The municipal utility serving Traverse City will add an additional $18 million to its debt to expand its high-speed internet service, despite low sign-up rates to date.

On Jan. 4, the City Commission unanimously approved an application to the U.S. Department of Agriculture for a loan, which would be used to extend the geographic reach of the fiber optic network.

The changes would allow the electric utility create a so-called smart grid, capable of detecting and responding to power outages more rapidly, and provide the means to reduce energy consumption.

They would also give all the utility’s nearly 13,000 customers access to high-speed internet service. That service is already available to about 3,200 of those customers, due to $3.3 million committed in 2019 and another $850,000 obtained in 2020 through a loan from the city’s economic development fund. High-speed internet service is already available from multiple private sector providers.

According to the most recent reports from the city utility, fewer than 200 customers have signed up for fiber optic service in the initial service area. That number is far below projections published when the system was launched, after nearly a year of delays, in October 2020.

Traverse City resident Gerald DeGrazia, a retired telecom executive, said that by his reckoning, the utility will have to increase sign-up rates by about 400% over the next six months to meet its first-year projections. As a result, the system has fallen far short of the numbers needed to meet its 2021 targets, DeGrazia said.

Traverse City Light and Power spokesman Scott Menhart told the Traverse City Record-Eagle the utility was satisfied with the sign-up rate to date “because we haven’t done any targeted marketing or anything, it’s just simply word of mouth.”

DeGrazia said he remains skeptical about the level of demand for a new provider in a community where most potential customers for high-speed internet already have it.

“The people I talk to are generally pleased with the service they’re getting” from private sector providers, he said. “If the internet is up and working, they’re not complaining.”

DeGrazia said he questions the wisdom of putting Traverse City residents on the hook for significant spending on a redundant broadband system.

Jason Allen, a former state senator and director of USDA’s rural development program in Michigan, said the potential $18 million loan is consistent with the agency’s vision of increasing broadband access and the reliability of the electric grid.

Traverse City is adopting a model that has been successfully deployed in several other regions in Michigan, Allen said. The decision on whether to include high-speed internet as part of that expansion is left to the local officials, he said.