The changes in Washington DC in January, as a new presidential administration takes office, may bring changes to the E-rate program.[1] In brief, E-rate reimbursement for special construction charges may not survive through the incoming administration, and E-rate funding in general may be reduced. To hedge against these potential changes, public entities that can benefit from the E-rate program should act now to secure those benefits in the coming funding cycle.

This memo outlines the opportunities for E-rate reimbursement of fiber construction charges—and explains why both service recipients (school districts and library systems) and potential public sector service providers (like city and county governments) should act quickly to capitalize on the program in the next funding year.

Benefits of E-rate Special Construction Reimbursement

For schools and libraries, an E-rate procurement that includes investment in fiber optics can:

• Ensure the long-term affordability of network connectivity required to meet growing broadband needs.
• Hedge against potential increases in price in broadband services.
• Help school and library facilities reach federal broadband connectivity goals as defined by the most recent E-rate modernization order.
• Protect against potential reductions in, or elimination of, federal E-rate funding over time.

For local governments that serve their schools and libraries as an E-rate service provider, the special construction reimbursement can be a means to build out a public sector fiber network with significant federal funding. This assumes, of course, that the local government participates in the competitive bidding process (i.e., responds to the school or library’s E-rate RFP) and is selected as the winning, most cost-effective bidder to serve the schools or libraries. While the fiber strands built for the schools or libraries would be dedicated to that purpose, the locality could install additional strands of fiber at the small incremental cost of those materials.

In a similar way, the E-rate special construction reimbursement could create new competition in the local broadband market if the schools or libraries select a private provider to build fiber. In this scenario, as in the scenario in which the local government wins the competitive bidding process, the private provider, answering an eligible E-rate applicant’s bid for leased dark fiber or leased lit fiber, could add fiber strands in addition to the fiber it builds to connect schools. Then the private sector entity could use those additional strands to offer broadband services in the neighborhoods around the schools, and wherever else the fiber reaches.

Brief Overview of Approaches to E-rate Special Construction Reimbursement

The E-rate program provides financial assistance to schools and libraries to obtain affordable broadband. Eligible schools, libraries, and consortia of schools and libraries apply for E-rate support every funding year (July 1 through June 30).

Applicants (schools and libraries) are generally required to seek competitive bids for the services they seek to purchase using E-rate funds; the price of eligible products and services must be the primary factor in selecting the winning bid. City and county governments are eligible to bid and provide services to schools and libraries that utilize E-rate, much as private sector service providers are.[2]

In 2014, the FCC updated the E-rate rules for reimbursement of construction costs, known as special construction charges. The rule changes were designed to expand opportunities for E-rate applicants to select higher bandwidth lit services that may require the construction of new infrastructure by a service provider, or allow applicants to pursue other service options such as dark fiber IRUs and self-provisioning when traditional lit services are unavailable or not as cost-effective.

This E-rate capital funding offers an opportunity for school districts and library systems to enable the construction of fiber optics by the winning bidder of their broadband procurement, so long as the bid that includes the cost of construction is the most cost-effective bid (measured over some period of time that can be as long as 20 years or more).

E-Rate Bidding Process for Special Construction

In this scenario, the school or library system would issue an RFP under the E-rate rules for both “lit” services and for a long-term lease for “dark” fiber. The incumbent provider can bid on this RFP, as can competitors (including public sector competitors) that propose to build and own new fiber, subsidized by the E-rate program, and then to provide to the schools or libraries either lit communications services or a dark fiber lease for a period of time specified in the RFP. (The schools or libraries can then “light” the fiber with equipment funded under E-rate.)

Under the rules of the E-rate program, the winning bidder would be the one that offers the most cost-effective option, measured over a period of time selected by the school district or library system. If a bid to build fiber and then provide services or dark fiber would be more cost-effective than procurement of the same services from other providers, measured over the next, say, 20 years, then the E-rate program would fund construction of the fiber at the community’s standard E-rate discount rate.

