I wrote this short case study of the Powell network in Wyoming for our Breaking the Broadband Monopoly report but it never got published on this site. As we noted a year ago, Powell bought its system back from investors last year.
The city of Powell started talking about a fiber network in 1996 but did not make progress for almost ten years. They developed a plan to build a FTTH network and lease it to an outside operator. The incumbents declined to partner with the City and later spent considerable effort to derail the City’s efforts. However, the City found a local cooperative, TriCounty Telephone (TCT), willing to offer triple-play services on the City’s network.
Financing the deal took more time than expected because the City was unwilling to commit public money directly or even as a backstop if the network fell behind on debt payments. While the City worked on the financing, cable incumbent Bresnan and telephone incumbent Qwest tried to convince the state legislature to abolish Powell’s authority in this arena. The legislature did create new obstacles for cities building such systems but Powell was grandfathered in.
In late 2007, the City agreed to an arrangement where TCT would exclusively lease the network and make up shortfalls in debt payments if required for a period of six years. After that period, the network would be open to other service providers as well and it would be the City’s responsibility to cover any shortfalls if needed. If the City chose not to appropriate in that situation, the investors could take the network. Estimates suggested a 33% take rate would allow the network to break even by the fifth year but most expected a higher take rate.
In early 2008, Powell completed the $6.5 million bond financing. As is more common in small builds, they immediately connected a line to the home rather than waiting for the subscriber to sign up. They trenched a fiber to the side of every house regardless of whether they were taking service, putting the fiber in a box on the side of the house. If the occupant signs up, a crew only has to install electronics rather than bringing a line down from the pole. This approach increases the capital cost slightly but can significantly decrease operating expenses as residents subscribe.
TCT began offering services in early 2009, creating a price war. Bresnan and Qwest significantly lowered their promotional prices in response to the network, ensuring that even residents who do not subscribe to the new city owned network will benefit from it. Bresnan has lowered its prices considerably, offering deals to Powell customers that are unavailable in nearby communities without competition. Incumbent providers often engage in what appears to be predatory pricing – a matter we discuss below in Obstacles to Community Ownership.
Powellink, built with the slogan “Our Fiber, Our Future,” offers much faster speeds than Qwest and Bresnan, both of whom are limited to asymmetrical connections that leave upload speeds at 1Mbps or less. TCT, whose network can offer 100Mbps symmetrical connections, does not fool around with promotional rates and long-term contracts.
Responding to critics of the City’s investment, Powell’s mayor noted that small communities like Powell always have to wait for companies to get around to them:
"It was 10 years ago when people at Qwest said they would be bringing us a fiber-to-the-home system," he said. "I found a letter from 1997 saying, 'It's coming soon.' Obviously, 'soon' for us is different for them."
The network has attracted jobs that require these high speeds – teaching English to students around the world using tele-presence applications. The company intends to hire 100 people, a major economic development win in a community of 5,000.
Powell’s City Administrator, Zane Logan, argues that building a modern network offers much more bang for the buck on the matter of economic development. Some communities work out tax breaks and other advantages for a company that announces it will create a certain number of jobs. In Powell, they instead focused on providing great infrastructure. They started by upgrading the public power system to ensure the highest reliability. Then they built an impressive network, offering speeds rarely available in even the densest urban areas of the U.S. and at prices below existing packages. Now, as Powell expands, developers will pay the majority of costs to expand the network in newly built neighborhoods in the same way they connect sewer systems.
Powellink Photos, courtesy Ernie Bray.