Craig Settles kicks off this event with a 45 minute presentation discussing what community networks should do to succeed financially and how they can go beyond simply making broadband access available to more people. Bryan Sivak, Chief Technology Officer of the District of Columbia; Joanne Hovis, President-Elect of NATOA and President of Columbia Telecommunications Corporation; and Gary Carter, Analyst at City of Santa Monica Information Systems Department responded Craig Settles' presentation. One of the key points is something we harp on here: if community broadband networks run in the black according to standard private sector accounting procedures, that is great. But it is a poor measure of how successful a community network is. Community networks create a variety of positive benefits that are not included in that metric and those benefits must be considered when evaluating such a network.

More towns in Utah are deciding whether to support UTOPIA's new plan to expand the network and recover from the significant errors of the first managers. Under the new management, UTOPIA has added new ISPs and thousands of new subscribers, a significant turn around for a network many had written off as a failure. Unfortunately, UTOPIA has too much debt and no capital to expand the network to bring new subscribers online. As we have consistently maintained, building next-generation networks is challenging in the best of circumstances - and the circumstances around the towns in Utah are far from ideal. Most of the information in this post comes directly or indirectly from the Free UTOPIA blog which has excellent independent coverage of the network (as well as stinging critiques of wasted opportunities like the broadband stimulus). I strongly recommend following FreeUTOPIA, but I wanted to comment on some of the recent developments. As UTOPIA and some member cities have formed a new agency to fund further expansion. Five cities have agreed to be part of the new Utah Infrastructure Agency with at least 2 deciding against and more still considering what they want to do. The Salt Lake Tribune has tepidly endorsed the plan (which involves some changes regarding rogue providers - something I want to follow up on). The Utah Taxpayers Association (which is funded by Qwest and Comcast, among others) decided to mount a big protest in Orem to convince the City to abandon UTOPIA. Rather than simply waiting to see what effect the rally would have, UTOPIA responded decisively.

The Utah “Taxpayers” Association thought it would get an upper hand with a BBQ in Orem just before the city council voted on a new construction bond.

The East Central Vermont Fiber Network is launching a pilot project to start connecting rural customers with a FTTH network. EC Fiber has long labored to find funding -- it was one of many projects to see funding avenues disappear with the economic collapse following the fall of Lehman Brothers. The Feds also failed to fund them (instead opting to fund middle mile after middle mile of projects that were less offensive to powerful incumbent companies. But they have returned to the private markets and feel sufficiently confident about financing options to build this pilot project.

The pilot project will provide a solid foundation for the capital lease used to build out the rest of the network, providing 100% coverage in 23 towns in East Central Vermont. While the intent of the project is to prove that the larger project is viable, according to Nulty, “it will be able to stand on its own if we don’t raise another dime of capital.”

The project is expected to cost some $80 million in total to cover the 23 participating towns. ECFiber has already obtained the necessary permissions from the State to offer video and telecommunications services. The Pilot Project targets the town of Bethel, where the central hub for the entire network is located. ECFiber is one of many groups that are using a nonprofit ownership model to build the network. The towns work together to create a nonprofit that will finance, own, and operate the network to ensure community needs are put before profits -- now and in the future. Update: The pilot project will only offer broadband and phone services due to the high fixed cost of trying to offer video services for such a small population.

Cedar Falls, Iowa, is the latest of a number of publicly owned cable networks that are upgrading to FTTH. Cedar Falls has been planning this for some time, squirreling away net income over the years as it ran surpluses to help afford the costly upgrade. A story in the WCF Courier notes it will cost $17 million and is expected to be completed in 2012. The bonds used to finance the project will be repaid over 10 years. When I last spoke to folks in Cedar Falls, they had massive take rates - bolstered by local service that Mediacom could not compete with. Cedar Falls Utilities (CFU) had already been offering fiber services to local businesses and will be expanding that to the entire area. According to an article in the Cedar Falls Times, the utility had already been installing FTTH capability into greenfield developments, so they have certainly planned for this transition. Motivation for the upgrade seems to be the faster broadband speeds and more capacity for HD channels. The Utility also noted that needed bandwidth has been doubling every year -- a likely reason they opted for FTTH rather than a cheaper DOCSIS3 upgrade that would not offer the same scalability as FTTH (and DOCSIS3 is much more constrained in upstream capacity). The Cedar Falls Times article explains the benefits of FTTH over HFC:

An HFC plant uses thousands of active devices (such as amplifiers) to keep data flowing between the customer and the service provider. Any one of these devices can fail, interrupting service. In contrast, the all-fiber plant will be a passive optical network, with no active components between the distribution center and the end user. Fewer “moving parts” means fewer points of failure and a more reliable system.

CFU puts community needs first:

“We know from experience that economic growth comes to cities that keep their infrastructure up to date, whether it’s roads, water, electricity or broadband,” said Krieg [CFU General Manager]. “CFU is going to do what it takes to make sure Cedar Falls has leading-edge communications technology, and maintain economical rates for internet and video services.”

