On Tuesday, Lancaster city council is expected to reallocate money needed for a breakup with Reading-based MAW Communications, which was tasked six years ago with building a municipal broadband system.
Once city council approves the financing, the mayor can execute the settlement agreement that will give the city complete control of the unfinished network, which includes 16 miles of cable and some 200 residential customers.
While the city won’t be back at square one, it is still a long way from realizing the vision for a high-speed, low-cost internet service for residents that also streamlines city services such as remote meter readings, traffic lights and security cameras.
When did the City of Lancaster’s relationship with MAW Communications to build the LanCity Connect fiber optic network begin?
In February 2015, the city hired Reading-based MAW Communications to install a municipal fiber-optic network for the city, culminating discussions with the company that began around 2006. The city gave MAW a $1.5 million loan and allocated an additional $1.5 million as startup costs to subsidize residential connections, which began in 2017 and were expected to reach the entire city by the end of 2019.
Exactly what type of services does MAW and LanCity Connect provide to the city?
Half the bandwidth for the new system was reserved for city functions such as remote water readings, traffic signals interconnection and security cameras, some of which have begun. The rest was to be used for a consumer broadband offering called LanCity Connect, which offers a high speed internet service for residential customers.
What type of services does LanCity Connect provide to residential customers? How much does it cost? Who is eligible?
LanCity Connect is a fiber optic system that offers upload and download speeds up to 1,000 Mbps, a hundred times faster than what is typically considered adequate for most usage. Currently, the most basic service for LanCity Connect is $48 a month, including fees, for a service that offers 50 Mbps of speed. A plan with 100 Mbps of speed costs $125 a month.
But after signing up hundreds of customers initially and mainlining a waiting list that swelled to 4,000, no new customers have been added for more than two years because of legal dispute.
What happened between MAW and PPL that slowed MAW’s rollout of LanCity Connect?
In late 2017, the project stalled when workers from electricity provider PPL saw MAW contractors installing equipment on PPL utility poles. That December, PPL sued MAW in Lehigh County court, claiming MAW had made unauthorized and unsafe attachments to its poles. Some LanCity Connect customers lost service in 2018 when MAW was forced to remove some pole attachments. The legal issues were settled in June 2020 with MAW agreeing to pay $370,000 to PPL and bring its use of poles into compliance.
How did the city end up in a dispute with MAW?
As it battled PPL in court, MAW billed the city for some of its legal costs, which the city refused to pay, prompting MAW to initiate an action against the city through an arbitration process outlined in it is original agreement. In all, the city disputed nearly $1.4 million in billings from MAW. The city also intervened in PPL’s lawsuit against MAW, saying the suit revealed the company had violated the original agreement by not getting proper approval for pole attachments. In the meantime, MAW had also stopped making payments on its $1.5 million loan from the city.
Why does the city now want to take over the fiber optic system?
City officials remain optimistic about the potential of a municipal broadband system even as they now view MAW as an impediment to their ambitions. The settlement will give the city control of the current system, allowing it to find another private company to build it out. Officials have stressed they only want to be temporarily in charge.
“Being an (internet service provider) and running a fiber network is not our area of expertise,” said Patrick Hopkins, city business administrator.
City officials have not offered any timeline for getting a new private partner, saying they will first need to evaluate the system once they own it.
How much is it going to cost the city to settle with MAW? Where is the money coming from?
The city will make a $1.2 million payment to MAW and forgive the balance of the $1.5 million loan it made to the company. All of the money for the settlement was previously set aside for the broadband project; it is just being reallocated.
The $1.2 million payment is what remains of the $1.5 million the city allocated in 2017 to underwrite residential connections for LanCity Connect, which cost around $1,000 each. The money, which originally came from savings reaped when the city refinanced bonds for water infrastructure, was being paid back with a 13% customer surcharge applied to all LanCity Connect bills.
The $1.5 million loan was allocated from the city’s general fund as a working capital loan for MAW. It was to be paid back over 13 years at 7% interest. MAW wound up only making $180,000 in payments.
If a settlement is approved, how much will the city have spent for the existing network and the 200 customers? Is it worth it?
If the settlement is approved, the city will have paid about $4.3 million for the system, a cost that includes professional services, legal bills and other expenses incurred during the past five years. City officials say those costs are far exceeded by the value of a having a high-speed internet service that won’t need to be upgraded for decades.
Christopher Mitchell, director of community broadband networks at the nonprofit Institute for Local Self-Reliance, called amount the city has paid is “within the ballpark of reasonable.”
Are any changes in services provided or cost anticipated if the city takes over?
The city says it will maintain pricing and service arrangements for existing customers. The proposed settlement agreement gives the city the option to contract with MAW to maintain LanCity Connect for 90 days.
How could the system be expanded in the future?
City officials say their goal remains to offer every city resident access to high speed internet service as a way of “bridging the digital divide.” At the same time, they want to have enough capacity to continue to operate and expand the use of the broadband system for city services.
“Getting to this point is what will take more work to plan out, find the right partners, finance and then implement,” Hopkins said.