US Internet's fiber spreads across south Minneapolis

The spring thaw shot new energy into the battle for your Internet dollar.

Workers drilled holes for US Internet's fiber optic lines in Lowry Hill. White boxes showed up in Minneapolis' Como neighborhood. CenturyLink's fiber plans sent city inspectors in Minneapolis and St. Paul running around issuing permits for its new 1-gigabit service.

The average home in the Twin Cities area accesses the Internet at 27 megabits per second. Comcast, the cable TV giant, dominates the market, followed by CenturyLink, which descended from the phone system legacy of names like Northwestern Bell and U.S. West.

Over the last few years, Minnetonka-based US Internet, a provider of business and wireless services, moved into residential Internet by laying fiber along a few streets in south Minneapolis. The company in a portion of Minneapolis offers Internet access at less than half its competitors' prices -- anywhere from 25 megabits per second to 10 gigabits (see chart).

Now, it's planning an expansion that will test whether a local, private business can succeed in competition with the giants of the telecom industry. Its effort could drive down the prices that people in the Twin Cities pay for data while renewing a debate between market-driven and regulated access to it.

"Where they are today, their takeup rates have been excellent," Otto Doll, the city of Minneapolis chief information officer, said of US Internet. "Most definitely I think they can challenge when it comes to Internet."

This will be a pivotal year for US Internet, which expects to spend several hundred million dollars over many years to build a fiber optic network across the Twin Cities. This summer, the firm's crews plan to head east and bury fiber in five neighborhoods south of Powderhorn Park.

"Our first goal is to get under 35W and get on to the other side," said Travis Carter, US Internet's chief of operations. "My hope is that we'll be kissing the river by the end of next summer."

CenturyLink won't disclose where its new 1-gigabit (which is 1,000 megabits) service will be available, or when. Stacks of permits in Minneapolis and St. Paul show the company's contractor, Telcom Construction of St. Cloud, is digging all over the metro area.

Permits filed in the past few weeks in Minneapolis show new CenturyLink projects just west of Lake Nokomis, along Franklin Avenue East, at the corner of Lowry Avenue and University Avenue in Northeast, at 35th Street and Lyndale, or up north on Thomas Avenue by Crystal Lake.

High-speed fiber networks and the rise of online streaming like Netflix are transforming the business of Internet access. The traditional cable TV package has lost value. For cable firms, the speed of their Internet links is becoming more important.

Google operates fiber networks in Kansas City; Austin, Texas; and Provo, Utah, and is adding four more cities. Some municipalities like Chattanooga, Tenn., have built their own 1-gig networks. Local cooperative service providers in some small cities in Minnesota, such as Bemidji, are upgrading to that speed.

At the same time, major TV channels are decoupling from exclusive cable packages. HBO will offer stand-alone streaming and ESPN is available as part of Sling, an online streaming package that costs $20 per month.

Into this changing media landscape, US Internet is the local wild card, said Chris Mitchell, director of the Community Broadband Networks Initiative, a national organization based in Minneapolis. The firm charges $48 per month for 100-megabits per second service, compared to Comcast's $115 per month or CenturyLink's $92 per month.

"There are good reasons Comcast should be more afraid of USI," Mitchell said. "Comcast competes with CenturyLink around the country. The cable companies have a history of duopoly — of a soft competition rather than hard competition because they recognize that a rough and tumble competition between the two would hurt each more than each is likely to gain."

Comcast and CenturyLink complain that US Internet has an unfair advantage because it doesn't have to provide universal service and, so far, it has concentrated on affluent southwest Minneapolis.

"It's pretty clear that US Internet decided to cherry-pick the most lucrative customers in the wealthiest neighborhoods to roll out their service," said Blois Olson, a contract spokesman for CenturyLink.

Comcast spokeswoman Mary Beth Schubert calls US Internet's geographic limitations "a disadvantage for consumers," and added that at Comcast, "we don't pick and choose different neighborhoods." The company cannot pick and choose because of its cable TV franchise with the city.

But city officials also are watching to see where US Internet expands and how quickly it can offer high-speed Internet in northeast, southeast and north Minneapolis.

"The biggest thing that we're looking for is where they go with the service," said Doll, the Minneapolis CIO. "We would like all technology to be available to all four corners of the city."

Carter, from US Internet, said the company wants to serve all of the Twin Cities eventually, including the suburbs. He envisions expanding fiber into north Minneapolis, for instance, in three to four years. That part of town will be first to get a new wireless Internet service the company is testing in downtown Minneapolis right now.

Hundreds of yellow fiber optic cables hang in a humming brick building just south of the Midtown Greenway. Each strand represents a home, business or apartment building. Those plugged in are customers, those hanging loose are potential customers.

"You shine a light in one end and it comes out the other," Carter said.

The fiber runs in underground cables encased in pipe and accessible in underground boxes. This summer, its crews will fill in missing streets in southwest Minneapolis, he said. In July, the company will dig under Interstate 35 to offer fiber in the Field, Northrop, Regina, Bryant, and Bancroft neighborhoods (see map).

People east of Interstate 35 could get prices as low as $30 per month for 25-megabit speed service from US Internet, compared to $67 per month for the same speed from Comcast.

"I would jump for joy with that because the prices are so much different," said Wilbur Ince, a Web developer who works from home in Bancroft and can't get a good signal from US Internet's wireless network. "The option of a hard wire is really, really appealing."

Adam Belz • 612-673-4405 Twitter: @adambelz