financing

Content tagged with "financing"

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Lake County, National Public Broadband, Go Separate Ways

For two years, National Public Broadband (led by Gary Fields and Tim Nulty) has worked with Lake County, Minnesota, to build a universal rural FTTH broadband network to everyone in the County and some nearby towns in Saint Louis County. Toward the end of 2010, the relationship became somewhat tense as some county commissioners questioned what NPB had told them about Burlington Telecom, and a number of media outlets raised questions about Nulty's relationship to BT's problems without actually investigating the story. Now the Lake County News-Chronicle (which, over the course of this story, has taken the time to report facts rather than following the lazy lead of the Star Tribune and Duluth News Tribune), reports that Lake County and National Public Broadband are kaput. Lake County is seeking a new partner to build the project.
Lake County could not reach agreement on a permanent contract with National Public Broadband, its consultant firm for nearly two years. The two sides battled for nearly two months and couldn’t solve issues based on bonus payments and the ability for the county to fire NPB without cause and without penalty. The negotiations had bogged down work on the actual project, Commissioner Paul Bergman said, and the board wanted a fresh start.
Additionally, due to the state of financial markets, the County is planning to self-fund the $3.5 million local obligation required to access to the broadband stimulus award. Lake County hoped to bond for the matching funds but the current interest rates make that an fiscally unwise approach. While this does not change the project, it will change the perception of the project and open it to increased attacks from those who don't want the County to build a network (despite the fact that private providers have no interest in providing anything other than slow DSL and cable networks). The County had long maintained that no public money would be used. However, most people will likely not care as long as the project keeps its promise to deliver fast, reliable, and affordable broadband to the community.

EC Fiber Pilot Project Exceeds Financing Goals

Update: We have covered the second round of financing from ECFiber here.

The East Central Vermont Fiber Network, connecting some 23 rural towns, announced back in July that they would self finance a pilot project as a preliminary step to securing the full funding for the project.

Right around Thanksgiving, last year, David Brown updated the community on progress via an article in the Vermont Standard:

It would have been terrific to get the $50million needed to build out all 35,000 telephone and electric poles with 1,500 miles of fiber optic cable. Along the way, we learned an important lesson. We noticed that government money went to existing telephone companies to expand existing networks rather than funding start-ups like ours. That’s when the ECFibernauts decided on a change in strategy: build a small network, get a few real customers, and deliver rock-solid ultra-fast Internet to them as a proof of concept – all using our own money. Then, when all the critical components are up and running, go to the commercial markets for funding needed to expand out to all 23 towns.

The ECFiber Governing Board and our technology partners ValleyNet, Inc. are fortunate to have several experienced financiers within our ranks. Working with our attorneys (to keep everything legal) ECFiber is reaching out to the community with a private offering of tax-exempt promissory notes. As of this writing, we have raised more than three-quarters of what is needed to complete Phase I of our project. The ECFiber hub is now under construction on Waterman Road in Royalton and an initial pole attachment application for 500 poles is being processed. Phase I will bring ECFiber service to selected businesses, schools, town facilities and residents in Bethel, Barnard, Stockbridge and Royalton.

RUS Stimulus Program, BIP, Greatly Favored For-Profit Companies with Grants

We are noted critics of federal policies that prioritize subsidies and support for private companies over the public sector (broadly defined to include local government, nonprofits, and cooperatives).  When we analyzed the stimulus rules, we were horrified at the reversal of Congressional Intent, which was clearly to prioritize publicly accountable entities over private entities.

Telecompetitor brings our attention to an RUS report summarizing awards from the BIP stimulus program.  Download the report here [pdf].

As we feared (and previously wrote here), the private sector was heavily prioritized by the Rural Utility Service.  For-profit companies won more awards and received more funds than entities that are structurally accountable to the community.  While we are not opposed to profits per se (we are strong allies with local businesses in the many aspects of our work), the history of private companies owning infrastructure (thereby making the rules) has taught us that communities do best when they have a strong voice over essential infrastructure.

Further, in the rural areas that RUS oversees, networks that are focused on profit have refused to upgrade to modern networks and often offer poor customer service.  Throwing more public money at the private sector is a terrible long-term solution that will require ever larger subsidies over time when policy should encourage self-reliance and a lessening need for subsidies over time.

These charts are snipped from the RUS Report linked to above.

RUS awards by awardee

Medina County Bonds for Network in Partnership with OneCommunity

The Port Authority of Medina County, Ohio, has successfully bonded $14.4 million to take advantage of a broadband stimulus award to build a fiber-optic network connecting community anchor institutions and businesses with better broadband.

