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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AUGUST/SEPTEMBER 2014 | www.broadbandcommunities.com | BROADBAND COMMUNITIES | 31 providers. In other neighborhoods, they still had to get water in a bucket from a communal well. Te same arguments used to create a publicly owned water infrastructure (everyone has better access, overall expenses are lower, the investment promotes economic development and growth) apply to broadband. However, community broadband systems, unlike community water systems, don't necessarily replace the private systems. Tus, there is going to be some competitive tension between incumbent providers and any community-owned enterprise. Community broadband projects have to start with and maintain a business mindset. Failing to budget. Some community projects do not manage their budgets well. Some do not even use formal budgets to help direct their enterprises. A bookkeeper or an accounting frm may provide periodic reports on revenue and expenses, but as in any startup business, those monthly or quarterly fgures need to be plugged into a multiyear budget. Tat budget must show current and past fnancial data and must set targets for take rates and expansion so the board can determine whether the efort is stagnating or making progress. GROWTH ISSUES Not planning for expansion. Most community-funded eforts start small. Tis minimizes fnancial risk and gives the board and senior leadership the opportunity to learn on the job. However, some projects stall after the frst year instead of expanding to a sustainable size. Te underlying problem is twofold: First, even small networks have fxed operational costs, and the network needs enough revenue to pay those expenses and make principal and interest payments on any loans. Te second problem is that network infrastructure wears out and needs routine maintenance. Lack of funding to keep the network in good condition will degrade service over time. Te solution is to have an expansion plan (even a modest one) that contributes to revenue growth over time. Not budgeting for drops. Adding new customers requires placing drops from the distribution fber to the customer premises. Because of the high cost of customer drops, careful budgeting and adequate funding are necessary. Te worst thing possible is for a business or resident to request connection to a network that lacks the funds to make that "last 100 feet" connection. Some networks bill customers (or try to get the service provider to pass that expense through to customers) for the cost of the drop. Some businesses are willing to pay for the drop because of the money they will save, but other businesses and many residential property owners continue to resist paying for construction. I believe that over time, as the benefts of fber become more compelling, more customers will be willing to pay for their connections. However, in its frst year or two of operation, a community- owned network needs funds to pay for new customer connections and thereby meet take-rate targets. Poor costing of drops. Te ongoing challenge of getting new customers connected is often aggravated by infated costs for installing fber drop cables. Some fber construction contractors, used to working for deep-pocketed incumbents, specify construction techniques for drops that make them too expensive. For example, a drop cable to a single business customer may not need to be installed in conduit buried 36 inches deep. Once it leaves the public right-of-way, it could be direct buried just 12 to 18 inches deep or installed in a very shallow slot. Getting good prices from contractors is not difcult, but it usually involves sitting down with them, discussing the kinds of construction methods they can provide and negotiating prices for various construction techniques in advance. As an example, in one community where I was asked to help, the contractor doing drops wanted to use horizontal drilling for all drops even where direct bury with a much less expensive machine would have saved thousands of dollars. I recommended a change to a contractor who had a wider variety of equipment and was comfortable with simpler and less expensive installation techniques. MARKETING Not ofering incentives for service providers. In multiservice, multiprovider networks (often called open access), I have found ofering price incentives to providers is necessary to get them to sell their own services more consistently. Tese can take the form of short-term incentives (such as waiving the connection fee for all new customers in the next 60 days) or volume and term discounts for increasing the number of customers they have on the network. Without incentives, some providers tend to slack of on new customer attraction after making an initial furry of sales eforts when the network opens for business. Confusing marketing with sales. Board members and senior managers without enough business experience think that in a multiprovider network, the private sector providers will do all the marketing and sales. However, for There is going to be some competitive tension between incumbent providers and any community-owned enterprise. Community broadband projects have to start with and maintain a business mindset.

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