In 2021, HG&E wrapped up a test marking campaign that was designed to better understand current customer demand for municipal fiber-to-the-home (FTTH) broadband service. While HG&E is interested in providing residential FTTH service, and is currently providing residential broadband service within Holyoke on a very limited basis, there must be sufficient interest in order for a City-wide venture to be economically viable and not have an adverse effect on utility rates. Taking the time to fully understand the impact of a potential FTTH build is critical to meeting HG&E’s mission to provide competitive rates, innovative and sustainable energy solutions, reliable service, and excellent customer care.
Summary
In spite of several seriously interested respondents, not enough households are currently willing to subscribe to a local, residential fiber internet service to justify an estimated $40 million expenditure to provide City-wide FTTH service.
Purpose
The Fiber-to-the-Home Interest Form was not intended as a poll or a survey of the general population. Rather, it was the first step in a test marketing campaign to determine how many of those interested in FTTH would sign up for the service and to obtain contact information for future follow-up. The question that needed to be answered was whether or not there was enough interest to make the project financially viable. Also, it is important to understand if the interested customers are willing to pay service rates that would cover the buildout cost while paying for continued operation and upgrades.
The Goal
It is important to HG&E that the FTTH project be financially self-supporting for several reasons. It would be unfair to have some people pay more for their utilities so other people could have faster, less expensive internet. It is critical that the FTTH enterprise be able to pay back the original investment in a reasonable period of time so that the enterprise can afford the upgrades that are inevitable.
An often-cited theory is that a municipal internet project needs a 30% share of its market in order to reach the break-even point. However, market research suggests only approximately 7% of HG&E customers would likely subscribe at rates between $90-120 monthly. Further complicating this effort, many residents in Holyoke have access to discounted internet through existing providers at rates below $15 monthly. As of February 2024, roughly one-third of City households were enrolled in these discounted programs making it more difficult to achieve the required subscription rates to break even. If this venture does not break even, there would be a significant impact on utility rates to pay the costs for network construction.
Methodology
In order to determine the number of potential subscribers in Holyoke, HG&E launched a test marketing campaign with the slogan - “If we build the network, will you cut the cord?”. This three month outreach effort ran from April 2021 to July 2021 and included significant advertising and outreach within HG&E’s footprint. From print ads to social media and from direct mail to radio, HG&E saturated the market in an effort to educate customers and solicit feedback from the community.
The campaign encouraged “customers who would like to subscribe to a local, residential fiber internet service” to visit the website to fill out an interest form which was available to all, in Spanish and English. An effort was made to keep the form as fair, as factual, and as brief as possible, but it was important to explain what was involved in cutting the cord for those unfamiliar with the process. Potential advantages and disadvantages were included, but neither was exaggerated.
Responses were screened to exclude duplicates and incorrect addresses and to include households that could be served as part of the potential investment.
Findings & Results
Results indicate that less than one-out-of-ten (7.0%) of residential households within HG&E’s service territory reported they would be willing to subscribe to residential fiber internet, while 93.0% were either not willing, or did not complete the interest form.
A significant portion of customers who completed the interest form (69.5%) reported they are unhappy with their current provider and their current provider is too expensive. These customers indicated they would switch if HG&E offered a lower cost alternative. Based on the required costs to implement and maintain fiber optic internet in the service territory, HG&E estimates that it would not be able to offer a significantly below market rate for FTTH internet access due to the cost of the overall investment and the continual upgrades necessary to maintain an up-to-date network capable of meeting changing customer needs.
Conclusion & Next Steps
At this time, the interest in FTTH is not sufficient enough for HG&E to move forward with a city-wide residential FTTH project. With that said, HG&E has identified pockets of interest throughout the City and completed a network design in 2023. HG&E has been activly seeking grant opportunities as well.
As previously mentioned, HG&E is fully capable of providing the service when there is adequate demand. Residents who did not previously complete the interest form are encouraged to provide feedback.
HG&E is committed to the following:
In order to better understand the true cost and key variables associated with a network buildout, including type of delivery (overhead/underground, backyard or street-side), residence type (single family, multi-family, multi-dwelling unit), and pole make-ready needs, HG&E will procured a full network design. In addition to determining the true cost in today’s economic climate, the design will allow HG&E to develop a scalable and cohesive network, ensuring any investment is sustainable long-term.
The results of this test marketing campaign have helped to identify pockets of interest throughout the community, providing the ability for HG&E to better understand the feasibility of a gradual roll-out, neighborhood by neighborhood.
- MBI Broadband Equity, Access, and Deployment Program Grant, 2025
- MBI Residential Retrofit Program, 2024
- WeLink Cities Challenge, 2022
- City of Holyoke ARPA Application, 2021
- Google Fiber RFI Response, 2010
HG&E will continue to explore and assess all broadband opportunities within the service territory, while studying the outcomes of similar projects in neighboring communities. For more information see the 2021 test marketing campaign report.