If you’re a regular reader at MuniNetworks.org, listen to our podcasts, or if you simply follow publicly owned network news, you know an increasing number of communities have decided to invest in local connectivity solutions in recent years. We’ve watched the number of “pins” on our community network map multiply steadily, but every now and then, a network drops off through privatization.

FastRoads Sold To N.H. Optical Systems

New Hampshire FastRoads received America Recovery and Reinvestment Act (ARRA), which combined with state funding, created the open access fiber optic network in the southwest section of the state. Over the next several years, the network expanded with private donations and local matching funds. Many of the premises that connected to the network had relied on dial-up before FastRoads came to town. But in part because state law makes bonding for network expansion difficult, Fast Roads will no longer be locally controlled.

The Monadnock Economic Development Corporation (MEDC), a nonprofit organization whose purpose is working to see like projects are completed that will improve economic development prospects in the region managed the project. MEDC contracted with another entity to maintain the network, which cost approximately $15,000 per month. Since they had achieved their core goal - the construction and launch of the network - MEDC had been looking for another entity to take over the network or to partner with them. They recently finalized a deal to sell the network to New Hampshire Optical Systems. 

A little over a year ago, we first shared the news about Bristol’s decision to privatize its FTTH network, OptiNet. Virginia based Sunset Digital Communications offered to purchase the network for $50 million. The network has saved Bristol millions of dollars, stimulated economic development, and cut telecommunications costs for local residents and businesses. Nevertheless, after several corrupt officials drove the network into a dark period of scandal, all those advancements paled and Bristol was ready to sell the network.

After months of negotiations with BVU’s partner in the Cumberland Plateau area service area, the details for the sale are coming together.

When There's A Partner

One of the last steps to completing the sale required approval from the Cumberland Plateau Company (CPC), which operates as a partner with BVU to bring connectivity to four additional counties in Virginia. As a partner with OptiNet in those areas, CPC owns approximately 50 percent of the assets.

When Sunset Digital offered $50 million for the BVU assets, CPC obtained the right of first refusal for the assets in the four counties where BVU and CPC work together as partners according to their contract.

Back in the fall of 2016, CPC was concerned about the legality and the details of the proposed transaction; they decided to wait for federal and state review before granting approval. Because the NTIA, the Economic Development Administration (EDA), and the Virginia Tobacco Commission provided grant funding to the CPC region for the deployment, the agencies needed to review and approve the proposal. The agencies approved the sale, but required that a large amount of BVU debt be paid. One of the claims that they required be paid was a claim for $8 million from CPC.

Approving The Offer

As part of the offer, Sunset promises to invest $6.5 million to connect more homes and businesses in the CPC region. They estimate CPC will gain about $21 million in revenue over 13 years while Sunset operates the network. CPC will retain ownership of its assets in the CPC service area and Sunset will transfer ownership of equipment in the CPC area to CPC.

Johnson City Power Board (JCPB) in Tennessee began considering expanded uses for its fiber-optic infrastructure way back in 2009. After several stops and starts, the community is on track again, having just commissioned a Fiber and Wireless to the Premise (FTTP) Feasibility Study.

A Long Road

In 2009, when the municipal utility was installing fiber to substations they reviewed the idea of offering broadband to businesses and residents. Ultimately, they chose to focus on smart-grid development and save possible telecommunications offerings for some time in the future. 

This isn’t the first time the community of 63,000 has commissioned a feasibility study. In 2011, community leaders took the results from a study and decided a public-private partnership was the best route. The community is located between Bristol, Virginia, and Chattanooga, Tennessee - both communities with municipal fiber networks that have seen upticks in economic development. Competing for new businesses and retaining the ones they already have could not have been easy while sandwiched between the two communities with high-quality connectivity.

In 2012, Johnson City announced that it would be working with the BVU Authority in Bristol as a partner. Now that the BVU system will likely be sold to a private provider, Johnson City is back to square one, but with considerable experience in its pocket. 

Asking For Input

As part if the study, JCPB has launched surveys on their website for residents and businesses; they’re also making the surveys available through the mail. JCPB is asking the community to complete the surveys before the end of June.

From the JCPB survey page:

For more than a decade, the people of Bristol, Virginia have enjoyed what most of us can only dream about - fast affordable, reliable, connectivity.  In recent days, we learned that Bristol Virginia Utilities Authority (BVU) has entered into a deal to sell its OptiNet triple-play fiber network to a private provider. The deal is contingent on approval by several entities.

As we dig deeper into the situation, we understand that troubles in southwestern Virginia and Bristol have led to this decision. Nevertheless, we urge the Bristol community to weigh the long-term consequences before they sacrifice OptiNet. Once you give up control, you won’t get it back.

"...A Few Bad Apples..."

