A Record Increase In Municipal Fiber Broadband

Broadband Communities’ 2017 census of municipal and public-private fiber networks now shows 216 active projects – and many more in preliminary stages.

  • Community Broadband

Broadband Communities’ count of public and public-private fiber-to-the-premises network projects in the United States now stands at 216. This is a 21 percent jump over last year’s count of 178 and the largest increase in any year. In fact, municipal fiber optic network projects are progressing so rapidly that, by now, there may be several more municipal networks than are listed here.

Fifteen of the new networks are in Western Massachusetts, where the state government promised several years ago to help fund last-mile networks in unserved and partially served towns. The original plan was for the unserved towns to build a fiber network through a coalition called WiredWest; however, the state rejected WiredWest’s plan and, after considerable delay and confusion, allocated the funds to the towns separately. Fifteen of the towns are building municipal fiber networks on their own (some may hire WiredWest as a network operator); others are using their funding to subsidize builds by private network operators, including Comcast and Charter. Some towns are still considering their options.

A few networks that appeared on last year’s list do not reappear this year. Sun Prairie, Wisconsin, sold its network to TDS, which was in a better position to finance the network’s expansion. In addition, several projects that never materialized were removed from the list.

Other networks, though still listed here, are up for sale in whole or in part. For example, BVU Authority of Bristol, Virginia, is about to sell its fiber optic network, OptiNet, to Sunset Digital Communications. Burlington, Vermont, is sorting through bids received for Burlington Telecom (though it expects to retain part ownership of the network). Lake Connections in Lake County, Minnesota, is trying to find
a purchaser.

Though some cities, including the three just mentioned, seek to sell their networks because they failed to build, manage or market them effectively, that is not the only reason to do so. Localities sometimes build networks because no other operator will make the investment and are happy to sell these assets if private investors appear on the scene. Ted Chase, chairman of the Sun Prairie Utilities Commission, explains the sale of its telecom network in this way: “By transitioning our network to TDS, more households and businesses will have access to fiber internet at no risk to the utility.”

As in prior years, the majority of community fiber networks appear to be self-sustaining or profitable. Despite the controversy attached to a few of them, most are not controversial in any way – rather, they are sources of civic pride. Many continue to expand or add new types of customers and services. (For three examples, see “Slow and Steady Wins the Fiber Race,” p. 32.) Often, a municipal fiber network begins in one community and expands by popular demand into neighboring communities, though in some cases, state legislatures have quashed expansions requested by residents.

Well-run community fiber networks are instrumental in attracting new businesses and retaining existing businesses. The most common rationale for building community networks is to provide businesses with affordable fiber connections; in fact, many networks are built or extended to accommodate specific requests by local businesses. However, community fiber networks do not lead automatically to economic development. They succeed in doing so when network operators understand what businesses – including home-based businesses – are looking for (price-performance, redundancy, reliability, service level agreements) and when economic development agencies can communicate a network’s capabilities to prospective businesses.

Similarly, cities use municipal broadband networks to improve educational achievement, health care and other quality-of-life measures, but like economic development, quality-of-life improvement doesn’t happen on its own. Municipal broadband is an opportunity, not a panacea.

What’s a Municipal fiber Network?

There are many ways to define a municipal fiber network. Even state legislatures that want to restrict such networks disagree about what they are restricting. Broadband Communities identifies networks as municipally owned if a public agency undertakes most of the investment, incurs most of the risk and exercises most of the control over the network.

All the MUNI network deployers on this list

  • Are public agencies, public authorities, public benefit corporations or consortia of public entities
  • Own all-fiber infrastructure that connects local homes or businesses to the internet (or are actively developing such networks). In most but not all cases, deployers also own the equipment that lights the fiber. In at least one case, Huntsville Utilities, the service provider owns the drop cable; this network could arguably be classified as public-private, but because the municipality is making the great majority of the investment, we classified it as municipal.
  • Make available – directly or through retailers – such services as voice, internet access or video (or are planning such services)
  • Are in the United States or U.S. territories.

Excluded are municipalities that provide broadband services exclusively for municipal government facilities, schools and other anchor institutions; those that provide broadband services only over cable or wireless networks; and those that serve private customers only by leasing conduit or dark fiber to them. (A few, such as Circa and Huntsville Utilities, lease dark fiber to retail service providers that serve private customers.)

This list includes only organizations that have either functioning networks or approved plans and funding. However, plans do not always materialize; every year, one or more listed projects fail to survive. Others, although partially deployed, have stalled.

Multiple-municipality projects can achieve economies of scale in construction and operation and, by aggregating demand, can attract third-party service providers more easily. Examples are ECFiber in Vermont, SMBS in Minnesota and OTO Fiber in Maine.

Even a network owned by a single town or city may provide service beyond city limits. For example, EPlus Broadband and EPB Fiber Optics in Tennessee both serve areas adjacent to the cities that own them – areas that were already served by their electric utilities. The city of Williamstown, Kentucky, used broadband stimulus funding to expand its community network beyond city borders. (Its original network was hybrid fiber-coax, but the expansion area is FTTH.) In Washington state, though each public utility district builds and operates its own network, most or all belong to the Northwest Open Access Network (NoaNet), a coalition of public utility districts that linked their fiber optic networks to achieve economic feasibility in underserved areas. NoaNet offers long-haul transport and last-mile access to wholesale communications providers throughout the Pacific Northwest.

