Tag: "bonds"

Posted November 24, 2010 by Christopher Mitchell

David Isenberg, of isen.blog, has published a short history of Reedsburg's community fiber network that he previously wrote for the FCC when they were gathering evidence of successful networks they would later ignore in formulating a plan to continue the failed status quo of hoping private companies will build and operate the infrastructure we need.

Nonetheless, one cannot say that smart people like David did not try to help the FCC overcome its obsession with national carriers who dominate the conversations, and whose employees often work periodically with the FCC in what we call the revolving door (which itself, is a reason the FCC has been captured).

Back to Reedsburg; it is a small community approximately 55 miles northwest of Madison that just happens to have far better broadband service than just about anywhere else in Wisconsin.

David writes,

RUC first entered the telecommunications business in 1998, when it constructed a ring to tie its wells, its five electrical substations together and to provide Internet access for its high school, middle school and its school administration building. In planning the ring, the city asked Verizon and Charter if they would build it, but they were not responsive. RUS built a partly aerial, partly buried 7-mile ring of 96-strand fiber at a cost of about $850,000. Internet access was provided by Genuine Telephone, a tiny subsidiary of LaValle Telephone Cooperative which ran a fiber from LaValle, about 8 miles NW of Reedsburg.

As they were building the ring, local businesses asked to be connected as well. Reedsburg took the path that so many communities have followed, start by building for yourself and expand opportunistically. Of course, this requires that you originally engineer the network so it can be later expanded, which is good practice regardless of your future plans.

Reedsburg used bond anticipation notes, a financial mechanism that few others have used in building similar networks.

A local bank loaned the initial $5 million in bond anticipation notes for planning and construction. Then RUC issued an...

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Posted June 21, 2010 by Christopher Mitchell

Powell, a small community in Wyoming, has bought its own network from the investors who financed it [Powell Tribune], eighteen years ahead of schedule. For a short history of Powellink, see Breaking the Broadband Monopoly.

The decision, unanimously agreed to by City Council, came from the realization that the City's reserves were earning very little interest while they were paying a higher interest rates to those who financed the network. So they decided to invest in themselves.

Under the new agreement, Powellink will become a fifth enterprise for the city, joining the electric, water, waste water and sanitation enterprises. The other four enterprises will loan Powellink the $6.5 million, and payments from service providers using Powellink — such as TCT — will go back to the enterprises to pay off the loan.

City Administrator Zane Logan had previously told me that he thought Powellink was a much better approach to attracting jobs to the area than the approach frequently used by communities - tax breaks to companies in return for creating jobs. In the Powell Tribune article, he explained how this approach allows Powell to be more self-reliant.

Logan said he believes the new agreement will help Powell during a difficult economic climate. The state cut its funding of cities and towns this year, and sales tax revenues are down.

“We’re trying to help ourselves and not be dependent on the state,” he said. “The Legislature is saying cities need to take care of themselves, and I like to think that Powell is doing that.”

Local cooperative TCT had the right to another four years of exclusive operation as the sole service provider but gave that up, meaning the network will now be open access. In return, TCT does not have to guarantee revenue to the City (as it agreed to do in each year it was an exclusive service provider).

These changes come about as Cablevision bought Bresnan, the cable incumbent that had radically lowered rates to compete with Powellink. It will be interesting to see how Cablevision continues or changes company policy in Powell.

Photo courtesy of Ernie Bray...

Posted June 26, 2009 by Christopher Mitchell

Jesse of Free UTOPIA offered an in-depth explanation of UTOPIA's financial situation and some of the financial difficulties they are facing in mid-2009.

A snippet:

I had the opportunity to go down to UTOPIA’s office today to get updated on what’s going on down there. I walked away with a much better feel of what’s going on and a better understanding of what has caused the situation with the bonds. They also comitted to do a better job of keeping me up to speed on what’s happening. Here’s the lowdown on why the bonds are being called.

The bond situation they are in is complex, ugly, and not at all their fault. UTOPIA was required by the financing bank to use variable rate bonds instead of fixed rate bonds. Variable rate bonds obviously create a lot of issues with financial planning since you can end up with drastic and sudden rate changes. As a hedge against this, UTOPIA opted to create sort of a hedge against this volatility using a second type of bond. (If I screw up this explanation, someone send Kirt Sudweeks in to fix my explanation.)

The gist of it is that UTOPIA makes payments on a bond at a fixed 5.65% in exchange for receiving revenues on a type of variable-rate bond that has, historically, been withing 14 basis points (0.14%) of the type of bond they are using for financing. Because the bonds paid to them have historically been about the same as the bonds they are paying, it should, in theory, ensure that they pay no more than 5.65% on the outstanding debt.

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