Tag: "bresnan"

Posted June 10, 2011 by christopher

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.

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Posted June 21, 2010 by christopher

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...

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