Blog

APR

25

City of Seattle Releases Plan for Facilitating Equitable Access to Wireless Broadband Services

The City of Seattle has released its Plan for Facilitating Equitable Access to Wireless Broadband Services.

This report represents a strategic approach for deploying Wi-Fi and other wireless technologies as a tool for addressing Seattle’s digital equity and digital inclusion needs. The plan balances the City’s two key project goals: The need to serve the public by filling broadband gaps (due to lack of availability or affordability), and the need to deploy services through a financially sustainable business model.

Read the report in its entirety here.

Published: Tuesday, April 25, 2017 by CTC Technology & Energy

APR

14 A Technical Guide to Dig Once Policies

Our latest white paper, A Technical Guide to Dig Once Policies, is a discussion of technical considerations regarding dig once conduit, a comprehensive process for developing dig once policies, and examples of dig once policies across the country. Read it here.

For more information on the benefits of dig once policies, see CTC’s Gigabit Communities

A Technical Guide to Dig Once Policies

During his campaign, President Trump vowed to rebuild the nation’s infrastructure, with a plan to spend more than $500 billion fixing the country’s aging roads and highways. This type of investment could also provide an opportunity for local and state governments seeking to increase the deployment of broadband networks.

While internet service providers are often trying to reach new consumers, the process of installing fiber networks can be prohibitively expensive and time-consuming. Local and state governments can ease the process by adopting a “dig once” policy, which requires public and private excavators to coordinate with local government on the installation of extra fiber or conduit whenever ground will be broken in the public right-of-way (PROW).

“Dig once” policies were identified as a best practice for local governments by the Obama administration’s Broadband Opportunity Council as a means of enhancing competition in the broadband market.^[1] The Council noted an important truth: “While sound national policies and programs are important, most decisions on broadband investment are made by Local governments in partnership with the private sector, guided by State law.”

Dig once policies have many benefits, including:

Protecting newly and recently paved roads and sidewalks
Enhancing the uniformity of construction
Ensuring efficient, non-duplicative placement of infrastructure in the PROW
Reducing overall costs of all underground work in the PROW, both utility- and telecommunications-related, for public and private parties
Facilitating private communications network deployment by reducing construction costs
Leveraging construction by third-party entities for the deployment of a public communications network, or deployment of conduit that can be made available to other entities

While dig once policies are beneficial, they are not a one-size-fits-all policy prescriptive. To develop “best practices” guidance for local governments, we surveyed the approaches adopted or proposed by jurisdictions across the country. In the process, we interviewed representatives of cities and other government entities that have adopted such policies, and reviewed the treatment of costs in dig once scenarios.

Based on our survey and our own experience, we identified three general approaches:

Some communities require an excavator applying for a permit in the PROW to notify utilities and other relevant entities about the project and invite their participation.
Localities with a “shadow conduit” installation policy require the excavator to install excess conduit for future use; depending on the policy, the excavator or the jurisdiction may then lease that excess capacity.
Other localities undertake a longer-term process, coordinating multi-year plans with excavators.

We recommend that localities consider the following steps in developing an ordinance or policy:

Prioritize projects suitable for additional construction, based on a scoring mechanism
Develop a refined estimate of the incremental costs during the design stage
Develop a standard engineering specification for dig-once conduit
Develop a procedure to systematically track and manage the construction and to create a repository of existing infrastructure

For state and local governments and the public, the advantages of dig once policies are significant and easily understood. But, while fiber and conduit materials are relatively inexpensive, dig once construction is still costly—so many factors should be taken into consideration to ensure dig once policies are implemented in a cost-effective and useful way. Communication between local government and the companies that would potentially use the conduit is critically important. Localities should also establish a system to track its planned, ongoing, and completed construction.

Read the paper in its entirety here.

[1] “Broadband Opportunity Council Report and Recommendations,” U.S. Department of Commerce and U.S. Department of Agriculture, August 20, 2015, https://www.whitehouse.gov/sites/default/files/broadband_opportunity_council_report_final.pdf (accessed July 26, 2016). See also: “Executive Order on Accelerating Broadband Infrastructure Development,” Federal Highway Administration, U.S. Department of Transportation, May 5, 2016, http://www.fhwa.dot.gov/policy/otps/exeorder.cfm (accessed July 26, 2016).

