Tag: "financing"

Posted July 18, 2013 by Lisa Gonzalez

In the 1990s, the community of Shafter, California, began developing its strategic plan; the move would eventually lead them to build a municipal broadband network. The town of 17,000 still depended primarily on agriculture but manufacturers were relocating to the community, drawn by its proximity to the railroad and its open space. Potential employers increasingly focused on broadband access as a priority and Shafter realized broadband would be critical to continued growth.

Shafter’s Assistant City Manager Scott Hurlbert recently explained to us how the community built its own fiber network to serve commercial clients, local government, and schools. This incremental approach is not unique but Shafter has no municipal electric nor gas utility, which does puts it in the company of Santa Monica, Mount Vernon, and a few other communities that have built networks without having a municipal power company.

Shafter’s City Council examined its strengths and its weaknesses and found a way to build a network with no borrowing or bonding. The community continues to expand its fiber network, attracting businesses and improving quality of life in this central California town.

In the 1990s AT&T was the main business services provider and it would only improve business telecommunications on an order-by-order basis. Companies that wanted to build beyond the developed town had to pay for the installation themselves, often waiting months to get connected. Prices were "obscene" and the delays almost killed several commercial deals. Even today AT&T takes the same approach in Shafter.

When he joined the City in 2005 as the IT Director, Hurlbert and his staff researched wireless technologies but determined that fiber-optic deployment would be the best option. At that time, the bandwidth demand was already intense and a wireless network would need fiber for backhaul. Hurlbert and staff also investigated other communities, including Chelan, Washington, to look for workable models.

In 2006, three master planned residential subdivisions were approved for expansion of the City of Shafter. The city saw this as an opportunity to...

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Posted July 2, 2013 by Christopher Mitchell

I was troubled to see Broadband Communities publish an odd and misleading story about Palo Alto in the May-June issue [pdf]. Authored by Stephen Blum of Tellus Venture Associates, a consultant that has been hired by Palo Alto in the past, it showed a remarkable level of ignorance about community owned fiber networks and broadband more generally.

The title alone, "Can FTTP Work in Palo Alto?" is just odd. Why exactly would FTTP not work in Palo Alto? It works in hundreds of other cities and towns, most of whom are less well positioned than Palo Alto for such a venture. A more honest title would have been "Consultant Argues Never Used Financing Mechanism Also Won't Work in Palo Alto." Blum made a very good case for that narrow argument but fails to lay out any convincing evidence that a variety of other models are doomed.

Parts of the article can only be called cable and DSL boosterism - such as repeating the talking point that AT&T's U-Verse and Comcast already offer "high levels of service at competitive rates." Competitive to what? Neither can deliver the speeds offered by modern fiber networks and are only "competitive" if one ignores the much slower upstream speeds, higher prices, lesser reliability, problems of oversubscription, and poor customer service one gets from those providers.

Reminds me of "Slick Sam" from Lafayette and the "functional equivalence" between DSL and FTTH.

Blum apparently knows better - that Palo Alto residents are "happy" with the existing services because they have not spontaneously marched down El Camino Real demanding faster speeds at lower prices. This is the wrong measure - reminiscent of the now oft-quoted Henry Ford line that if he asked people what they wanted, they would have said "faster horses."

The number of specific errors in this piece are many, and have been well documented by those familiar with the history of Palo Alto's studies. I want to focus on just a few. Let's start here:

Overall, 79 percent of households would have to pay $3,000 apiece to fully fund FTTP construction costs.

YIKES! Cue the foreboding music! Palo Alto...

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Posted June 30, 2013 by Lisa Gonzalez

Westminster, Maryland, began public consideration for community broadband investment last fall and has now decided to "stick our toe in the water and see how it works." The Carroll County Times recently reported that the community will move ahead with engineering for two community pilot projects.

Local leaders see this as an opportunity to flesh out any challenges for residential and business connectivity. Carroll Lutheran Village, a retirement community, was chosen for several reasons. From the article:

The residential pilot project, Carroll Lutheran Village, would cover approximately 90 acres, according to the feasibility study.