Community fiber networks are found in 39 states and American Samoa. (Alaska and American Samoa are not shown.)
 
 

THE CHANGING LEGAL AND POLITICAL LANDSCAPE

About 20 states either prohibit communities from building community networks altogether or impose restrictions that discourage or effectively prevent them from building such networks. State legislatures aren’t the only obstacles; often, opposition comes from community members who disapprove of municipal broadband on principle.

A 2015 FCC attempt to preempt state laws on this subject was overturned in the courts, and the current FCC appears unlikely to support municipal broadband. On the other hand, several recent attempts to make state laws stricter were defeated.

Because the pendulum of public opinion shifts constantly, a broadband project that is legally or politically impossible one year may become feasible the next year. In Colorado, for example, the state law that restricts municipal broadband has been effectively nullified in the last few years as at least 68 cities and counties voted to exempt themselves from it. (Most of these localities are still in the planning stages, and not all are expected to proceed with broadband initiatives.) Holding a referendum is an expensive, time-consuming and unnecessary step in building a broadband network, but it does not seem to deter many Colorado cities at this point.

In several cases, city leaders and broadband activists succeeded in changing public opinion by educating citizens about the economic and social benefits of high-speed broadband. Some states – such as Massachusetts, as described above – now actively support municipal broadband projects.

MUNICIPAL UTILITIES

Municipalities have always been more likely to become broadband providers when they are already in the business of providing electric power. Citizens in these municipalities are already used to the idea of government-provided utility services. Many public power utilities were set up in response to the private sector’s failure to deliver adequate services, and residents accept that government might set up communications utilities for the same reason.

In most cases, citizens have had positive experiences with their municipal utilities and are prepared to buy additional services from them. In addition, public power utilities already have the outside-plant personnel and back-office operations, such as billing and customer service, that they need to provide telecom services.

Finally, public power utilities, like all electric utilities, are building communications networks for smart-grid applications; once they begin planning these networks, they often realize the networks are suitable for business or residential broadband. Municipal utilities that distribute Tennessee Valley Authority electricity have been in the forefront of combining smart grid and telecom applications.

In some cases, such as Hudson, Ohio, the city operates a municipal electric utility but set up the telecommunications utility as a separate entity or department.

In the last several years, as the concept of municipal broadband has become more familiar, more cities are embarking on broadband projects without having previously operated a utility. Often, they seek experienced operators to build and manage their networks and provide services. The 15 Western Massachusetts hill towns funded by the state this year do not operate electric utilities; they are all working with Westfield Gas & Electric, a nearby municipal utility that is in the process of building its own fiber network.

What’s a Public-Private Partnership?

Throughout the broadband industry, the term public-private partnership is used loosely – and no two partnerships seem to follow the same model. In the last few years, cities have become much more proactive about working with private providers and offering a variety of concessions and assistance to encourage the provision of better broadband. To keep the list to a manageable size, we restrict the usage to cases in which both public and private partners make significant investments in the access network, incur significant risk and retain significant control. The investments may include contributing pre-existing conduit or fiber.

However, as there is no accepted definition of a public-private partnership, we do not argue for our definition over any other. To make matters even more confusing, descriptions of the details of public-private partnerships are not always precise or complete, and the agreements themselves change over time; in some cases, we are guessing about whether a public-private network meets our definition.

To the best of our knowledge, then, all the network deployers identified on this list as PUBLIC-PRIVATE

  • Are consortia of public and private entities, public entities that built networks and later received infusions of private capital, or private entities that built networks with significant investment or participation by local governments
  • Own all-fiber networks that connect homes or businesses to the internet (or are actively developing such networks)
  • Make available – directly as a partnership, through one of the partners or through third-party retailers – such services as voice, internet access or video (or are planning such services)
  • Are in the United States or U.S. territories.
  • Excluded are publicly owned networks that contract with private retail service providers or operators (those are labeled MUNI); privately owned networks for which public entities have helped raise funding; privately owned networks for which public entities have donated access to rights-of-way, expedited permitting or offered marketing assistance; privately owned networks for which municipalities have committed to be anchor tenants; and privately owned networks that lease backbone fibers or conduit from public entities in arms-length, market-rate contracts.

    Public financing for private networks. One of the excluded categories – private networks for which public entities have helped raise funds – deserves special mention both because it fits many people’s definitions of public-private partnerships and because it is a rapidly growing category. In these cases, a municipality obtains capital funding that a private operator is not eligible for – either grant funding or low-cost tax increment financing (or “tax abatement financing,” as it is called in some states) and passes it through to the private operator. If the funding is a loan, the private operator is obligated to repay the municipality.

