The following article was published by Sean Gonsalves at Community Networks:
At the “Municipal Broadband and Innovative Financing Models: Unlocking Economic Growth” webinar earlier today, attendees got an inside look at how successful community broadband networks have been funded – and how cities and towns can still finance networks even with the uncertainty now swirling around the federal BEAD program.
Co-hosted by ILSR’s Community Broadband Networks Initiative and the American Association for Public Broadband (AAPB), the webinar featured a wealth of municipal broadband financing knowledge from four guests with deep experience navigating the numbers.
Co-host Gigi Sohn, who was joined by ILSR’s Sean Gonsalves, began the webinar with a brief explanation on why AAPB and ILSR are joining forces for what will be a series of webinars designed to assist cities and towns in how local and state leaders can deal with solving local connectivity challenges where the big incumbent ISPs have failed to deliver ubiquitous and reliable service.
“I've been traveling around the country and I hear from a lot of communities who are very interested in a model where they control their broadband networks in their communities,” she said. “We want to kind of demystify the finance part and try to get communities more comfortable with how they can move forward.”
The first guest expert to take center screen was Ernie Staten, the City of Fairlawn, Ohio’s Public Service Department Director.
Staten walked through how the city was able to finance its citywide fiber network FairlawnGig, which has supercharged Fairlawn’s local economy and provides local subscribers with reliable and affordable access to symmetrical gig speed service for as low as $55/month.
“We started out with residents paying $75 (per month) for a gigabit,” Staten explained, after sharing FairlawnGig’s origin story and the steps the city took to finance network construction. “A year and a half ago we dropped that to $55 (per month) and now we only really have a gigabit speed or higher offering to our residents.”
What has made FairlawnGig a source of envy in many towns that do not have municipal broadband, Staten said, was that Fairlawn has “really talented staff” who embraced the project – which began in 2015 – and saw telecommunication infrastructure much like building and maintaining roads. “And there was buy-in from (city officials) and from the residents.”
“We’re taking care of our own debt and not relying on the city to do that out of the general fund,” having financed the project with bonds and without having to raise any municipal taxes to do so, Staten said.
The Big ‘Payback’
Staten said what makes municipal broadband such a value-added investment – in comparison to other municipal projects – is:
“There's a payback where, say, a park or a road or a sewer, there's no payback in that. I would tell you that (building a fiber network) is well below most of the big investments we make as a city.”
F.X. Flinn, Governing Board Chair for ECFiber in Vermont, agreed with Staten about the many benefits of community-owned fiber that are not often captured by the balance sheet.
After sharing how ECFiber created the state’s first Communications Union District (CUD), beginning with an initial investment from 500 future subscribers, Flinn walked through how ECFiber, which now serves 23 small rural towns in east central Vermont, was able to tap the bond market to expand the network and how ECFiber enjoys the benefits of having a high bond-rating with Standard & Poor Global.
To put it in perspective, in comparison to other public investments, Flinn said: “If we're building (fiber) at $45,000 a mile post-Covid, that is far less than what it costs to repave a mile of road by a factor of ten…at least in rural areas.”
Adding to that was Laura Lewis, Principal and Co-Owner of LRB Public Finance Advisors – which has served as a financial adviser on over $1 billion dollars in municipal bond transactions. Lewis said:
“One of the nice things about fiber is it has a much longer useful life than those roads that they're going to have to replace again and again and again. And (with fiber) there’s payback.”
Earlier on in the program, Lewis – who also covered some of the more creative “capital stacks” cities and towns use to finance network construction – was joined by Eric Rex, Vice President at KeyBanc Capital Markets.
Rex explained how KeyBanc operates its digital infrastructure practice which has helped finance over a billion dollars worth of broadband related projects.
He discussed the many questions and concerns municipalities have in financing broadband projects and spoke candidly about “cash flow pressure.” Still, he said, there are multiple ways to structure financing, including mechanisms such as delaying principal payments to “alleviate cash flow pressure in the early years.”
Watch the hour-long webinar in its entirety here.