Community-Wide Fiber Discussion. The City of Hudson

Transcription

1 Community-Wide Fiber Discussion (Phase 2 Analysis) for The City of Hudson April Uptown Services, LLC Dave Stockton & Neil Shaw, Principals

2 Phone survey to eliminate voluntary response bias Total sample size of 400 respondents (± 4.8 sample error at 95% confidence interval) List includes wireline and wireless numbers Age quotas used to ensure robust sample across all age groups. Results weighted to reflect actual age distribution from 2010 Census data Respondents screened to ensure Decision-maker for telecommunications and entertainment services in the home Reside within city limits Respondents with immediate family members employed by any of the following were excluded: The City of Hudson Windstream Spectrum 2

3 Research process utilized both subject matter and functional expertise across multiple contractors by specialty: Uptown Services: Subject expertise and study data needs SDR Consulting (Rick Hunter): Research expert overseeing design and execution (23 years experience with 200k completed research projects) American Directions Research Group: Survey fielding and data collection (7 US-based call centers with capacity to complete 85k person-hours of call interviews per month) Prairie Research Group (James Wolken): Crosstab analysis and production of output banners (25 years experience) Survey Instrument Design Sample File Survey Programming & Fielding Data File Processing & Crosstabs Client Report Uptown, SDR & City Staff City Staff & SDR ADRG PRG Uptown 3

4 Community-Wide Quantitative Survey Current Broadband Services Usage

5 Survey results are weighted to reflect the actual age distribution (by age decile) per the 2010 Census of Hudson. Dwelling Ownership 7% 93% Household Income Own Rent Census Sample 25% 22% 22% 18% 17% 15% 23% 22% 17% Head of Household Age (Unweighted Sample) Census Raw Sample Weighted 1 6% 1% 3% Up to $25k $25k - $50k - $100k - $150k - > $200k Refused < $50k $100k $150k $200k 5

6 98% of Hudson households use the Internet at home Cable Modem has the majority of market penetration at 74% 94% of Internet households use a wireless access point Incidence of Internet Households 98% 2% Internet Market Share (Households) No Internet Have Internet 1% 2% Use of WiFi Access Point/Router 23% 5% 1% 74% 94% None DSL Cable Satellite Use WiFi No WiFi Don't Know 6

7 Internet Type by Age Cable modem Internet is more prevalent among younger and high earning households 10 8 Cable Modem DSL Satellite 6 DSL Internet is at market share parity with cable only for household with income below $50k or aged Influencing factors are likely lower incidence of wireline phone and greater emphasis on Internet speed in younger households 10 Internet Type by Income Cable Modem DSL Satellite Up to $50k $50k - $100k $100k - $150k - > $200k $150k $200k 7

8 While reliability and price are always important, Internet speed has dramatically increased in importance over the last several years. Bundling and Brand are secondary in importance to other attributes Importance Rating of Select Broadband Service Attributes (Mean Rating on a 1-5 Scale) Brand Service Bundle Customer Service Price Internet Speed Reliability 8

9 Number of Phone Lines in the Home Wireless substitution is lower than the national average at 35% of HHs A further 13% of wireline phone users will drop for wireless in the next 12 months The average number of lines is: All Households: 0.8 Wireline Households: % 35% 58% National Average* Hudson 4% 3% Q6: Who is your local phone service provider? 35% 29% None or More *Source: National Health Interview Survey, % Households Without Wireline Phone Service by Age 46% 41% 3% 32% 29% 17% 11% Windstream Spectrum Other None

10 37% Across Hudson today, 23% of households do not have traditional Pay TV, compared to the national average of 22%* Among younger households, up to 47% are using OTT (stream) or Off Air as a substitute service Uptown estimates a further 12% of pay TV users in Hudson will cut the cord in the next 12 months *Source: The Diffusion Group, 2017 Households Using Substitute Service In Place of Pay TV by Age 7.8% Q2: For TV service, do you have 12.5% 21.3% 2.3% 56.3% Cable Satellite Off Air Only Online Only No TV: Likelihood of Cancelling Pay TV for OTT (among all pay TV users) Definitely Not 34% 1 22% 15% 8% 8% 6% 6% 4% 2% 5% 11% Probably Not Might/Might Not Probably 16% 14% 25% Definitely 9% 4/30/2018 Online Off-Air Study conducted by Uptown Services, LLC 10