Published: Friday, April 14, 2017 by CTC Technology & Energy

APR

12 Producing Value through Effective Governance

CTC just published a new paper on the steps community broadband network operators can take to develop an effective governance process to maximize value to the community.

Operating a community broadband network entails complex technical, financial, and strategic business considerations—and those decisions are all made within a governance framework.

Effective governance enables a locality to organize its decision-making to produce the greatest value. While value is measured in terms unique to that community, the key to good governance is that the network’s value will reflect the community’s needs. For example, a local government might construct a broadband network to lower the cost of its internal communications services, promote economic development, or serve local schools and libraries. In each of those scenarios, the locality’s governance should ensure that the network delivers on its stated goals.

In this brief white paper, we describe a high-level approach to adapting a governance process to support identified needs and produce effective value. This approach includes:

Identifying key goals and objectives

As a project unfolds and stakeholders and needs are identified, goals and objectives are often added and shaped in the context of what is realistically achievable with available resources.

Identifying key stakeholders

While a more comprehensive stakeholder analysis needs to be completed as a project’s objectives and operational model are fleshed out, the initial core goals and objectives point to natural leaders, advocates, and stakeholders who need to be active participants in the project.

Focusing on needs and value

Periodic re-checks help to keep your governance development aligned with the issues that matter to your community—and to ensure that you have the right stakeholders engaged in the right roles.

Identifying strengths and weaknesses

What changes need to be made in terms of organization and staffing to effectively manage operations?

Developing an appropriate organizational structure

Strengths and weaknesses are always relative to something—some idea of what the network should deliver, and to what extent the necessary pieces for delivery exist.

Managing strategic governance

Identify roles of stakeholders depending on whether the stakeholder represents a service provider, service partner, or client; and what resources and information the stakeholder brings to the table.

Retooling organizational structures as needed

The degree of organizational change necessary to support a fiber optic network can vary widely, and depends heavily on the phase of the project. Newer projects can involve drastic change, while those undertaken by mature organizations may only entail modest changes.

Developing key performance indicators

The industry standard is the balanced scorecard, which considers leading and lagging indicators from different perspectives, and ties those back to strategic objectives and goals. What makes most sense for your network should be something you continually discuss with your stakeholders.

Read the white paper in its entirety here.

Published: Wednesday, April 12, 2017 by CTC Technology & Energy

APR

03 Boston Releases RFP for Dark Fiber IRU to Upgrade Broadband Connectivity to Public School Facilities

The City of Boston is committed to closing the digital divide for its students—and to laying the foundation to meet the growing broadband needs of the 21^st century. The City plans to accomplish this by connecting all City schools to BoNet, the fiber-based network operated by the City.

This City has issued an RFP for scalable dark fiber backbone infrastructure—primarily to upgrade broadband connectivity to Boston Public Schools (BPS) facilities. The City may also seek to bolster the existing BoNet infrastructure and provide future connectivity to Boston Housing Authority (BHA) facilities and critical public safety sites. Additionally, this expansion will help the City expand and improve public safety services across the City and expand opportunities to deploy “Wicked Free Wi-Fi” to a broader geography.

The City’s goal is to leverage as much existing infrastructure from private carriers by seeking an IRU of dark fiber to connect approximately 145 sites throughout the entire city. The term of the IRU shall be for 20 years, with two 5-year renewal terms.

The complete RFP and its accompanying documents can be accessed on the City’s Procurement Page.

Responses to the RFP are due June 6, 2017

Published: Monday, April 3, 2017 by CTC Technology & Energy

MAR

29 Town of Wake Forest, NC Releases Broadband FTTP RFI

The Town of Wake Forest, North Carolina has issued a Request for Information (RFI) to convey its interest in partnering with a sophisticated and motivated partner to bring fiber-based, Gigabit-class broadband service to the area. The successful Partner will deploy ubiquitous FTTP infrastructure and provide broadband internet service to residents, businesses, and community anchor institutions (CAIs) in the Town.

Responses to the RFI are due to the Town May 17, 2017.

Read the RFI here.