In the scenario in which the applicant contracts for dark fiber (as opposed to lit services), it could procure a guaranteed long-term lease of 20 or more years. This approach would serve as a hedge against reduction or elimination of the E-rate program in the future, ensuring that the schools or libraries control sufficient fiber infrastructure to meet their needs at low cost into the far foreseeable future. We think particularly highly of this approach because it entails extremely low risk and relatively low effort for applicants—but gives them long-term security.

Construction of new fiber by the winning bidder enables a school district or library system to meet its own needs for advanced broadband services – and to simultaneously enable its provider to build new infrastructure that can serve as a base for deployment of new services to the public in the neighborhoods around the schools or libraries. (E-rate rules do not allow any fiber strands built with E-rate funding to be utilized for other purposes, but the winning bidder could pay the incremental materials cost to install excess fiber strands alongside the fiber dedicated to the schools or libraries.)

Act Now to Capitalize on Potential E-rate Funding Before Expected Changes to the Program

Based on the outcome of the presidential election and likely changes in leadership at the FCC, we believe that the next chairperson of the FCC will not be as committed to this fiber-based competitive model as is the current chair. Indeed, there is some risk that in the coming year or two, the FCC under new leadership could adjust its direction on special construction funding.

Even if the E-rate program does not see substantial changes in what can be funded, it is likely that that total amount of funding will be reduced. We anticipate an effort in the new administration to lower the cap on the E-rate program (which was raised quite substantially in recent years). If the cap is lowered, there may be insufficient funding for procurements that require special construction. The procurement cycle for the 2017-18 funding year, which will only partially overlap with the new administration, could thus be the last opportunity to seek reimbursement for fiber construction.

For this reason, we strongly recommend that schools and libraries seek to maximize the next E-rate funding year, the process for which has already begun for some districts (i.e., those that are planning their RFPs in advance of the FCC’s upcoming bidding window) and extends into the late spring for funding to begin July 1st.

We note, too, that there is benefit to testing this strategy even if the bids on dark fiber turn out not to be of interest to a school district or library system, or if the applicant chooses to accept a bid for lit services. (Under the E-rate rules, an applicant can test this strategy through an RFP process without being obligated to execute it.) Including the dark fiber option in an E-rate RFP increases the competitive pressure on existing vendors—often leading them to offer lower pricing for lit services. In this scenario, simply the potential for new competition emerging through the dark fiber procurement strategy could reduce a school district or library system’s costs for communications services.

[1] The term “E-rate” is the informal name for the Federal Communications Commission’s Schools and Libraries universal service program.

[2] If the eligible E-rate applicant is part of city or county government, the city or county government should make certain that there is a process of bid evaluation for the E-rate applicant that involves no conflicts with the city or county entity that submits the E-rate bid.  For example, the county IT director should not be part of the E-rate applicant’s bid evaluation process if the county IT department is the operator of the network which is proposed to serve the E-rate applicant’s broadband needs.

The City of Pikeville, Kentucky has released a Request for Proposals (RFP) seeking a motivated partner to enable phased broadband deployment in the region through a Public-Private Partnership for a Fiber Optic Network.  View the RFP.

Proposals are due to the City by 10:00 a.m. on January 4th, 2017.  Additional details can be found by visiting the City’s procurement page.

As demand for wireless data continues to grow, a diverse group of tower companies, wireless carriers, fiber companies, and neutral-host infrastructure providers such as Mobilitie and ExteNet are requesting attachment permits from city and county officials nationwide. The flood of requests and actual deployments is creating uncertainty and stress for local officials as the new technologies are proposed on poles, streetlights, and new structures in neighborhoods. Community members, too, are increasingly asking their local officials whether the new equipment is necessary—and whether there are alternative approaches that would reduce the impact on their neighborhoods.

The wireless carriers are investing billions of dollars to enhance their networks by adding antennas and interconnecting them with fiber. Through a process they refer to as “network densification,” the carriers will use a mix of traditional macro cell towers, distributed antenna system (DAS) networks, and small cells to reach individual customers—both on the move and in their businesses and homes.

