November 6, Rick Smith City of Cortez. Re: Results of the Residential Broadband Survey. Rick:

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1 825C Merrimon Ave, Box 290 Asheville, NC November 6, 2018 Rick Smith City of Cortez Re: Results of the Residential Broadband Survey Rick: CCG Consulting recently completed the residential survey of residents of the City of Cortez that asked about residential usage and issues for Internet access, cable television and telephone service. The report below discusses the results. There is a full set of the survey questions and responses included at the end of the report. Doug Dawson President CCG Consulting Page 1

2 Survey Methodology The survey was given to residents that live within the city boundaries of Cortez. Our recent broadband feasibility study had identified that there are 3,661 residential living units in the City. The survey was conducted by CCG callers by telephone. We obtained the telephone numbers by purchasing a database of current phone numbers that is guaranteed to be a mix of both landline and cellular telephone numbers. Surveys today should include a mix of both kinds of telephone numbers to cover the broadest number of people in the community. Some of the largest survey companies that conduct business and political surveys have determined that, in general, households that only have a landline now tend to be older and more conservative than households that only use a cellphone. Since we wanted to talk to households across the socioeconomic and age range, the mix of both cellular and landline telephone numbers should represent the broader community. Most business and political surveys strive to achieve an accuracy of about 95% with results that are plus or minus 5%. In layman s terms this means that the results of such a survey are reliably accurate (the 95% number) and you would expect to get the same results (within 5%) if you could ask the questions to everybody in the survey universe. At CCG we use an online survey tool that is provided by Creative Research Systems and is found online at We ve used this tool for many years and have manually done the mathematical calculations that demonstrate that the tool is accurate. We were able to complete 360 surveys for the City, and the online tool shows the accuracy of this survey to be 95% accurate plus or minus 4.91%. It s important that the calling is done randomly. In this case we were able to start with one file that already mingled cellular and landline telephone numbers. We then used a method of calling every 20 th number in the listing. This method is called systematic sampling and is used by almost all companies that conduct phone surveys. With systematic sampling, we call each 20 th number, and when we reach the end of the phone list we cycle back to the beginning and continued to select every 20 th number until we obtain enough responses. We typically must call 6-7 residences for every completed survey (many don t answer and some refuse to take the survey), so we recycled through the number list multiple times. Survey Results The survey produced some interesting results. A full copy of the survey questions and the responses are at the end of this report. Here are highlights of the survey results: Penetration Rates. A little more than 93% of residences in the survey have some kind of landline Internet connection at home. Another 6% of households only use their cellphones for broadband. This Internet penetration is significantly higher than the national average for landline broadband, which the FCC recently reported as 84%. Astoundingly, only one household said they don t have any kind of broadband connection (landline or cell phone). Page 2

3 In a result that was surprising to me, 47% of households still use CenturyLink DSL and only 40% use the TDS cable network for broadband. We haven t seen a network in a Coty in years where DSL still has more customers than the cable company. This is evidence of the poor condition of the cable network in the City, and probably also the result of the accumulated dislike of the previous cable company. In most communities with a cable network we see the DSL penetration rate in the range of 10% - 15% of the market. In another surprising result, 94% of homes report the purchase of traditional cable TV. That is extraordinarily high with the nationwide average reported earlier this year at 69% and dropping slowly over time (I ve seen speculation that it s now down to about 68%). What is striking is that 70% of all homes use satellite and only 24% use TDS for cable TV. We note that many residents listed their cable company as CenturyLink, which bundles DirecTV. The high concentration of satellite TV in the City is more evidence that people don t like the TDS network, and perhaps the pricing. I don t have any explanation of why so many people subscribe to cable TV in the market. We recently completed a survey for a city in Oregon with a similar high penetration rate, so this high penetration rate is high, but believably so. Interestingly, only 1% of households claim to be cord cutters meaning they only watch programming online from providers like Netflix or Sling TV. There are different projections of the nationwide percentage of cord cutting that vary between 10% and 15% of homes both numbers much higher than in Cortez. This result surprised me because we had several hundred homes take a sped test as part of the feasibility study. Most of the households in that test were getting download speeds that are sufficient for video streaming. We don t the specific reasons why there aren t more cord cutters in the City. I can speculate that perhaps the broadband products there are not reliable, meaning that there might be stoppages or interruptions in the broadband signal that would make it annoying to watch video. In technical terms such problems are called jitter. This is hard to measure and was not something that is measured during a speed test. Nationwide surveys that have studied cord cutting report that the number one reason that households cut the cord is to save money. There are several later responses in the survey that indicate that there is a significant segment of the Cortez market that is price conscious making the low number of cord cutters even more of a mystery. In another surprising finding, 71% of homes still claim to have a landline telephone. This is a lot higher than the nationwide average of 45%. This means that 29% of homes only use cellular for voice. We ve recently seen cities with even higher landline penetration rates, so while the Cortez number is high, it is not unbelievably so. Jut like with the other services, we see more customers using CenturyLink for landlines (42%) than TDS (29%). I have no specific reason why so many homes there still have landlines - in rural markets this is generally seen in areas where there is spotty or unreliable cellular coverage. Internet Speeds. 91% of those with Internet access don t know the speed they are supposed to be getting at their home. 95% don t know the actual speed they are getting. Of the few people that knew their speed, it looks like many are getting less than they are subscribed to the same thing we found with the speed tests. We know from the speed tests that both incumbents advertise speeds that are faster than what households receive. Page 3

