Person:

Hessekiel, Kira

This case study documents the success of a municipally-owned electric utility in providing Internet access services. Massachusetts has 41 such “munis” –- serving more than 900,000 people and thousands of businesses -– but only 10 are in the Internet access business as allowed by state law. The Holyoke Gas & Electric Department’s telecom division competes with Comcast and Charter and serves 300 business customers and numerous public buildings. It has shown steady growth in revenues, and $500,000 in net earnings over the past decade. It also saves the city at least $300,000 a year on various Internet access and networking services. HG&E's telecom division is also now providing a variety of services to three other municipalities. Finally, the utility is considering a residential high-speed Internet access offering, something the muni in neighboring Westfield is piloting later this year. HG&E’s success in a competitive environment was achieved without any debt issuance, tax, or subsidy from electricity or gas ratepayers.

Key Findings:

HG&E Telecom saves city offices and HG&E itself more than $300,000 a year by providing Internet access and networking and telephone services to public agencies. The utility provides approximately 300 businesses and large institutions with telecom services and creates competition, which tends to improve service offerings from all market participants, aiding the local economy. HG&E Telecom forged inter-municipal agreements that extend services and accompanying benefits to the neighboring city of Chicopee and to the city of Greenfield, 30 miles north. While HG&E Telecom has focused on selling services to businesses, the utility is now considering a residential fiber-to-the-home (FTTH) offering, given the declining market pressure to provide television content. Demonstrating that a municipal light plant can diversify into the consultancy business, HG&E Telecom also recently became project and network manager for a FTTH project in the town of Leverett. HG&E Telecom has shown steady growth in the face of competition, never incurred debt, and has reaped a 10 percent profit in both 2013 and 2014.

We collected advertised prices for residential data plans offered by 40 community-owned (typically municipally owned) Internet service providers (ISPs) that offer fiber-to-the-home (FTTH) service. We then identified the least-expensive service that meets the federal definition of broadband—at least 25 Mbps download and 3 Mbps upload—and compared advertised prices to those of private competitors in the same markets. We found that most community-owned FTTH networks charged less and offered prices that were clear and unchanging, whereas private ISPs typically charged initial low promotional or “teaser” rates that later sharply rose, usually after 12 months. We were able to make comparisons in 27 communities. We found that in 23 cases, the community-owned FTTH providers’ pricing was lower when averaged over four years. (Using a three year-average changed this fraction to 22 out of 27.) In the other 13 communities, comparisons were not possible, either because the private providers’ website terms of service deterred or prohibited data collection or because no competitor offered service that qualified as broadband. We also made the incidental finding that Comcast offered different prices and terms for the same service in different regions.