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Communities, telcos connect

Homeowner fees may include Internet service

Jeff Smith, Rocky Mountain News

Published October 3, 2007 at midnight

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LONE TREE - Suzy Olmsted said she doesn't mind paying $35 a month for Qwest's high-speed Internet service as part of her homeowners association fee at RidgeGate in Lone Tree.

"We don't have to think about it," Olmsted said, adding that the service, which she uses for e-mail and news, is "very fast."

Increasingly, new, mostly luxury housing developments in Colorado are signing exclusive, or "preferred provider," agreements with telecommunications companies.

In some cases, such as at 275-home RidgeGate, the agreements cover only high-speed Internet services, with home-owners choosing their TV and telephone providers. In Colorado Springs, Falcon Broadband recently signed a deal to provide TV and Internet services exclusively to the fledgling, 24,000-acre Banning Lewis Ranch development.

Developers see the agreements as a way to offer advanced telecommunications services to their residents and gain a marketing edge in the process. They also can use the agreements to deliver information to residents about the community, via the Internet or television.

Telecommunications providers like the fact that a certain amount of business is guaranteed by the preferred agreements and know residents will be economically motivated to buy additional services.

But some worry the agreements give consumers fewer competitive options. Homeowners also can be locked into services that could become pricey or even shoddy over time, which has occurred in some areas of the country.

Barbara Fernandez, chief of staff at the Colorado Public Utilities Commission, said state regulators have no control over the private agreements so it's buyer beware.

"It's between a homeowners association and the residents, and customers need to beware they are restricted to a service, and if they don't like that, they probably should live somewhere else," Fernandez said.

Mark Cooper, research director for the Consumer Federation of America in Washington, D.C., said the most important point is for consumers to be notified of the agreements.

Cooper also said if a provider has a major program of deploying telecommunications services such as fiber to the home, then that provider should be required to service the entire area over a reasonable period of time.

"You can't have a system where some (companies) can skim cream," Cooper said.

That's similar to the debate over cable-TV franchise agreements. Cable companies argue telcos will "cherry-pick" neighborhoods, while telcos such as Qwest maintain second entrants to the market shouldn't face build-out requirements. The Federal Communications Commission recently issued an order preventing municipalities from imposing "unreasonable" build-out requirements.

Scott Binder, head of Comcast in Colorado, declined to comment on the exclusive deals between telecommunications providers and housing developers. But he did say: "At this point, we have not sought any of these (in single-family communities) since Comcast came to Colorado in 2002."

In most markets, Comcast and Qwest battle fiercely, with each offering "triple play" TV-Internet-phone packages that start at roughly $100 a month.

At RidgeGate, since homeowners already are paying for Qwest Internet service, they are more inclined to buy their TV and phone service from Qwest as well.

The Olmsteds, for example, also subscribe to Qwest Choice digital television service, and Qwest local and long-distance phone service.

Qwest Choice TV in Lone Tree, delivered along fiber, costs more - $42.99 a month - than the $29.99-a-month DirecTV satellite package that Qwest typically resells in most markets. But it also provides more than 300 channels, including music channels, and such features as caller ID integrated with the TV signal so viewers can decide whether to answer the phone.

Fernandez of the PUC noted that Comcast is the sole phone provider to some multiunit residential complexes in the region. Colorado Comcast spokeswoman Cindy Parsons confirmed a "handful" of such cases but said they were inherited from predecessor AT&T Broadband.

Keith Simon, a vice president and director of development for Coventry Development, RidgeGate's developer, said the company is pleased with its agreement with Qwest.

The fiber-optic technology, for example, can be a platform for interactive television, and home energy and safety management programs, such as remote control of security systems, thermostats and appliances.

"In order to make the deal financially viable (for Qwest to run the fiber to each home), we had to guarantee they got the data (Internet) service," Simon said.

As is typical of these agreements, RidgeGate also markets Qwest services in literature and on its Web site.

But Simon said Coventry also wanted to give residents a choice of phone and TV providers. Some residents have signed up for Comcast or a satellite-television service instead of Qwest, he said.

Jim Vogel, a Qwest vice president of sales, said the arrangement with new developments such as RidgeGate is the most cost-effective way for Qwest to provide consumers "instant access" to fiber-to-the-home technology. The company has similar fiber developments in Arizona, Utah and Washington.

Qwest has been slower to provide its own TV services in existing neighborhoods where it has video franchise agreements, such as in Salt Lake City.

"Qwest intends to deploy its TV service as broadly as possible," said Qwest spokeswoman Carey Madsen. "However, technology deployments are always done in phases."

In Salt Lake, for example, Qwest is extending fiber deeper into the neighborhoods in preparation for deploying TV services, Madsen said.

She also noted only about 30 percent of the homes in Qwest's 14-state market area could get high-speed Internet service in 2002, and now 83 percent can. "This is exactly the same way that the cable companies have deployed telephone services," she said.

What the agreements can mean

Telcos increasingly are signing exclusive deals with developers to provide services to homeowners as part of their association fee. The agreements can provide subdivisions with the latest services, but critics say they undermine competition.

PROS

• Services initially are state of the art, featuring blazing fast Internet service and advanced digital and high-definition television.

• With fiber, all kinds of services are possible, including interactive TV and remote management of a home's energy and security systems.

CONS

• Homeowners are locked into paying for at least one service as part of their association fee. So there's an economic disincentive to go with another carrier, since that might require paying twice for the same service or more for a telecommunications "bundle."

• Homeowners could be stuck in the future, if the provider fails to perform up to expectations, especially if the exclusive relationship discourages other providers from competing in the subdivision.

Some telecom relationships in Colorado

• Banning Lewis Ranch, Colorado Springs. Falcon Broadband, fiber to the home. 55-channel TV and Internet service for $42.50 a month. Included in homeowners association fee. More advanced TV services are optional.

• RidgeGate, Lone Tree. Qwest Communications, fiber to the home. $35 a month for high-speed Internet service. Included in homeowners association fee. TV, phone services are optional.

• SouthShore, Aurora. Qwest Communications, fiber to the home. Same arrangement as RidgeGate.

• Ravenna, Douglas County southwest of Waterton Canyon Road. Qwest Communications, fiber to the home. Same arrangement as RidgeGate.Source: Rocky Mountain News, Based On Information From Developers, Telecommunications Providers

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