Tag: "finance"

Posted April 17, 2018 by lgonzalez

When Fort Collins voters chose to amend their charter last year, they were choosing a path to simplify their ability to improve local connectivity. When Comcast tried to derail the measure to protect their monopoly, community members established a vibrant grassroots effort to overcome the influx of cash and disinformation. Now, Fort Collins is moving ahead after establishing that they intend to issue revenue bonds to develop a municipal fiber optic network.

Big Spending Didn’t Stop The Need

After all the spending was totaled last December, Comcast and CenturyLink under the mask of Priorities First Fort Collins, spent $900,999 to try to defeat measure 2B. The proposal passed anyway and allowed the city to amend its charter. That change allows Fort Collins to issue bonds for telecommunications infrastructure and to take other steps necessary to offer Internet service without taking the issue to the voters a separate time.

Thanks to the efforts of Colin Garfield and Glen Akins and their citizen-led effort to educate and correct Comcast’s disinformation, voters in Fort Collins passed measure 2B. The city opted out of the state’s restrictive SB 152 back in 2015 and voices in the community have advocated for exploration of a publicly owned option for several years. Seems people and businesses in Fort Collins were not able to get the connectivity they needed and incumbents weren’t interested in providing better services.

When the FCC decided late in 2017 to abandon network neutrality policy, Fort Collins City Council decided the time was right to move forward. In January, they voted to establish a municipal telecommunications utility. Their first step was in approving $1.8 million for startup costs, including hiring personnel, equipment, and consulting; the measure passed unanimously. The city council approved the loan from the city’s general fund to the city’s electric...

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Posted June 1, 2017 by lgonzalez

For the second week in row, our staff has felt compelled to address a misleading report about municipal networks. In order to correct the errors and incorrect assumptions in yet another anti-muni publication, we’ve worked with Next Century Cities to publish Correcting Community Fiber Fallacies: Yoo Discredits U Penn, Not Municipal Networks.

Skewed Data = Skewed Results

Professor Christopher S. Yoo and Timothy Pfenninger from the Center for Technology, Innovation and Competition (CTIC) at the University of Pennsylvania Law School recently released "Municipal Fiber in the United States: An Empirical Assessment of Financial Performance." The report attempts to analyze the financial future of several citywide Fiber-to-the-Home (FTTH) municipal networks in the U.S. by applying a Net Present Value (NPV) calculation approach. They applied their method to some well-known networks, including Chattanooga's EPB Fiber Optics; Greenlight in Wilson, North Carolina; and Lafayette, Louisiana's LUS Fiber. Unfortunately, their initial data was flawed and incomplete, which yielded a report fraught with credibility issues.

So Many Problems 

In addition to compromising data validity, the authors of the study didn’t consider the wider context of municipal networks, which goes beyond the purpose of NPV, which is determining the promise of a financial investment.

Some of the more expansive problems with this report (from our Executive Summary):

  • They erred in claiming Wilson, Lafayette, and Chattanooga have balloon payments at the end of the term. They have corrected that error in a press release. Other errors, such as confusing the technologies used by at least two networks, are less important but decrease the study’s credibility.
  • Several of the cities dispute the accuracy of the numbers used in the calculations for their communities.
  • The Net Present Value calculation is inappropriate in this context for...
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Posted May 26, 2017 by Nick

S&P Global Market Intelligence - May 26, 2017

Hard Data on Municipal Broadband Networks

Written by Sarah Barry James

There is a dearth of good data around municipal broadband networks, and the data that is available raises some tough questions.

A new study from University of Pennsylvania Law School Professor Christopher Yoo and co-author Timothy Pfenninger, a law student, identified 88 municipal fiber projects across the country, 20 of which report the financial results of their broadband operations separately from the results of their electric power operations. Municipal broadband networks are owned and operated by localities, often in connection with the local utility.

...

Yet Christopher Mitchell, director of the Community Broadband Networks Initiative at the Institute for Local Self-Reliance, argued that Yoo's study did not present an entirely accurate or up-to-date picture of U.S. municipal networks.

"When I looked at the 20 communities that he studied — and his methodology for picking those is totally reasonable and he did not cherry pick them — I was not surprised at his results because many of those networks are either in very small communities … and the others were often in the early years of a buildout during a period of deep recession," Mitchell said.

As an example, Mitchell pointed to Electric Power Board's municipal broadband network in Chattanooga, Tenn. — one of the five networks Yoo identified as having positive cash flow but at such a low level that it would take more than 100 years to recover project costs.

...

In fact, without the revenue generated by the fiber-optics business, EPB estimated it would have had to raise electric rates by 7% this year.

