There’s been a lot of debate over whether the United States should treat Internet service as a utility. But there’s no question that Internet service is already a utility in Sandy, Oregon, a city of about 10,000 residents, where the government has been offering broadband for more than a decade.
“SandyNet” launched nearly 15 years ago with DSL and wireless service, and this summer it’s putting the final touches on a citywide upgrade to fiber. The upgrade was paid for with a $7.5 million revenue bond, which will be repaid by system revenues. Despite not being subsidized by taxpayer dollars, prices are still low: $40 a month for symmetrical 100Mbps service or $60 a month for 1Gbps. There are no contracts or data caps.
“Part of the culture of SandyNet is we view our citizens as owners of the utility,” City IT Director and SandyNet GM Joe Knapp told Ars in a phone interview. “We’ve always run the utility on a break-even basis. Any profits we do have go back into capital improvements and equipment upgrades and things like that.”
In a video feature produced by the Institute for Self-Reliance, Sandy Mayor Bill King said the city didn’t pay for the fiber network with taxes because “we didn’t feel it was right for everyone to have to pay for something that maybe not everyone was going to participate in.”
SandyNet operates a lot differently from private Internet service providers, which generally sell Internet access in multiple cities or states.
“There’s a lot more overhead there and they’ve also got investors that they’re trying to keep happy by making sure their stocks are performing well and all that,” Knapp told Ars. “I get their stance and where they’re coming from, but for us as a small municipal provider it’s a completely different mindset.”
Instead of giving dividends to stockholders, SandyNet focuses on keeping prices low for residents. “We’re able to operate very lean because my service footprint is Sandy and my staff all live and work in Sandy, so we’re able to operate in a different manner than a lot of those companies are,” Knapp said.
While many states have laws that restrict municipal broadband projects in order to protect private providers from competition, Sandy officials don’t have that problem.
“There were some efforts in Oregon, probably over a decade ago, to try to stop municipal Internet providers, but the Oregon legislature said no. They made us a safe state to have this kind of thing in,” Knapp said.
SandyNet competes against Wave, a cable company, and Frontier, a DSL provider. Before the fiber upgrade, SandyNet’s market share was about 30 percent of homes in the city, Knapp said. That number has already risen dramatically and it expected to hit more than half of the city’s 3,700 households once the project is able to hook up everyone on the waiting list, which should happen by October at the latest. SandyNet also sells Internet service to local businesses.
It all started because City Hall couldn’t get DSL
While SandyNet is blowing past the competition, it was started in 2001 because private companies weren’t serving the city, which is less than 30 miles from Portland.
“We couldn’t get a DSL line at City Hall and this was back in 2001,” Knapp explained in the Institute for Self-Reliance Video. “We literally called the phone company and said, ‘We want broadband,’ and they said, ‘Sorry, we don’t have it.’”
The cable company at the time also wasn’t providing broadband, Knapp said.
“The mindset was, if that’s what they’re telling the city government, what are they telling our residents, and what are we going to do about this problem?” Knapp said.
“We could get better speeds on wireless, especially in far, outer reaching areas,” Knapp told Ars. “Also, it’s an administrative burden to do line-share DSL; you’re basically providing DSL over the phone company’s wires through a wholesale agreement.”
Before the fiber project, SandyNet was offering a $25-per-month wireless service with download speeds of 5Mbps and uploads of 1Mbps. It was time for an upgrade.
“The fiber project for us was meeting the needs and desires of our SandyNet customers and the overall benefit of the community,” Knapp said. “It wasn’t necessarily that they were unhappy with what the incumbents were doing at that point, it was just the evolution, these are the customers we’re serving and this is what they want.”
The wireless service had to die in order to make way for the citywide fiber network.
“It’s a much more difficult system to operate than a fiber network,” Knapp said. “We had over 100 access points around the city for our customers to connect to, and it’s a lot of maintenance to manage all those individual powered devices out in the field.”
It also didn’t make sense to have a $25-per-month service compete against the new fiber service that started at $40 a month, even if the slowest fiber service was 20 times faster downstream and 100 times faster upstream.
SandyNet is upgrading every wireless customer to fiber. “We said, ‘we’ll give you a risk-free trial of the fiber network,’” said Knapp. “We did a free installation for them, we kept the rate at the same $24.95 for the first three months. They were able to try it out with no risk and we haven’t had any of them cancel.”
Only about four percent of customers have opted for the $60 gigabit service. While the advent of 4K and 8K streaming video may change things, at the moment Knapp believes 100Mbps is enough for typical residents.
“We’re pretty bad salesmen,” Knapp said. “We have some people who will ask for the gigabit service and we actually try to talk them down to 100Mbs… We tell them, ‘I would recommend trying the 100Mbps service and if it’s not fast enough, it’s a button click for us to turn it up to a gigabit.’… What we tell our citizens is, ‘we want to keep our rates as low as possible for you and part of that is I don’t want to sell somebody a product they don’t need.’”
Getting enough bandwidth isn’t a problem. SandyNet buys 30Gbps of capacity, with physically redundant paths into Portland.
SandyNet also sells a $20-per-month phone service and is partnering with a company called yondooto provide TV service over the fiber wires. Details on the TV packages are still being negotiated.
50 new homes being connected each week
Construction of SandyNet’s fiber network began in June 2014 after about three years of research and negotiation with construction companies. Sandy was able to get the revenue bond because “we had all that experience of 10-plus years running an ISP, and we were able to do some pretty accurate revenue projections,” Knapp said.
To break even, SandyNet calculated that it needed 35 percent of the community to subscribe. It blew past that and as a result had to borrow an additional $500,000 on top of the original $7.5 million to cover the extra construction costs. Debt service will be paid off over the next 20 years.
SandyNet now has more than 50 miles of fiber, all underground, and it passes every residential property in the 3.14-square mile city. SandyNet offered free installation to residents who signed up during construction, and about 2,000 took the service up on the offer.
The first customers were brought online in September 2014. When we spoke to Knapp on July 22, about 1,400 homes were hooked up, with new ones being added at the rate of about 50 per week. Residents that haven’t already signed up will have to pay a $350 one-time construction fee “to help offset the cost of getting fiber from the distribution network up to the side of the house,” Knapp said.
The last few feet of construction are the most difficult.
“What we found is… the last 50 feet to get to the house is the most difficult part. You’ve got to go around irrigation systems, you’re tearing up people’s landscaping. It’s not the most fun,” Knapp said.
The city is doing all this with a very small staff. While Sandy hired a construction company to build the network, Knapp and his staff of four other employees manage SandyNet and do IT support for the city government’s internal systems.
The fiber network has brought advantages beyond fast, cheap Internet service. For example, SandyNet wired up the traffic lights in town so they can be monitored and controlled remotely.
Nearby municipalities have asked SandyNet to hook them up.
“We’ve told them, ‘not right now,’” Knapp said.
But if revenue remains strong, SandyNet is expected to grow along with the city itself in the coming years. Sandy officials plan to expand the borders of the city into surrounding areas that are not currently part of any city or town, Knapp said.
“The city has a 40-year master plan; we know where the city will expand and what those areas will be zoned,” Knapp said. In areas “that are currently not inside the city limits but we anticipate them becoming residential centers in the city over the next 20 years, we’ll start extending the fiber out in that direction.”