The trouble with today's broadband marketplace is that the product being sold is too valuable: For customers, that value is in the economic development of their communities, the operational efficiencies gained by their connected institutions, and the innumerable and intangible benefits that come just from being on the Internet. But building broadband infrastructure in rural, underpopulated or poorer regions isn't particularly lucrative for providers, so those areas often go unserved.
One such area is Westminster, Md., a city of about 18,000, just 30 miles outside Baltimore. Once a farming community, more than half the city's workforce now commutes to neighboring Baltimore or Washington, D.C. They were tired of waiting around for big-name Internet service providers (ISPs), said Robert Wack, president of the Westminster City Council, and that's why they built their own gigabit network. The city's fiber-to-the-home network was founded on a public-private partnership model with a creative division of risk seldom seen in American broadband projects.
The city first began connecting its institutions around 2005, but that project didn't spur the fiber-to-the-home projects officials had hoped for. So to build out the second phase of the project, the city in January partnered with Ting, a subsidiary of Canada-based ISP Tucows, whose main business centers around leasing wireless towers from major cellular providers and offering services at discounted rates. The first customers love the service so far, Wack said, and the city will continue building out fiber to more than 2,000 homes during the next three to six years.
City officials didn't necessarily want to do it themselves, Wack said, but the big-name ISPs "just couldn't or wouldn't do it," Wack said. "And it wasn't for lack of trying. We worked with them for years and years and years to try to get better services in our community, and they just wouldn't do it."
The reasons, he added, were a combination of population density, median income and, perhaps the biggest hinderance, the time frame of their return on investment. "They need payback on their big capital investments within five years, and you just can't do that with fiber," Wack said. "That's why there's no other choice for our country. If we want these services to be widely available, the public sector has to take this responsibility on."
Chris Mitchell of the Institute for Local Self-Reliance (ILSR) explained that cities like Westminster fall into the population sweet spot for broadband projects like these — because with a population of 10,000 or fewer, it can be difficult to get the economics to work, and with a population of 50,000 or more, the citizens begin to distrust their government.
The second phase of Westminster's broadband rollout is funded through a $21 million bond agreement with SunTrust Bank. Wack said he expected funding the project to be the most difficult aspect, but it ended up being the easiest part. The bank loved the city's business model so much, he said, that they offered terms beyond what was even requested.
The most difficult part, Wack said, was convincing the city to commit to the project.
"It took me the better part of two years," Wack said. "It's doing a lot of research, doing a lot of financial analysis and comparing different business models, and really drilling down and understanding where all the risks were, understanding other projects and seeing which ones succeeded and which ones failed."
The people, the community, "they wanted it yesterday," he added. "It's no problem convincing them. It was the city staff and the elected officials. That was the big hurdle."
Westminster built a business model for its network that accounted for the strengths and weaknesses of both the city and its partner, Ting. The city is financing, building and owning the network's outdoor infrastructure, because those are the kinds of public works projects government excels at, Wack explained. Ting is leasing the city's fiber to offer Internet service to businesses and residents, and provide customer support, something it has excelled at in the wireless business since 2012.
This model is less common than models where one entity handles everything. Governments are often overwhelmed by the prospect of broadband because it means taking on several large projects at once: building the network, handling customers and developing Internet packages to be sold on top of the network. It's better to play to a government's strengths, Wack said, while maintaining ownership of critically valuable broadband infrastructure.
"We do these kinds of things all the time and no one bats an eye," Wack said. "If you look at broadband networks as just conventional public works projects, which building just the fiber piece of it is, the technology risk and operational risk only comes in when you start buying boxes and hooking them up. We pushed all of that operational technology on our private partner, and we keep all the capital, financial, construction risk on the public side where we're comfortable. We know how to do those things. We know how to build, we know how to supervise contractors, we know how to manage rights of way and dig poles. It's not that different than what we already do."
In an interview with ILSR, Tucows CEO Elliot Noss explained that Ting's movement into the fiber business will follow a similar model as its wireless business, which is to lease infrastructure already built and operated by an existing entity. In the case of fiber, Ting will seek cities like Westminster that are good at digging holes and managing rights of way, and offer their expertise in customer service and technology, things at which governments aren't as well versed. Ting also has launched broadband service in Charlottesville, Va., and Holly Springs, N.C., is on the roster to be the next Ting provider.
Governments that succeed in their municipal broadband projects share a common characteristic of taking on the project pieces they know they can do well and carefully choosing a contractor for the pieces they know they can't. The esteemed gigabit network in Chattanooga, Tenn., succeeded in partbecause its operator, the city-owned utility EPB, had decades of experience in customer service and delivering electricity to customers. The transition to selling broadband involved a learning curve, but historical precedent ensured the city wasn't overwhelmed.
Ultimately, none of this is that complicated, Wack said.
"The only obstacle between doing this and not doing this is just deciding to do it," he said. "Political will. All these other problems are very solvable. Mostly it's just that people have to decide to do it."