How Publicly Owned Networks Start

On the Daily Yonder - offering coverage of rural issues - Craig Settles offers advice to community networks on the need to attract institution and business customers because networks rarely generate enough revenue to make debt payments by focusing solely on residential subscribers.

When communities compare the costs of different technologies, they often get too caught up in the upfront costs and ignore the ongoing costs (operating costs, or opex). He offers an example of a modest wireless network:

It’s important to understand that while it costs a lot of money to create a broadband network, over a five-to-ten-year period, it costs even more to operate that network than to build it. Say it costs $1 million to build a wireless network. During the municipal wireless heyday, it was estimated to cost 20% of buildout expense to operate the network annually – to pay for customer service, maintenance, upgrades, etc. That’s $200,000 a year.

This is a great intro article for those who may not be used to thinking about the economics or business plans networks need.

For the rest of us, it is a strong reminder of how many networks start (and a good path for those who want to create a network):

Santa Monica, California, had a legacy PBX phone system and slow connection circuits from incumbents. The city pooled money it was already paying for voice and data services, using this capital to build a fiber network and implement new communication technology.

City CIO Jory Wolf states, “By switching to fiber we realized a $500,000 savings in data circuits and $250,000 savings in voice circuits, all of which stayed in our fund. Ongoing savings enabled us to provide our police with video streaming in their vehicles. We have excess bandwidth, so we provide (a) large number of sites with free wireless access.” Wolf said that the city is also selling companies fiber lines that haven't yet been turned on. “Our network budget is self-sustaining,” he said, “and I have $2.5 million in capital.”

I remember Tim Nulty saying that Burlington Telecom started the same way. They figured out how much they were paying each month for telecom as a city. They used that number to compute how much they could spend on a monthly basis for opex and debt repayment. From there, they designed a system to meet the budget - a gigabit network connecting all the public schools and local government buildings (with the capability for further expansion if needed). They started saving money on day 1 and radically increased their productivity. From there, they decided to bring fiber to every last person in the community.

Even if incumbent carriers can offer the kinds of speeds needed by community institutions (in Burlington, they couldn't), they may charge prohibitive prices that effectively make it unavailable. Settles has a great quote from Pulaski, Tennesee that touches on this:

Dan Speer, Executive Director of the Pulaski-Giles County (TN) Economic Development Council, declares that “the World Wide Wait is over in Pulaski. There’s a printing operation here that has to send large graphic files all the time to their corporate headquarters in Los Angeles. One company with offices on the north side of community and the manufacturing plant on the south side use the network to send large data files back and forth. Broadband makes this possible.”