Tag: "financing"

Posted April 2, 2014 by Lisa Gonzalez

In a revealing video about the Internet access problem in rural Minnesota, Annandale City Administrator Kelly Hinnenkamp below describes her town's struggle with connectivity. The video is the latest in a series on the Minnesota Senate DFL YouTube page intended to shed light on the critical situation in the state.

Hinnenkamp describes broadband in the areas outside of Annadale as "horrific." She goes on to discuss how the community's poor connectivity negatively impacts its economic health. She shares a story about entrepreneurs from an artisan spice business once located in Annandale. The company started with online sales but the owners anticipated opening a storefront in the downtown area of the lake community. After contending with eight outages in three weeks, the new business pulled up stakes and moved to Buffalo. 

Buffalo, located only 15 minutes away from Annandale, offers fast, reliable, affordable fiber service to local businesses.

In a February Minnesta Public Radio News article, Hinnenkamp told Dave Peters:

“Broadband is probably the single most important issue in our community right now,” she said. “Our big issue is not that we don’t have service but that we have one provider that has shown little interest in improving it. Broadband is our future."

In a Star Tribune article, Pete Kormanik, the owner of a local McDonald's, expressed his concern as a business owner:

Downloading data for a digital menu board — a task that would have taken 30 minutes at his other restaurants — dragged on for more than four hours.

After delays in processing credit cards, watching training videos and transmitting orders, Kormanik switched to an AT & T antenna. But a cloudy day can slow that service.

“If you can’t stay current with [connectivity], you’re just going to fall behind,” Kormanik said. “And businesses won’t go into those locations.”

Watch the brief interview with Hinnenkamp below or visit the series website to see more interviews. In the words of...

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Posted March 26, 2014 by Lisa Gonzalez

The East Central Vermont Community Fiber-Optic Network (ECFiber) recently connected its 600th customer. The network continues to connect to additional homes and businesses, recently reaching Royalton. According to the Valley News, the network will extend to over 200 miles by the end of 2014, passing more than 2,000 homes and businesses.

The story notes that the Vermont Telecom Authority's Orange County Fiber Connector, a dark fiber project running through Orange and Windsor Counties, facilitated the expansion. From the article:

“In addition to offering us the possibility to connect more than 500 homes and businesses along the route, the (Orange County connector) will enable the interconnection of our remote hubs, allowing us to purchase more bandwidth and offer higher throughput to our subscribers,” said Stan Williams, chief financial officer and interim chief executive officer of ValleyNet, the Vermont nonprofit charged with operating ECFiber.

ECFiber sells tax-exempt promissory notes to local investors to fund the network. The coalition of communities that participate in the network now number 24. The Valley News also reports that the new CEO for ValleyNet will be Tom Lyons, formerly of Sovernet. Lyons replaces Tim Nulty, who recently retired.

Leslie Nulty, one of the network's champions, talked with Chris in episode 9 of the Community Broadband Bits podcast. She described the ECFiber model and shared the history of the network.

Posted January 23, 2014 by Lisa Gonzalez

The Logan Journal recently reported that the Russellville Electric Plant Board (EPB) now offers gigabit service to local businesses. The article notes that Net Index, an online tool to measure download and upload speeds, recognizes EPB as the first Gig city in Kentucky. To learn more about the community and its network, we talked with Robert White, General Manager of EPB.

The community of 7,000 is the county seat of south central's Logan County. Russellville is located in the center of several other larger communities: Nashville, Bowling Green, Hopkinsville, and Clarksville, Tennessee. Manufacturing has been a large part of the local economy for generations, but community leaders recognize the vulnerability of a narrow economic base. In order to encourage a versatile economy, Russellville invested in its telecommunications utility.

The community wants to encourage small business while simultaneously providing manufacturers the connectivity they need. Leadership sees the ability to remain competitive directly tied to their network. In addition to the economic development opportunities a fiber network can provide, communities like Russellville rely on electricity revenue from large consumers. Retaining the large electric consumers that also provide jobs in the community is a must.

Russellville's electric utility created a strong advantage when it was time to venture into telecommunications. EPB had already established a strong relationship with its Russellville customers, says White, and locals felt they could trust their municipal electric provider.

EPB began offering wireless Internet to the community in 2005; at the time, there was very little choice for wireless or wired Internet. The product was competitively priced and it performed well for wireless service at the time but EPB eventually shifted focus to its next generation high-speed network. The wireless service is still available to customers who subscribed prior to the construction of the fiber network but EPB no longer offers it to new customers. Wireless speeds vary from 1-2 Mbps download and approximately 500 Mbps upload. The area now has several options from the private sector - Verizon and Bluegrass Cellular provide...

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Posted January 9, 2014 by Christopher Mitchell

We are adding a new fact sheet to our growing collection with the new, Financing Municipal Networks Fact Sheet. Many have assumed that municipal networks are funded with taxpayer dollars, but this is not true in the overwhelming number of cases.