Published: Wednesday, March 29, 2017 by CTC Technology & Energy

MAR

27

How the Local Oversight Process Addresses the Concerns of the Public Sector in Small Cell Siting

Andrew Afflerbach, PhD, PE
CEO & Director of Engineering

As the FCC and many state legislatures consider interfering with local processes regarding wireless facilities siting, I recently prepared a report for the Smart Communities Siting Coalition, addressing wireless siting and the critical importance of local process from a technical standpoint.

Among other things, my report describes and illustrates “small cell” infrastructure and discusses how the local oversight process addresses the concerns of the public sector that wireless facilities not compromise public safety, traffic, people with disabilities, and other communications.

Accommodating permitting and other local government requirements in public rights-of-way is typically a relatively small part of the cost and time required for design and construction of outside plant for a communications network, with only marginal impact on broadband investment decisions. Indeed, local permitting processes and fees have negligible impact on the decision to deploy broadband in urban versus rural areas. In fact, in our experience, the permitting process and local government coordination can help and facilitate deployment. When it is done effectively, it protects the integrity of existing infrastructure and public safety, and provides certainty and predictability to wireless carriers and wireless infrastructure companies.

In my own experience and in the experience of my colleagues at CTC, the optimal way to facilitate and smooth the wireless siting process is for wireless companies to work with localities by filing complete, accurate, timely siting applications—and by collaborating with the localities in an efficient, mutually-beneficial process of pre-planning, specification development, and reasonable staging of the deployment. In city after city and county after county, we have found that localities are highly motivated to facilitate and incentivize broadband build-out, and are willing to use permitting and other processes to enable and smooth the deployment process as much as possible.

Numerous localities are currently involved in creative efforts to understand private sector needs and to develop ways to work collaboratively. The next generation of wireless broadband deployment can best be achieved if wireless companies undertake a similarly collaborative, constructive engagement with localities.

The report was submitted to the FCC in the Mobilitie docket (WT docket 16-421) by the Smart Communities Siting Coalition. It can be found here.

Published: Monday, March 27, 2017 by CTC Technology & Energy

MAR

21

CTC President Joanne Hovis Testifies Before U.S. House Subcommittee: “Broadband: Deploying America’s 21st Century Infrastructure”

The following is CTC President Joanne Hovis’ testimony before the U.S. House of Representatives Committee on Energy and Commerce Subcommittee on Communications and Technology, “Broadband: Deploying America’s 21st Century Infrastructure” on March 21, 2017.

For the full hearing, visit the Energy and Commerce Committee’s website here.

A PDF copy of Ms. Hovis’ testimony can be downloaded here.

Broadband: Deploying America’s 21st Century Infrastructure

Chairman Blackburn, Ranking Member Doyle, and members of the Subcommittee, good morning and thank you for inviting me to testify today. My name is Joanne Hovis. I am the president of CTC Technology & Energy, an independent broadband technology and planning consultancy that supports public sector clients nationwide. I am also the CEO and co-founder of the Coalition for Local Internet Choice, a national organization that represents a wide range of public and private interests who support the authority of local communities to make broadband internet choices. I believe that local internet choice is critical to enabling broadband deployment and creating broadband competition, especially in unserved and underserved areas.

I am a member of the boards of directors of the Benton Foundation and the Fiber Broadband Association (formerly the Fiber-to-the-Home Council).

At CTC, I have developed business model analysis and strategy for some of the largest public-private broadband initiatives in the country. I lead the CTC teams that advised the states of Connecticut, Kansas, Kentucky, Maryland, Massachusetts, New Mexico, and New York; the cities of Atlanta, Boston, Palo Alto, San Francisco, Seattle, and Washington, D.C.; and many other public entities.

I focus in particular on broadband public–private partnerships (P3) that enable both public and private entities to benefit from public assets and private innovation and service delivery. Among my client engagements are the pioneering broadband P3s in the Commonwealth of Kentucky and the cities of Boulder, CO; Bloomington, IN; Madison, WI; Westminster, MD, and Huntsville, AL.

Deploying Broadband Will Require Federal Infrastructure Funding, Innovative New Approaches, and Partnerships

One of the hallmarks of President-elect Trump’s candidacy was a commitment to major infrastructure investment across the U.S. and to increasing the role of the private sector in such development through tax mechanisms and public–private partnerships.

