Glenwood’s wireless Internet system rankles ISPs
Local Internet providers say Glenwood Springs spent too much on its new wireless Internet system and allege that the city’s consultants made threats in an effort to gain more of the market.Internet providers also complain that city officials yanked a bidding process and gave the work to Brunetti DEC, the Denver consulting firm that shaped the project from the beginning.Sopris Surfers and Crimson Wireless said the city paid Brunetti too much for consulting and engineering.Glenwood Springs city manager Mike Copp said the $1.6 million paid so far to Brunetti covered a feasibility study, planning, engineering and “getting us to this point.”That’s the cost of installing such a complex system, he added.Crimson’s Internet administrator, Bill Challis, claims that Brunetti used veiled threats to convince Crimson to vacate coveted public wireless Internet frequencies.Jim Stine, operations director for Brunetti, said the alleged threats were likely a misunderstanding, and said the providers should sit down and fairly divide up the frequencies.Sopris Surfers president Paul Huttenhower complains that the city tempted local providers with a lucrative contract for the system’s operation and maintenance work, but scrapped the bid approach in favor of a month-to-month agreement with Brunetti.Copp and Glenwood Springs Electric Department supervisor John Hines said city code does not require seeking bids for the type of services provided by Brunetti, no matter how much those services cost.
Just as Glenwood Springs was one of the first cities in Colorado to provide electricity to residents a century ago, it now seeks to be on the cutting edge of new technology by providing high speed Internet access as a common utility.Nearly two years ago, city officials, spurred on by a similar state government project, began exploring the idea of installing a fiber optic network to link residents, businesses and community institutions to the Internet.A $3 million, three-part project assessing needs, designing the system and installing fiber optic cables and other equipment, was approved in steps by the City Council.Funding for the project came from profits earned by the city’s Electric Department, and the department will manage the fiber optic system.The system consists of two fiber optic loops and a tail connecting government, school and medical facilities directly to the city’s access nodes. It also includes a wireless system that can give city residents and businesses high speed, or broadband, access through a local Internet service provider, or ISP. The fiber optic system, originally pegged at $3 million but now estimated at closer to $3.5 million, is the first municipally owned system in Colorado. Hines said part of the reason the city installed the network is to reduce high speed Internet rates for residential customers to around $50 a month, about $15 to $20 less than current rates. Copp said the network will also work as an economic development tool, making the city more attractive to high-tech companies that might want to relocate here.Rather than directly providing Internet access, the city is acting as a “last-mile provider.” The city’s plan is to contract with existing Internet service providers to feed the World Wide Web into the city. Then the city system will relay Internet service into people’s homes via a wireless signal. Hines said the city-owned system will bring high-speed communications access to the new City Hall, the police and fire departments, the Community Center, Municipal Operations Center, Roaring Fork School District and Valley View Hospital.
The system could also generate revenue by reselling broadband capacity to residential and business customers.But Challis said the city was misled by Brunetti about the number of customers who might buy into the system. “If there was such a lucrative market here, we’d all have a thousand customers,” Challis said. “They built a system they won’t be able to sell. … There are only so many people.”Challis predicts if Glenwood Springs can’t recoup the $3.5 million spent on the system, “those who can least afford it will pay the most” – meaning electric customers. “My belief is that the city has made a large mistake,” he said. Hines insists that electric rates won’t go up to bail out the fiber optic venture.Despite earlier plans to go live with wireless in July, the city’s system still isn’t operational, largely because city officials haven’t come to terms with any Internet service providers.In fact, Stine said even if an ISP is signed quickly, it could still take weeks before local residents can sign up and log on.
Last week, Huttenhower said he and other ISPs were approached by Brunetti’s staff urging them to become the city’s ISP for residential and business customers.He declined.”The way they have it structured, it’s not profitable for an ISP,” Huttenhower said. Crimson Wireless and Sopris Surfers have been offering high-speed, broadband Internet access for the past 18 months.But after a meeting with city officials on Thursday, Huttenhower said he was getting closer to a deal. “Sopris Surfers, if we get the right deal, will resell the system. I think they want to work with us,” he said of the city. “I don’t think they want to be an ISP.” Hines, who will be in charge of the broadband system, and Copp, said they don’t want the city to be an ISP. But if they can’t find one to partner with them, the city could be forced to act as its own ISP.”We don’t want to, but if we have to, we have to. We have a $3.5 million investment that we have to sell,” Hines said. Challis said an ISP wouldn’t be able to make a worthwhile profit using the city’s system because, he feels, the margin is too low. And if the customer rates were raised by the ISPs, the price would be so close to other available broadband providers, including Crimson’s, that customers would have no incentive to go with the city system. Hines argued that while the costs for residential broadband could be comparable, the city’s prices for higher Internet speeds – in the range that a business would purchase – would be much lower than the other ISPs. Huttenhower said the major stumbling block in inking a deal is figuring out how to finance the cost of installing wireless Internet equipment needed by each user.”The installation fee could be huge,” Huttenhower said. “That’s their biggest challenge.”Monthly costs for residential users are expected to range from $45 to $50, but Huttenhower estimated the user’s equipment installation fee could be $500.”No ISP is going to eat that cost,” Huttenhower said.Also, he said, obtaining information and communicating with the city about the project has been difficult. Hines said the city is looking into grants to help pay for wireless Internet equipment and installation. The city could also set up a financing plan for customers to spread out the installation costs over time.
