The first fiber-to-home Sun Prairie customers are now online as part of a municipal pilot project that could take high-speed fiber optics citywide.
By the end of February, more than 178 Smith Crossing’s residents are expected to be hooked up.
Sun Prairie Utilities Manager Rick Wicklund said that’s higher demand than expected with 54 percent of residents taking the Internet-only service. The city council approved the project for $500,000, based on 30 percent take rate that would see a positive cash flow in three years.
“We did a really good job of marketing and contacting everyone, having neighborhood meeting and getting everyone excited about it, that has a lot to do with the high take rate,” Wicklund said.
Forty-three percent of residents are taking the 100Mbps ($49.98 a month) and 11 percent ordering the 250 Mbps ($69.98 a month). Wicklund said the subdivision had receptive demographics “of young professionals who understand the value of high-speed Internet and having gotten away from cable.”
In the city’s initial timeline, the first customers were expected to go online in December but Wicklund said the installation had a few delays. An overcommitted contractor started a month late, and rocky soil conditions in Smith’s Crossing caused construction problems. Higher than expected demand also slowed installation down. He said all those factors will affect budget projections.
“We are running the numbers and still have work to do but it will be over budget, but we hope to be in the $550,000 range,” Wicklund said.
The pilot project also includes running fiber-optic broadband to the Main Street corridor and the TIF 9 area. Wicklund said they haven’t received a lot of interest from businesses along Main Street, but several along Capitol Drive have made inquiries, the city will start to market to those areas after the Smith’s Crossing installations are done.
“It’s first things, first,” Wicklund said.
SPU borrowed $624,000 through a general obligation promissory note sold to the Bank of Sun Prairie, to cover installation costs—$550,000 for Smith’s Crossing, $68,000 to the Main Street corridor and $40,000 to the TIF 9.
Wicklund said the closing on the sale took place on Nov. 13, but SPU completed the necessary paperwork so that they could reimburse themselves for Smith’s project expenditures prior to receipt of the borrowed funds.
The city council approved the fiber-optic pilot project in July to see if a municipal wide project, estimated to cost $27 million, would be a good fit for the city.
Advocates say it will bring better service and economic development to the area but cable competitors and concerned taxpayers say it’s too high of a financial risk for the city to take on.
Cable industry executives came to the council last summer cautioning the city on moving forward with its plans, citing a half a dozen municipalities projects that have failed across the U.S., resulting in multi-million dollar losses that had taxpayers footing the bill.
City alders want to give the pilot project a year, to look over results and conduct an independent market analysis before making a decision on citywide expansion.
Wicklund said if the city does decide to move forward on the project, he would suggest a few things based on the Smith’s Crossing project. He favors concentrating on new subdivisions where laying conduits in the ground with electric cable would be possible at the same time, which would reduce construction costs.
Other considerations, he would suggest, is moving from one subdivision at a time starting with the most favorable logistically, implementing marketing plans, and getting customers signed up before construction starts.
He said comparing costs in installing fiber optics to other areas of the city, won’t be the same as Smith’s Crossing.
“It’s like comparing apples to oranges,” Wicklund said.
Already the project has received a lot of interest, not only from potential customers but other municipalities, as the city of Sun Prairie tests the waters.
“Every community in Dane County is looking at this and wanting to know how is it going, what’s happening, and if customers are happy,” said Gary Sanders, SP Utilities Telecommunications Manager.
Developers have also showed some interest, Sanders said, with Veridian Homes officials meeting with the city several times to see how they could better configure their “Smart Homes” to receive the service. The company is expected to build more homes in the Smith’s Crossing subdivision.
Sanders said increased competition in providing Internet, either through municipalities or private company could benefit consumers by lower prices and bringing better services, he said.
“That is our mission here, to make things better for the customer,” Sanders said.
He said there were various reasons that Smith’s Crossing residents gave for not taking the service; no need for high-speed broadband, wanting to stay with bundle pricing from companies offering phone and cable, or those who are taking a wait-and-see approach on how the service pans out to the first wave of subscribers.
“I will be curious in 12 months to see if the take rate remains the same, goes up or goes down, that will be the true test,” Sanders said.