11 Across all of Hudson households, 36% have all 3 services from a single provider Incidence of Triple Play Bundle 48% 16% 36% Have All 3 Services From Multiple Providers Have All 3 From Single Provider Do Not Have All 3 Services 11

12 Stated average monthly spend per household: Cable TV: $90 Satellite TV: $87 DSL Internet: $61 Cable Modem Internet: $62 Satellite Internet: $75 Wireline Phone: $ Monthly Internet Spending DSL Cable Satellite Monthly Pay TV Spending Cable Satellite Monthly Voice Spending

13 Satisfaction Rating by Service/Service Provider (Mean Rating on a 1-10 Scale) Cable TV Satellite TV DSL Cable Modem Sat. Internet Telephone Electric (City) Electric (First Energy) Hudson Ft Collins Longmont Satisfaction Rating by Service/Service Provider (Percent Rating a 9 or 10 ) 7 64% 64% 65% 6 48% 5 41% 36% 4 31% 33% 31% 3 23% 17% 2 23% 19% 2 14% 16% 19% 23% 15% 1 Cable TV Satellite TV DSL Cable Modem Sat. Internet Telephone Electric (City) Electric (First Energy) 13

14 The chart below compares the results of this study with 30 other markets where Uptown has completed similar quantitative research: Ohio (3) Washington North Carolina Oregon (2) Iowa Wisconsin Kansas (2) Alabama Georgia Oklahoma (2) New York Arkansas Tennessee (4) Michigan Kentucky Colorado (7) 9 Satisfaction Rating by Service/Service Provider (Mean Rating on a 1 to 10 Scale) = Tied for Low Cable Satellite TV DSL Cable Modem Telephone Utility 4/30/

15 Hudson households place importance on lower prices and Internet speed Q29: What would you like to see most improved from your current broadband services? Lower Prices 46% Increased Internet Speed 23% Reliability/Reception 17% Customer Service 5% Service Availability 2% Nothing 7% 15

16 Question 25: In your opinion, is the availability of low-cost, high-speed Internet important to the future local community? Importance of Having Low Cost High-Speed Internet Hudson Ft Collins Longmont 81% 81% 68% 12% 14% 25% 3% 2% 4% 2% 2% 2% 2% 1% 1% Very Important Somewhat Important Neither Somewhat Unimportant Very Unimportant 16

17 Viable Community with Slow Internet by Age 7 out of 10 households believe that communities need fast Internet to remain viable This perception does not vary across age or income demographics Q26: Would you consider Hudson a viable community if there were slow Internet service? No Yes Viable Community with Slow Internet by Income Yes No DK 5% 28% No Yes 68% 2 Up to $50k $50k - $100k $100k - $150k - > $200k 4/30/2018 $150k $200k 17

18 54% of Hudson households support the payment of a monthly property tax levy to help fund the new fiber network Q30: The City is considering a property tax levy to offset some of the costs of constructing the fiber network. The monthly cost of this levy would be $8 per $100,000 of the appraised value of your home. To what extent do you support using this levy to offset some of the costs of providing 1 gigabit Internet for $30 per month? I am very supportive I am somewhat supportive 23% 31% 54% support I am neutral 15% I am somewhat unsupportive I am very unsupportive 8% 21% 29% do not support DK 2% 4/30/

19 Level of Support by Age Decile Support of the property tax levy varies primarily by age: 8 6 Younger households very supportive (3:1 margin under age 45) 65+ households split at about 4 each for and against the levy Support of the property tax levy varies secondarily by income: -4-6 Higher income households very supportive (2:1 margin over $100k) Lower income households have more supporters than non-supporters, but have higher incidence of being very unsupportive 8 6 Somewhat Supportive Very Supportive Somewhat Unsupportive Very Unsupportive Level of Support by Household Income Up to $50k $50k - $100k $100k - $150k $150k - $200k > $200k -4 4/30/