Indeed, FCC Chairman Tom Wheeler, speaking at a recent CTIA conference, noted, “There are just over 200,000 cell towers in the U.S., but there may be millions of small cell sites in the 5G future.”(1)

Local communities will feel the impact of these new cellular installations, particularly because the antennas will need to be even closer to where people live and work. Local government decision-makers need to be aware of the rapid emergence of large-scale DAS and small cell wireless deployment in residential neighborhoods—and the potential opposition to those deployments from residents.

Understanding the Augmentation of Towers with Small Cells and DAS

Traditional Approach to Wireless Service

Cellular network designers have a goal of providing customers with coverage and high-speed access—in the areas where customers expect to use the service. Challenges to network designers include the range of performance of phones and wireless devices, the limited availability of radio frequency spectrum, the placement of the wireless transmission facilities with respect to the user, rapid growth in demand, and obstructions such as building walls and trees.

Historically, to support only voice and text, wireless providers installed 150- to 200-foot towers to serve users in a five-mile radius (for a total service area of 50 to 75 square miles). The industry regarded the tall tower approach to wireless deployment as a reliable and cost-effective way to address narrow-bandwidth cell phone voice applications.

The most common forms of cell tower deployment have been self-supporting towers and monopoles. Typically, three or more wireless carriers share a common structure, with each carrier installing separate multi-antenna arrays (or rings) at designated heights. A common area beneath the tower is used to house the electronic equipment and backup power for each carrier, often with each carrier having a separate building.

Figure 1 is a typical self-supporting tower with three service provider antennas. Figure 2 is an example of a monopole cell tower. In addition to the antennas used to provide wireless service to customers, both towers also have microwave antennas to link the sites to neighboring sites and connect with the backbone telephone network and Internet.  This connection can be provided either by a microwave or a cabled connection.  However, to support expanding future needs for broadband Internet, typically a fiber optic connection is needed.

Figure 1: Self -supporting Tower 

Figure 2: Monopole Tower

Evolution of Wireless Technology

Modern broadband 4G and future 5G technologies require substantially greater bandwidth and signal strength than voice and text.

Over the past decade, service providers have begun to augment tall tower deployment with neighborhood wireless transmission facilities—such as DAS and small cells—that have smaller coverage footprints. In the new distributed wireless architecture, broadband users communicate with localized access points, typically mounted at elevations of 20 to 30 feet above ground level. These neighborhood access sites target service areas with a radius of 250 to 300 feet from the access site.

The rapid increase in wireless data usage requires an increase in the overall capacity and functionality of local wireless networks. Initially, nationwide wireless carriers focused on the 700 MHz band. Commercial wireless carriers then began to address the growth by acquiring and activating spectrum in higher-frequency radio bands (1.9 GHz to 2.5 GHz and higher), and segmenting the coverage area of their access points to serve smaller areas, so that fewer users share the same spectrum. While the higher-frequency bands increase the capacity, they are also more susceptible to blockage from buildings, foliage and terrain and often have more limited range.

Wireless providers additionally propose to expand their transmission capacity by adding hundreds of megahertz in unlicensed spectrum (in the 2.4 and 5.8 GHz bands used by Wi-Fi) to augment the licensed spectrum that they hold. The FCC is currently evaluating alternatives for providing additional spectrum to further enhance the resources of the wireless industry, focusing its efforts across the 2.4 to 6.0 GHz spectrum, as well as submillimeter spectrum up to 80 GHz.

A wide range of innovations currently is included under the evolving category of “5G,”(2) offering the promise of improved transmission speeds and accompanying throughput by enhancing coding techniques; “beam forming;” spectrum band aggregation; and other technological advancements. But even with these technological enhancements, user demand for high-speed network access will potentially continue to exceed technology updates.

The industry sees smaller network segments and large numbers of DAS and small cell network access points situated close to the user as a pragmatic and cost-effective approach to enhancing the delivery of broadband services.

Deployment Options for Achieving Targeted Neighborhood-Area Coverage

Currently, the industry is focused on enhancing broadband delivery, particularly in urban and suburban markets with high concentrations of users in relatively small areas. DAS networks and small cell antennas are two of the most common technologies for filling in capacity and coverage gaps within carriers’ existing footprints. (That is, the DAS networks and small cells are typically not being used to expand the area covered; they add capacity in existing coverage areas, or fill in spotty coverage gaps in very targeted areas within a carrier’s current coverage area.)

