250 feet. In order to get higher bandwidth, the frequencies to be used for 5G will be much higher than what are used today, and that means they will require line of sight and don’t penetrate structures very well, if at all. In fact, the current 5G concepts call for separate cells inside and outside of buildings connected by fiber. In essence, in order to have new wireless technologies Lake Oswego will need much more fiber infrastructure.
WHAT ABOUT THE EXISTING CABLE USED BY CABLE PROVIDERS? WHAT ABOUT DOCSIS 3.1?
While some ask if fiber could be obsolete in the next 30 years, others ask why 75-year-old cable technology won’t last a lot longer. The cable companies have realized that copper cable over long distances is obsolete. While cable companies will be able to wring out slightly higher speeds from copper cable over short distances, the inherent limitations of copper cable networks result in slower speeds shared with more subscribers as compared to the proposed municipal fiber network. Also, the upload and download speeds are not the same (not symmetrical) resulting in significantly slower upload speeds. Until recently, the focus of most Internet users has been on download speeds but with the increasing use of the cloud (which moves data storage and computing capacity from the home or business to the Internet), upload speeds have become just as important. DOCSIS 3.1 is an improvement, but will still come with the same inherent speed limitations of copper cable. While we expect for the next 10 years cable will play a role for those subscribers willing to accept lower speeds, beyond 10 years only fiber will deliver the speeds necessary to meet minimum needs.
BUT WON'T I BE ABLE TO GET FIBER FROM COMCAST?
It depends on your location and how much you are willing to pay. Comcast has or will have a program for those lucky enough to be within a third of a mile of Comcast’s fiber backbone (even Comcast doesn’t use copper for its entire network), are willing to pay up to $1,000 for installation and activation, and $299.95 per month for just Internet (no bundling discounts are provided). A company like Comcast has little incentive to incur the cost of a full fiber to the premises buildout given their monopoly position in Lake Oswego (Comcast serves 78% of LO citizens according to the Broadband Assessment study).
WHAT IF INCUMBENTS REACT TO THE INCREASED COMPETITION AND LOWER THEIR PRICES?
Let’s be clear – lower prices and competition are not a curse, but in fact one of the substantial benefits of a municipal fiber network. We fully expect that all Internet costs will decline across the board due to increased competition provided by a municipal fiber network whether you become a subscriber or not - this has occurred in municipalities with fiber networks across the country. That is the beauty of a municipal fiber network – every citizen benefits regardless of whether you are a subscriber. If residential and business rates decline on average by $30/month, the total benefit to Lake Oswego citizens over 30 years would be approximately $200 million (more than 6 times the estimated cost of the network). These savings would be a direct benefit to citizens and businesses in the community.
SN does not view competition from the incumbents as a negative or a long-term threat to the municipal network. First, the current proposed municipal network and pricing will be superior (provide the most sophiticated in-home access point with a router and WiFi built in) at no cost to the subscriber, no residential installation fees, and one of the lowest retail prices in the nation for 1Gbps). Second, only fiber will be able to keep up with increasing bandwidth requirements, which are inevitable, and cable will become obsolete over time. Third, it will not be difficult to compete on customer service. Pivot’s (the marketing and survey firm hired by Lake Oswego) representative stated that Comcast’s satisfaction rating in the Lake Oswego broadband survey was the lowest he has seen. Fourth, we will not even start to build the network until we have pre signups of 35% of the market. Fifth, we believe that residents would much rather support their own municipal network as opposed to one of the out of state incumbents and the survey results seem to support this view.
WHAT HAPPENS IF WE DON’T MEET THE MINIMUM SIGN UP THRESHOLD OF 35% OF BUSINESSES AND RESIDENCES?
The network won’t be built. The municipal network utilizes demand aggregation to minimize the financial risk to the Lake Oswego. If there isn’t sufficient demand to cover the minimum lease payments to pay for the build, the network will not move forward.
WHAT WILL HAPPEN TO THE MUNICIPAL NETWORK’S PRICES OVER 30 YEARS?
Prices are subject to annual increases only by inflation, as measured by the CPI-W index. This is something that an incumbent would never agree to. As higher speeds become possible, Symmetrical Networks and the City of Lake Oswego will work together to determine reasonable pricing.
WILL THE CITY OF LAKE OSWEGO NEED TO HIRE MORE PEOPLE FOR THIS PROJECT?
No, the proposal calls for no new city employees
WILL YOU PUT UP UTILITY POLES IN OUR NEIGHBORHOOD?
No. To be clear, no one is going to put utility poles in neighborhoods with underground utilities in order to provide a municipal fiber network. Our original proposal allowed for use of existing utility poles in aerial neighborhoods. We have also presented Lake Oswego with an alternative construction technique (entirely underground) that would be approximately the same cost as our original proposal. In any event, there is absolutely no reason to fear that your neighborhood with underground utilities will have utility poles installed.
WHAT HAPPENS IF GOOGLE FIBER BUILDS A NETWORK IN LAKE OSWEGO?