Bethany Dentler, executive director of the Medina County Economic Development Corporation, said Dec. 17 that a bond consultant had just completed sale of the bonds at an average interest rate of 5.96 percent. Cash from the bond sale was expected to be in the hands of the Medina County Port Authority by the end of the year and a fiber lighting ceremony to kickoff the construction phase of the project is planned for March or April. Dentler said the port authority, which will own the network, plans to pay off the bonds over the next 20 years with fees charged to customers of the fiber network.

The nonprofit organization OneCommunity will build and presumably operate the network, which will be owned by the County. Being located in close enough proximity to work with OneCommunity appears to be a terrific advantage for communities who make investments in broadband infrastructure. The $1.4 million in stimulus funds aiding this project were a part of the larger award given to OneCommunity as part of their efforts to better wire 20 counties in Ohio.

Burlingon Telecom Audit and Nulty Response

Vermont's Department of Public Service has released its audit of Burlington Telecom. The audit is highly flawed and a disappointment in terms of actually illuminating what went wrong with Burlington. We have been awaiting this audit in the hopes that it would actually explain how the network could have gone into such great debt so quickly. The few answers provided from this audit are entirely unsatisfactory, due in large part to its overall sloppiness. We will soon put up a more substantial post about Burlington and lessons learned, but we wanted to post this information now as readers are undoubtedly wondering. The audit should be read by any community running or considering a network because it describes a number of bad practices that should not be duplicated. That said, it isn't yet clear how accurate the audit is (they did not even attempt to interview key people), as explained by Tim Nulty in his response to it (linked below). Perhaps the biggest disappointment is that the audit simply did not explain where the money went. Steve Ross examined this question more than a year ago, but we appear no closer to an answer. A longer explanation on this, next week. Finally, Andrew Cohill's thoughts about lessons learned from BT is well worth a read as well. Regardless of whether BT really did make all those errors, Cohill's post should serve as an educational item to any community considering such an important investment.

Bristol Virginia Utilities Refinances Debt

BVU, which operates OptiNet (the nation's first triple-play muni FTTH network), has transitioned from being owned by the City to being an independent authority. In its last fiscal year (2010-11), the public power utility finished with net income. OptiNet finished ahead of projections. Having split from the city, BVU is taking advantage of the Virginia Resource Authority to issue $44 million revenue bonds to refinance its debt.
“We’re going through the VRA pool which helps fund 88 cities and service authorities. Because of that – and because of the market – we’re potentially looking at very low interest rates of 3.3 percent,” Rose told the board during his presentation.
The debt currently has an interest rate approaching 5%. After refinancing, the utility expects to save some $500,000 to $750,000 a year - for a period of 20 years. The cost of refinancing is $900,000. This story is worth noting for two reasons:
  1. Restructuring debt is not necessarily a sign of weakness -- BVU's OptiNet is quite successful.
  2. A reminder that small communities can benefit significantly by pooling bonding through programs like Virginia's VRA. States should help communities to work together in this way.

Rural Washington Network, Chelan PUD, Increases Speeds and Expands

The Chelan Public Utility District in Washington state is upgrading network capacity as it starts expanding the network following its broadband stimulus award. We previously covered their consideration of whether to expand from passing 80% of the territory to 98%. Chelan is one of the most rural publicly owned fiber networks as well as one of the oldest ones. In a rarity, it looks likely to run in the red permanently (the pains of rural, mountain terrain) with the support of most ratepayers. These ratepayers recognize the many benefits of having the network outweigh its inability to entirely pay for itself. The utility also runs a sewer project that is subsidized by wholesale electricity sales. Though some areas in Chelan are served by Charter and Frontier, the more remote folks would have no broadband access if not for the PUD. With the planned upgrades in 2011, Chelan's open access services will offer far faster speeds than available from the cable and DSL providers. Under Washington law, the PUDs cannot sell telecommunications services directly to customer. The PUD builds the network infrastructure and allows independent service providers to lease access while competing with each other for subscribers. Though this is a great approach for creating a competitive broadband market, it has proved difficult to finance (if one believes this essential infrastructure should not be subsidized as roads are). When the PUD considered whether to pursue the expansion (meaning taking a federal grant covering 75% of the costs and agreeing to run the network for 22 years), it asked the ratepayers for feedback:
Sixty-four percent of 450 randomly chosen Chelan County registered voters who were part of phone survey in August said they favor taking the grant and completing the buildout, even if it means their electric bills will go up by as much as 3 percent — about $1.50 more on a $50 per month power bill.
On November 9, PUD Commissioners approved the rate increase. Chelan's service providers currently offer connections of 6Mbps/384kbps or 12 Mbps/384kbps.