Both DAS networks and small cells are pole-mounted installations smaller than the rings of traditional cellular antennas at large macro sites.  DAS network installations are typically the larger of the two types of installations, supporting multiple spectrum bands and multiple wireless carriers within the same structure. Small cells typically support only one wireless carrier and have a smaller physical size than a DAS installation.

Similar in appearance to telephone, cable-TV, or electrical devices mounted on utility poles, the DAS or small cell installations are installed 20 to 30 feet above ground on structures in the public right-of-way (ROW) such as utility poles, traffic lights, and streetlights—providing a reliable communications range of 200 to 300 feet from the mounting structure.

Figure 3 illustrates a typical neighborhood DAS deployment, with access points connected via fiber optics. (From the perspective of visual impact, a small cell antenna will look similar.) Access point locations are selected based on the availability of suitable mounting structures with the goal of delivering a uniform signal level to users throughout the service area.

Figure 3: DAS With Fiber Optic Cable Backhaul

An alternative approach to linking DAS and small cell access points is to connect them wirelessly (Figure 4). Wireless interconnection (or “backhaul”) uses a separate wireless network to interconnect individual local access points to the service provider. This approach eliminates the cost and time required to bring fiber optics to the access point. At the top of each pole, another independent antenna connects the access point to a core aggregation site.

With a wireless backhaul approach, poles or other structures must support a wireless backhaul antenna that is higher on the pole than the DAS access point.

Additionally, in the wireless backhaul approach, the core aggregation site that communicates with each of the access points must be 100 to 120 feet above ground, substantially taller than the other access points.

Figure 4: DAS with Wireless Backhaul

Key Technical Facts for Local Government Decision-makers

Our review of small cell and DAS technologies indicates that overall they share most of the following attributes:

• Deployment is focused on existing structures in the public right-of-way such as utility poles, traffic lights and streetlights. Where necessary, the wireless provider replaces the existing light pole with a stronger light pole to accommodate the wireless access equipment, or otherwise reinforces the structure.
• Systems utilize low power and high-frequency spectrum (1.9 GHz or higher) providing near-line-of-sight communications. Design coverage from an individual access site is typically 400 feet or less from the antenna and is consistent with the placement of future 5G equipment.
• In many cases, the systems are installed to accommodate multiple wireless carriers utilizing common equipment.
• The systems are typically not being deployed with the 800 MHz antennas and equipment wireless companies typically used for voice service
• In a typical multi-dwelling, high-density, suburban environment the density of systems can be as high as 25 to 30 access points per square mile.
• Typically, the antennas are installed 20 to 30 feet above ground level.
• Wireless access points are interconnected to the wireless provider’s network through a fiber-optic or wireless backhaul network. Systems that use wireless backhaul typically require core consolidation antenna sites exceeding 100 feet in height, and wireless providers are frequently seeking to place these larger poles in the public right-of-way.

Understanding Wireless Carrier Business Planning and Strategies

It is important to understand that wireless carriers face significant challenges in the large-scale deployment of outdoor small cell antennas and DAS networks, and that these motivate the strategies and choices of wireless deployers:

• Site acquisition,
• Variation from locality to locality of planning and zoning laws, including those governing placement of antennas and enclosures on poles and in the ROW,
• Provisioning fiber to and increasing power to poles and traffic lights, and
• Fiber backhaul availability, including access to fiber in less competitive and rural markets.

One strategy that large Mobile Network Operators (MNO) like AT&T, Sprint, T-Mobile, and Verizon Wireless are using to address these challenges is to outsource their deployments to third parties.

This approach insulates the MNOs from some of the cost and risk associated with antenna deployment. For example, when MNOs do not apply directly to the local jurisdictions for the new infrastructure, they avoid municipal and public scrutiny over the applications and leave it to the third parties.

The outsourced companies include tower companies such as Crown Castle and American Tower; fiber operators such as Zayo, Lightower, Lumos, FiberLight, and Uniti Fiber; and “neutral host” infrastructure companies  like Mobilitie and ExteNet.