The area presents well-defined boundaries and enough population density to allow a relatively small fiber build to reach a relatively large group of currently unserved residents, the study states.

Carroll Lutheran Village will also provide insight into potential construction issues around single and multi-family housing, and the benefits and impacts of telehealth, according to the study.

Westminster's business pilot project, located in the Westminster Technology Park, is near the Carroll County Public Network (CCPN). The feasibility study notes the location as a good candidate for economic development and also a relatively dense area. We had a great conversation with Gary Davis from CCPN in episode #43 of the Broadband Bits podcast. Davis relayed how the CCPN is saving money and creating opportunities for Caroll County Public Schools.

Both Westminster projects include local cost sharing for construction; the city will use capital benefit assessment funds specially designated for such improvements. Estimate for both projects is $650,000.

Westminster's long-term goal is to connect every resident and business in the city. Like the situation all over the county, Westminster cannot convince large providers to bring the connectivity they need for economic development. 

Posted June 20, 2013 by Christopher Mitchell

It has been about a year since we checked in on FiberNet Monticello, a city-owned FTTH network about 40 miles northwest of Minneapolis. At that time, the network was generating insufficient revenue to meet debt payments, the private company operating the network (HBC) was stepping down, and Gigabit Squared was kicking the tires.

Since then, Gigabit Squared and Monticello decided against a partnership and the City ceased making payments to bondholders. Previously, the City had covered the difference between revenues and debt payments by borrowing from the City's liquor store fund, a municipal enterprise fund.

Monticello had financed the network with unbacked revenue bonds, meaning investors understood from the start that the full faith and credit of taxpayers would not "make them whole" in the event that the network did not create the revenues necessary to pay back the bond. Because Monticello chose that financing method, it had to pay a higher interest rate - those who buy bonds understand the differences in risk with different types of bonds and rates.

However, the City has been negotiating with bondholders for a settlement to avoid potential lawsuits over the telecom utility and because this is a typically what how these situations are worked out. Bondholders will "take a haircut" in the parlance of finance rather than risk a total loss.

Last week, Monticello City Council approved a $5.75 million proposed settlement in addition to the remaining funds left in the reserve fund, totaling approximately $8 million from an outstanding bond of $26 million. Final resolution may take many more months, but the major arguments seem to be worked out.

This means that Monticello will own and continue to operate FiberNet Monticello. It also means that rather than having a network financed by revenue bonds, the network will have benefited from City funds from the liquor store and will almost certainly be re-financed with other City funds. Monticello could issue a bond for the new $5.75 million but to my knowledge, no one has suggested that.

Thus far, the impact on...

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Posted June 5, 2013 by Lisa Gonzalez

Good news for Vermonters who want connectivity from the East Central Vermont Fiber Optic Network (ECFiber). The community owned network recently raised another $430,000 from local investors who purchased tax-exempt promissory notes. As a result, the nonprofit can now expand another 20 miles. Approximately 100 more households and businesses will soon have access.

Twenty-three towns belong to the consortium; Montpelier is the largest. The network currently serves 325 customers via 50 miles of fiber. Warren Johnston reports in the Valley News:

“Before the fall, we’ll have people connected in Chelsea, Vershire, Thetford, Tunbridge, Royalton and Sharon, and a lot of the people in Strafford, along with service to several neighborhoods in Norwich, [ECFiber Chariman Irv Thomas] said.

The nonprofit has raised about $3.5 million through grants and investment loans from community members.

Although residents wanting service are not required to loan money to ECFiber, the tax-free notes promise a good return for investors, ranging from 5.3 percent to 7.65 percent, depending on the type of note.

Johnston also spoke with Wynona Ward, an attorney with Have Justice Will Travel, a nonprofit legal service for victims of domestic violence and abuse in Vershire: 

“It’s just wonderful. It’s like going from the horse-and-buggy age to the jet age overnight,” said Ward, who got the service on April 23. “I’ll always remember the date. It’s made such a difference in our lives.”