High-tech fiber optic lines covering an entire city don’t come cheap.According to Glenwood Springs accounts payable records, as of July 25, the city paid Brunetti $1,658,000.Payments started in February 2001, and by Dec. 13, totaled $535,000. That covered the first two parts of the project, assessing the community’s broadband needs and engineering the installation of fiber optic lines.On Dec. 20, 2001, the city paid Brunetti $640,000 with a description that the payment applied to phase III, the actual installation of the fiber lines.This year, the city paid Brunetti another $483,000.In addition, Glenwood Springs paid nearly $850,000 this year to Manuel Bros. of Grass Valley, Calif., for the fiber optic project construction work.The city also paid the Glenwood Springs consultant Diane Kruse and her firm, Outsourced Telecommunications and Information Systems Inc., $31,930 in 2001 and $83,605 in 2002 for fiber optics and telephone system consulting work.Those bills total $2.6 million.In all, the system originally was expected to cost close to $3 million, but new estimates put that cost closer to $3.5 million, Copp and Hines said. “Even if this thing is not a money-maker, but a break-even, it’s a success, because we’ve provided our citizens with this service,” Hines said.
The city is also facing competition for wireless Internet frequencies, another cause for delay in firing up the system and tension between the city and local ISPs. The frequencies are public, so it would be legal for the city – or anyone else – to use them. But if a frequency is already in use and another provider tries to use it, the resulting interference would scramble the signal for both users.Crimson’s Challis said a Brunetti representative broached the subject of overcrowded frequencies early this month. “I get a phone call from this guy, he finally admits that everyone is already using all the frequencies,” Challis said.Challis claimed he was asked to vacate the frequencies Crimson is using.”(Brunetti) said, `Why don’t you just take all your radios and leave town?'” Challis said.Challis refused. “I’ve already got a business. I’m up and running,” he said.But he said the Brunetti staffer told him, “Our system isn’t on yet. You may be experiencing trouble now, but wait until we go online.””I said, `That sounds like a threat,'” Challis said. Brunetti’s Stine said although he wasn’t the person who called Challis, he believes the threat was a misunderstanding. Stine suggested that all wireless Internet providers come together and figure out who will broadcast on what frequency. “If no one is willing to do that … pretty much everybody’s free to do whatever,” Stine said. “There’s a considerable amount of interference in this city. It’s an open, everybody-come-as-you-are shared frequency band. The FCC sort of allows people to self-regulate that.”Here’s this small community of us who are out there transmitting, we all know that there’s a number of channels available to us. Do we want to sit down and allocate marbles to everybody so we can all play in the same sandbox equally, or are we just going to bicker and spat and blast all over everybody?” Stine asked.Challis said he was offered an exclusive installation contract by the city if he would, in turn, vacate Crimson’s frequencies.He declined. Crimson does install wireless systems, but Challis doesn’t want to give up being a wireless provider.Challis said Brunetti’s staffer also asked how much it would cost to switch all Crimson’s customers over to the city’s system, and offered to pay that cost.”They want us to get out of the Glenwood Springs market,” Challis said.
Meanwhile, Huttenhower said he was irked because operations and maintenance work on the system was handed to Brunetti without looking at other bids.By deciding not to go out for bids, Huttenhower said the city may have unnecessarily squandered hundreds of thousands of dollars on consulting costs.But city officials insist contracts were issued properly. Copp said city officials hired the most qualified company for the job.”We do not have to go out on a bid on professional contracts,” added Hines.Sopris Surfers planned to bid on the O&M contract, but shortly before the May 31 bid opening, city officials decided not to put it out for bid.Brunetti is now operating the system on a month-to-month basis, at least until the system “is up and running,” Copp said.City officials gave two reasons for revoking the bid process:-Consultant Diane Kruse told Huttenhower the city elected not to award the bid because of sales tax decreases.-Copp and public works director Robin Millyard said the city decided against putting the contract out for bid because Brunetti had designed and managed the project to that point, so they figured Brunetti should stay on until the system is fully functional. “It’s legal for us to withdraw at any time or not accept a bid,” Hines said.”We know they’re upset because Brunetti got a lot of it,” Copp said of Sopris Surfers. “But in the end, the result is what we’re looking for.”
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