The community seeks to use federal funds and private capital to overcome the challenge of providing broadband to residents and businesses, and to achieve risk sharing in the creation of a network driven by open access infrastructure.
Access to affordable high-performance broadband remains a challenge for millions of Americans. Whether caused by infrastructure gaps, limited competition, or other policy and market failures, this digital divide has persisted between governments and for decades. Today, federal action is providing important new resources for state and local broadband plans, and recently provided $65 billion in potential funding for the infrastructure bill reached in late June 2021 under a bipartisan framework. The scale of this funding allows cities of all sizes to consider bold investments in broadband infrastructure.
If private Internet service providers (ISPs) fail to provide adequate services, cities often switch to municipal fiber-to-the-home (FTTP) models. As governments become infrastructure owners and service providers, these methods enable municipalities to design networks that serve their residents and achieve policy goals. However, the analysis of the financial performance of such networks by researchers at the University of Pennsylvania illustrates the obstacles to sustainable operations. The study analyzed 20 municipal fiber optic networks and found that most of the networks have negative cash flow within four years, and only two networks can repay the debts generated during the typical service life of the network in 30-40 years.
Recognizing these challenges, a new public-private partnership (P3) approach is emerging that combines elements of public and private models. A proposal by the Local Internet Choice Alliance (CLIC) "Public Infrastructure/Private Services" outlines what the author calls a "pragmatic, community-driven, pro-market, and pro-business approach, so that solutions have not yet appeared "Under this model, the public sector builds and owns an open-access optical fiber network, while private ISPs operate and provide services on this public infrastructure. Therefore, the public sector can control the construction site and management method of the optical fiber network, laying the foundation for one or more private partners to provide Internet services. The private sector, in turn, bears performance and market risks, competing for customers in terms of service quality and pricing.
In order for this approach to be successful, there must be a clear line between the assets owned and managed by the city (for example, the right of way, pipelines, and the dark fiber in the middle mile) and the assets owned by the social capital (for example, the last mile fiber). Horizontal). An early example of this model is Westminster, Maryland, which decided in 2010 to build, own, and maintain dark fiber, and selected Ting Internet through RFP to provide services on this public infrastructure, and at the same time reached a risk sharing agreement , To limit the adverse effects of all parties and the risks associated with debt repayment and performance.
In some cases, cities may choose to provide open-access optical fiber services, as does UTOPIA (Utah Telecom Open Infrastructure Agency) optical fiber, which is a group of 11 Utah cities that uses active Ethernet The infrastructure operates at the wholesale level. Eleven residential ISPs and approximately 30 commercial ISPs provide end users with more choices than typical. Despite the low charging rate, UTOPIA stated that subscriber income has already covered the debt repayment of all projects since 2009.
In 2020, the outbreak of the COVID-19 pandemic has further accelerated people's interest in new business models for network construction and operation. Facing the deadline of December 15, 2020, the town of Bristol, New Hampshire, was able to use the $15.4 million in the Coronavirus Aid, Relief, and Economic Security (CARES) Act to build a fiber optic network connecting the town In the first phase, to the existing Plymouth State University, eX² Technology was selected to provide a hybrid network architecture solution using active Ethernet and Gigabit Passive Optical Network (GPON) technology.
In some cases, public funds may not even be needed. In May 2021, Salem, Massachusetts announced a partnership with SiFi Networks to establish a city-wide open-access optical fiber network with a private investment of 35 million U.S. dollars. This approach, funded by private investors, creates an infrastructure that can be used by multiple ISPs, mobile network operators, and municipal users while limiting the city’s financial risks. By choosing partners who have the ability and enthusiasm to participate in the market, it is also possible for cities to share the financial advantages of successful projects.
In addition to FTTP, wireless may play a greater role in municipal broadband infrastructure in the next few years. The open access fiber model enables the use of traditional ISPs and fixed wireless networks to reach areas that are difficult to service. Similarly, with the acceleration of 5G deployment across the country, the introduction of small cells has become increasingly important for municipal leaders. Cities with open-access fiber optic infrastructure will be best able to adopt multi-tenant, neutral host networks to provide fair coverage while supporting municipal use cases such as education and "borderless classroom" networks.
The various approaches that cities have recently adopted give a sense of the catalytic potential of federal funds being considered this year. The US$65 billion allocated for universal broadband will have a significant impact, but the overall scale of national demand may be much higher. Likewise, once federal funding is gradually reduced, cities will need to prepare for sustainable operations. Municipalities can seek to combine the best in the public and private sectors, instead of taking on all the tasks themselves. For many cities, this may mean using federal funds and private capital to achieve risk sharing when creating networks driven by open access infrastructure.
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