In the Monadnock Region of New Hampshire, at least six towns have voted to issue bonds to construct fiber networks in partnership with regional incumbent telephone company Consolidated Communications. Chesterfield approved the measure in April 2019 and recently executed a public-private partnership contract with Consolidated.
Chesterfield was the first municipality in New Hampshire to take advantage of Senate Bill 170, signed into law in 2018, which allows municipal governments to bond in order to build broadband infrastructure in places not served by commercial broadband providers. Over the last year, the towns of Dublin, Harrisville, Rindge, Walpole, and Westmoreland have also voted to bond are also in the process of bonding, or have already bonded (Rindge), and are finalizing public-private partnership contracts with Consolidated to develop Fiber-to-the-Home networks. The towns plan to issue bonds in July and should have finalized contracts by that point.
New Hampshire’s rural areas have struggled to connect rural residents to adequate broadband, and these towns are undertaking these partnerships to improve currently insufficient connectivity. Part of the challenge has been the rotating series of incumbent telephone companies, from Verizon to FairPoint and now Consolidated. Large publicly-traded telephone firms have difficulty justifying investments in rural areas when the same amount of capital could offer a much greater return in higher-density cities. But Consolidated is developing a new model with these towns that may work to everyone’s benefit.
Chesterfield has already executed their contract with Consolidated. The forthcoming contracts between Consolidated and Dublin, Harrisville, Rindge, Walpole, and Westmoreland will very likely be reflective of Chesterfield’s contract with one important difference, shared Tim Wessels, a Rindge Teltech Committee Member. The Chesterfield contract with Consolidated calls for the town to transfer the town-funded network to Consolidated when the 20-year bond is retired. But according to Wessels, Consolidated does not want to own the town-funded last-mile networks in Dublin, Harrisville, Rindge, Walpole, and Westmoreland, and this requirement is no longer in the contracts with the other towns.
Chesterfield and Rindge have officially bonded, and the four other towns in New Hampshire pursuing partnerships with Consolidated have voted to issue bonds through the New Hampshire Municipal Bond Bank. All of the towns’ partnership contracts include a matching donation from Consolidated to help fund the network. The town of Rindge bonded for $2.6 million and Consolidated contributed $2.5 million; Chesterfield bonded for $1.8 million and Consolidated contributed $2.5 million. To finance the town’s bond payments, Consolidated will charge every subscriber a monthly “infrastructure fee” and deliver the collected fees to the town 30 days before the annual bond payment is due. To start, Chesterfield residents will pay a $10 fee and Rindge residents a $9.50 fee. The fee is based on how many miles of fiber will be needed in the towns and how many residents might subscribe to Consolidated's broadband service.
If there are an insufficient number of subscribers paying the “infrastructure fee” at the time the town’s bond payment is due, Consolidated is contractually bound to make up the difference, which they anticipate will be the case for the first few years as they build their subscriber take rate. The “infrastructure fee” cannot be increased but may decline over time because the interest for the bonds is front-loaded, with higher rates in the first half of the 20-year period. The town of Rindge is also considering a flat-rate fee structure for the entire 20-year bond period; Consolidated Communications would return any excess money in the “infrastructure fees” fund to the town annually.
In New Hampshire, when a municipality bonds to build something they must own the infrastructure. Each town will execute a 20-year contract under which they own the network and Consolidated maintains, operates, and monitors the network. When the 20-year contract ends, each town (with the exception of Chesterfield, which will turn over ownership to Consolidated) can renew the contract with Consolidated or request bids for a new network operator. Consolidated does own the fiber patch cable from the street address to the premises and the premises fiber router, unless the subscriber has opted to purchase these components rather than renting them. This model is similar to that of Huntsville, Alabama, which is working with Google Fiber and other service providers in an open access arrangement. We think it gives the first ISP a significant advantage, but is an improvement over most networks today where the ISP owns the entire network.
In contrast to the other towns’ pending partnerships, Chesterfield’s arrangement with Consolidated actually transfers ownership of the fiber network to the company after the town retires the bond in 20 years. While the town will be able to levy taxes on the network once it’s in Consolidated’s possession, the loss of public ownership will severely curtail the town’s ability to ensure the company continues to provide high-quality service. Christopher Mitchell, Director of the Community Broadband Networks initiative, said of the town’s decision:
Chesterfield has found a reasonable solution to how they incorrectly defined the problem — a lack of modern Internet access. However, the real problem is distant monopoly control of an essential input for the community — high-quality Internet access — and as they again lose control over that essential input, they will regret giving it away.
The hookup to each premise in Chesterfield will be free if the home is located less than 150 feet from the connection box, and it will cost subscribers 55 cents per foot beyond that. This could result in large hook-up fees for some residents whose homes are far from the roadway and the connection box. The other towns plan to waive this fee in their forthcoming fiber projects, but it may be temporary. This detail could be changed in forthcoming contracts with the other towns who may see it as discouraging to subscribers. Consolidated owns the optronics and the network electronics, which it purchases and installs as the managers of the network. If the network changes operators after the 20-year contract, these components would be part of that negotiation.
The contract for Chesterfield has been executed but none of the other contracts have been signed yet for the five other New Hampshire towns pursuing partnerships with Consolidated. Once contracts are signed and the towns have secured bond funding through the New Hampshire Municipal Bond Bank, Consolidated must begin building the network in 30 days and cannot take more than 24 months to complete the network build-out.
Access and Competition
As it stands, none of the partnerships with Consolidated Communications will be open-access networks. The company has an indefeasible Right of Use (IRU) to the town-funded networks, and Consolidated Communications will be the sole ISP on each of the networks.
At the Institute for Local Self-Reliance, we have developed a set of criteria to determine whether we consider a partnership’s network to be community-owned. Both parties must balance the risks and rewards of the partnership, which includes build out costs, maintenance, ownership, and service. We have looked to towns such as Westminster, Maryland, as an example of an equitable partnership that balances these risks and rewards proportionately between the municipality and the private company. In the example of Westminster, the city built the fiber network, owns it, and leases it to Ting, which operates the network during an initial period of and has a period of exclusive Internet exclusivity service providing privileges. After this period, Ting will remain an Internet Service Provider (ISP) but the network will become open-access, allowing other ISPs to rent the fiber infrastructure, enabling more service competition. Importantly, Westminster owns the network, ensuring that the network can adapt to meet local needs.
The public-private partnerships with Consolidated Communications are largely equitable agreements, but the lack of current broadband competition and the fact that the contract gives Consolidated sole ISP rights to the new networks leaves subscribers and the municipalities in the Monadnock region with less power to advocate for appropriate pricing and service. With that said, Consolidated is taking on some risk in guaranteeing the bonds, and reportedly the company's pricing will be the same statewide.
Broadband competition lowers prices and improves service quality. Without many foreseeable competitors, Consolidated will have an advantage as the most accessible high-speed fiber broadband provider. While some of the towns have cable, DSL, and/or limited fiber access, which creates some competition, none of the services are on par with the high-speed Internet access that Consolidated can provide via the town-funded fiber infrastructure.
However, for people struggling with slow DSL, the prospect of a fiber network is undoubtedly persuasive along with the fact that Consolidated will have to make a case for renewal after 20 years if it treats its subscribers poorly. It's certainly better than resigning oneself to a life of spinning wheels and failed file uploads.
"Town hall and historical society, Chesterfield, New Hampshire" by Wikipedia user Magicpiano, licensed under Creative Commons Attribution-ShareAlike 4.0 International (CC BY-SA 4.0)