Like electricity in the last century, high-capacity broadband internet access today is rapidly becoming the critical platform and driver of simultaneous progress in economic development and global competitiveness, education, health care, public safety, transportation, and much more. By working cooperatively with state and local governments, the private sector stands to benefit in multiple ways—as partners in designing, building, financing, and operating these advanced communications networks, as users of the networks to market their goods and services in the rapidly emerging information-based global economy, and as contributors to the next generation of innovations.

I make the case today for including broadband, particularly in rural areas, among the infrastructure categories in any infrastructure investment program, and recommend particular P3 and related mechanisms that can be included to increase the likelihood of the necessary capital flowing to the areas with the greatest needs.

Broadband Gaps Align with Lower Income Levels and Lower Population Densities—These Are the Areas that Would Benefit Most from Broadband P3s

Americans access the broadband internet over networks owned by phone companies, cable companies, and, in a few locations, competitors.

Broadband, like any other type of infrastructure, requires significant upfront capital for deployment of networks and services, and private capital will flow to areas where potential return is highest. In a number of densely-populated, higher-income areas, incumbent phone and cable companies have upgraded their networks to enable new services and high-speed internet access. A handful of these areas have also seen investments by new entrants seeking to outflank the incumbents in establishing 21st century broadband infrastructure.

In contrast, in less densely-populated areas and lower-income areas, the pace of progress has been much slower. Offering lower returns on private investment, these areas have seen their economies stagnate, their children move to more promising locations, their hopes for a better future ebb away. Fortunately, P3s and other collaborative public-private structures offer one promising solution.

Broadband Public–Private Partnerships Present Opportunities for Economic Benefit in Rural and Low-Income America

State and local governments are increasingly motivated to incent private sector investment in next generation broadband networks, with a focus on homes, businesses, and government users such as public safety. States and localities have experience, capabilities, and assets that enable them to build broadband infrastructure that can be made available to the private sector for competitive services and innovation, with the public entity building the infrastructure but uninvolved in the private sector role of operations and service delivery to the public. Alternatively, the state or locality can partner with the private sector for shared investment in private networks that secure public sector goals (such as service in rural areas that seek to maintain economic viability and enable such critical practices as home-based business and home-schooling).

Private sector users could include application developers and innovators in a range of areas (home-based education, transportation, public safety, health care, etc.) as well as broadband internet service providers (ISPs) and wireless companies seeking fiber backhaul for next-generation wireless such as 5G cellular.

To maximize this possibility, I will recommend in the next section creation of a series of P3 opportunities and financing support that will have the following positive effects on the deployment of both wired and wireless broadband:

Increase investment in new broadband facilities by reducing borrowing costs for P3s.
Stimulate development of a P3 market for broadband networks, which has been limited until now (despite the interest of private entities) because of the high cost of infrastructure deployment.
Maximize use of existing public broadband assets by enabling states and localities to add to them, and then make them available to private sector ISPs.
Create investment opportunity in areas that struggle to attract capital, particularly: (1) small business areas in both urban and rural areas that are chronically underserved with business-grade broadband, and (2) smaller, remote towns and rural areas that have suffered from chronic underinvestment with respect to private broadband infrastructure.
Create broadband construction jobs. Construction of fiber optics and wireless towers has immediate, significant direct job creation benefit because the bulk of funding is for labor rather than materials.
Support workforce education and development programs to prepare America’s workers to succeed and thrive in the emerging information-based global economy.

Recommendations

Even a combination of tax credits and P3s alone would be insufficient to attract investment to rural areas. All things being equal, investors will go to where the market is strongest, the returns are highest, and the revenues are likely to be most robust.

As a result, unless tax credits are geographically targeted, investors will not generally take the tax credits to rural parts of the country. Instead, investors will likely use the tax credits in markets, including through P3s, where the potential for substantial revenues is greatest – wellto-do, densely-populated areas.