20 Community-Wide Quantitative Survey Fiber Broadband Market Potential

21 The majority of respondents, when given the choice, would prefer to receive high speed Internet from the City Q24: Among the following list of potential providers, who would you prefer to receive high-speed Internet service from? Hudson Ft Collins Longmont 69% 45% 52% 11% 9% 3% 15% 12% 6% 4% 6% 3% 8% 23% 19% 16% Incumbent Incumbent The City Other A new provider Don't Know Telco Cableco Incumbent 21

22 87% of respondents indicated they would definitely or probably switch to the Fiber system for Internet service 10 Q20/22/23: Stated purchase intent for: - Internet at $30/mo. for 1Gbps - Voice at 1 Less than Windstream - Video at price parity to Spectrum 22% 19% 75% 64% 19% 27% 'Definitely Would' 5 13% 'Probably Would' 'Might/Might Not' 14% 26% 'Probably Would Not' 'Definitely Would Not' 25% 23% 27% 14% Don't Know 7% 11% 5% 4% Internet Phone Video 22

23 Uptown uses a Likert Scale with Overstatement Adjustment Conservative research techniques from the Packaged Goods sector Clearly specify purchase intent vs. interest and removes overstatement bias Example: How likely would you be to subscribe? Definitely Would 21.5% x 7 = 15. Probably Would 35.6% x 3 = 10.7% Might/Might Not 20. x 1 = 2. Probably Would Not 10.4% 27.7% = Penetration Estimate Definitely Would Not 4.4% Don't Know 8.1% Residential Phase 1 Pro Forma (Terminal / Year 5 Eroded) Residential Research (Terminal / Year 5 Eroded) Small Business (Terminal) Video Not Included 24. / 20.4% - Internet % 51. Telephone 15. / 10.5% 22.5% / 15.7%

24 The survey results indicate strong interest in the multi-gig tiers at tested price points. Internet Dispersion and ARPU $70 $70 $50 $150 $100 7 $ $30 $30 $ ARPU: $42 ARPU: $35 ARPU: $68 Hudson Survey Hudson Pro Forma Beverly Hills Survey 24

25 Market share impact if Spectrum implements DOCSIS3.1 and is the sole provider of residential Gig service priced at $105/month: Adds 2.7 points to Internet penetration Upsell 1 of subscribers to 1Gig Internet Market Share Post DOCSIS3.1 (Spectrum $105) 1% 2% 21% 77% Internet Market Share (Households) 1% 2% 23% None DSL Cable Modem Satellite Spectrum Internet Dispersion (Spectrum $105) 12% 74% 88% None DSL Cable Satellite 1 Gbps All Other Tiers April 18 Study conducted by Uptown Services, LLC 25

26 Participants were asked if they would or would not switch to a different Internet service if both of the following services were provided in the future. The new service options would be the following two Internet services, both offering 1 Gbps speed Q28: If both Spectrum (formerly Time Warner Cable) and the City of Hudson were to offer 1 gigabit Internet to your home and your service options were: - 1 gigabit Internet from Spectrum for $105 per month, or - 1 gigabit Internet from the City of 91% 1% 6% 2% I Would Upgrade with Spectrum I Would Switch to Hudson I Would Retain My Current Service Don't Know 26

27 Market A Market B Market C Market D Market E Market F Market G Market H Market I Market J Market K Market L Market M Market N Market O Market P Market Q Market R Market S Market T Market U Market V Longmont Market X Market Y Market Z Market AA Market AB Market AC Market AD Market AE Hudson 6 5 Terminal Penetration by Service (Across all Tested Price Points) Actual vs Research $ Video Internet Phone 27

28 Spectrum is the dominant Internet provider at 74% penetration. 98% of households use Internet at home. Internet service satisfaction levels benchmark below average. Cable Internet satisfaction is very low. Top market needs are lower prices and enhanced Internet speed Residential Internet purchase intent at 52% and residential voice at 23% validate the pro forma metrics of 4 and 15% respectively. Strong provider preference for the City versus other incumbent options Strong interest in multi-gig tiers with minimal incremental buy-ups at $20 resulting in ARPU of $42 versus $35 Minimal market risk from DOCSIS3.1 at a Spectrum price point of $105/mo. Households support the use of a property tax levy of $8/$100k home value to partially fund the project April 18 28