For the second week in row, our staff has felt compelled to address a misleading report about municipal networks. In order to correct the errors and incorrect assumptions in yet another anti-muni publication, we’ve worked with Next Century Cities to publish Correcting Community Fiber Fallacies: Yoo Discredits U Penn, Not Municipal Networks.

Skewed Data = Skewed Results

Professor Christopher S. Yoo and Timothy Pfenninger from the Center for Technology, Innovation and Competition (CTIC) at the University of Pennsylvania Law School recently released "Municipal Fiber in the United States: An Empirical Assessment of Financial Performance." The report attempts to analyze the financial future of several citywide Fiber-to-the-Home (FTTH) municipal networks in the U.S. by applying a Net Present Value (NPV) calculation approach. They applied their method to some well-known networks, including Chattanooga's EPB Fiber Optics; Greenlight in Wilson, North Carolina; and Lafayette, Louisiana's LUS Fiber. Unfortunately, their initial data was flawed and incomplete, which yielded a report fraught with credibility issues.

So Many Problems 

In addition to compromising data validity, the authors of the study didn’t consider the wider context of municipal networks, which goes beyond the purpose of NPV, which is determining the promise of a financial investment.

Some of the more expansive problems with this report (from our Executive Summary):

S&P Global Market Intelligence - May 26, 2017

Hard Data on Municipal Broadband Networks

Written by Sarah Barry James

There is a dearth of good data around municipal broadband networks, and the data that is available raises some tough questions.

A new study from University of Pennsylvania Law School Professor Christopher Yoo and co-author Timothy Pfenninger, a law student, identified 88 municipal fiber projects across the country, 20 of which report the financial results of their broadband operations separately from the results of their electric power operations. Municipal broadband networks are owned and operated by localities, often in connection with the local utility.

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Yet Christopher Mitchell, director of the Community Broadband Networks Initiative at the Institute for Local Self-Reliance, argued that Yoo's study did not present an entirely accurate or up-to-date picture of U.S. municipal networks.

"When I looked at the 20 communities that he studied — and his methodology for picking those is totally reasonable and he did not cherry pick them — I was not surprised at his results because many of those networks are either in very small communities … and the others were often in the early years of a buildout during a period of deep recession," Mitchell said.

As an example, Mitchell pointed to Electric Power Board's municipal broadband network in Chattanooga, Tenn. — one of the five networks Yoo identified as having positive cash flow but at such a low level that it would take more than 100 years to recover project costs.

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In fact, without the revenue generated by the fiber-optics business, EPB estimated it would have had to raise electric rates by 7% this year.

According to Mitchell, Yoo's study captured the Chattanooga network when it was still "small and growing," but misses "what's going to happen for the rest of the life of the network, which I think is the more important part."

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Telecompetitor - May 25, 2017

Municipal broadband networks do not have a strong financial track record, according to an analysis conducted by the University of Pennsylvania’s Center for Technology, Innovation and Competition. The municipal broadband financial analysis, which looked at 20 municipal fiber projects, found that only nine were cash-flow positive and that of those, seven would need more than 60 years to break even.

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An Opposing View

Municipal network advocate Christopher Mitchell, director of the Community Broadband Networks Initiative at the Institute for Local Self-Reliance, pointed to several flaws in the Penn Law municipal broadband financial analysis.

He noted, for example that a substantial portion of the 20 networks studied were “early in the process and very small.” He also argued that the 2010-2014 study period may have biased the results, as that period included a recession and subscribership for some of the networks has increased substantially since 2014. He noted, for example, that EPB’s broadband network in Chattanooga had about 50,000 to 55,000 subscribers in 2014 but has now hit the 90,000 mark.

The Penn Law authors’ approach was “not the proper way to measure these networks,” said Mitchell in a phone call with Telecompetitor. The analysis “doesn’t take into account jobs created or the impact on the municipal budget,” he said.

He argued, for example, that a municipality that previously paid $1 million annually for connectivity might instead pay itself $500,000 for connectivity on the municipal network.

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Read the full story here.

You might not have made it to Mesa for the Digital Southwest Regional Broadband Summit, but you can now watch some of the speakers and panel conversations. Next Century Cities has posted video from panel conversations and the keynote address from Commissioner Mignon Clyburn.