This is both because the market and the asset type facilitate high revenues, and because the state or locality that sponsor the P3 will probably be capable of undertaking more significant public spending or public guarantees of the P3 private revenues than state or local entities in lower-income, sparsely populated areas. For this reason, based on my experience, I suggest that the strategies include some of the following recommendations to make the tax credits and P3s in rural areas more viable and more attractive to investors:

Create financing support mechanism to reduce P3 borrowing costs. Create financing mechanisms that would reduce borrowing costs for states, localities, and private entities to build the infrastructure, thus making the P3s more viable at modest cost to the treasury. For example, federal contribution toward/reduction of interest costs would improve viability of P3 projects.
Enable use of tax-free municipal bonds to fund public infrastructure in P3 environments or for lease to private ISPs, thus reducing municipal borrowing costs, enabling P3s, and increasing project viability at modest cost. Specifically, create exception to private use limitations for tax-free municipal bonds focused on funding broadband infrastructure that would be available for private use, or that would be managed by a private partner under a formal P3 structure. Allowing use of tax-free bonds for broadband infrastructure to be leased and/or operated by private ISPs is projected to greatly increase state/municipal interest in broadband P3s and in investment in assets for use by private entities.
Enable transferability of tax benefits such that non-profits and public entities can sell tax credits or other tax opportunities on the market—thus making tax mechanisms more viable for areas that are of less interest for private capital. By way of analogy, the New Market Tax Credits program has had consistent bipartisan support for a similar approach focused on lower-income areas. This two decade-old, proven program allows investors in economic development infrastructure to sell their investment tax benefits on the market, thus realizing cash inflows that can help finance and support the project. This bipartisan program should be renewed and enlarged as a particularly efficient way of attracting private capital to areas that otherwise offer insufficient returns on investment.
Carve out funding and other support for areas where the local economy has been impaired by technology change and globalization—and where broadband could have a disproportionate impact (relative to cost) on improving economic opportunity. Geographically-targeted incentives could include more robust funding or financial benefits for infrastructure investments in rural and low-income areas. Unfortunately, recent budget proposals go in the opposite direction. For example, President Trump’s budget proposal would exacerbate this issue by eliminating funding for two programs that have delivered measurable benefits in the areas of digital inclusion and broadband infrastructure. His budget would zero out both the Appalachian Regional Commission (ARC) and the Department of Commerce’s Economic Development Administration (EDA). As I discuss below, my experience working with the government of Garrett County, Maryland—which has received modest ARC funding for an innovative broadband public-private partnership project—illustrates the importance of programs such as these.
Include mandatory Dig Once and construction efficiency strategies in other P3 projects, in order to capitalize on opportunities presented by construction in the rights-of-way— whether by government agencies, utilities, or private entities—to cost-effectively install fiber and conduit. For example, consider a P3 scenario for replacement of an aging municipal water system. The concessionaire could be required to simultaneously install conduit in all of the trenches dug to replace water mains and supply pipes, thus effectively constructing extensive broadband infrastructure at incremental cost. Dig Once is thus an enormous opportunity at the local level to create a multiplier effect on federal infrastructure funding.

Local Government Examples

At the moment, early actors are developing new and exciting partnerships to bring next-generation broadband to their communities. I describe some of those projects in the following brief case studies.

City of Westminster, Maryland

In this rural town, home to 20,000, a broadband P3 has emerged in which the city has invested to deploy fiber optics to every home and business—and then leased the fiber to a private ISP that committed to provide services. For small businesses, in particular, the new services have been transformative, as they previously had no Internet option above a few megabits per second.

Garrett County, Maryland

This remote Appalachian community has no broadband in some remote, mountainous areas. The county’s concern arose from citizen complaints that they could not home-school their children without adequate bandwidth to download home-schooling curricula, and could not telework or run home-based businesses without broadband.

The county developed a P3 to support the deployment of a fixed-wireless broadband network, currently under construction, that will serve up to 3,000 currently unserved homes. The private partner will match the public investment with its own capital and will assume operating risk. The county contribution (which was matched with development funds from the Appalachian Regional Commission) made the economics of this opportunity attractive to the private partner.

Huntsville, Alabama

In February 2016, the city of Huntsville, Alabama, the state’s northern technology hub, announced that its municipal electric utility will build a fiber network throughout its city limits (presumably, to pass all or most businesses and homes), and that Google Fiber will become the first lessee of some of that fiber in order to provide gigabit services to residences and small businesses.