4 80% of homes said they are not satisfied with their Internet speeds. I think that s the highest percent I ve ever seen in a City I only normally only see that high level of dissatisfaction in rural areas with extremely slow broadband options. This might be the most significant finding in the survey because that level of dissatisfaction opens the door for a quality alternative. In towns that have two incumbents we ve rarely seen dissatisfaction with download speeds that were higher than 30% of households. A household being unhappy with data speeds infers that they are experiencing difficulties doing what they think are reasonable activities on the Internet. Internet users vary from light users that only read s and perhaps browse websites to heavy users where multiple family members want to engage in heavy data activities simultaneously. To see 80% of households unhappy with data speeds tells me that there are problems that are affecting all classes of Internet users. We asked households why they were unhappy and got responses like: they couldn t watch videos, or that the performance was lagging, or that their Internet connection freezes up or that they have to reboot fairly often. These are all symptoms of poorly performing networks. In looking deeper at the responses, the dissatisfaction level applied to both TDS (73%) and CenturyLink (82%). To see 80% dissatisfaction tells me that people aren t unhappy with speed, but with their overall online experience. The speed test results we saw during our study indicate that slow speeds are not the sole issue there were customers getting decent speeds. The quality of an Internet connection is influenced by three things the speed, the latency and jitter. Latency is a measure of the length of time it takes packets to get to the home from the network. Poor latency can be caused by the technology - satellite broadband takes a long time for the signal to go back and forth to the satellite. However, latency on the network in Cortez are more likely due to network congestion there are probably too many customers in a neighborhood sharing a common Internet connection. Jitter is a measure of noise, meaning interference in the signal. A fiber network would fix these issues. Fiber networks have extremely low latency (almost no delays) and also virtually no jitter. A customer getting a 50 Mbps on fiber would perceive it to be significantly faster than a 50 Mbps connection on one of the incumbent networks in the City. Products and Prices. 55% of homes report buying a bundle of services. That is a low percentage and we normally see this in the range of 70% - 75%. It makes sense in Cortez that the percentage of homes that bundle is lower since there is a large percentage buying satellite TV service directly outside of a bundle. Every home with a bundle reported that they are paying more than $100 per month. 15% of the whole market is paying more than $200 per month for a bundle with another 7% of the market paying more than $200 while buying individual non-bundled products. In total that s 22% of homes paying more than $200 per month. Only 11% of the households report total monthly bills of less than $100 per month, mostly from buying only one or two of the triple play products. I observe that households in the City spend more per month in aggregate than what I ve seen in other cities. I think this is due to somewhat high prices of the incumbents and also due to the fact that such a large percentage of people in the City are subscribing to cable TV. Page 4

5 Support for a Fiber Network. We asked if households support the idea of the City building a fiber network to reach everyone. 70% of households support a fiber network. Another 22% said they might support the network but need more information. Only 7% of households said they didn t support a fiber network. I note that the 22% responded to this question before they were asked the questions about possibly using sales tax financing to pay for the network. The response to those questions leads to believe that many more of the maybe responses would have been positive had they known about that financing idea. We asked why households might support a fiber network. Respondents were able to select more than one response. 62% said they hoped a new network would bring competition and choice. 91% hoped a new network would bring lower prices. Recall from above that the monthly spending in the City looks to be higher than what we ve seen in other cities. 37% of respondents hoped the network could bring faster Internet speeds. 23% hoped a new City ISP would provide better customer service. Only 25 of the 360 respondents did not support the fiber network. 72% of them said they were happy with their current provider. 44% don t believe that government should compete with private business. 64% said they worried about higher taxes. 28% said they didn t think the City would provide better service. Willingness to Change Service. One of the most important sections of the survey asked households if they were likely to change service to a City fiber network. Internet. We asked if households would change if they could get faster speeds at rates similar to what they pay today. 67% of households said they would definitely switch their broadband service. Another 21% said probably, and 6% said maybe. The first two results are 88% of the market and we ve never seen a response that high in a City. Only 6% of households said they were unlikely to use the new network (which is roughly the same percentage of households that don t have a landline Internet connection today). This means that basically everybody who has broadband in the market today said they would consider changing to a City fiber network. That is a startling result and speaks volumes about how people feel about current broadband service. In our feasibility study we had assumed that only 50% of households would buy from a City fiber network a typical penetration rate we see in cities of your size. The survey results indicate to me that there is a reasonable chance that 75% to 80% of households could be persuaded to change to a City fiber network. Cable TV. We asked if households care about cable TV being part of the bundle. 53% said they wanted cable TV in a bundle. 35% said that offering cable would be nice, but not mandatory. Only 12% said that cable wasn t important to them. We then asked if households would switch cable TV service if they could get a betterquality picture for the same price they pay today. 67% of households said they would definitely change, 21% said they would probably change and 6% said they might change. Page 5