In her address, Commissioner Clyburn said:

“Access to high-speed broadband is a necessity in today’s 21st century economy, providing a gateway to jobs, education, and healthcare. I am honored to join state and local leaders who are on the front lines of closing the digital and opportunities divide. Working together, we can achieve our shared goal of affordable broadband for all Americans.”

The Commissioner’s full remarks were about 18 minutes long:

Sharing Knowledge on Infrastructure 

Christopher moderated Panel Two, focused on infrastructure needs, which included CISSP President and CTO of CityLink Telecommunications John Brown, Partner at Conexon Jonathan Chambers, Director of Technology at the Southern California Tribal Chairmen’s Association Matt Rantanen, Manager of Tribal Critical Infrastructure at Amerind Riskand Kimball Sekaquaptewa, and Vice President of Digital Innovation at Magellan Advisors Jory Wolf. If you listen to the Community Broadband Bits podcast, you’ll probably recognize most of these voices.

The video lasts one hour thirteen minutes:

The other videos are available on the Next Century Cities YouTube channel page, or watch them here.

Welcome and Introduction: Deb Socia, Executive Director of Next Century Cities and Eric Farkas, Fujitsu Network Communications, 7:32

West Virginia rural communities struggle with access to broadband but a bill in the state legislature is taking some first steps to encourage better connectivity. HB 3093 passed the House with wide support (97 - 2) and has been sent on to the Senate for review. The bill doesn’t appropriate any funding for Internet infrastructure projects around the state, but adopts some policies that may help local communities obtain better connectivity.

Revenue Neutral And Popular

The state is facing a $500 million budget deficit and lawmakers don't have the appetite to appropriate finds for Internet infrastructure projects. As in most states, policy bills do well during times of financial strife. Elected officials still want to do what they can to encourage better broadband so, according to at least one lawmaker, the revenue neutral nature of the bill has contributed to its success in the legislature. Delegate Roger Henshaw, one of the bill's co-sponsors, told Metro News:

“Notice this is a revenue-neutral bill,” Hanshaw said. “That’s in fact one of the reasons we’re rolling it out now. We have other bills here in both the House and Senate that are not revenue-neutral bills that were on the table for consideration.

“But with the clock ticking on us, it became clear that we probably ought to be looking at options to advance service that didn’t even have the possibility of a financial impact. This bill does not.”

Check out the 3-minute interview with Hanshaw on Soundcloud.

The Broadband Enhancement Council

West Virginia’s Broadband Enhancement Council was created in a previous session and receives more authority and responsibility under HB 3093. They are tasked with the authority to, among other things, gather comparative data between actual and advertised speeds around the state, to advise and provide consultation services to project sponsors, and make the public know about facilities that offer community broadband access. 

Pennsylvania’s state barriers won’t stop this community from improving Internet service for its municipal facilities, residents, and businesses. The City of Lancaster is collaborating with private provider MAW Communications to ensure the community has next-generation technology. Their public-private partnership, LanCity Connect, will offer affordable 1 gigabit (1,000 Megabits per second) service over a new Fiber-to-the-Home (FTTH) network.

Shared Risk, Public Financing

The Lancaster Online has closely followed the development of the partnership from a 2015 Wi-Fi project between the partners to the current citywide fiber plan. Here's a quick summary of the basic framework of the partnership: 

MAW Communications originally built a $1.7 million fiber backbone starting in 2015 with financing from the city's water fund bond. The city had refinanced its water utility debt, saving some $7.8 million and they worked out an agreement with MAW where the private partner would deploy and own a backbone fiber network. Over the 20 year term of the deal, the city has the right to half the network for city services, including automatic meter reading (AMR) and a traffic control system, with the city being able to renew the deal for four additional terms. Officials have said this arrangement will not impact water rates.

MAW Communications will extend the network to premises, aided by a $1.5 million loan with a 7 percent interest rate from the city's general fund reserves. The provider will repay the loan over a 13 year period. As long as MAW Communications has an outstanding loan to the city, the provider cannot sell the network without the city's written approval. Though the loan will help MAW to begin building the network, the costs of connecting homes and businesses would still be prohibitive at $1,000 each if not for another element of the plan.