As in Westminster, the Huntsville model puts the city in the business of building infrastructure, a business it knows well after a century of building roads, bridges, and utilities. The model leaves to the private sector (in this case, Google Fiber and any other provider that chooses to lease Huntsville fiber) all aspects of network operations, equipment provisioning, and service delivery.

Swift County, Minnesota

In one innovative, shared-risk project, a state grant and a county bond issuance have enabled a private company to deploy next-generation broadband in Swift County, a rural area in west central Minnesota that has a population of only 10 people per square mile.

Swift County is no exception when it comes to the economic challenges of deploying broadband in low population density areas.

With the active support and encouragement of the county, Federated Telephone Cooperative, a phone co-op in the region, applied for and won a grant with the State of Minnesota in 2015. (Set up to promote “border to border” broadband access, the state of Minnesota has a $35 million statewide grant program designed to help new and existing ISPs as they try to reach new customers in hard-to-reach areas.1 According to Minnesota’s Department of Employment and Economic Development, 25 percent of the state’s rural residents lack access to high-speed broadband.) Federated Telephone won the state’s largest award: $4.95 million. That amount pays for only 40 percent of the project’s projected cost, however, under the terms of the grant. The balance of the project’s $12.5 million total cost is funded by a loan from the county.

To launch the project, Swift County sold $7.8 million in general obligation bonds. Federated provided a $1 million cash security in the event of missed payments, and will repay the loan over 20 years.

The project is designed to expand broadband availability to 600 households, 425 businesses, and 75 community buildings.

RS Fiber Cooperative (Minnesota)

Construction of a new fiber optic network to residences and farms is underway in rural, south-central Minnesota thanks to a public-private partnership, called the RS Fiber Cooperative, and the state’s grant program. The network will eventually pass more than 6,200 potential customers across 10 cities and 17 townships. The network will be built in phases, with the first phase expected to cost $15 million. The state contributed $1 million to the effort through the rural broadband grant program, and the participating municipalities have financed the rest with $8.7 million in general obligation bonds, as well as additional bank loans. Once completed, the first phase of the network will allow the cooperative to offer better broadband than is currently available in the area using wireless transmitters. The cooperative will use the revenue it begins to generate to service the bonds and finance the construction of the last-mile portion of the fiber network.

State Government Example: Kentucky Wired

With eastern Kentucky losing coal jobs at an unprecedented rate, Kentucky developed a plan to use broadband to spur economic development. But Kentucky faced the same challenges found in rural communities across the country: Bringing high-speed internet to low-population density areas is an expensive prospect.

The solution is a statewide P3 that will connect 1,100 government entities into a 3,400-mile fiber optic backbone that will be made available to private sector ISPs for use and development. The selected concessionaire will build, maintain, and operate the network for 30 years.

KentuckyWired has been a bipartisan effort from the outset, and originated with U.S. Rep. Hal Rogers as an economic development initiative for replacing lost coal jobs. The program has been strongly supported by state elected officials of both parties, first by former Gov. Steve Beshear and, more recently, Gov. Matt Bevin.

Conclusion

Thank you for your consideration and the opportunity to appear before you today.

Published: Tuesday, March 21, 2017 by CTC Technology & Energy

JAN

30 City of Seattle Releases RFI for Collaboration and/or Partnership for Wireless Services and Potential Smart Cities Deployments, Including in Low-Income Districts, and Parks.

The City of Seattle Information Technology Department has posted a Request for Information for Collaboration and/or Partnership between the City of Seattle and Private Sector Entities for Wireless Services and Potential Smart Cities Deployments, Including in Low-Income Districts, and Parks.

Responses are due to the City by February 28, 2017 at 2:00 PM PST.

View the RFI.

More details, the RFI in its entirety, and a complete timeline can be found here.

Published: Monday, January 30, 2017 by CTC Technology & Energy

JAN

24 City of Salisbury, NC Issues RFP for Fibrant FTTP Provider Arrangement

The City of Salisbury, North Carolina has issued a Request for Proposals (RFP) to convey its interest in entering into a contractual arrangement (Provider Arrangement) with a third-party provider (Provider) that will enhance the operation, sales, marketing, and delivery of Gigabit-class broadband service to the community.