The companies building small cells and DAS know that there are often limited sites that are best suited for small cell attachment. As soon as they receive award for a small cell deployment from an MNO, some may “over permit” to lock up the attachable real estate. As the first to the site in many markets, an early over-permitter may create de facto monopolies and restrict future deployment and competition, leaving future MNOs to then find other means of deployment, or turn to an infrastructure operator already attached to the poles.

Infrastructure deployers are also pursuing policies and business arrangements that will streamline their buildout efforts, including:

• Seeking blanket agreements for utilization of public-owned structures to reduce administrative hurdles and speed implementation,
• Exploring partnerships with cities and/or technology companies on Smart City Internet of Things deployments, potentially providing wireless providers more access to structures such as light poles and street furniture, and
• Asking federal and state governments to restrict and standardize local authority on use of ROW, and enact expedited timelines.

Impact on Local Governments and Their Citizens

MNOs and their infrastructure partners are calling for local governments to expedite approvals for new wireless facility siting—but the large-scale deployment of small cells and DAS is also causing concerns about aesthetics, safety, potential frequency interference, and how future modifications to those structures can amplify those problems in the future. Expedited approval timelines can limit a locality’s ability to properly review an application, or to consider the potential future impact of a siting.

We anticipate that the wireless industry’s large scale deployment of small cells and DAS will have a significant impact on local governments in the following areas:

• Administrative burden – Municipalities generally are prepared to deal with a small number of tower requests each year, but many localities may potentially receive hundreds of new applications at once as deployments begin. Additionally, under the FCC’s rules, all applications must be reviewed and acted on within 90 days (for modifications to existing sites) or 180 days (for new towers).
• Aesthetics – The increase in applications for small cells, DAS networks, and other antennas means that neighborhoods could have a high density of antennas and cabinets. In neighborhoods without utility poles, antennas will need to be placed on streetlights or on new poles.  If a deployer is using wireless backhaul technology, it may seek to place a 100 to 120-foot tall tower in a residential neighborhood.
• Support for internal communications – With the industry’s aggressive deployment, some municipalities may face future challenges in finding places to mount radios for their own public safety needs or Smart City deployments. As new fiber is placed to support fiber-to-the-tower deployments, there will be less space on utility poles for other communications uses, including municipal Smart City infrastructure.

If a locality is educated and prepared to respond, it can negotiate from a position of strength. There are opportunities for local governments to actively shape the future visual appeal of their neighborhoods while still ensuring that the community is equipped with the technology needed to enable Smart City planning and meet the wireless needs of residents and businesses.

Locality strategies for managing small cell and DAS buildout might include:

• Limiting in advance how many poles a single deployer can use (perhaps one out of four),
• Requiring the use of existing poles or the replacement of those poles with poles that visually resemble the existing poles, or
• Sharply restricting or banning exceptionally tall poles in residential rights-of-way.

Wireless deployments may create opportunities for public–private partnerships.  These include:

• A locality working with a deployer to build a Wi-Fi network in public gathering places such as parks, shopping districts and downtown business centers in return for the use of City fixtures and assets, (3)
• A wireless deployer and a locality to reducing costs by jointly building fiber,
• A wireless deployer buying or leasing existing locality fiber instead of building new fiber, or
• A locality and a wireless deployer working together on wireless deployment for Smart City applications.

What Localities Can Do to Facilitate and Manage Small Cell, DAS, and 5G Deployment

Local governments have a dual role in the expansion of wireless facilities and services in their communities. They want to actively support the expansion of high-quality wireless services for their residents and local businesses, but they also must address citizen concerns related to deployment of new wireless facilities.

In addition, localities must perform these roles under tight time constraints imposed by the FCC’s “shot clock” for reviewing and approving the industry’s applications for co-locations and new facilities.

In our experience as wireless facility advisers to local governments, we have found that localities can take steps to facilitate and enable the process, such that the needs of the carriers and the needs of the community are addressed. If local governments perform their roles in a structured and organized fashion, there is predictability around the process for both the carriers and the community—and the process is more likely to fit within the timeframe established by the FCC.