According to Mitchell, Yoo's study captured the Chattanooga network when it was still "small and growing," but misses "what's going to happen for the rest of the life of the network, which I think is the more important part."

...

Read the...

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Posted May 25, 2017 by Nick

Telecompetitor - May 25, 2017

Municipal broadband networks do not have a strong financial track record, according to an analysis conducted by the University of Pennsylvania’s Center for Technology, Innovation and Competition. The municipal broadband financial analysis, which looked at 20 municipal fiber projects, found that only nine were cash-flow positive and that of those, seven would need more than 60 years to break even.

...

An Opposing View

Municipal network advocate Christopher Mitchell, director of the Community Broadband Networks Initiative at the Institute for Local Self-Reliance, pointed to several flaws in the Penn Law municipal broadband financial analysis.

He noted, for example that a substantial portion of the 20 networks studied were “early in the process and very small.” He also argued that the 2010-2014 study period may have biased the results, as that period included a recession and subscribership for some of the networks has increased substantially since 2014. He noted, for example, that EPB’s broadband network in Chattanooga had about 50,000 to 55,000 subscribers in 2014 but has now hit the 90,000 mark.

The Penn Law authors’ approach was “not the proper way to measure these networks,” said Mitchell in a phone call with Telecompetitor. The analysis “doesn’t take into account jobs created or the impact on the municipal budget,” he said.

He argued, for example, that a municipality that previously paid $1 million annually for connectivity might instead pay itself $500,000 for connectivity on the municipal network.

...

Read the full story here.

Posted May 2, 2016 by ternste

A new study conducted by two economists from a major banking institution says that municipal broadband networks contribute significantly to helping low income households gain access to banking services.

Major Findings, And Why Does This Matter?

The researchers concluded that access to the Internet is a more significant predictor of access to banking services (specifically, having a bank account) than both race and education level. They found that when low income families get access to Internet service, their likelihood of having access to banking services increases by 10%.

Economists commonly focus on access to banking services as a key indicator of financial inclusion for low income households. A bank account enables basic human stability and prosperity as it facilitates financial planning, paying for recurring expenses, and allays negative effects of unexpected financial shortfalls from traumatic events. Bank accounts also allow individuals to build working capital and financing for small business enterprises.

Financial inclusion is a significant concern not just in developing nations but in some wealthy countries as well. Currently, the U.S. ranks 23rd out of 38 high-income nations on the World Bank’s Global Financial Inclusion Database. 

Municipal Networks: Catalysts For Equal Opportunity

The authors suggest that in addition to directly improving Internet access through better availability, municipal networks improve Internet access by improving local Internet service competition. They note that collaborative efforts between local governments and private industry can also improve Internet access and financial inclusiveness.

What can be done to advance the goal of getting fast, affordable, reliable Internet access - and access to banking - for all? The authors of the study suggest that municipal broadband projects in particular increase the likelihood that everyone, regardless of...

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Posted January 16, 2016 by lgonzalez

In April 2015, Wisconsin's Brett Schuppner from the Reedsburg Utility Commission (RUC) had a conversation with Chris about the utility's plan to expand the municipal fiber network. Funding is one of the biggest challenges but in December, the RUC learned that it a state grant will help move those plans forward.

WisNews recently reported that the RUC applied for $110,000 to bring the triple-play fiber network to Buckhorn Lake in Sauk County. The Wisconsin Public Service Commission announced on December 11th that the RUC will instead receive $69,300 which will allow the network to extend to an additional 105 homes and 40 properties. From the article:

Schuppner said an informal survey of members of the Buckhorn Property Owners’ Association suggests the utility commission will likely recover its out-of-pocket costs for the project not covered by the grant of about $40,000 from new users in the first year.

RUC began serving the community in 2003, expanding in 2011, and offering gigabit service in 2014. The community is located about 55 miles northwest of Madison and home to approximately 10,000 people.

Ten other entities across the state also received grants. RUC anticipates construction to begin on this expansion early this year.

Posted April 22, 2015 by lgonzalez

Lincoln, Illinois, has contemplated investing in a fiber-optic municipal network since 2009 and, while they have not taken steps to deploy yet, the community appears to be ready to dive in. The Lincoln Courier reports that the City Council recently considered investing $100,000 to deploy fiber in the downtown business district.

Lincoln, located right in the center of the state, is home to approximately 14,500 people. At the meeting, City Administrator Clay Johnson described the need as essential for economic development:

"Fiber optics are the sewer and water for economic development; what businesses look for when they want to locate in your area or expand in your are is, ‘do they have access to high speed internet’ and in a lot of areas, no they don’t."

Johnson believes that existing fiber from local Lincoln College could be integrated into a network that would eventually lead to better access to businesses and as backhaul for downtown Wi-Fi. His "extremely preliminary" estimate is $140,000 - $160,000 for a fiber connection from the college down one of the main commercial corridors.

