By Mike Rogoway
If Portland wants Google Fiber it's going to have to give something up.
Specifically, the city is going to have to abandon the idea that Google's hyper-fast Internet service would be available everywhere in the city.
The Portland City Council takes up a franchise agreement Wednesday afternoon for Google Fiber, which wants to string fiber-optic cable across the city -- and in five suburbs -- to provide Internet connections and cable TV service. A vote is scheduled for June 11.
The company promises "gigabit" speeds -- about 100 times faster than the average U.S. download connection.
But not for everyone.
The franchise allows Google to pick which neighborhoods it wants to serve. The company says it will choose areas with a critical mass of customers, what the company calls "fiberhoods," where residents have committed to subscribe to the service.
That makes sense from a business perspective: It will cost Google hundreds of millions of dollars to build out its network in the Portland area, and it wants to see a return on its investment.
Choosing the most lucrative areas gives it the best chance of recouping its money.
From the point of view of individual residents, though, it means some areas will go without.
"There's a big concern that this approach of fiberhoods could leave economically disadvantaged areas behind, more or less permanently, because it's a market-based approach," said Christopher Mitchell, Minneapolis-based telecommunications director at a public policy group called the Institute for Local Self-Reliance.
Google says it's committed to "digital inclusion," and will work to expand Internet access to nonprofits and people who can't afford its top-tier service. The company sent a specialist to Portland this spring to gauge how to work with community groups, but Google Fiber isn't bending its core, market-based approach to determining which areas to serve.
The company announced in February that it's looking to expand to nine metro areas across the country, including Portland. Plans call for service in Beaverton, Hillsboro, Gresham, Lake Oswego and Tigard, too.
Google has made no commitments, though. It says the decision on which markets to serve will depend on local utility layouts, geographic obstacles and the degree of cooperation it receives from local governments. Portland's pending franchise with Google puts the city in the lead -- the company says it will pursue similar agreements with the suburbs later.
Google Fiber has been criticized in Kansas City, its first market, because its service model has tended to favor more affluent areas. Its Portland franchise requires nothing more than that the city be available to consult on "public goals of equity and inclusion."
Other franchise agreements in the Portland area have required broader service standards than Google's. Comcast is required to serve nearly all portions of the regions where it operates in Oregon, a legacy that dates to the early history of local cable TV service. Yet Verizon agreed to similar terms when it built a fiber-optic network in Portland's suburbs beginning in 2005. (Verizon later sold that network to Frontier Communications.)
Still, this isn't the first time Portland has approved a telecom franchise without requiring broad service. The city OK'd a cable TV franchise for Qwest Communications in 2007 without requiring the company to serve the whole city. (Qwest never used the franchise, and the company later sold to CenturyLink.)
In Google Fiber's case, city officials negotiating the deal say they agreed to Google's terms because the company offers other public benefits "commensurate" with existing cable franchises. One in particular stands out: Google offers free Internet service, albeit at a comparatively slow 5 megabits per second (which is still plenty fast for most online tasks -- including bandwidth-intensive streaming services, such as Netflix and YouTube). Customers who agree to pay a $300 installation fee will receive at least seven years of service.
"Cost shouldn't be a barrier to anyone who wants it at home," said Erica Swanson, Google Fiber's program manager for digital inclusion.
To get the free service, customers must still be in one of Google's fiberhoods. And if they live in an apartment, the landlord will have to work a deal with Google to bring its fiber service into the building.
But Swanson said that in deciding which areas to serve, Google Fiber will weigh equally households that commit to full-bore, $70-a-month gigabit service and those who commit to pay the $300 installation fee for free, slower service.
"The slow, free, nonrecurring cost option is very important. That's something Google seems to have invented, and is very good for the community," said Mitchell, from the Institute for Local Self-Reliance.
Nonetheless, he cautioned that Google's arrival will make Portland too competitive a market for another broadband provider to jump in. The terms that Portland sets for Google will therefore be the ones it has to live with indefinitely.
"I expected Portland would do a better job than most cities," Mitchell said. "I'm just not sure that we've seen that yet."
Google's franchise contains another notable break -- the company won't have to pay a 3 percent "PEG fee" on its video revenues. Comcast pays that fee, a charge it passes along to customers, to fund public access, educational and governmental programming and other public services.
In lieu of that fee, Google promises to provide Internet service to unspecified nonprofits and provide free Wi-Fi service in as many as three "outdoor public areas" -- the locations are, again, unspecified.
Google promises to carry PEG programming, but the absence of a specific fee means it will essentially be able to offer its customers a discount compared to what Comcast charges.
The city says it's received very few objections to Google's proposed franchise. CenturyLink and Comcast both issued statements that say they want an equal footing in Portland -- but don't object outright.
Comcast did submit a seven-page list of requirements Portland imposed on it, but didn't on Google. Among other things, Comcast noted that Google Fiber's franchise agreement commits Portland to a joint legal defense of the deal if unspecified third parties contest it as being unfair -- perhaps by alleging that it gives preferential treatment to Google.
Comcast's submission also notes that it has a "Most Favored Nation" clause in its own franchise agreement, entitling it to modified obligations in the event that another company wins a franchise with different PEG or franchise fee requirements.
Comcast didn't say so specifically, but the cable company might be suggesting that it may seek to reopen its own deal, reduce its own financial burden -- and city franchise revenues -- should commissioners approve Google's deal.
"Comcast welcomes a fair and robust competitive marketplace made up of responsible competitors," Theressa Dulaney, Comcast's Oregon spokeswoman, said in a written statement. "That includes a level playing field so that no provider operates with fewer obligations or more benefits."
Another organization one might expect to object to Google's deal is Portland Community Media, which runs Portland's public-access channels and other media-oriented community programs. It derives a big share of its funding from PEG fees, which presumably will decline if cable viewers switch from Comcast to Google.
And yet PCM director Cece Hughley Noel embraces Google's franchise agreement, calling it "tremendously exciting." She met this spring with Google Fiber's digital inclusion specialist and came away convinced the company's arrival would have a broad impact, introducing Internet service to poor residents and immigrants who have never had the opportunity to use it.
Nonprofits need broadband to serve large numbers of people, she said, and Google represents a tremendous opportunity to make Internet service available to those who haven't had it.
"We like what they say to us," Hughley Noel said. "It feels like they're genuine. Competition is always good."
Correction: This article has been corrected to indicate that the franchise vote is scheduled for June 11.
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