Among the steps that localities can take to enable due consideration of community concerns while providing a predictable filing experience for carriers are:

• Ensuring that a carrier or third-party entity that seeks to install wireless infrastructure has the proper authority to operate the equipment. That authority might be granted by a Public Service Commission, another applicable state authority, or the Federal Communications Commission (which licenses the use of some radio frequencies).
• Enacting zoning requirements to regulate wireless facilities in residential areas. Zoning might consider whether a facility is speculative (and could deny an application that does not identify a cellular carrier for which the antennas will be installed), whether an antenna is proposed for attachment to an existing structure or if a new structure will be constructed, and whether the proposed facility meets established height limits and setback requirements. Zoning might also distinguish between DAS and small cell antennas.
• Managing the public rights-of-way by reviewing applications for licensing/permitting, structural issues, placement of facilities to minimize community impact, acceptable results of RF emission studies, and compliance with national codes (NEC, NESC) and pole owners’ attachment requirements.
• Evaluating the community impact of proposed small cell and DAS installations with the same focus as traditional towers and antenna siting. Once approved, structures are subject to federal law for co-location—which could permit a co-locator to increase a facility’s height by up to 10 percent or 20 feet, whichever is greater, without local approval.
• Establishing a community notification process to require carriers to notify residents of upcoming applications in their neighborhoods.

These recommendations may form pillars of a locality process. In order to manage these challenges and opportunities, we recommend that localities continue to become educated, share knowledge and experiences, and stay informed and active as discussions occur at the state and federal level.

Endnotes: 

(1) “Remarks of FCC Chairman Tom Wheeler,” CTIA Super Mobility Show 2016, Las Vegas, September 7, 2016, http://transition.fcc.gov/Daily_Releases/Daily_Business/2016/db0907/DOC-341138A1.pdf

(2) Technologies in the “5G” category include upcoming releases of 4G LTE technology known as “LTE-Advanced” as well as submillimeter high-frequency technologies providing line-of-sight communications, typically over very short ranges.

(3) One example is Sprint’s collaboration with the City of Kansas City and Cisco Systems, placing free Wi-Fi for the public in downtown areas and parks, http://investors.sprint.com/news-and-events/press-releases/press-release-details/2016/Sprint-Launches-Free-Wi-Fi-Service-as-Part-of-Kansas-Citys-Smart-City-Initiative/default.aspx

The City of Boulder released a report prepared by CTC exploring the potential for citywide fiber-to-the-premises (FTTP) deployment. CTC presented the report findings to the City Council on Tuesday, July 12, 2016. The City commissioned the Broadband Feasibility Study in late 2015 as part of the its development of a comprehensive community telecommunications strategy.

Read the full report here. Watch the presentation to the Boulder City Council here.

We are proud to announce that the District of Columbia’s in-building wireless project has been recognized as one of “the most innovative uses of technology in government” by the American Council for Technology and Industry Advisory Council (ACT-IAC).

Working with CTC, the District government plans to deploy enhanced in-building wireless coverage in up to 80 buildings over four years. The program is designed to serve the capacity and coverage requirements of both the District’s emergency responders’ systems and the commercial cellular carrier networks.

The District government has established best practices in serving its own needs, while improving communications for its residents and expanding options for commercial service providers. The program is a model for enabling cost-effective and rapid deployment by wireless carriers in large buildings.

CTC Principal Engineer Shawn Thompson is representing CTC and the District at ACT-IAC’s “Igniting Innovation 2016 Showcase & Awards” today. A nationally recognized expert on wireless communications, Shawn leads the CTC team that has worked closely with the DC Office of the Chief Technology Officer for more than two years to design and implement the in-building wireless project.

Shawn is presenting the work his team has done for the District, demonstrating that the District has been able to work with the major wireless service providers to incent private investment in government buildings to improve coverage and public safety communications.

Our kudos to Shawn and his team on this tremendous work and the innovative public–private collaboration he has helped to foster on behalf of the District.