If the people of Bristol surrender this valuable public asset to the private market, they run the risk of undoing 15 years of great work. None of this is a commentary on the private provider, Sunset Digital Communications, which may be a wonderful company. The problem is that Sunset will be making the decisions in the future, not the community. 

OptiNet has helped the community retain and create jobs, attracting and retaining more than 1,220 well-paying positions from Northrup Grumman, CGI, DirecTV, and Alpha Natural Resources. Businesses have cut Internet access and telecommunications costs. Officials estimate around $50 million in new private investment and $36 million in new annual payroll have come to the community since the development of OptiNet. The network allowed public schools to drastically reduce telecommunications expenses and introduce gigabit capacity long before such speeds were the goal among educators.

Schools and local government saved approximately $1 million from 2003 - 2008. Subscribers have saved considerably as well, which explains OptiNet's high take rate of over 70 percent. Incumbent telephone provider Sprint (now CenturyLink) charged phone rates 25 percent higher than OptiNet in 2003. The benefits are too numerous to mention in one short story.

This is the third year the Open Technology Institute (OTI) at New America Foundation studied the cost and quality of connectivity in the U.S. Once again, the results indicate we trail behind peer countries. On November 11th, Chris joined Sarah Morris, one of the report authors, to discuss the report's findings, municipal networks, and how Title II reclassification may change the landscape. They joined Dave Miller for the Think Out Loud program on Oregon Public Broadcasting. 

In addition to detailed data analysis on where the best speeds and prices are,  The Cost of Connectivity 2014 provides reviews of several other papers from sources such as Akamai, the FCC, and the American Enterprise Institute.

Some notable findings from the report:

• The average cost of plans in nearly every speed tier studied for the report was higher in the U.S. than in Europe.
• Cities considered speed leaders have consistently increased speed offerings on an annual basis. In places where the speed was not increased, as in Lafayette, rates decreased. Almost half of the speed leaders cities offer gigabit speeds. 

OTI made special note of the success of municipal networks in places where traditional providers are not willing to invest:

Although there are many examples of successful locally-owned networks, we focus on Chattanooga, TN; Bristol, VA; and Lafayette, LA, which now offer some of the fastest and most affordable high-speed residential products available in the country despite the fact that they have some of the lowest population densities among the cities we survey.

“There are companies that do what we do, but we can do it in hours, and they can take weeks,” said Posey. “Anywhere else, it would take a lot more time and a lot more money ... Chattanooga is essential to our business model.”

Al Jazeera America's Peter Moskowitz recently spoke with Clay Posey, one of the entrepreneurs flocking to Chattanooga for the network. Posey works in one of the startup incubators there, Co.Lab, developing his idea for pre-operative models that allow surgeons to prepare before operating on patients.

While Chattanooga may not be the norm and may not be an easy venture for every municipality, it lifts the bar. From the article:

“Whenever a corporation like Comcast wants to do something like raise prices, we can point at Chattanooga and say, ‘Why can’t we have something like that?’” said Christopher Mitchell, head of the community broadband networks initiative at the nonprofit Institute for Local Self-Reliance. “It establishes a baseline or at least an aspirational standard.”

The article describes lobbying efforts by large corporate providers designed to stop the municipal networks model. Another Chattanooga entrepreneur told Moskowitz:

“Having public or quasi-public Internet service providers is a good solution to consolidation because they most likely won’t be sold,” said Daniel Ryan, a local Web developer who helped run the digital operation of Barack Obama’s 2012 presidential campaign. “Do I think if every city did this, Comcast would go out of business? No. But it means there will always be competition.”

Moskowitz included a brief historical summary of the network, its contribution to the electric utility, and the challenges created by state barriers. He included our Community Broadband Networks map.

BVU in Bristol is now offering Quantum Home, a security and home management system that uses the community's publicly owned fiber network. The system allows home owners to also manage lights, temperature, and appliances from anywhere using a computer, tablet, or smartphone. For a quick video demo, check out the BVU website.

Installation costs range between $200 to $2,000 for installation and monthly charges are $39.95 - $49.95. Comcast offers a similar service, Xfinity Home, and requires installation fees to be paid in full when the system is installed. BVU plans to allow customers to amortize the installation fees over 12 months if they wish.

BVU launched OptiNet in 2001 and offers reliable triple-play at affordable prices in Bristol and surrounding areas. We talked with Jim Baller about the history of publicly owned networks in Episode #57 and Episode #63 of the Community Broadband Bits podcast. BVU's OpiNet played a prominent role as one of the first publicly owned completely fiber triple-play networks.

Tricities.com reporter David McGee recently attended a BVU Board of Directors meeting where management described the new service.

“This is an exciting new service that is actually in the market and we’ve already been selling it,” [Authority interim CEO Mike] Bundy told the board... "It will be not just home security but home automation. It’s cutting-edge technology.”