Specifics of an Orlando broadband company’s deal with Lakeland to provide high-speed Internet emerged this week as the City Commission prepares to vote on a proposed contract next Tuesday.
Under the proposed agreement, Summit Broadband of Orlando would pay the city $144,000 a year at first and ultimately a 10% share of gross revenues as their business increases. In exchange, Summit would be able to build onto the city’s 350-mile fiber optics network and provide Internet, video and telephone service to Lakeland homes and businesses.
City commissioners decided last year to seek a public-private partnership to increase high-speed Internet options after balking at the $250 million estimated price tag for the city to develop its own Internet utility. Summit was chosen in August from among eight companies that submitted proposals to the city.
Currently most residences in the core of Lakeland are served only by Charter Communications’ cable-based Spectrum Internet. Some newer neighborhoods in Lakeland’s suburbs also are served by Frontier’s FiberOptic network, although Verizon has started placing fiber optic cables in neighborhoods south of downtown.
The proposed contract , negotiated over the last six months, addresses the City Commission’s objective of providing faster speed and greater service at competitive rates, City Manager Shawn Sherrouse told commissioners when they reviewed the proposal this morning at an agenda study session.
Despite the mention of competitive rates, there were no specifics regarding what those rates might be or what speeds residents and businesses can expect.
Sherrouse summarized the partnership via a slideshow this morning; commissioners asked him to repeat the presentation when they meet at 9 a.m. Tuesday at City Hall, saying they will probably have more questions after reviewing the proposal over the weekend.
The contract is for 10 years and is automatically renewable unless Summit fails to meet its commitments. Some highlights of the proposed partnership:
- Summit’s minimum revenue guarantee is the greater of $144,000 a year or 10% of gross revenue from Internet service. Voice and TV service isn’t included because those are loss leaders, a Summit representative said.
- Summit guarantees it will invest $20 million in Lakeland service in its first five years. Company CEO Kevin Coyne told commissioners today that investors have approved more than $50 million in investment here.
- The city continues serving its existing nine dark fiber customers, including Lakeland Regional Health; the revenue stream brings in $543,000 a year, officials said.
- Summit will serve all new residential and business customers; that includes current city customers who expand to new facilities, such as Lakeland Regional’s upcoming behavioral health clinic.
- Summit will handle all installation, maintenance, billing and customer service for its customers.
- The city will retain up to 30% of the fiber and will continue to maintain the fiber it owns.
- The city will provide up to $100,000 over the life of the contract to “augment” fiber in locations where there are less than six strands that Summit can use.
- Fiber might not to be augmented in places where splices result in speeds slower than 0.30 decibel per kilometer (0.30db/km). Summit can offset those costs against the 10% revenue share but not against the $144,000 annual minimum.
- The city estimates it will spend up to $250,000 per year over the first five years of the contract to support the project. Sherrouse said that is the amount the city would spend anyway to maintain its fiber network.
- Summit will contribute at least $20,000 a year during the first 10 years of the contract toward the city’s effort to “bridge the digital divide,” ensuring free or low-cost Internet is extended into underserved communities.
As negotiations began, Summit discovered that portions of the city’s fiber network is “antiquated,” Coyne said, so some of the investment will go toward upgrades.
Summit’s initial plans call for building networks near 20,000 homes in the Lakeland area with a target of 40% penetration in the first three years, Coyne said.
Summit’s 2,700+ route miles of fiber-optics serves homes, businesses, hospitality and wholesale customers, with its largest clusters in metro Orlando, Lake County and the Fort Myers-Naples area. The company has worked on constructing networks for 20 years, Coyne told commissioners.
Summit “offers upload and download speeds of up to 1 Gbps in some communities,” it says on its website.
Summit was acquired last year by Grain Management, a Washington, D.C., private equity firm.
Video: Broadband Presentation and Commission Discussion
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