6 The overall response for those three categories is identical to the responses we got from the question about changing Internet service. We ve never seen that before, but we ve also rarely seen this many households in a market that subscribe to cable TV. We caution that this response would not result in seeing a mass migration to a Cityoffered cable product. It turns out the majority of households in the City use satellite TV, which is cheaper than landline cable TV. If the City was to offer cable TV you might be able to match the prices charged by TDS, but you could not match the prices of the satellite providers. It s also worth noting that in recent years we ve seen customers decide to cut the cord with cable when they decide to change providers. The process of changing gives them a fresh opportunity to choose cable TV and many of them decide at that decision point to not buy it. I d further note that one of the likely reasons for the high penetration of cable TV in the City today is the poor experience of watching online video on the current networks. Fiber will enable households to watch multiple simultaneous streams of highquality video online. Finally, the nationwide penetration of households using traditional cable TV continues to drop and the percentage of cord cutters continues to increase. There are now over 200 online video products, and by the time the City built a network and considered offering cable TV the public will likely have a huge potential array of online services, meaning less allegiance to traditional cable TV. Telephone. We asked if households would buy landline telephone from a new network if the prices were affordable. 45% said they would definitely change, 13% sad they would probably change and 13% said they might change. Contrast this to the current landline penetration rate of 71%. We ve seen that customers that change providers often use that decision point to drop landlines. However, with that said, the responses to your survey are still higher than what we have been seeing in other markets. We then told respondents that the City is considering offering a free minimal Internet connection to everybody in the City. We included this question in the survey with some trepidation, because we suspected that a lot of households would say they would take free broadband. 48% of respondents said they would take the free Internet. 36% said they would upgrade to something faster. 6% said they would not purchase Internet from the City (the same 6% we saw in other responses). Interestingly 10% of respondents said that they didn t think anybody should get free Internet service and that everybody should pay. The 48% that said they would take free Internet is probably overstated. Households would not be happy with a slow 5 Mbps connection on the fiber network any more than they are happy with slow speeds today. I would guess that a significant percentage of these households would upgrade over time once they realized that they would still have trouble doing simultaneous tasks or watching high-quality video online. However, this response does indicate that a lot of Page 6

7 households would likely try a free Internet connection and is something to consider in predicting revenues for the business. The only homes that would likely be happy with the free slow connections are those that are light users of broadband. Sales Tax Financing. Finally, we asked respondents how they feel about paying for the network with a temporary sales tax. 64% said they supported the idea of using sales taxes. 12% said they would support a sales tax if it resulted in lower prices. 6% said they would support a sales tax if they got faster speeds or better customer service. 18% said that they would not support a temporary sales tax. We then asked respondents about their support for differing levels of sale tax levies. 54% supported a sales tax of 1 cent levied over five years. 8% supported a sales tax of ½ cent over ten years and 21% favored ¼ cent sales tax over twenty years. Summary The most important take-aways from the survey are as follows: I ve never seen a City where 80% of households say they are unhappy with their broadband product. That s nearly triple what we normally see. This tells us that both the telephone copper network and the cable company coaxial networks use old technology or have technical problems. 70% of households said they favored the construction of a fiber network to reach everybody, with another 22% saying they might support the idea but need more information. The most important result of the survey is that 67% of homes said they would definitely buy broadband from a new provider and another 21% of homes would consider it. That is significantly higher than the penetration rates we used in the broadband feasibility study. This finding provides a good basis for re-looking at the business plans with penetration rates between 70% and 75%. The City has a cable penetration rate that is significantly higher than the national average. The City also has a higher penetration of telephone landlines than the national average. Many of those residents said they would consider moving these services to a new network. The original feasibility study did not include a cable TV product, and I still have can t recommend getting into that business line. The good news is that the majority of cable customers use satellite, meaning they could retail that even with a fiber connection. There was significant support for using a temporary sales tax to pay for the network, with 64% of respondents supporting the idea and another 29% supporting it if that means lower prices, faster speeds or better customer service. Customers have high monthly bills for the triple play with 22% of households paying more than $200 per month for triple play products. Only 11% of the market had monthly bills under $100 per month. This tells me that offering superior products with even a modest price reduction over today would be popular there. As would be expected 48% of respondents said they would take a low-speed, but free Internet product if offered by the City. Overall, this survey provides strong support for building fiber in the City. Page 7