The network was launched in 1996, one of the first communities with citywide broadband access.

Powell, a small community in Wyoming, has bought its own network from the investors who financed it [Powell Tribune], eighteen years ahead of schedule. For a short history of Powellink, see Breaking the Broadband Monopoly. The decision, unanimously agreed to by City Council, came from the realization that the City's reserves were earning very little interest while they were paying a higher interest rates to those who financed the network. So they decided to invest in themselves.

Under the new agreement, Powellink will become a fifth enterprise for the city, joining the electric, water, waste water and sanitation enterprises. The other four enterprises will loan Powellink the $6.5 million, and payments from service providers using Powellink — such as TCT — will go back to the enterprises to pay off the loan.

City Administrator Zane Logan had previously told me that he thought Powellink was a much better approach to attracting jobs to the area than the approach frequently used by communities - tax breaks to companies in return for creating jobs. In the Powell Tribune article, he explained how this approach allows Powell to be more self-reliant.

Logan said he believes the new agreement will help Powell during a difficult economic climate. The state cut its funding of cities and towns this year, and sales tax revenues are down. “We’re trying to help ourselves and not be dependent on the state,” he said. “The Legislature is saying cities need to take care of themselves, and I like to think that Powell is doing that.”

Local cooperative TCT had the right to another four years of exclusive operation as the sole service provider but gave that up, meaning the network will now be open access. In return, TCT does not have to guarantee revenue to the City (as it agreed to do in each year it was an exclusive service provider). These changes come about as Cablevision bought Bresnan, the cable incumbent that had radically lowered rates to compete with Powellink. It will be interesting to see how Cablevision continues or changes company policy in Powell.

Photo courtesy of Ernie Bray

The good folks at Broadband Properties Magazine recently ran an article I wrote about Brigham City's use of a new financing model for FTTH networks. You can read it there in the nice layout and formatting, or here: The UTOPIA project, an ambitious fiber-to-the-home network developed by a consortium of 16 Utah cities, has encountered difficulties that delayed its original buildout schedule. However, it is now building out fiber in Brigham City, one of the original cities in the consortium. Brigham City found a local solution to UTOPIA’s slow deployment schedule and created a model to speed buildout in willing communities. Brigham City, a city of 18,000 in northern Utah, decided to form a voluntary assessment area – sometimes called a special assessment area – to finance the network buildout that will pass all homes and connect residents looking to subscribe. As with all wired networks, upfront costs are steep and typically require a heavy debt load. Brigham City’s unique approach may catch the interest of deployers unwilling or unable to shoulder that debt. For several months, a group of canvassers organized by UTOPIA went door to door in Brigham City to talk to residents about UTOPIA and ask if they were interested in subscribing to the network. Supporters organized some 30 block parties and invited UTOPIA to attend with a mobile home to demonstrate the superiority of full fiber optic networks. Residents who wanted service were requested to ask the city to create a voluntary assessment area. Creating this special district would allow participants to finance their connections themselves. Residents who wanted to subscribe could either pay the connection cost up front or agree to pay up to $25 per month (the exact amount would depend on how many joined the program) over the course of 20 years. This amount does not include the cost of services; rather, it is the cost of connecting to the network and having the option of subscribing to UTOPIA-based services (see sidebar for current services). Those uninterested are not levied. In other UTOPIA cities, when residents subscribe to services on the UTOPIA network the connection costs are included in the service fees.

We finally have a realistic estimate of the cost of bringing 100Mbps to every home in America... and Light Reading labeled the cost "jaw-dropping."

Want to provide 100-Mbit/s broadband service to every U.S. household? No problem: Just be ready to write a $350 billion check. Federal Communications Commission (FCC) officials shared that jaw-dropping figure today during an update on their National Broadband Plan for bringing affordable, high-speed Internet access to all Americans. The Commission is schedule to present the plan to Congress in 141 days, on Feb. 17.

Don't get me wrong, I agree that $350 billion is a lot of money. On the other hand, we spent nearly $300 billion on surface transportation over 4 years from 2005-2009. $350 billion buys a fiber-optic network that will last considerably longer. Additionally, such a network will generate considerably more revenue than a highway. In fact, these networks will pay for themselves in most areas if they can access to low-interest loans. Consider the comments of Deputy Administrator Zufolo (of the Rural Utilities Service) from my recent panel at NATOA:

Zufolo explained the RUS decision to use its $2.5 billion in funds primarily to subsidize loans and not provide grants, as the agency's best opportunity to make the more efficient use of the federal money and have maximum impact. Because the default rate on RUS loans is less than 1% and the subsidy rate is also low, only about 7%, it costs the government only $72,000 to loan $1 million for rural network development, she said.

Let's say that RUS decides to embark on getting 100 Mbps to everyone in a rural area - some of the projects will be riskier than the standard portfolio, so let's assume it costs the federal government $100,000 to loan $1 million (makes it easier math too). In order to spur the $350 billion investment for these networks, the government would have to put up $35 billion.