The new system lets all of the firm’s five computers to be online at one time, something that the old system would not allow. Clients and lawyers now can send photographs and case files to her office, which would have crashed her previous system.

“We used to plan an hour a week to do our payroll online. Now, we can do it in a matter of minutes. It’s a tremendous savings of time,” she said. The new system also gives firm members an opportunity to keep up with online training.

“If we filed a grant application before, which can...

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Posted May 20, 2013 by Lisa Gonzalez

Longmont, Colorado, will move ahead with plans to offer fiber connectivity to the entire community. After presenting this business plan to the City Council, members voted unanimously on May 14th to support the measure. Scott Rochat from the Times-Call attended the meeting.

Residents stepped forward to express their opinions and all but one urged the council to "get it done."

From the Rochat article:

The plan projects a four-tier price structure. For residential rates, that's proposed to range from $39.95 a month for 10 megabit-per-second upload and download, to $99.95 for 100 mbps.

The study estimates that 35 percent of homes would choose to get their Internet service from the city, still leaving plenty of the field for the existing providers.

"Competition is good," Councilman Alex Sammoury said. "Just because we're a government entity doesn't mean the free market doesn't apply to us. If someone can do it better, more power to them."

The plan proposes to have the city provide Internet directly and work with a private partner for phone service.

Video service would not be provided, Roiniotis and the Uptown consultants said, because Internet video has eroded the market for traditional television.

Vince Jordan, LPC Manager, began the presentation and stressed economic development, education, and lifestyle.

Representatives from Uptown Services reviewed recommendations and the business plan. They answered about 3 hours of questions from council members, including skeptical members who want to avoid becoming the next Provo, Utah. Neil Shaw and Dave Stockton from Uptown Services provided some perspective between the two communities. They pointed out the large number of successful networks in states across the country.

Longmont had been prepared to incrementally expand the network using the cash on hand from the many years of dark fiber leasing. Such an expansion could be done without borrowing but would take a long time (more than ten years, likely) to get to everyone. This is the approach Danville, Virginia, has been using.

Instead, Longmont is now developing a plan to finance the...

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Posted May 13, 2013 by Lisa Gonzalez

In January, Longmont Power and Communications (LPC) announced they would begin connecting businesses located within 500 feet of the existing network. As we reported, local businesses were chomping at the bit to get hooked up and enjoy the high-speed next generation network. Even without efforts at marketing or advertising, more businesses have added themselves to the queue. LPC will present the formal business plan for expanding the network to the City Council on May 14th. Tony Kindelspire recently reported on the race to get on LPC's network in the Longmont Times-Call:

"We are bringing to council a business plan to build out all of Longmont," [Vince] Jordan, [Broadband Services Manager], said. "It's the whole enchilada."

The fact that there has so far been only limited rollout is due to economics. Currently, the installations are being paid for from a reserve fund that Longmont Power has built up over the years leasing portions of its fiber-optic loop to entities such as Longmont United Hospital and a third-party provider that services the school district. Those leases bring in about $250,000 annually, Jordan said.

For 2013, the Longmont City Council authorized LPC to use $375,000 of that reserve fund to begin connecting businesses and residents to the loop.

This model works, but does not connect everyone fast enough for their liking:

To expedite the build-out, extra up-front dollars will have to be allocated, but where those dollars will come from is yet to be determined, Jordan said, adding that ultimately, the decision will lie with City Council.

Map of Longmont Fiber Rings

Right now, Longmont will cover the initial cost of connecting subscribers except in cases of extraordinarily high cost cases. If it would cost $10,000 to install but the payback to the utility in 2.5 years is only $6,000, a customer would have to cover the $4,000 difference presently. While there are over 1,300 businesses with in 500 feet of the network, connection...

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Posted May 7, 2013 by Christopher Mitchell

This is a show I have been wanting to do for years - discussing some of the common mistakes that have been make by community owned networks. Offering broadband and other telecommunications services is a difficult business for any entity, public or private and all network owners make mistakes. The vast majority of these errors can be and are fixed so the network may carry on.

