Unique Model Makes Citizens a Funding Partner in Broadband Network
A city in eastern Idaho figured out how to build a gig network for its city of 13,800 residents with no debt and a strong sign-up rate. Maybe there’s a lesson for other communities here.
Public-private partnerships, or PPPs, are a popular way to build community broadband networks. These networks typically are the result of local government entities finding ways to partner with private companies. But what if communities “think differently” about how to form PPPs?
Ammon, Idaho (pop. 13,800), today celebrates its success at thinking differently to produce a city-owned gig network. The city built the network with no debt and got an impressive 70% of the potential customers to sign up for service. One key is new technology. The other is that the “private” in this PPP structure is citizens themselves.
“Ammon has created a unique and interesting model,” says Deb Socia, executive director of Next Century Cities, a national organization of mayors and other civic leaders who are trying to improve broadband connectivity locally. “The funding structure for Ammon’s [system] worked perfectly for them and may possibly work for others.”
No one has to convince Technology Director Bruce Patterson of the City of Ammon the value a bringing new thinking to the table. He recalled a city he knew that recently hired a consultant to do a broadband feasibility study.
“The consultant was taking advice that was dispensed in 2005, changing the name of the city at the top of the document, and then handing it to this other city today,” he said. “Much of what he told the city administrators was erroneous in this day and age.”
Patterson and city administrators started down that familiar path. The incumbent communication provider offered various city offices internet access, but city leaders thought the prices were too high. Ammon’s public utility thought the city could own its own network, but they didn’t want to pay for operating the services that would run on the network.
City officials went for this model. “We replaced outsourced communication services with our own infrastructure to connect government facilities, and the [city’s] IT group operates services,” says Patterson.
Other government entities also got on board. “The schools determined that the city can provide 10 Gigabit service at a third the cost of an outside provider,” Patterson says.
The city’s $1 million initial investment mostly went into fiber. After some analysis, the city realized that the difference between 48 strands of fiber and 144 strands wasn’t that much. Why not go for the 144 strands and sell the excess fiber strands to businesses and residents? This is where creative thinking entered.
In Ammon (ID), everyone as a partner – and an ISP.
Ammon determined that they could cover the costs of the network by charging residential and commercial property owners about $3,000 for installation and assessing a utility fee of $16.50 per month. Constituents still have to pay the ISP’s internet access fee.
For people or businesses that can’t, or don’t want to, invest $3,000 up front, Ammon established Local Improvement Districts (LID) to offer financing. The LIDs were based on where there are the biggest numbers of interested business and residents. Subscribers can opt in during the buildout phase and have 30 days following the completion of construction to determine if they want to pay for the installation costs in full, or take the monthly fee option of about $17.50.
In essence, subscribers are private partners who are paying for the cost of construction. After the city pays for the initial infrastructure, the LID takes on responsibility to retire the debt by collecting money from subscribers. The financing for the network is based on the payments made over time by the users.
“We maintain a sign-up website where we track interest and determine where the highest demand is so we can create the next LID,” says Technology Director Patterson. “Without the LID, we have no way to amortize the amount for [consumers].”
This is a different way of tapping the community’s collective ability to finance the buildout. “Ammon’s approach is different from those who have tried to have constituents pay utility fees to finance the network,” says Christopher Mitchell, director of community broadband networks at Institute for Local Self-Reliance. “The city owns the network but wants service providers interacting directly with subscribers. Ammon uses some of the latest technologies that delegate liberties to ISPs and subscribers.”
Re-thinking what’s an ISP
City officials created a novel approach for recruiting ISPs to offer internet to consumers via the city’s network. Sometimes it can be relatively easy to find the first ISP in a small town. The trouble is getting a second ISP. It is hard enticing two or three competitors to split a small pie because it’s harder for each to recover their start-up investment and make a profit.
Ammon addressed this problem by installing Point of Presence (POP) and other equipment in town to facilitate the needs of ISPs. Typically, each ISP would run a cable from the ISPs home-office out to the towns and rural counties, which can be very expensive. Because the town has it own POP, they can charge an ISP just $50 a month. Patterson says, “Since the start up costs are so small, ISPs feel they can take a chance offering services because there is so little risk.”
Patterson was a little surprised that four ISPs signed up to deliver services. “We know it’s unlikely all will survive,” he said. “But in the best free-market tradition, these ISPs are trying new services, different pricing, different audiences and so forth.” Ultimately, constituents benefit because there is a competitive market that so many other cities crave, he said.
Another feature of the system is the ability to use software to create a private virtual network, or a VPN. So a gamer, an entrepreneur, or anyone can invite participants or potential customers to join the respective private network or buy into it. Anyone can be a provider of service, for as long as they want, with as many members as they want. This gives subscribers unlimited ways to use the network, and these “instant” ISPs potentially can generate capital for the local economy or at least for the network.
Jeff Christensen, the CEO of EntryPoint Network, which provides the VPN software, says, “Our software does network automation, orchestration, and user authentication to automate the provisioning of networks so that it is easy for a lay person to do what previously required a network engineer. Because these are virtual private networks, they have inherent privacy advantages in comparison to networks that traverse the public internet. Additionally, an organization such as a hospital could use encryption if desired to add an additional layer of security.”
Thursday’s day-long gathering to celebrate the network launch may help spread the word to other municipalities about the funding model. Patterson, Ammon Mayor Dana Kirkham, and other officials are gathering representatives from cities throughout the region to be part of the celebration.