The Provider Arrangement could be a sale and purchase of the existing City FTTP assets, an operating lease of such assets, a management contract pursuant to which the Provider operates such assets, a “public-private partnership” with respect to such assets, or any other contract arrangement that satisfies the City’s objectives. The details of the assets and the City objectives are included in the RFP.

Letters of Intent (LOI) to respond to the RFP are due to the City by 4:00 PM EST Friday, February 3rd. Responses to the RFP are due to the City by 4:00 PM EST Friday, March 10th.

View the complete RFP

Additional details and a response timeline can be found on Fibrant’s Community Interest Page.

Published: Tuesday, January 24, 2017 by CTC Technology & Energy

JAN

09 Partnerships, Sharing, and Community Anchor Institution Broadband

Originally published by the Benton Foundation on behalf of Joanne Hovis on January 4, 2017. The original post can be found by following this link.

The SHLB Coalition developed Connecting Anchor Institutions: A Broadband Action Plan to provide ideas and actionable policy recommendations for government leaders at the federal, state, and local levels to address the broadband needs of anchor institutions. The ten policy papers highlight connectivity gaps and explain why broadband access is vital to communities nationwide. In the coming weeks, the Benton Foundation will be highlighting each of the Action Plan policy papers. The following is an excerpt of the third paper. Be sure to register for Partnerships and Rural Broadband Needs, a webinar coming on January 10.

Introduction

Partnerships, aggregation, and coordination in securing broadband services are valuable tools for community anchor institutions (CAIs). Aggregating buying power on a regional or statewide basis is a tested best practice that can enable anchor institutions to achieve lower per unit pricing, higher bandwidth, and improved service quality. Policymakers should encourage anchors to consider joint procurement and coordination with entities representing other anchor sectors in their state or region. Aggregated procurement also encourages broadband providers to collaborate and bid with other providers—which could flatten pricing and reduce geographical disparities.

The Aggregated Purchasing Model

Under the aggregated purchasing strategy, multiple anchors (such as school districts and/or libraries) on a regional or super-regional basis—or ideally, on a statewide basis with support of one or more state agencies—combine their request for proposal (RFP) processes to solicit and contract for Internet bandwidth and wide area network (WAN) connections, dark fiber, wavelengths, Ethernet, or any other service. (The RFP process established by the Federal Communications Commission (FCC) in its E-rate program is conducive to this model, but the strategy can also benefit CAIs that do not participate in E-rate.)

In this approach, the anchors cooperate to develop the joint RFP and select the vendor(s). Ideally, the buying group would be as large as possible and would include both rural and metropolitan-area anchors—thus enabling, on the one hand, rural communities to benefit from the substantial buying power of higher-volume urban districts and, on the other, enabling urban communities to benefit from the buying power afforded rural stakeholders by federal funding programs. Establishing a joint urban-rural consortium for the purchase of broadband services can also permit the CAIs to adopt a “postalized rate” pricing regime that allows rural CAIs to pay the same per-unit rate as the urban CAIs.

The FCC encourages consortium buying in both the E-rate program(1) (for schools and libraries) and in the Rural Healthcare program.(2) In the Rural Health Care Pilot program, originally adopted in 2007, the FCC found that “the flexible, consortium-based approach of the Pilot Program fostered a wide variety of health care broadband networks that enabled better care and lowered costs, . . . enabling smaller HCPs [health care providers] to draw on the medical and technical expertise and administrative resources of larger HCPs.” As a result, the FCC has directed the Universal Service Administrative Company (USAC) to prioritize consortium applications for expedited review in both the E-rate and Rural Healthcare programs.(3)

Statewide or Regional Procurement

Aggregated buying is a best practice that has also been utilized powerfully at the state and regional level. A large-scale state or regional procurement strategy can leverage the collective buying power of several anchor institutions, which together represent a massive customer for commercial service providers. Significant leadership and organization are necessary to implement aggregated buying, including convincing stakeholders at the local level to participate. But the challenge can be overcome by pointing out the significant cost benefits. These benefits include:

Lower per unit pricing across the full range of key services, including Internet bandwidth and WAN
transport costs;
Potential increased investment and improved services by private sector providers;
Reduced (per CAI) administrative and processing costs; and
Additional management expertise that could benefit participants with limited technology resources.

