‘Gold mine’ promise slowly materializes

  • By Chris Fyall Enterprise editor
  • Friday, January 25, 2008 3:31pm

While not yet the windfall that many predict it will become, Edmonds’ broadband network nevertheless is now closer than ever to generating serious revenue for a city concerned about its financial future.

Both Stevens Hospital and the Edmonds School District agreed in January to five-year contracts with the city for broadband, fiber-optic Internet connections.

The agreements will net the city nearly $3,000 a month. Together with the city’s existing contract with Lynnwood-based Net River, an Internet services company, that will bring the city’s monthly broadband income above $4,000, finance director Dan Clements said.

That is not enough to solve city’s looming money worries, but it is a start, officials said. Politicians in Edmonds have long trumpeted the possibility of the city capitalizing on its high-tech gold mine.

The hospital will pay $1,895 plus taxes per month, and the district will pay $898 plus taxes monthly. Both agreements are structured like cellphone contracts, so Edmonds can charge more money if usage is higher than expected, documents show.

“While this certainly isn’t going to solve the city’s financial situation, every little bit helps,” Mayor Gary Haakenson said Tuesday. “You start to do a lot of these things, and it adds up.”

Edmonds’ City Council approved the Stevens Hospital contract Tuesday, Jan. 22. It approved the school district contract Jan. 15.

Currently, the school district purchases bandwidth from a statewide education network called K-20, said Cynthia Nelson, the district’s technology director. Instead of completely replacing that connection, the city connection will supplement it, she said.

“We were looking for a way to provide redundant access to the Internet,” Nelson said. “Being able to partner with the city was a cost-effective thing to do.”

The city contract comprises most of the district’s annual $16,000 Internet-access budget, she said.

Agreements with Edmonds Community College and a number of other public organizations are in the works, Clements said.

As long as Stevens Hospital’s usage based on the 95th percentile calculation method is lower than 20 megabits, no overages charges will be assessed, according to the agreement reached with the hospital.

The district won’t be charged overage as long as its 95th percentile calculation is lower than 10 megabits, documents show.

The agreements allow the hospital or district to increase the cost of their contracts, but not to decrease them.

Selling bandwidth has been a dream of Edmonds officials since 2005, when the city was gifted fiber-optic cables by the Department of Homeland Security as part of a security installation at the city’s ferry dock.

Since then, the city has been studying ways to monetize its Internet gold mine.

“It is exciting now that we have basically created a brand new service,” Haakenson said.

A business study performed by Utah-based consultants was delivered to the city Jan. 19, but no copy was available publicly by press time. Clements said it was nearly 100 pages long, and examined a marketing plan, market analysis and concepts for a business plan.

The study promises to explore additional revenue models for the fiber-optic cables.

“We are still at the tip of the iceberg here. But, the fact that we are already bringing in revenue, the fact that so many people are signing on, speaks to the fact that we are providing value and a good service,” Haakenson said.

Selling broadband services can be tricky terrain. It is possible legal worries could limit the extent and ambition of the city’s broadband sales efforts. In particular, city officials have expressed concern in the past about the possibility of lawsuits brought by Verizon or Comcast, which might try to argue that government shouldn’t be competing against private companies.

A representative from Verizon was unavailable for immediate comment Tuesday.

The business study does not explicitly confront the legal challenges, Clement said.

Reporter Chris Fyall: 425-673-6525 or cfyall@heraldnet.com

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