With today’s news that Huntsville, Alabama will build fiber optics throughout its community, and that Google Fiber will lease much of that fiber in order to provide gigabit services to residences and small businesses, communities throughout the United States have entered into a new era of possibility — that of robust, sustainable broadband public-private partnerships.

The partnership model announcement today between Huntsville and Google Fiber is on the model of that pioneered by Westminster, Maryland in 2014 and by Santa Cruz, California last year.  We extend our congratulations and admiration to the City of Huntsville, Huntsville Utilities, and The Broadband Group, which provided extensive consulting for Huntsville Utilities throughout this process.

We at CTC are proud to have advised the City of Huntsville on public-private partnership models and to have written the request for information (RFI) with which launched its search for a private partner.

This innovative, shared-risk partnership model puts the locality 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, service delivery, and customer service.

While playing to the respective strengths of both public and private sectors, this model allows a community to take its long-term destiny into its own hands, rather than waiting for private investment to materialize (in the form of a Google Fiber build or a network upgrade by an incumbent).

This locality-driven model enables the community to build, own, and maintain the fiber infrastructure of the future — while still benefiting from private sector competition and innovation.

In our view, Huntsville, as well as Westminster and Santa Cruz, are demonstrating a thoughtful, innovative, and replicable way forward for localities throughout the United States.

Joanne Hovis

For more information on broadband public-private partnerships, see the P3 library of the Coalition for Local Internet Choice (CLIC).

For a full discussion of P3 business models, including the one adopted by Huntsville, Westminster, and Santa Cruz, see the white paper published last week by CLIC and the Benton Foundation.

To learn more about P3 business models, sign up for CLIC’s webinar on Thursday, which will survey the P3 environment, including today’s announcement.

Are we seeing a new trend in broadband public-private partnerships? This week, the City Council of Santa Cruz, CA unanimously approved a partnership with a local provider, Cruzio Internet, in which the City will build, own, and maintain fiber optics that pass every home and business in town, while Cruzio lights and operates the network and provides retail services to Santa Cruz customers. The project will run fiber past each parcel of land in the City and deliver the potential for gigabit Internet service to every home and business by 2018.

I wrote earlier this year about the innovative partnership of this same model between Westminster, MD and Ting Internet—to my knowledge, the first of its kind in the U.S. As someone who spends my days thinking about, and crafting, new ways to develop fiber-to-the-premises networks, I believe the Westminster model has the greatest potential to be replicated in communities across America—because it plays so beautifully to the respective strengths of public and private sectors, and because it reflects an attractive shared risk opportunity.

Santa Cruz is the first demonstration of that replicability, as the model is substantially similar in framework to that of Westminster: public sector fiber; private sector electronics and services; and a sharing of risk that makes the opportunity more attractive for both public and private sectors.

Like Westminster, Santa Cruz is just far enough removed from a major metro area to make unlikely a purely private investment in ubiquitous fiber. Although the City is less than an hour drive from the heart of Silicon Valley, it is still cut off from the rich broadband infrastructure in the Valley—and from Google Fiber and Comcast’s tentative plans for even more. Incumbent providers in Santa Cruz have not indicated any interest in upgrading their networks to the emerging standard—fiber-to-the-premises. Frankly, absent competition, incumbents don’t have much economic incentive to upgrade.

The City’s solution is a partnership that plays to the strengths of both public and private sectors. The Council approved a shared risk/shared cost partnership with a very local—and very committed—private partner. Santa Cruz will build the $52 million network, financing the construction with bonds and leveraging its long experience with public works and utilities to focus its efforts on the fiber optic infrastructure in the public rights-of-way. Cruzio, for its part, will lease the fiber from the City and will serve as network operator and service provider, focusing on what it does best, providing great Internet and customer service to Santa Cruz homes and businesses.

The model is win-win-win—for the City, for Cruzio, and for Santa Cruz consumers. For the City, this effort is a long-term economic development program, enabled by the City’s bonding capacity. For Cruzio, the City’s efforts will enable it to move its existing Santa Cruz customers over to state-of-the-art fiber and to build its customer base in its home town.