When a community decides it needs to establish its own publicly owned network infrastructure, one of the biggest challenges is financing the investment. Each community is unique but three main methods of financing are most popular. This fact sheet offers a quick look at these common approaches and provides real-world examples.

Download the Fact Sheet [pdf]

Posted January 9, 2014 by Christopher Mitchell

This the second in a series of posts exploring lessons learned from the Seattle Gigabit Squared project, which now appears unlikely to be built. The first post is available here and focuses on the benefits massive cable companies already have as well as the limits of conduit and fiber in spurring new competition.

This post focuses on business challenges an entity like Gigabit Squared would face in building the network it envisioned. I am not representing that this is what Gigabit Squared faced but these issues arise with any new provider in that circumstance. I aim to explain why the private sector has not and generally will not provide competition to companies Comcast and Time Warner Cable.

Gigabit Squared planned to deliver voice, television, and Internet access to subscribers. Voice can be a bit of hassle due to the many regulatory requirements and Internet access is comparatively simple. But television, that is a headache. I've been told by some munis that 90% of the problems and difficulties they experience is with television services.

Before you can deliver ESPN, the Family Channel, or Comedy Central, you have to come to agreement with big channel owners like Disney, Viacom, and others. Even massive companies like Comcast have to pay the channel owners more each year despite its over 10 million subscribers, so you can imagine how difficult it can be for a small firm to negotiate these contracts. Some channel owners may only negotiate with a provider after it has a few thousand subscribers - but getting a few thousand subscribers without good content is a challenge.

Many small firms (including most munis) join a buyer cooperative called the National Cable Television Cooperative (NCTC) that has many of the contracts available. But even with that substantial help, building a channel lineup is incredibly difficult and the new competitor will almost certainly be paying more for the same channels as a competitor like Comcast or Time Warner Cable. And some munis, like Lafayette, faced steep barriers in just joining the coop.

FCC Logo

(An...

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Posted January 7, 2014 by Christopher Mitchell

Today, Lisa and I are joined by Eric Lampland for a discussion of how a community could justify building a community owned network from the indirect benefits that it would create, including the savings that each household realizes from competition driving down prices. Eric Lampland is the CEO and principal consultant of Lookout Point Communications, which helps local governments that are building a network or considering an investment.

Eric and I start by discussing how quickly the cost savings per household add up to equal more than the cost of building a network and we digress from there, covering other topics related to community owned networks. This includes how big cable companies would respond to this approach.

I have to note that most community networks have not been justified on this basis - the vast majority of community networks were designed to pay their full costs and they are doing so. Here, we discuss the general benefits of these networks that are often sidelined in the policy discussion and how they alone may justify a fiber network.

Toward the end, we begin discussing open access, something we will likely return to in the future as Eric has long both advocated for open access and has some insights into the technical challenges of building such a network.

Read the transcript from this episode here.

We want your feedback and suggestions for the show - please e-mail us or leave a comment below. Also, feel free to suggest other guests, topics, or questions you want us to address.

This show is 25 minutes long and can be played below on this page or via iTunes or via the tool of your choice using this feed.

Listen to previous episodes here. You can can download this Mp3 file directly from here.

Find more episodes in our podcast index.

Thanks to...

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Posted January 6, 2014 by Christopher Mitchell

A few weeks ago, a Geekwire interview with outgoing Seattle Mayor Mike McGinn announced that the Gigabit Squared project there was in jeopardy. Gigabit Squared has had difficulty raising all the necessary capital for its project, building Fiber-to-the-Home to several neighborhoods in part by using City owned fiber to reduce the cost of building its trunk lines.

There are a number of important lessons, none of them new, that we should take away from this disappointing news. This is the first of a series of posts on the subject.

But first, some facts. Gigabit Squared is continuing to work on projects in Chicago and Gainsville, Florida. There has been a shake-up at the company among founders and it is not clear what it will do next. Gigabit Squared was not the only vendor responding to Seattle's RFP, just the highest profile one.

Gigabit Squared hoped to raise some $20 million for its Seattle project (for which the website is still live). The original announcement suggested twelve neighborhoods with at least 50,000 households and businesses would be connected. The project is not officially dead, but few have high hopes for it given the change in mayor and many challenges thus far.

The first lesson to draw from this is what we say repeatedly: the broadband market is seriously broken and there is no panacea to fix it. The big cable firms, while beating up on DSL, refuse to compete with each other. They are protected by a moat made up of advantages over potential competitors that includes vast economies of scale allowing them to pay less for advertising, content, and equipment; large existing networks already amortized; vast capacity for predatory pricing by cross-subsidizing from non-competitive areas; and much more.

So if you are an investor with $20 million in cash lying around, why would you ever want to bet against Comcast - especially by investing in an unknown entity that cannot withstand a multi-year price war? You wouldn't and they generally don't. The private sector invests for a return and overbuilding Comcast with fiber almost...

