In the case of muni systems, which are not-for-profit enterprises, one measure of “success” is defined as the level of their “take rate” – that is, the percentage of potential subscribers who are offered the service that actually do subscribe. Nationwide, the take rates for retail municipal systems after one to four years of operation averages 54 percent. This is much higher than larger incumbent service provider take rates, and is also well above the typical FTTH business plan usually requiring a 30-40 percent take rate to “break even” with payback periods.
New Broadband Networks Increase Tension in Vermont
We have previously covered the East Central Vermont Fiber Network and their local frustrations at receiving little state or federal support in building a next-generation network. The feds and state government seem too heavily influenced by those with lobbying clout -- leading to subsidies to build lesser networks that local do not want.
They want real Internet, not another wireless promise that fails to deliver. A story from Vermont Public Radio discusses increased tensions as the networks struggle over a few community anchor tenants to help finance the rest of the network. Here, Loredo Sola of EC Fiber explains the problem:
SoverNet will own the infrastructure but is required to provide bandwidth at wholesale cost to providers who extend the service outward.
Loredo Sola is skeptical. He says he's already lost one institutional contract to the SoverNet project. He says that's forced E.C. Fiber to scrap its plans to serve smaller users in the area.
Sovernet is building a middle mile network connection community anchor institutions, but is an example of the exact wrong way to do it. Supposedly, the investment (the vast majority of which is funded by a federal stimulus award) will allow more ISPs to build more last mile networks as they have access to better backhaul.
But lowering the operating cost of a network does very little to make that network affordable to build. The high up front capital costs are what limit broadband in rural (and urban too!) areas. Compounding the problem is what Sola mentions above, Sovernet is taking the key anchor institutions off the board with its project so communities are actually left with a harder business case to connect themselves.
Groups like the Vermont Telecommunications Authority are so proud of having solved a short term problem, they have totally missed the fact that the longer term problem of making sure everyone has fast, affordable, and reliable access to the Internet is now much harder to solve.
When I first read about the WiscNet situation, I was interested to learn that it acted as an ISP but rarely provided the physical connections -- leaving opportunities for communities to build those connections themselves, using themselves as an anchor tenant.
Smarter programs, like the Building Community Capacity through Broadband project, result in the community owning the network. Communities have greater incentive to build out these networks to connect everyone because they understand the value of building infrastructure rather than just trying to maximize a profit from it.