Perhaps best of all, for Santa Cruz consumers, the partnership offers them the same high speeds Silicon Valley consumers will enjoy, provided by a local company with a history of fantastic customer service. Cruzio has been operating in the Santa Cruz area for 26 years and is one of the oldest ISPs in California—and remains locally owned and operated. The name of the company even derives from its identity as a Santa Cruz company—Cruz from Santa Cruz, and io from Input/Output.

The shared-risk model makes the partnership attractive to both parties. The City can take a long view with regard to capital—bonding over the long terms that are typical of municipal bonds (but atypical of private investments in communications infrastructure that require ROI in a handful of years). And Cruzio will share the City’s financing risk—part of Cruzio’s commitment is that it will cover 80 percent of funding shortfalls if revenues are insufficient to cover the City’s costs.

Market surveys demonstrate clear enthusiasm in the community for gigabit Internet and the open partnership model. At the Santa Cruz City Council meeting Tuesday, Economic Development Director Bonnie Lipscomb commented that “we haven’t even built the fiber network and people are excited to work with us.”

I’m proud of CTC’s role in developing this partnership. The City selected its preferred private partner and then hired us to provide systems-level engineering, cost estimation, market data analysis, financial modeling, and business model development. It was a thrill for us to be engaged in such a community-focused partnership and innovative business model—and I’m personally delighted to rack up another win for local Internet choice, following the great outcomes in Westminster, MD and Holly Springs, NC.

This week’s yes-vote is another example of the innovation we are seeing in broadband partnerships nationwide. Through the partnership with Cruzio, Santa Cruz has the power to ensure the entire community is served with fast, affordable, future-proof broadband. Huge congratulations to Santa Cruz and Cruzio—like Westminster and Ting before them—and the many projects we think are likely to build on their innovative model.

— Joanne S. Hovis, President, CTC Technology & Energy

 

Autumn is here and the trees on the I-95 corridor between DC and North Carolina are lit up with fall color, so it’s almost a shame we here at CTC no longer have an excuse to hit the road to visit our client in Holly Springs, NC. But, on the plus side, we’re really happy to announce the successful outcome of a project we are proud to see come to fruition.

For four years, CTC has acted as an advisor to Holly Springs as the Town’s government designed and built a visionary fiber backbone network. CTC has also assisted the Town in developing policies and strategies to attract private broadband investment. As a result, Ting Internet, a division of Tucows, Inc., has just announced it will bring “crazy fast fiber internet” to the homes and businesses of Holly Springs.

The CTC team served as advisor to Holly Springs in the Town’s efforts to engineer and construct a backbone fiber network to connect municipal buildings, and advised the municipal government to build a network with an eye toward the future. To their great credit, Holly Springs’ visionary elected officials chose to build a fiber network with dramatically higher capabilities than the need apparent at the time, in the knowledge that a robust fiber backbone would attract interest from private ISPs that recognize the potential to leverage that backbone to build their own fiber-to-the premises infrastructure more efficiently.

We were thrilled when Ting Internet jumped on the resulting opportunity, as that company has a proven track record of bringing quality infrastructure, an excellent end product, and top-notch customer service to communities, including our good friends in Westminster, MD. Ting plans to expand on Holly Spring’s existing fiber pathways and offer symmetrical gigabit internet access to homes and businesses.

A key factor in Tucows, Inc.’s decision to invest in Holly Springs was the fact that the Town not only was willing to lease excess fiber in its backbone, but also brought best practices to bear in its willingness to work with and facilitate Tucows’ efforts. Among other things, the Town offered efficient government processes, access to information and facilities, and facilitation and support – all of which boosted Tucows’ confidence about this community as an investment opportunity.

In a written statement, Tucows, Inc. CEO Elliot Noss said, “While Google Fiber and other providers race to get started in big cities, we’re finding that there’s also a lot of interest from, and opportunity in, smaller cities and towns that might otherwise get passed over.”

CTC is proud to have helped the Town of Holly Springs position itself as the most attractive site for Ting Internet’s next investment, so crazy fast internet can bring crazy fast economic development to one of our favorite parts of North Carolina.

Joanne Hovis and Matt DeHaven