    Cities entering into these arrangements take on considerable risk (they are on the hook if revenues are insufficient to repay loans or if private operators do not comply with grant terms) without gaining ownership or control. That’s why we don’t consider these arrangements true public-private partnerships. However, entering into this type of arrangement can still be a reasonable choice for a municipality. Typically, an operator commits to build out a high-quality network throughout the municipality in return for access to the funds. The network may be a “life or death” investment for the community, and if it succeeds and bolsters the local economy, the investment can be well worth the risk.

WHO ARE THE CUSTOMERS?

The municipal and public-private networks on this list vary widely in terms of the customers they serve. Some are essentially institutional networks that happen to serve a few businesses conveniently located near municipal facilities. Others have made fiber connections available to every premises within their borders – and often to outlying areas. Most are somewhere in between. The smallest network we know of has seven customers, and the largest, EPB Fiber Optics, has about 75,000.

A typical deployment path is for cities to begin by installing institutional fiber networks to serve municipal office buildings or utility substations, then extend fiber to commercial buildings or business parks, add multiple-dwelling-unit properties and greenfield residential developments, and finally reach single-family households and small businesses. The list shows deployers at various points along this path.

Building an institutional fiber network can also be a starting point for a path to a public-private partnership, as exemplified by Urbana-Champaign Big Broadband, which began as a BTOP project.

Sixty-three community networks, or 29 percent of the total, deliver fiber services only to businesses, and several others serve mainly businesses. (Some of these deliver residential broadband services via cable or wireless; most don’t serve residences at all.)

Some fiber networks that began as business-only, such as nDanville in Virginia and Cedar Falls Utilities in Iowa, eventually built out fiber to residential customers citywide. Owensburg Municipal Utilities in Kentucky and Whip City Fiber in Massachusetts recently added residential pilot programs to their fiber-to-the-business networks; the success of these pilot programs encouraged them to commit to larger residential buildouts. Others are beginning to upgrade residential cable to fiber. Still others, such as Chanute Utilities in Kansas, gave serious consideration to building out fiber to residences but failed to gain political support for their projects.

THIRD-PARTY SERVICE PROVIDERS AND OPERATORS

Municipalities are more likely than private deployers to allow third parties to provide services on their networks. There are several reasons for this: State laws or federal funding conditions may require a wholesale model; local political support may depend on a city’s following a wholesale model; municipalities may not have the expertise, resources or will to become service providers; some municipalities want to offer a wider variety of services than they can provide on their own.

Forty-eight community fiber networks either allow or plan to allow multiple retail service providers to deliver services. Another 53 have contracted, or plan to contract, with a single third-party service provider to deliver services (in a few cases, just phone or video service). Some of these, such as the city of Westminster, Maryland, plan to transition to a full open-access model in the future.

At least 25 municipal fiber systems contract with third parties – local exchange carriers, other municipalities or other network operators – to operate their networks. Such contracts (which privately owned networks also enter into) can be helpful for municipalities that lack experience operating telecommunications networks.

On the other hand, like any critical outsourcing contracts, they must be intensively managed. Several such arrangements have ended abruptly or even resulted in lawsuits.

TECHNOLOGY

Community broadband networks use a mix of PON and active Ethernet technologies. At this point, active Ethernet is used primarily for business customers, but in earlier years, active Ethernet was preferred even in residential networks for its ease of supporting open access. (GPON can now support open access.)

Municipalities have been leaders in deploying gigabit networks – Chattanooga EPB had the first citywide gigabit network in 2010 – and now lead the way in deploying 10 Gbps networks. Fibrant and EPB were among the first U.S. providers to announce 10 Gbps residential service.

GEOGRAPHIC DISTRIBUTION

Laws that govern municipalities’ ability to compete as telecommunications providers vary from state to state. Some states give municipalities a free hand, and others do not. Municipal electric utilities are more common in some areas than others, and some regions are better served by private providers than others are. Considering all these factors, the chances of municipalities’ building their own broadband networks are wildly uneven in different parts of the United States.

This census identified community fiber systems in 39 of the 50 states and in American Samoa. There are also about a dozen fiber networks, not listed here, built on tribal lands by tribal governments. Eight states account for a large number of deployments: Massachusetts, California, Florida, Iowa, Kentucky, Minnesota, Tennessee and Washington.

With a few notable exceptions, municipalities that build fiber networks are small to midsized. As broadband improves in large metropolitan areas, smaller, more remote localities are increasingly left to fend for themselves.

TRIPLE PLAY AND BEYOND

Though some municipalities offer only internet access over their fiber networks, many offer the triple play of voice, video and data. Specialized business services are common, as are smart-grid applications. Broadband stimulus funding and encouragement from the Tennessee Valley Authority have made smart-grid applications more prevalent in recent years.

A few open-access networks actively recruit many different kinds of services. For example, on the St. Joe Valley Metronet, providers deliver more than 20 different types of services, including conferencing, disaster recovery and video surveillance. Enabling a wide variety of broadband services could make more community networks financially viable.

In conclusion, there is no single model for public broadband. Each project takes a slightly different approach, depending on the legal and political landscape, the availability of financing, the interest of potential partners, and the skills and assets that public agencies possess. Communities have many options and should explore as many as possible before committing to a plan or deciding that public broadband is not for them.

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