Vermonters Angry at Wireless Broadband Stimulus Grant Instead of Fiber Loan

Vermonters are asking some hard questions about the federal broadband stimulus decision to throw money at a wireless network for Vermont rather than loaning money to an organization dedicated to delivering real broadband. Senator Bernie Sanders convened a meeting to discuss the awards toward the end of October.
Senator Bernie Sanders led off his “broadband town meeting” Saturday morning at Vermont Technical College with a ringing affirmation of the need for better broadband coverage in Vermont and the nation. However, nobody in the crowd of nearly 300 people needed to be convinced of that. What they wanted to know was whether a huge new federal grant to a private company was the right way to do it.
VTel, a small private telephone company, received a $116 million grant to build a FTTH network to serve their existing 18,000 footprint as well as a wireless network that is intended to serve the entire state. In contrast, the East Central Vermont Fiber Network (which we have covered previously), applied for a loan to build a FTTH network to everyone in the 24 communities that have joined together to form the network. The ECFiber network would be run by a nonprofit and would repay the loan from revenue generated by selling triple-play services on the network.

Background From Reedsburg, Wisconsin: Community Fiber Pioneer

David Isenberg, of isen.blog, has published a short history of Reedsburg's community fiber network that he previously wrote for the FCC when they were gathering evidence of successful networks they would later ignore in formulating a plan to continue the failed status quo of hoping private companies will build and operate the infrastructure we need. Nonetheless, one cannot say that smart people like David did not try to help the FCC overcome its obsession with national carriers who dominate the conversations, and whose employees often work periodically with the FCC in what we call the revolving door (which itself, is a reason the FCC has been captured). Back to Reedsburg; it is a small community approximately 55 miles northwest of Madison that just happens to have far better broadband service than just about anywhere else in Wisconsin. David writes,
RUC first entered the telecommunications business in 1998, when it constructed a ring to tie its wells, its five electrical substations together and to provide Internet access for its high school, middle school and its school administration building. In planning the ring, the city asked Verizon and Charter if they would build it, but they were not responsive. RUS built a partly aerial, partly buried 7-mile ring of 96-strand fiber at a cost of about $850,000. Internet access was provided by Genuine Telephone, a tiny subsidiary of LaValle Telephone Cooperative which ran a fiber from LaValle, about 8 miles NW of Reedsburg.
As they were building the ring, local businesses asked to be connected as well. Reedsburg took the path that so many communities have followed, start by building for yourself and expand opportunistically. Of course, this requires that you originally engineer the network so it can be later expanded, which is good practice regardless of your future plans. Reedsburg used bond anticipation notes, a financial mechanism that few others have used in building similar networks.
A local bank loaned the initial $5 million in bond anticipation notes for planning and construction.

Florida Muni Dunnellon Building FTTH Network

Yet another town has decided to take responsibility for their broadband future: a small Florida community has secured financing and is moving forward with their publicly owned FTTH network.
The City Council voted unanimously Monday night to approve the $7.3 million in funding with Regions Bank in Orlando. City Manager Lisa Algiere told the council members the city would be doing most of its business with the local Regions Bank. The funding will come in the form of three bonds: a series 2010A Bond, which is good for 20 years and has an interest rate of 3.61 percent; the second bond is a Series 2010B Bond and is for five years with an annual interest rate of 3.20 percent; while the third bond is a Series 2010C Bond and is good for one year. The funding secured by the city is a drawdown loan, meaning it will only take what it needs and only repay that portion.
The network has been branded Greenlight (though the website is not yet fully functional). Greenlight is also the name used by the Community Fiber Network in Wilson, North Carolina. Light Reading interviewed a network employee, shedding more details than have been released elsewhere. He says they are passing 7,000 premises, but Wikipedia only notes a population of 2,000 in 2004, so there is more than meets the eye at first glance. They financed the network without using general obligation bonds, working with a nearby bank (Regions is a big bank, headquartered out of state). Local competitors are AT&T and Comcast, though both offer extremely slow services; the fastest downstream speed available from Comcast is 6Mbps. The new network, as do nearly all recent community fiber networks, will offer much faster connections, the slowest being 10Mbps.