Partner with Care for Broadband Projects
[imgbelt img=skategraphic200.jpg]Towns considering partnerships as they go after federal broadband funding need to reckon with real differences between public and private interests.
[imgcontainer left] [img:skateicepond373.jpg] [source]BaristanetSkaters in Montclair, New Jersey’s Edgemont Park – As Round 2 of federal broadband funding competition begins, many communities are getting back out onto the ice.
One of those others, from rural Missouri, tweeted me: “Don’t have a choice. We are sitting on the New Madrid fault. We NEED a public safety network in a strategic location.”
NOFA 2 has given top priority to middle-mile projects (infrastructure projects that primarily connect data centers to each other rather than delivering broadband to end-users. Find a fuller definition here.) And it’s also been announced that NOFA 2 will look with favor on applications that partner public and private interests.
Communities that are responding with plans for public-private technology partnerships should not take such efforts lightly or pursue them in haste. This promising approach is also fraught with challenges great enough to knock you off track.
Michael Johnston, Vice President of Internet Technology and Broadband at Jackson Energy Authority, a public utility in Tennessee, described some of these challenges. While Jackson isn’t rural, Michael Johnston’s extensive experience, both positive and negative, offers rare insights that rural communities can use.
Jackson’s current fiber network is a success story with 16,000 subscribers, but it had a rocky start. Johnston gives a blunt assessment of why communities, particularly local governments and public utilities “need to do a gut check before you go after broadband. You can’t be a nice fluffy business person,” he said.
Whether any applicant writes a proposal to get broadband stimulus and other government grant money or creates a standard business plan to secure traditional commercial funding, a broadband project will have to show how the network will be sustained financially after it’s built. NTIA head Larry Strickling, head of the National Telecommunications and Information Administration (NTIA), said in a recent speech, “We want these projects to be up and running five years or more after the government grant money has run out.”
Communities need to ask themselves: What’s the return on investment under normal, best case, or worst case scenarios? Understanding these forecasts is key to financial sustainability.
“Let’s say we just borrowed $10 million with the assumption we’ll get 100 new subscribers every month for a year,” Johnston proposed. “What about the price of greater success? If you get 200 subscribers a month, what’ll do you do? You need more customer service people, more technicians. Beating your ‘take plan’ is counterproductive if you can’t get any more ‘free’ government money and you have to go to the bank for real money.” In this respect, the business of broadband is as much about managing growth as curtailing losses.
The challenge of public-private partnerships
The public/private partnership for establishing community broadband service has become the Holy Grail for some, but it also can be the source of heartburn.
“Partnering with a telco does help because you have to be ready for the different world of telecom operations,” said Johnston. But difficulties often arise, he said, because “you can have completely different goals that are at cross-purposes. The town or county wants to deliver services in places where it’s currently not offered. The partner needs to make money.”
It’s essential that a lot of time – and strenuous effort, if necessary — be spent in frank conversation so that both parties thoroughly understand how the other’s business works. Such discussions will spot where potential troubles may lie, troubles that could lead to irreconcilable differences. More positively, these talks will help to construct and evaluate a business model with clear knowledge of how it affects all partners.
UTOPIA, a collective of 16 rural towns building their own fiber network in Utah, took on debt via a bond and couldn’t (by law) provide anything but the Internet pipe. Prior to NOFA, this had been a typical middle-mile project scenario. Service providers then connect to the pipe to build last-mile infrastructure that delivers services directly to consumers. UTOPIA makes money on fees from providers based on how many of their customers use the network.