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 Monticello's bond rating has been fairly minimal considering the prolonged ambiguity about the bond. Last year, the City had moved from Moody's AA3 to A2, which suggested they are only a slightly higher risk, falling to upper medium grade out of high grade for credit worthiness.
We have seen some criticism of the City for not being more open in how they run the network and engage in negotiations, some of which was noted in the Monticello Times article linked to above. I'm sympathetic to the need for secrecy in discussing matters being litigated but we have also seen secrecy taken to extreme levels in some networks. We encourage Monticello to be as transparent as it can with residents while respecting its need to shield some information from competitors that are far more secretive.
We continue to see FiberNet Monticello as benefiting the community on the whole, as I wrote last year. We draw a number of lessons from this experience, which I will expand on in a future post. As a teaser, they include the impacts of predatory pricing, frivolous lawsuits to delay a project, the challenge of public-private partnerships, and the oddity of being the only city on Earth with two FTTH networks going head-to-head.
Shining a light on bond-backed municipal broadband projects is the recent announcement that ECFiber, Vermont's first Communications Union District (CUD), obtained a BB rating from Standard & Poor Global, the nation’s preeminent credit rating agency. In what ECFiber officials describe as "a historic moment,” the bond rating will allow ECFiber to pay lower borrowing costs to complete a network expansion project now underway.
Los Angeles becomes first city in the nation to define digital discrimination at the local level in the wake of the new rules issued by the Federal Communications Commission to prevent digital discrimination. Other cities from Oakland to Cleveland are also leveraging the new FCC rules for local action.
Waterloo, Iowa’s municipal broadband project has taken a major step forward after nearly two decades of planning. Waterloo Fiber officials just launched their first limited fiber trial, will connect their first commercial customers in February, and are on target to deploy affordable fiber at speeds up to 10 gigabit per second (Gbps) to every last city resident by 2026. Construction of the network began last summer at a groundbreaking ceremony hosted by Waterloo Mayor Quentin Hart. Last month the city connected the first of four participants in a limited pilot project.
A looming new bill by Republican Kentucky State Senator Gex Williams could undermine decades of broadband progress made in the state’s capital city by a popular locally-owned utility, Frankfort Plant Board (FPB). Home to 28,000 Kentuckians, locals and utility officials are incensed at the bill, which they believe will unnecessarily result in higher rates, fewer jobs, and less broadband competition overall. Williams is circulating a bill in the Kentucky state legislature that, if passed, would force FPB to sell its broadband division to a private-sector company and subject it to more stringent oversight requirements.
A plan in Jamestown, New York to deploy affordable fiber to every last city resident has received welcome support from state leaders, even though deployment details remain murky and network construction remains well over the horizon. Still, the city’s plans got a needed attention boost last month when Empire State Development–tasked with boosting economic development across New York State–gave a nod to Jamestown’s efforts in the organization’s five-year development plan.
Syracuse officials have launched a new wireless community broadband network they hope will help bring affordable broadband access to the city of 145,000. Dubbed Surge Link, the effort is backed by more than $3.5 million in federal funding and aims to deliver free broadband access to the city’s lowest income neighborhoods. Using CBRS technology, Brooke Schneider, the city’s Senior Information Officer, told ILSR that Syracuse zeroed in on CBRS, in part, because “Fixed Wireless Access technology provides a quick time to market.”