TRAVERSE CITY — Gigabit-speed internet is coming to part of Traverse City, but not without a cost to the city-owned utility setting out to build it.
That cost is seen as an investment by supporters and a blunder by critics; Board of Directors member Patrick McGuire later called it a "gamble" before voting against moving ahead with the network.
The remaining board members on Tuesday voted to approve a $3,309,426.90 contract with Fujitsu Network Communications to build out the network past the same roughly 2,200 homes and businesses connected to the utility's Hall Street substation. Part of that sum would pay to connect customers who sign up. They set that limit as a cap, and any additional expenses would require board approval.
It's a financial risk that had a few audience members asking the board to drop the idea, including Barb Willing, who dismissed a cost-benefit analysis from Fujitsu as largely "gobbledygook," and Matt Schoech, who said many publicly owned broadband networks fail.
Others supported the idea, including Boomerang Catapult Principal Lowell Gruman. He said it's needed to serve Traverse City tech companies and lure more. Jeff Pynnonen said he drove from his cabin in Onaway to speak in favor of the idea.
Board member Amy Shamroe said she believes the risk came 13 years ago when the utility spent millions on a "dark fiber" network that'll serve as the project's foundation.
"This is now giving us access to that, to the people who paid for it, who have really not had access to it over the years," she said.
Building out a high-speed data network is only one part of the project, board member Ross Hammersley said. It'll also have benefits in future deployments of "smart grid" technology. Board Member Paul Heiberger said those benefits could lower future costs.
A $3.5 million transfer from the utility's electric fund to its fiber optic fund will pay for part of the project cost. That would drop the latter from $15.7 million to $12.35 million, figures show. But it wouldn't take the electric below its minimum cash reserves, utility Controller Karla Myers-Beman said.
It's still too close for comfort for McGuire, he said. He also noted some capital projects will be put off as a result, and the projections for paying back the electric fund contemplated three 2.5-percent electric rate increases, which the board hadn't discussed.
"I don't think ratepayers should have to pay a higher rate because of this inter-fund loan," he said.
Board member Elysha Davila said she's comfortable with the transfer, knowing the utility's existing fiber optic network brings in revenues that can make the electric fund whole in 15 years.
Davila couldn't support a contract with Fujitsu to run and operate the network, though, joining McGuire's "no" in the 5-2 vote. The utility will pay $849,663, more or less, for the first year, documents show.
She wanted assurances that Fujitsu, as the private partner in the public-private partnership, had "skin in the game" if financial targets weren't met, she said.
The concept is there — a 10 percent bonus or cut to what the utility pays Fujitsu if the goals are met or not, respectively — but Davila had no specifics on those targets prior to Tuesday's vote, she said.
Charter Communications already provides gigabit-speed internet service in Traverse City, company Government Affairs Director Marilyn Passmore said. She also panned Fujitsu Network Communications' business plan, and said the utility will be entering into a competitive environment.
John Cafaro, Fujitsu Network Communications vertical markets director, said lots of research went into the business plan.
He likened the board's decisions to a continuation of TCL&P's original charter — building out the electrical grid.
"We think it's going to be a very sound investment in regards to the ability to grow the network and the economic development that's going to occur within the community," he said.