Sun Prairie officials this week began to debate the merits of a possible $27 million telecommunications investment with Sun Prairie Utilities that would bring fiber optic network capabilities to every home and business in the city.
Committee of the Whole members received two presentations Tuesday, Jan. 14 — the first from Beth Ringley and Jennifer McCain of The Motive Group, the second from John Andres with Baker Tilly.
The Motive Group is a Tennessee-based consulting firm with a background in utilities and next-generation broadband services. Representatives from the company have worked for more than a year with city staff and Utilities Commission members to explore the possibility of lacing Sun Prairie with fiber.
Fiber optics produces connection speeds upwards of 50 times faster than today's common broadband, improving triple-play services (internet, telephone, television) along the way, Ringley said.
“A lot of effort has gone into getting to where we are at today, which is presenting to all of you a comprehensive plan to consider bringing fiber to every household in the City of Sun Prairie and setting us on a path to the digital age,” District 2 Ald. Jon Freund remarked.
Freund detailed Tuesday that when the suggestion of bringing fiber to Sun Prairie first was posed, “I was against it at that point.”
But a change of heart has since occurred.
“Technology has become a greater and greater need for both businesses and residents,” Freund continued. “This is an opportunity for us to basically differentiate Sun Prairie from all the other communities in Dane County.”
Freund said one city in Wisconsin (Reedsburg) has moved ahead on a fiber-to-the-home initiative.
He added that fiber installation would “put Sun Prairie on the leading edge” for economic development and local and long-distance education opportunities.
“Building infrastructure like this positions you within your state, within the U.S., and really globally,” Ringley told the committee. “We're seeing these communities who have done systems like this are getting calls from all over the world from companies that want to come and relocate.”
When The Motive Group first became involved with Sun Prairie, the firm conducted a survey that was accessible both online and through utility bill mailings.
According to Ringley and McCain, more than 700 responses were received and 88 percent of them favored fiber services in Sun Prairie.
The recommended plan put for by The Motive Group has a total cost of near $27 million, with $21 million of that as year-one capital expenditures to serve roughly 13,550 homes and businesses in the city.
Budgeted in the initial year's expense total is $11 million for aerial and underground construction and equipment.
Once the fiber system is operational and available for customers, Ringley said projections show $9.97 million in annual operating revenue by year 20 of the system to go along with expenses of $1.26 million.
By year 20, total assets are projected to be at $27.16 million, with total cash at $12.56 million.
“We tried to get a snapshot and detailed analysis of every cost it will take to build and operate this system over the life of the project,” Ringley said.
Ringley was also quick to note that with a 20-year window, unexpected changes in technology or otherwise may occur that could impact the projections. “I just want to be really clear that there may not necessarily be $12 million sitting in the bank at year 20,” she said.
Freund said to make the project work, the city and the utility would partner together. The alder likened such an effort to the city fronting money to other businesses and partnerships through tax increment financing (TIF) districts.
Freund said the city would stand to gain up to $4 million along with principal over the two-decade loan period “to help reduce property taxes and provide additional services.”
Although he did not dismiss the plan, Sun Prairie Mayor John Murray made it clear he would like to see the city approach some incumbent telecommunications providers such as Charter or Frontier Communications about any possible partnership or project to get fiber throughout Sun Prairie, thereby lessening the cost burden.
“I think this has a lot of merit and deserves consideration, but I don't want to guess,” Murray said.
McCain said that in 10 years of working with communities on fiber projects, existing service providers are always met with and tend to pass on building a system like the one outlined for Sun Prairie.
Freund said he and a few others from the city did reached out to Frontier over a year ago but were turned away.
“In almost every case, the reason you're considering this investment is because you can't get it from the incumbent,” McCain said. “They are not even investing in fiber-to-the-home technology in the middle of New York City, much less … the size of yours.”
Andres appeared before the committee to discuss some of the financial implications of the project.
With some Utilities Commission members in the audience, Andres noted that the fiber project would be one of the largest in the city's history. Andres said the project would rank near the more than $30 million spent for the city wastewater treatment and water utility systems.
“If you make this decision to go forward with the communication utility, you will be in a competitive environment,” Andres said. That competitive environment is different than the monopoly Sun Prairie Utilities (SPU) enjoys for water and electric service in the City of Sun Prairie.
Andres stated that municipal telecommunications operations are not common in Wisconsin and there just over 150 nationally. He acknowledged much of the financials provided by The Motive Group “seem reasonable compared to other communities.”
Andres said the 20-year debt service for the fiber project would equate to roughly $5 more per month, per SPU customer, should the project fail for some reason after implementation.
“The annual revenues are about $29 million for Sun Prairie Utilities,” Andres said. “There is about 13,000 customers … In round numbers, that works out to $5 a month per average customer in the city.
“That's about what it would mean for the debt service to continue for the life of the debt for 20 years,” Andres added.
Committee members after the presentations Tuesday did not take any action.
Sun Prairie City Council President and District 4 Ald. Mary Polenske said the topic will be discussed at future meetings once everyone can “a little time to think about it.”