8 Triple Play Services Cortez Residential Broadband Survey 1. Who provides Internet service to your home?? TDS % CenturyLink % Only use my cellphone data 24 7% Do not have Internet 1 0.3% Other - satellite 21 6% 2. Who is your current Cable TV provider? TDS 86 24% CenturyLink 82 23% Satellite % Watch only on-line (such as Netflix) 3 1% Do not have Cable TV 19 5% 3. If you have a telephone landline, who provides your telephone service? TDS % CenturyLink % Do not have a landline % 4. What do you pay for... Standalone Cable TV $25 - $ % $51 - $ % $76 - $ % $101 - $ % $ % Standalone Telephone $25 - $ % $51 - $ % $80 - $ % $101 - $ % $ % Standalone Internet $25 - $ % $51 - $ % $76 - $ % Bundled Services $100 - $ % $150 - $ % $200 - $ % % Page 8

9 Broadband 5. Do you know the Internet speed the company says they are providing? Don t Know % 4MB 1 0.3% 10MB 7 2% 15MB 2 0.6% 20MB 21 6% 25MB 2 0.6% Do you know the actual download speed you are getting? Don t Know % 10MB 7 2% 20MB 9 2% 25MB 2 1% 6. Are you happy with the Internet speeds you have today at your home today? Yes 73 20% No % If the answer is no, what problems are you experiencing that are caused by slow speeds? Lagging; Can't watch videos; Can't work; Can't stream; Have to reboot modem; Freezes up Possibility of Fiber 7. In general, how do you feel about the idea of the City building and operating a fiber network everywhere in the city? I support the idea % I do not support the idea 25 7% I might support the idea but need more information 80 22% 8. If you support having a City fiber network, which are the reasons for your support? You may choose all the responses that apply: **Percentages based on the 335 people who might or do support the network A new network will bring competition and choice % A new network would offer lower prices % The City would offer higher speeds at the same or lower prices % The City would provide better customer service 78 23% Page 9

10 9. If you do not support a City fiber network, which are the reasons? You may choose all the responses that apply: *Percentages based on the 25 people who do not support the network. I am happy with my current provider 18 72% I believe that city government should not compete with private business 11 44% I worry about higher taxes 16 64% I do not believe the City would provide better service 7 28% 10. If the City builds a fiber network, what factors would influence your decision to move your current services to the new network? You may choose all the responses that apply: Faster Internet speeds for the same price I pay today % Lower price than I pay today % Same price I pay today but better customer service 49 14% Choosing the City service would keep the dollars I pay in our community 12 3% 11. Would you buy Internet service from the City if the City guaranteed faster speeds than the competition at rates similar to what is currently available? Yes, definitely % Probably 75 21% Maybe 23 6% Probably Not 9 2% Definitely not 13 4% 12. If the City builds a new network, how important is it to you that the City provides cable TV along with Internet access? I want cable TV in the bundle % An option for cable TV would be nice, but not mandatory % Cable is not important to me 43 12% 13. Would you buy cable TV service from a new City network if they offered similar channel line-ups and prices as today, but higher picture quality than you get today? Yes, definitely % Probably 75 21% Maybe 23 6% Probably Not 9 2% Definitely not 13 4% Page 10

11 14. Would you buy a landline telephone from a new City network if they could offer affordable prices? Yes, definitely % Probably 45 13% Maybe 46 13% Probably Not 63 17% Definitely not 44 12% 15. One of the options the City is considering is offering a free minimal Internet connection to everybody in the City (5 Mbps) with the option to purchase faster speeds from 50 Mbps to 1 gigabit. What do you think about this idea? I would definitely take the free Internet % I would probably upgrade to something faster as long as it is affordable % I would not purchase Internet service from the City 22 6% Everyone should have to pay for a package, need a set price, no free internet 37 10% Paying for the Network 16. The City is thinking about paying for the installation of the network by use of a temporary sales tax that would be eliminated after a specified period of time. How do you feel about the idea of using sales tax to fund a new broadband network? I would support a temporary sales tax to fund the fiber network % I would support a temporary sales tax only if the City could guarantee lower prices than what I am paying today 43 12% I would support a temporary sales tax if I received better customer service or faster speeds for the same price I pay today. 22 6% I would not support a temporary sales tax 63 18% 17. Which of the following temporary sales tax would be the most appealing to you? Raise sales tax by 1 cent for 5 years % Raise sales tax by 1/2 cent for 10 years 28 8% Raise sales tax by 1/4 cent for 20 years 75 21% I do not support any sales tax increase 63 17% Page 11