He also suggested that a long-term plan would include connectivity for local schools as a cost-saving measure.

In 2009, former Mayor Keith Snyder's administration embraced the idea of investing in municipal fiber infrastructure as part of a downtown revitalization plan. In 2012 the community received a $600,000 grant of which $16,500 was dedicated to develop an initial plan for a network. City leaders ultimately decided to direct remaining funds toward other projects in 2012 and the City Council is once again taking up the possibility of fiber.

Posted August 4, 2012 by christopher

When communities are trying to figure out how to pay for networks, they sometimes fail to explore some logical places. A recent article on Telecompetitor gives us an estimate for revenues from inserting ads in cable television programming.

Before the economic downturn, a typical small video service provider could expect between $1.25 and $2.00 a month per subscriber in ad revenues, noted Walter P. Staniszewski, president of Prime Media Productions – a company that sells advertising for small video service provider clients. Since the downturn, the numbers are more like $1.00 to $1.50.

The article focuses on the windfall cable operators are seeing due to all the money being spent by big-money interests in anticipation of the election in November.

However, the smallest networks may not want to commit to ad-insertion until they are reaching thousands of homes, according to the Telecompetitor source:

“If you study the cable industry, even the big guys didn’t have their own sales force until they developed some real scale,” said Staniszewski. He cautioned operators with systems with fewer than 5,000 or 6,000 subscribers against hiring their own sales force.

Posted March 8, 2012 by christopher

Chattanooga's EPBFi community fiber network has been one of the most celebrated muni networks in the nation. They were the first to offer a gigabit to anyone in the city and have launched a bounty for geeks that relocate to the "Gig City."

They have connected 35,000 subscribers to the network, blowing away their original goal of 26,000 by the third year. They have attracted thousands of new jobs that would not have materialized if they simply accepted the AT&T/Comcast duopoly for their community.

The Times Free Press reports:

At the current rate, EPB can shave seven years off the time it will take to pay off its telecom debt, becoming virtually debt-free by 2020 instead of 2027 as projected, Eaves [EPB CFO] said.

Even so, the government utility still is spending money to sign up new customers, a process that will increase debt until 2013, Eaves said.

The utility has $51 million in total debt so far, but it only needs 30,000 customers to break even on operational costs, Eaves said.

"We are currently cash- flow positive from an operations standpoint, but still increasing debt to fund the capital associated with signing up new customers," he said.

As we frequently remind our readers, finances are complicated. Even though the network continues to do very well, its debt will increase for a few more years while it continues rapidly acquiring new subscribers. Each subscriber takes years to pay off the debt of connecting them.

Recall that EPB unexpectedly got a Department of Energy stimulus grant to deploy its smart grid much more rapidly than planned for. As the electric division owns much of the fiber fabric, the grant does not impact the finances of the Fiber-Optic division, aside from allowing EPB to roll the network out to more people more rapidly. The changed plan increased their costs and their revenues over the original plan.

Posted January 5, 2012 by christopher

Provo built a city owned FTTH network after its public power utility started connecting its substations with fiber-optic cables in the early 2000's. iProvo ultimately developed along similar open access lines as UTOPIA, but unlike UTOPIA, Provo did not actually want to operate on a purely wholesale model.

iProvo was forced into the wholesale-only model, where the publicly owned network offered wholesale services to independent ISPs that then resold service to residents and businesses. Comcast and Qwest (now CenturyLink) recognized the threat posed by municipalities building next generation networks -- particularly in communities that did not even have full DSL and cable coverage from the giant providers that long delayed upgrades, knowing that subscribers had no other options.

Comcast and Qwest went to the state legislature and did what they do best -- bought influence and pushed through laws to essentially prohibit publicly owned networks from offering direct retail services, knowing that the wholesale-only approach had proved a very difficult model to work financially.

UTOPIA had long had a vision of making the open access, wholesale-only model work (that proceeded to largely fail, for a variety of reasons -- only to start turning around in recent years) but Provo, with its public power utility, was denied its preferred model of offering services directly.

iProvo was built at a cost of $40 million and has operated in the red since, though a number of postive externalities from the network was not included in those calculations. For instance, City Departments had access to much higher capacity connections than were available previously and were not charged for them (a poor practice in our estimation). For more details on iProvo, I recommend a video of a discussion in 2011.

At any rate, iProvo was then sortof sold off to a private provider (sort of because the city is still on the hook for the debt) in large part because private providers are not as crippled by state law. Unfortunately, the network has already developed a bad reputation for many (thanks to the state law preventing Provo from being able to ensure a good subscriber experience).

And now Provo is...

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