Broadband Communities

AUG-SEP 2014

BROADBAND COMMUNITIES is the leading source of information on digital and broadband technologies for buildings and communities. Our editorial aims to accelerate the deployment of Fiber-To-The-Home and Fiber-To-The-Premises.

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28 | BROADBAND COMMUNITIES | www.broadbandcommunities.com | AUGUST/SEPTEMBER 2014 COMMUNITY BROADBAND several occasions. However, through door-to-door outreach and member-to- member conversations, 25 percent of existing electrical customers agreed to purchase broadband services, enough to justify building an FTTP network with its own funds. Co-Mo is constructing the network in a phased deployment over the next few years with a goal of expanding the network throughout its entire electricity service area. In December 2013, the cooperative announced a series of speed increases on its broadband service tiers, including upgrading its top speed ofering to 1 gigabit per second. Tere are currently only a few viable examples of cooperatives formed specifcally for broadband service (rather than phone or electric service), and most depend upon local governments rather than individual subscribers for support. East Central Vermont Community Fiber Network (ECFiber) is a cooperative project among 24 towns in rural Vermont to build an FTTP network in their communities. ECFiber is organized with an interlocal contract according to Vermont law, under which municipalities can contract with one another to provide services; the cooperative governing board consists of delegates appointed by the select board or city council in each of the member towns. ECFiber contracts with ValleyNet, a local nonproft that has extensive experience bringing Internet connectivity to residents and businesses in the region, to operate the network. Another example is WiredWest, a project among towns in western Massachusetts to build and operate a regional FTTP broadband network. WiredWest is an intermunicipal cooperative according to state law, which will allow it to issue municipal bonds. Founded in 2011 by 22 member communities, the project now boasts 42 municipalities. Each municipality that joins WiredWest has a representative on the cooperative's board of directors, and the project is led by an executive committee elected from existing board members. WiredWest plans to build a last-mile fber network by capitalizing on improved access to middle-mile fber thanks to the MassBroadband 123 project, a middle-mile network in western Massachusetts that received state funding and federal support from the Broadband Technology Opportunities Program. Te cooperative received a network planning grant from the Massachusetts Broadband Institute and is supported by membership dues, donations and in-kind stafng contributions from volunteers. Like other cooperative broadband projects, WiredWest has also been collecting presubscription pledges for service from area residents and businesses to prove market demand and bolster the project's business planning. BUSINESS MODELS A community should perform a robust feasibility analysis to demonstrate that a business case exists and that social and economic goals will be realized through a particular business model. All such projects and business models entail fnancial and other risks for the community at the same time that they enable enormous direct and indirect benefts. Retail Service. In this model, a local government builds an FTTP infrastructure and ofers retail phone, video and Internet services to businesses and residences. In terms of direct fnancial factors, a "pure" retail FTTP network operated by a community entails more signifcant risks than other business models because of the size of the up-front capital commitment necessary and the ongoing operating costs to run the network. In this business model, the locality may also be an overbuilder, providing services in competition with existing phone and/or cable incumbents. Although the potential exists for the community to obtain sufcient market penetration and cash fow to sustain its network, this can be a signifcant challenge, particularly when well- resourced incumbent providers can aggressively market or discount services in response to the entry of a public provider. Open Access. In this model, the local government builds, owns and maintains fber optics all the way to homes and businesses. Rather than becoming a provider serving the public, however, it leases access to private providers who then ofer services directly to the public. Under an open-access model, a community can operate and maintain the fber and the transport electronics, or it can contract these tasks out to a private-sector partner. Private providers then lease access to the infrastructure, which they use to deliver phone, video and Internet services. Tus a wholesale or open-access model separates the infrastructure from the retail service. In this way, a community can address the high cost of market entry for providers and facilitate the ability of multiple providers to serve residents and businesses over the same infrastructure. Te result is the potential for new competition. Te business model involves signifcant risk with respect to recovery of project costs through network revenues. A number of factors outside the control of the local government, including the interest of retail providers in ofering services over the network and the retail providers' marketing success, have the potential to reduce revenues below break-even cash fow needs. A community should conduct a feasibility analysis to determine whether a business case exists and whether the selected business model will yield social and economic benefts.

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