comcast_truck_portland.jpg

State utility regulators will vote on Comcast's application Tuesday, with "tens of millions" of dollars on the line.

(Mike Rogoway/The Oregonian)

Comcast has created a new class of hyper-fast Internet service it acknowledges almost nobody needs. And it charges a price few would pay.

What the new "Gigabit Pro" service does accomplish, according to Comcast, is make the company eligible for millions of dollars in state tax breaks. Those exemptions were written last year with Google Fiber in mind, for companies that bring very fast Internet service to Oregon.

Comcast argues it qualifies, too, by virtue of its obscure new service. Oregon cities are crying foul, but the staff of the Oregon Public Utility Commission says Comcast meets the letter of the broadly written law - even if hardly anyone signs up for a service critics say would cost subscribers $4,600 in the first year alone.

State utility regulators will vote on Comcast's application Tuesday, with "tens of millions" of dollars on the line, according to local government officials who hope to block the company's pending tax break and preserve a revenue stream they fought for years to keep.

"If the application is approved, schools, libraries and local governments across the state would receive significantly less revenue," wrote Mary Beth Henry, director of Portland's Office of Community Technology, in a letter to state regulators. "This application was not the kind anticipated by the Legislature."

Comcast maintains the cities are misreading the new law and says its new service - at 2 gigabits per second, it's 80 times faster than the federal broadband standard - is setting the pace for speedier Internet access.

"This product is the fastest residential broadband product in Oregon and we're proud of it," said Comcast spokeswoman Amy Keiter. And Comcast has suggested that it will offer a more affordable, 1 gig service to customers in some states by the end of the year.

In Oregon, Comcast wants to avoid an unusual tax formulation known as "central assessment," which calculates local property taxes in part based on the value of a company's brand. Comcast spent years fighting the tax through legal channels before finally losing before the Oregon Supreme Court in the fall of 2014.

That court decision had a side effect of derailing Google Fiber's plans to bring its own, 1 gigabit Internet service to the Portland area. Google didn't want its new service subject to the tax weighing on Comcast, so lawmakers scrambled to write a fix during the last legislative session.

What they came up with is a tax exemption for companies that invest in a new service that offers gigabit speeds to most of their Oregon broadband customers, and doesn't discriminate against certain areas based on income - a provision designed to block "redlining" of poor neighborhoods.

Comcast's "Gigabit Pro" service doesn't use the company's standard cable TV network. Instead, Comcast will run a new fiber line directly to individual customers' homes. Comcast says there's no price range for how much it would cost to roll out this kind of service one home at a time, but Portland claims installation and activation would cost each customer $1,000 just to get started.

Portland and other cities told regulators the installation cost and Comcast's monthly fee - at $300 a month, Gigabit Pro costs more than 4 times what Google Fiber charges for its 1 gigabit service - violates the nondiscrimination portion of the law because it costs more than the vast majority of households can afford. And the cities complain that Comcast hasn't made a substantial investment to enable the new service.

Lawmakers set no price threshold when they wrote their law last year, however, and didn't put anything in the law about how many customers need to sign up for a service for a company to qualify for the tax break. They did require that companies invest in new technology, but didn't say how much companies must spend.

The Legislature's attempt to create an exemption for Google has already encountered multiple setbacks. Language in the original bill accidentally excluded Google Fiber from the exemption, sending lawmakers racing to correct their error in another bill.

Lawmakers didn't include a definition for broadband in either measure. As a result legislators, telecom companies and regulators sparred last fall over what qualifies, an arcane fight that had very real implications for millions of dollars in tax revenues and the future of Internet speeds in the state.

Now, Comcast says cities are again misreading the legislation.

"Most households are not going to need the multi-gigabit service for years," acknowledges Keiter, Comcast's spokeswoman. But she said it's an advanced fiber-optic network that complies with the legislative requirements, whatever the cities say.

"We think they've incorrectly assessed the provisions of the new law," Keiter said, "and they've therefore drawn conclusions that aren't supported."

-- Mike Rogoway

mrogoway@oregonian.com

503-294-7699

@rogoway