A rookie alderman wants city buildings and City Council ward offices to switch from private Internet service providers to the city’s own higher-capacity fiber-optic network to chip away at Chicago’s $30 billion pension crisis.
Ald. Brian Hopkins (2nd) noted that Chicago taxpayers spent $53.3 million on technology costs and contracted services in 2013, while revenues generated from telecommunications taxes have been going in the opposite direction.
What better time, he says, for the city to use its vast fiber-optic network to create what Hopkins called a “self-sufficient, publicly-owned system” capable of saving money and generating revenue.
“We already have a robust infrastructure in place to build from. Fiber optic resources currently controlled and managed by [the Office of Emergency Management and Communications] for traffic, first-responder, and emergency services is an example,” Hopkins was quoted as saying in a press release.
“Given the debt Chicago faces, we should follow other cities by switching all municipal government broadband access from private incumbent providers to a taxpayer-owned fiber network. The money saved can be reinvested into the expansion of the municipal network to finally reach those communities that need fast affordable access. Why would we not do this?”
The “Annual Financial Analysis” that Mayor Rahm Emanuel has substituted for the city’s preliminary budget outlines the decline in telecommunications taxes that have reflected “trends in the industry and consumer preferences.”
In 2005, telecommunications taxes generated $147.7 million and accounted for five percent of total corporate fund revenues. Much of that giant revenue stream was generated by landlines.
One year later, consumers started dropping landlines in droves in favor cell phones. By 2014, city revenues from telecommunications taxes dropped to $106.1 million, just three percent of corporate fund revenues, with a continued decline to $104.9 million projected by the end of this year.
Hopkins argued that expanding Chicago’s already vast fiber optic network would allow city departments to operate at faster broadband speeds. That would not only provide city services more efficiently but could save “tens of millions of dollars” each year, the alderman said.
Smaller cities — including Aurora, Ill. — already have built fiber-optic networks that encourage economic growth and include their schools and universities so why not Chicago? the alderman said.
“The City needs to take a good look on how to cut costs and generate new revenues. A citywide fiber optic network is just as smart as it is effective, moving Chicago forward, both technologically and economically,” Hopkins said.
Earlier this year, four of the City Council’s most powerful aldermen called for City Council hearings on the use of city buildings, light poles and high-speed fiber-optic lines to support a wireless network, citing the potential to raise millions for the cash-strapped city.
More recently, Emanuel announced that four companies will vie for the right to provide low-cost “ultra-high speed” Internet service to seven Chicago industrial corridors and dangled “no or low-cost” access to city assets to cut costs.
City street lights and traffic poles, CTA and OEMC fiber, underground freight tunnels, sewers and building government rooftops are among the assets that could be made available to potential bidders at “no or low-cost,” City Hall said.
Respondents were also invited to bid on providing broadband service to the city of Chicago, with an annual cost of $500,000 to $2.3 million.
The high-stakes competition was narrowed to four companies: Lightower; Sunesys, Tilson and Zayo.
Emanuel hopes to succeed where former Mayor Richard M. Daley failed, by leveraging city assets and Emanuel’s plan to rebuild Chicago’s crumbling water and sewer system and by dividing the city into seven commercial corridors, down from his original plan for 15.
Three of the zones are in the Central Business District: Loop, West Loop and River North. The four neighborhood zones are: University of Chicago and Medical Center; IIT/Bronzeville; Pullman Industrial Corridor; and the Ravenswood Industrial Corridor.
Respondents must bid on at least one of the three zones in the Central Business District. They may also bid on “any combination” of the neighborhood zones. The company bidding on the most zones will get a leg up on the competition.
Each company also must devise a “community plan to provide an additional free or discounted broadband service” to a community or to several neighborhoods, City Hall said.
That may include “free wireless service to a park or public space, reduced pricing for residential broadband service in an under-served community or some other type of free or discounted service,” the city said.
In announcing the next stage of the so-called “Broadband Challenge,” Emanuel noted that “gigabit-speed” service can cost up to $5,000-a-month.
That’s out of reach for many small businesses and start-ups. So is the cost of “last-mile buildings connections that can add another $300,000 to the overall tab.
The city hopes to slash the cost of commercial, ultra-high-speed service by anywhere from 50-to-80 percent; it also wants to prohibit those lump-sum fees for last-mile building connections.