TDS will buy the Sun Prairie Utilities (SPU) municipal fiber optic network for $2.88 million and bring high-speed Internet to the city starting this fall.
The deal, approved by the Sun Prairie City Council on Tuesday, will pay off the city’s $2.7 million debt to build the municipal network.
TDS could also offer high-speed fiber optics citywide by 2019, quicker than what the SP Utilities could have done and without the $25-30 million price tag and risk to taxpayers.
Madison-based TDS started marketing services to Sun Prairie residents last week, with shovels expected to break ground next month and service to begin in some areas starting in September.
But the proposal has received pushback from residents concerned they won’t get the same service from TDS that they have from SPU.
Others questioned the TDS’ buildout plan, which by contract would take two and half years. Customer demand would dictate which areas would get service first and, if costs are too high, the company could bow out of building to those areas.
TDS would have to pay a $25 per unit penalty fee if it fails to start construction at the end of the 30-month period.
District 3 Alder Mike Jacobs rejected that amount as too little.
“I want this contract to have real consequences if the buildout doesn’t happen like they say it will,” Jacobs said at the April 11 special Sun Prairie City Council meeting.
Jacobs urged other alders to let SPU continue to build out its fiber optics system. He said based on the demand of the Smith’s Crossing pilot project, it isn’t risky, and that TDS interest in the city’s network proves that. Jacobs compared high-speed Internet as essential as police, fire, EMS and other services the city provides and said it should not be turned over to a for-profit company.
The city launched its fiber optic network in 1999 and currently serves 513 residential customers and 47 businesses, including the city and Sun Prairie Area School District. Annual revenue from the service comes in over $600,000.
Fiber optic cable is made up of thin strands of glass that carry information by transmitting pulses of light. The technology has several benefits over copper cable with less signal loss and higher bandwidth capacity.
District 3 Alder Maureen Crombie wanted to postpone the TDS contract vote for three weeks after hearing residents’ concerns over the sale but was overruled by the rest of the council.
TDS Chief Operating Officer Jim Butman told the city council Tuesday that the company could fulfill its buildout commitment.
“We will do a wonderful job for this community and its residents. We are not going to let you down,” Butman said. “It’s the right time, it’s the right technology, and we have the confidence to know it’s going to work.”
TDS officials say they will provide the same symmetrical broadband speed that SPU customers have now and there will be no Internet data caps. Sun Prairie subscribers will also be eligible for lower rates that are offered in other TDS markets.
City officials said that the city and the school district who now use SPU fiber optic service will see price drops or higher service levels under the TDS contract.
Mayor Paul Esser backed the sale because it would take the risk off the city and its taxpayers for building a citywide fiber optic system.
Esser said TDS offers internet, TV and phone, something the SPU couldn’t do. He said the company has the competitive advantage of marketing, customer service and a team of technicians and engineers on hand to solve problems.
There’s also other benefits to the city. Anita Gallucci, the attorney representing the city during the TDS negotiation, said there will be revenue sharing for five years once certain goals are met.
“In the beginning, revenue sharing will be small but we anticipate TDS will be successful as they roll this out,” Gallucci said.
The city would get up to 7.5 percent revenue sharing under the contract approved Tuesday.
TDS started marketing their Sun Prairie services on Thursday but company officials said they have already received a good response.
Charter Communications officials spoke against the contract Tuesday, saying it gives an advantage to TDS.
Mike Hill, Charter Communications government affairs manager, said the company has invested millions in building its cable coaxial system in Sun Prairie and, with the city helping to market TDS service, would create an unlevel playing field for competitors.
Several Sun Prairie alders discounted the unfair advantage argument saying that if Charter brought a proposal for a fiber optic system to the city, they would have considered it.
Esser said the city spoke to Charter and Frontier during the last two years, and neither company committed to upgrading their systems in the city.
The TDS sale passed on a 4-2 vote with Crombie and Jacobs voting against it. Alder Steve Stocker abstained from voting because his daughter is a lawyer for TDS Telecom. Alder Al Guyant was absent at the April 11 meeting but provided a statement that supported the sale.