San Bruno’s city-owned cable service is approaching a turning point, as city officials are weighing a costly upgrade designed to optimize the system and build its capacity to compete with other providers.
The San Bruno City Council will address Tuesday, April 10, a study examining the proposal to establish a fiber network serving patrons of San Bruno Cable — one of the nation’s few remaining municipal cable services.
Upgrading the system’s copper network is slated to cost about $10 million, raising financing concerns for city officials, as well as questions over their lasting desire to remain in the cable provider industry.
For Mayor Rico Medina, he said the system’s future deserves critical analysis.
“I don’t pretend to have the answer,” said Medina. “Because it’s a matter of do you invest and go in debt? Or do you keep it the same? Or do you reassess the asset? And are we best served to be in that type of industry?”
San Bruno is the only municipality remaining in California offering citywide cable, according to muninetworks.org, a website tracking the services. Such systems are relatively uncommon across the West Coast, as there are only a few scattered across Utah, Oregon and Washington. Municipal systems are more frequently found in the Midwest and Southeast.
No final decision is slated to be made at the meeting, but officials are expected to address the report authored by Tellus Venture Associates and offer staff direction regarding next steps.
Should a desire exist to upgrade the system, officials expect a bond measure would likely need to be floated to pay for the work. The study suggests it could take between 12 and 24 years worth of revenue generated by patrons to pay off the cost of the fiber installation.
Councilman Michael Salazar, who sits on a subcommittee overseeing the cable network, said he believes the upgrade is likely necessary should officials plan to preserve the service.
“It seems like it would be a pretty good investment for us, if we want to keep that enterprise moving,” he said, noting the city has a variety of other capital improvements which could be addressed with a future tax measure as well.
Salazar though maintained reservations regarding the viability of the network, noting it has turned over time from a true enterprise fund for the city’s coffers to more of a public service.
The study bears out the volatility of the city’s patronage, noting its market share in the cable industry dipped by 3 percent since January 2016 to 47 percent of total homes.
With TV and phone service subscriptions on a steady decline, the system’s future hinges on the improved internet performance offered through a fiber network, according to the report.
As a conduit for examining the desirability of the fiber network, the report highlights the increased demand for San Bruno Cable shown at the Shelter Creek apartment complex, where the service was upgraded last year.
Since then, subscriptions and revenue jumped, according to the report, and complex residents were less likely to sign up with AT&T — the other local competing cable network.
“This superiority in quantity and quality of services appears to explain most, if not all, of the different in basic business metrics between Shelter Creek and the rest of the system,” said the report.
Broadly, San Bruno Cable is facing stiff competition from AT&T, which the report notes should be considered as officials examine future investments. The international media conglomerate is also looking to establish its own fiber network in San Bruno, which would pose a significant threat to the municipal service’s patronage.
Noting the momentum for upgrading to fiber networks, Salazar said officials favoring maintaining the service would likely support the improvement.
“The industry seems to be moving in this direction, so it does make sense for us to adopt it,” he said.
But with the uncertainty surrounding the financing for the infrastructure work, as well as the city’s diminished opportunity to make money from the service, Salazar questioned the nature of the initiative.
“There may be a fundamental change in our philosophy if we intend to keep it going,” he said. “It would be less of a revenue generator and more of a public service.”
The public utility component could become increasingly valuable, said Salazar, as fears rise over net neutrality and the potential for corporate internet providers to throttle connectivity speeds for customers.
San Bruno officials maintaining their authority, however limited, in such a discussion could be an asset for residents and patrons of the cable service, said Salazar.
Ultimately, it will be that same community which guides officials’ direction on the issue, he said.
“There is a significant number of people in our community who do want to keep our system and keep it current and up to date, so it’s really going to come down to what we want to prioritize our spending on,” he said.
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