Lower Unit Pricing

An anchor institution, when acting alone, often is a relatively small purchaser, particularly in smaller communities in rural areas. Indeed, even if an anchor — such as a school district — is one of the bigger buyers in the region, it still has relatively modest buying power. Dramatically compounding this problem is the fact that, in many areas, there may be only a single broadband provider with the facilities to serve the anchors. As a result of the modest buying power and the effective lack of competition, rural and single anchors have little to no leverage to secure pricing comparable to that of larger buying groups or metropolitan area districts that may be fortunate enough to have slightly more competition.

In contrast, the aggregate of the communications purchases made by all anchors in a region or state is substantial—and in total likely represents one of the largest communications purchasing sectors in that area. Greater purchasing power can deliver better pricing because bidders offer lower per unit costs in order to secure the volume business opportunity.

The aggregated purchasing strategy is also likely to have positive impacts on commodity Internet bandwidth costs. The cost of bandwidth varies dramatically depending on location (i.e., it will be significantly less costly in Chicago or El Paso than in Peoria or Farmington) and the size of the total purchase (i.e., large bulk purchases of bandwidth will result in lower per-megabit costs than will smaller purchases). The ability of the broader anchor community to buy commodity bandwidth in bulk and then distribute it across a region or state to locations where it is needed can dramatically decrease the per-megabit price of that bandwidth.

Increased Private Sector Investment

The opportunity to realize more revenue and improve long-term business opportunities can convince commercial providers to make additional network investments to serve consortium purchasers. The scale enabled by large group buying is likely to create a business opportunity so appealing to the service provider community that it may organize itself to build additional fiber and offer improved services. Service providers may also offer certain benchmarks for service and upgrade service levels in order to win such a large opportunity.

The new E-rate rules, which explicitly allow E-rate funding for special construction and dark fiber, also present new opportunities for aggregate purchasing. The prospect of receiving substantial ongoing E-rate subsidy for services, and the opportunity to obtain upfront payment for network expansion (particularly for fiber construction), amplify the business opportunity for service providers.

The development of new infrastructure would serve not only the anchor customers, but also many other users in the surrounding area. Indeed, fiber built to currently unconnected anchors can serve as a “middle-mile bridge” into areas where the anchors are located—and then provide a means of extending service over time to business and residential customers. At the same time, the construction will have direct economic development benefits, as well as catalyzing long-term indirect benefits that flow from the new communications services.

Reduced Administrative and Processing Costs

Another significant benefit of regional, super-regional, or statewide procurement is lower (per anchor) net administrative costs, including RFP preparation, RFP review, contract negotiations, contract administration, invoice review and payments, and, very significantly, interaction with the E-rate administration. One of the E-rate program’s biggest challenges is the considerable administrative cost involved at the local level. While the FCC has made efforts to reduce the administrative burden, some of the components of the E-rate application process have become more complex as a result of the significant E-rate rule changes in the two E-rate orders adopted in 2014, particularly for “big-ticket” applications. Collaborative purchasing leads to the opportunity to share the costs of an E-rate consultant or consultants, thereby lowering administrative costs for all participants in the consortium.

Bringing Additional Resources to Help

Consortia applicants can also benefit from shared management and technological expertise. Either the purchasing cooperative itself, or service providers, can provide management services to help even out the technological skill and capacity of the membership. This benefits all members of the purchasing group in that it makes sure that all members are able to benefit evenly from the purchase, installation, and management of connectivity for their organization. This benefit is particularly important for rural CAIs that may not have the resources to hire engineering and legal support necessary to ensure the application meets all the criteria for approval.

Notes:

Federal Communications Commission, In the Matter of Modernizing the E-rate Program for Schools and Libraries, Report and Order and Further Notice of Proposed Rulemaking, WC Docket 13-184 (July 23, 2014) (“First E-rate Modernization Order”), ¶168. [The FCC stated, “Consortium purchasing can drive down the prices paid by schools and libraries for E-rate supported services. In this section, we reduce or eliminate some of the existing barriers to applicants’ participation in consortia.”]
Federal Communications Commission, In the Matter of Rural Health Care Support Mechanism, Report and Order, WCDocket 02-60 (December 21, 2012) ¶50.
First E-rate Modernization Order, ¶168.