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Posted January 3, 2014 by Lisa Gonzalez

In 1985, Auburn Electric became one of the first communities in the midwest to deploy fiber. At the time, the purpose was to improve electric and voice systems substation communications within the municipal utility. That investment laid the foundation for a municipal network that now encourages economic development and saves public dollars while enhancing services.

Auburn expanded its fiber network beyond electric systems in 1998. The utility began using the network to serve city and county government operations. It is not well known, but Auburn offered gigabit service to its public sector customers way back in 1998.

The benefits from the deployment prompted community leaders to develop an Information Technology Master Plan in 1998 that would answer the question of what other ways the fiber could serve the community? As part of the Master Plan, Auburn leaders collected information from other communities that were capitalizing on their own local fiber. While Auburn made no immediate plans, they kept an open mind, waiting until the time was right.

In 2004, Cooper Tire and Rubber (now Cooper Standard) was about to be sold from its parent company. The $1.6 billion auto component manufacturer needed a data center but bandwidth was insufficient and inconsistent in Auburn. Cooper considered leaving because the incumbents, Mediacom and AT&T, could not or would not provide the broadband capacity the company needed. If Cooper left town, an estimated $7 million in wages and benefits from 75 high-paying tech jobs would also leave. At the time, Auburn was home to 12,500 people.

County Courthouse in Auburn, Indiana

According to Schweitzer, the City tried to persuade the telephone company to find a solution with Cooper but the two could not reach an agreement. Rather than lose Cooper, the City of Auburn stepped in to fill the connectivity gap in 2005.

In a 2007 interview with Public Power magazine, Schweitzer noted advantages in Auburn that facilitated the project:

“We also had a major tier-one Internet provider with a...

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Posted December 19, 2013 by Lisa Gonzalez

Tullahoma Utilities Board's triple-play FTTH LightTUBe, began serving Tullahoma in 2009. The fiber network utility is paying off its city bond debt on schedule reports the Tullahoma News.

The network's income during the first four months of fiscal year 2014 is a positive $58,939. General Manager Brian Skelton spoke with Chris Mitchell in July 2013 and expressed confidence that that network will continue to operate in the black. The News reported on our podcast interview with Skelton and provided some recent updates:

With an estimated potential customer base of 9,000 in the TUB service area, LightTUBe services 3,201 fiber customers. That number is slightly ahead of goal (3,186) and represents nearly 36 percent market penetration against primary competitor Charter Communications.

Tullahoma deployed its network to encourage economic development. In 2011, we reported on J2 Software Solutions. The company located its headquarters in Tullahoma because LightTUBe offered fast, reliable, affordable service. 

According to the News article, expenditures on Internet service remain consistent while subscriptions grow. The Tullahoma Utilities Board (TUB) only recently approved a $7 rate increase for video service due to an increase in the cost of television content. When content rates rose in the past, TUB chose to absorb the increase but the cost of content continues to increase for all providers. Since 2009, TUB increased Internet service speeds five times without increasing prices. From the article:

”LightTUBe is in a very comfortable position from a financial perspective. Our biggest concern at this point is the unreasonable price increases that we (and others in the video business) are seeing from many of our channel providers,” said Skelton.

That comfortable financial position appears to rest largely on the shoulders of LightTUBe’s Internet service.

While video and telephone services together generate enough income to offset the system’s net maintenance and depreciation costs, Internet services generate enough income to offset...

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Posted December 12, 2013 by Lisa Gonzalez

Chanute's City Commission voted on November 25th to move forward with plans for a FTTH network. The community of approximately 9,000 began installing fiber in 1984 for electric utility purposes. They have slowly expanded the network throughout the community. Chanute's fiber and wireless broadband utility now serves government, education, and several businesses. We documented their story in our case study, Chanute’s Gig: One Rural Kansas Community’s Tradition of Innovation Led to a Gigabit and Ubiquitous Wireless Coverage.

Beth Ringley from The Motive Group presented its feasibility study to the City Commission at the meeting. The proposal includes smart grid technology to support Automated Metering Infrastructure for the municipal electric, natural gas, and water utilities and enhanced triple-play service offerings. City leaders hope to eventually support multiple providers via the infrastructure.

The Motive Group predicts a 35% take rate with 5,000 premises passed. The estimated cost will be $19.5 million; revenue bonds would finance the deployment. Business models predict a positive cash flow after six years with capital costs paid off in approximately 20 years.

The City Commission voted unanimously to allow the City Manager to move forward by investigating financial options for the project and make recommendations for Commission approval. The City Manager will also proceed with negotiations with vendors needed to construct and manage the project. 

The City Commission meeting is available online. Discussion about the proposal begins approximately one hour into the meeting. You can also view slides of The Motive Group Presentation in the meeting documents.

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