Traverse City, Michigan Launches Fiber Network

Traverse City has officially launched its new municipal Fiber-to-the-Home network in the northern Michigan town of 15,000. The city's municipal electric utility, Traverse City Light & Power (TCL&P), owns the network and operates it in a partnership with Fujitsu, with the latter building and initially helping operate it, but turning management over to TCLP as the city utility feels comfortable with each aspect of the operation.

TCL&P Fiber is being built incrementally, starting in the downtown area where the economic heart of the community lies. The first phase is estimated to cost $3.5 million and will offer 2,200 locations service. The rest of the community will be connected in coming years and perhaps ultimately areas outside the current electric footprint.

Getting up to Speed

Traverse City has been working in the communications space for more than 10 years with dark fiber leases to major anchor institutions and key economic entities. In more recent years they were providing free Wi-Fi downtown while considering how to improve Internet access to smaller businesses and residents. For years, they examined various options, with serious consideration of an open access network where the city would build the infrastructure but other ISPs would use it to connect customers. 

In an interview today, TCL&P Executive Director Tim Arends told us that they moved on this project after sensing a lot of pent up demand for better service — with speed, reliability, and especially customer service as common complaints with existing service. Though TCL&P did not name check the existing providers, AT&T DSL and Charter Spectrum cable are the main incumbent providers.

In 2017 TCL&P's Board voted unanimously to move forward with a citywide fiber approach but did not plan to be a retail provider themselves. But in 2019, a new plan with Fujitsu evolved into the current approach. 

Last year, they began building the network with underground boring in the downtown area. With 80% of Traverse City served by aerial electricity, the downtown area is probably the highest cost area in which to build. Executive Director Arends said they started there because it is the economic hub for the community and they expected it would offer the highest take rates. Ensuring high take rates will build a strong foundation to expand throughout the rest of the community.

Financing

The initial costs are $3.3 million in capital costs and another $850,000 for Fujitsu to manage and operate it in early years. Those funds come primarily from an inter-departmental loan within TCL&P going from the electric fund to the fiber fund at 0% interest.

Passing some 2,200 locations, the network is expected to break even with more than 400 residents and more than 350 businesses signing up. In all of the years of considering options and community discussions, TCL&P should have a pretty good sense of what the demand is in these areas. 

Earlier this month, the city decided to expand its first phase to add 1,000 additional, mostly residential locations in 2021. The expansion will be funded with an $800,000 loan from the city's economic development fund that comes with an interest rate of 2% above prime according to Executive Director Arends. 

The rest of the network may be built more rapidly than an incremental strategy would suggest if Traverse City is able to secure an attractive 30-year loan from the USDA. In the meantime, they have lots of work to do in downtown over the winter to hook up customers in both commercial and residential buildings.

Early Indicators Are Good

Though the network rollout was slowed by the Covid-19 pandemic, TCL&P Fiber had beta customers ironing out bugs in the network and billing systems in place by the end of summer. They officially launched this week, with 43 installs yesterday on October 1 and a waiting list of 92 at the time of writing. Half of those installs opted for gigabit service. They have not yet begun a marketing campaign.

The prices for services remain as expected after being approved from board last year. The introductory residential tier is $60/month for 200 Mbps symmetrical, 500 Mbps symmetrical for $70/month, and the full gigabit for $90/month. 

A press release offered praise from power user Tony Seely, an IT Systems Analyst for Munson Home Health and one of TCLPfiber’s first customers. Seely manages hundreds of connected devices for Munson, so having reliable, gigabit-speed fiber service at home was particularly important: 

The installation was easy and everything is just faster! On videoconferences, people keep telling me that my audio is better and the picture is sharper. When I watch 4Kvideo, the stream is near instantaneous. It’s far better than what anyone else is offering.

Word of mouth is starting as people share their experiences on social media — particularly speed tests that show consistent results in line with the advertised speeds. 

In our interview, Tim Arends noted that they have already seen existing providers offering better deals and lower prices in response to the pending competition. He noted that even if some people aren't taking TCL&P Fiber but are paying lower bills each month, "Fine, we did a good job" in providing a benefit to the community. 

Adding great connectivity to northern Michigan may bring the added benefit of more business investment and an increasing demand for homes within the fiber footprint.