Any fiber to the premises network for a particular city will be monopolistic in nature. The costs to deploy a fiber to the premises network are such that companies rarely “overbuild,” that is build another network on top of an existing one. If Google Fiber deployed in Lake Oswego, the potential customer base to recoup the costs of a second network build would be cut significantly. Therefore, Lake Oswego and Symmetrical Networks would be ill-advised to pursue a municipal fiber network if Google Fiber is already in town.
WHAT ARE THE DIFFERENCES BETWEEN the municipal network AND GOOGLE FIBER’S?
We have nothing against Google Fiber and appreciate what they are doing across the country by bringing awareness to the need for bandwidth and causing the incumbents to improve their service and product offerings. However, Google Fiber does not provide a municipal fiber network like what Lake Oswego has been pursuing with Symmetrical Networks. That is not their model and that is fine. However, if a city views the Internet as an essential service that should be accessible to everyone then they should be aware of the key differences between a fiber network under a Google Fiber model and one under a municipal model:
“Fiberhoods” - only build in areas with the highest demand, entire neighborhoods may be left behind
Pass 100% of homes and businesses in Lake Oswego - anyone can sign up and be connected
No dedicated line offerings or enterprise solutions for businesses
Connect every business requesting service with a full range of enterprise solutions
Residential retail rate is generally $70/mo. for 1 Gbps, with no pricing guarantees
Residential retail rate will be $59.95/mo. for 1 Gbps
Planned construction takes advantage of all aerial opportunities
Current proposal is 60% underground and 40% aerial. However, Symmetrical Networks has presented an all underground solution to Lake Oswego at approximately the same cost.
Has the ability to sell the network to anyone at anytime
Ownership transfers to Lake Oswego after the lease period at no cost – a significant future asset
No service level agreements or pricing agreements with Lake Oswego
Service level agreements and pricing agreements with Lake Oswego
Data mining for advertising (must have a Google account to sign up for service, TV service has “dynamic ad insertion”)
No data mining, period
Utilize Google brand
Utilize Lake Oswego brand – substantial recognition as a forward-thinking city attracting businesses and innovators
WHY IS A LOW RETAIL RATE SO IMPORTANT?
Every marketing demand study has shown that the price elasticity of demand for Internet services is high. Low retail rates make the Internet more accessible for everyone, which in turn increases the likelihood of success of the network, improves competition in the market, decreases the digital divide, and provides multiplicative economic benefits to the city and its citizens.
IN WHAT WAYS DOES SYMMETRICAL NETWORKS MITIGATE THE CITY OF LAKE OSWEGO’S FINANCIAL RISK?
Several. First, our model is designed to be 100% revenue neutral to the City of Lake Oswego by using subscriber payments at a 35% take rate to cover the city’s minimum lease payments for the network build. 61% of Lake Oswego respondents in the Pivot Survey said they would “definitely” or were “very likely” to sign up for the service at the monthly price of $59.95, or if their bundled monthly costs were the same (which is likely). Second, we encourage a demand aggregation tool to gather pre-signups with a small, refundable deposit to reach the minimum take rate threshold before beginning construction, which alleviates both financial and political risk to the city. Third, Symmetrical Networks takes 100% of the risk of connecting subscribers after the initial build.
WHO FINANCES THE SUBSCRIBER CONNECTIONS AFTER THE INITIAL 35% OF RESIDENTS AND BUSINESSES ARE CONNECTED?
Symmetrical Networks, along with its financing partner, pays for all subscriber connections (roughly $1,000 per connection) after the initial 35% of residents and businesses are connected. If any customers drop off the network, these “additional” customers are used to maintain the revenue-neutral design of the city’s minimum lease payments - in other words, Symmetrical takes 100% of the risk of connecting these additional customers.
WHY DO YOU NOT ALLOW FOR MULTIPLE NETWORK OPERATOR/INTERNET SERVICE PROVIDERS (ISPS)?
We believe in the modern definition of open access, which recognizes that true competition resides among the practically unlimited number of services that are offered over the Internet, rather than among the handful of companies that could provide the same Internet services on one network. Allowing multiple ISPs reduces economies of scale, causing an increase in retail rates at the expense of Lake Oswego’s citizens and the strength of the network. For the same reason that cities have single providers of water, power, sanitation, or emergency services, municipal fiber networks should have one ISP. In addition, we can obtain a lower financing rate by operating the network, savings that are passed on to citizens by a lower retail rate.
WHAT DOES SYMMETRICAL NETWORKS BRING TO THE TABLE?
We have assembled a team of experienced design experts, nationally recognized construction partners, internationally recognized equipment providers, operators of an award-winning municipal network, and one of the largest private equity funds in the world. The principals at Symmetrical Networks bring more than 75 years of involvement in construction, financing and deal structuring in total. Every aspect of what Symmetrical Networks is providing is being provided by some of the most experienced entities and individuals in the industry.
ISN’T SYMMETRICAL NETWORKS A “STARTUP”?
Yes, and no. While Symmetrical Networks was formed to provide communities with fiber networks, every aspect of what is being provided is provided by nationally recognized firms or experienced operators with long track records. Also, all our partners and operations staff have to be approved by the City of Lake Oswego, and Symmetrical Networks will be required to adhere to a service level agreement with the city.