While in Dallas for the Broadband Communities Summit, I asked Design Nine founder Andrew Cohill about common problems faced by community owned networks and how to prepare for them or avoid them entirely.

We discuss how having a strong business plan is essential, with some of the requirements that should be included. We agree that a reliance on grant funding is a giant warning flag. We also discuss a number of other things new networks should watch out for, especially overstaffing.

Read the transcript from our discussion 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 18 minutes long and can be played below on this page or subscribe via iTunes or via the tool of your choice using this feed. Search for us in iTunes and leave a positive comment!

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

Find more episodes in our podcast index.

Thanks to Mount Carmel for the music, licensed using Creative Commons.

Posted April 15, 2013 by Lisa Gonzalez

Carroll County is a bedroom community, with a variety of economies all around it. Washington, D.C., Camp David, Baltimore, Harrisburg, Fort Detrick, and the Aberdeen Proving Ground are a few of the places surrounding Carroll County. There is very little major transportation infrastructure and no major waterways. Many of the county's 167,000 people commute daily to jobs outside of the bullseye.

Gary Davis, Chief Information Officer at the Carroll County Public Schools (CCPS) and Chairman of the Carroll County Public Network (CCPN) started at the school district in 2002 and immediately recognized that the telecommunications arrangement was insufficient.

Schools and other facilities were connected to the hub via 1.5 Mbps T1 connections and the whole wide-area-network was connected to the Internet via an expensive Frame Relay DS3 connection. The total cost ran as high as $600,000 per year.  

When CCPS approached Verizon about increasing bandwidth, Verizon’s proposal was extremely cost-prohibitive. Verizon wanted a long-term commitment that resulted in more than 10 times their current costs. Basically, Verizon would own the network but capital costs would be funded by CCPS and maintained with ridiculously high recurring fees. The return on investment for Verizon was just too low owing the community demographics.

At that time, Davis met Robert Wack of the Westminster City Council and the two compared notes. Davis' vision for Carroll County Public Schools and Wack's ideas for Westminster and Carroll County were very similar. Both involved a high-speed network and Westminster is currently involved in its own municipal network project (to be covered in an upcoming post).

A 2003 feasibility study on telecommunications upgrades for the school and a second broader feasibility study for the entire county in 2005 resulted in a loose confederation between CCPS, Carroll County Government, Carroll Community College, and the Carroll County Public Library system. Davis is proud of the fact that the CCPN has broken through past silos. The public sector has worked together in Carroll County, preventing the rampant duplication of efforts that used to be the norm. 

...

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Posted April 11, 2013 by Lisa Gonzalez

Bartow, Florida, located in Polk County near the center of the state, is considering a FTTH network for the community's 17,000 residents. At a recent City Commission meeting, members decided to put city administrators on task and develop a plan to eventually offer triple play services to residents.

Suzie Schottelkotte reported on the initiative for The Ledger.com, quoting Mayor Leo Longworth, who commented, "I think the residents are ready for it and it's something that's needed."

The City has an existing 100 mile fiber network and offers connections to some local businesses. Government and schools also use the network. At the meeting, city commissioners heard from a fiber optic consulting firm that estimated an expansion to households at $3.3 million for capital costs and $2.5 million to run the network during the startup years until the network breaks even. 

Comcast now serves the community through its cable television franchise agreement and is a source of constituent discontent:

"Without discrediting anybody, we just don't have the quality," [Mayor Longworth] said.

The Polk County Democrat also covered the discussion. Steve Steiner referred to the Mayor's comments about the private sector:

[Mayor] Long reminded commissioners that they as well as city staffers and the general public present, are familiar with the problems experienced with the current broadband provider. Long also expressed the doubt another provider would be willing to come to Bartow to install and upgrade the current system in place. The number of businesses and the size of the population does not provide any true incentive.

The Florida Cable Telecommunications Association (lobbyists for the cable industry) responded to the initiative in a predictable fashion. From the Ledger article:

"Before the city fathers take the taxpayers' money and move in this direction, they had better understand what they're getting into," he said. "It's going to be a long time before they're making money. How long do they want to lose money? — that's the real...

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