One relatively short article cannot address every aspect of these issues, but it can at least highlight the crucial fundamentals.
One point that must be stressed is that your network's hard design specifications will dictate the revenue streams and services your network will achieve. If you build a network that has relatively low throughput and isn't 100 percent reliable, you'll see a direct correlation in the adoption rate, usefulness and return on investment.
Regardless of legal structure - public ownership, public-private partnership, private ownership, nonprofit or any other variations - there are two major financial categories that must be scrutinized. For the purposes of this discussion, I'll define these categories as Government Cost Redirection and Revenue-Generating Services/Applications.
Government Cost Redirection
Based on my experience, however, the best way to attack this question is to collect all the data, then determine what's applicable. Though it would be impossible to outline every line item in this article, a few obvious expenses immediately come to mind. How many telephone lines does your municipality have, and at what cost per line? How many Internet connections does your municipality pay for to connect your facilities? How about mobile data connections (evolution-data optimized) in your first responders' vehicles? Do you use metropolitan LAN connections to connect your facilities? If not, do you own fiber that connects your facilities? And if you do, are there any maintenance costs associated with those connections?
As time consuming and expensive as this process can be, a complete and thorough telecommunications audit must be done. Telephone lines are already mentioned, but how about the related cost of your leased private branch exchange (PBX) systems? Since you probably use traditional telephone service, chances are you also use an expensive and probably obsolete PBX system.
In one real-world example, the CIO of a large, East Coast city needed to replace a few phones and called his telecommunications maintenance vendor. He was informed that the PBX system the city was paying to maintain had long since reached the end of its usable life, and the service company no longer had any replacement units to swap out his dead phones. This led the CIO to cancel the expensive contract, since it was now painfully obvious the city was paying for a service the vendor couldn't actually provide. Even if your 1980s vintage AT&T Merlin system can still be serviced, many new and valuable features are unavailable to you.
As incredible as that story might sound, at least the municipality was getting continued value from these obsolete telephones. In many cities, telecommunications networks have acquired lives of their own. Just bringing a dial tone to each line (without looking at the PBX lease/maintenance fees), probably costs $17 to $55 a month, before adding any additional services to the equation. There are also documented instances of money being paid for lines that aren't used. In Macon, Ga., after a thorough telecommunications audit, city officials determined unused telephone lines cost the city roughly $5,700 per month (nearly $69,000 a year, or roughly 10
percent of the city's total $633,000 telephone budget, according to The Macon Telegraph). In 2007, Tennessee Pork Report: Tennessee's State Government Gone Hog Wild, Citizens Against Government Waste exposed that $15,205 was budgeted for unused phone lines in Hamilton County, Tenn., for fiscal 2007.
More importantly, if you observe employee telephone usage, you'll probably find that the overwhelming bulk of calls are local - often from one employee to another.
To bring this into focus, a well designed voice over Internet protocol (VoIP) system can not only dramatically drop your telecommunications costs, but may also virtually eliminate the entire cost of bringing telephone service into your facilities, with the notable exception of long-distance termination fees.
Take Macon, for example. If the city of approximately 100,000 were to build a carrier-grade network covering its 56.27 miles, we might expect the total cost to be $10 million. (This number is a hypothetical reference point.) If we assume 100 percent savings on telecommunications costs, based on the city's annual $633,000 telecommunications budget, we can see that roughly one-third of the network would be paid for with existing funds in five years. And that doesn't account for any other cost reductions the city could realize, or possible revenue from other services that might be brought in through reselling network capabilities. As a point of balance, the above example doesn't include the operating expenses that would keep this network running for that same five-year period.
Telecommunications is just one of many services that could be carried on a properly engineered network. Another potential cost redirection is what can be saved and earned by using automatic meter reading (AMR), even though this application must be looked at as a decade-long return on investment.
In many municipalities, three meters must be read regularly for every residence, business and municipal facility: water, electric and gas, with the sewer usually tied to water usage. The worst case scenario I've heard of is that as much as one-third of the total utility bill is attributed to data collection and billing. Most municipalities have upgraded and largely automated billing data collection, many by driving up and down every street, wirelessly collecting current meter data. But a percentage of meters still can't be read this way and must be collected by sending someone to manually read the meter. Setting aside the real cost of this method (i.e., gas, vehicle depreciation/maintenance, payroll, etc.), any number of circumstances pose a liability risk.
One of the more dramatic instances I know of happened in Corpus Christi, Texas, where a meter reader was savagely attacked by three dogs while attempting to read a meter. As one might expect, the meter reader sued (and won a settlement), as did the owner of the dogs, two of which were killed in the fight to save the meter reader. The legal cost associated with the incident would nearly pay for a complete wireless network. This is only one risk that manual meter reading creates. In some areas, meters are buried in a pit where poisonous snakes or spiders live, and a reader must visit every one of these locations every other month at a minimum.
Using a wireless infrastructure to collect this data also presents financial incentives. The most obvious would be for departments, such as water and power, to see where the highest usage locations are, in real time. Seeing where resources are being used allows for greater control in reducing use during shortages. Agencies can also identify and react to failures, such as a water line break, even if no one is at the site to report it. If a two-way system were installed, the water company could remotely shut off the water supply instead of immediately dispatching someone for repair - sometimes in the middle of the night - which is expensive.
Electricity also can reap some of the same benefits as the water utility. During a heat wave or a severe cold snap, the electric company can see, in real time, what the power demand looks like throughout the community. A forward-looking utility might also want to create a system where it can shut down water heaters for consenting customers in the middle of the night to reduce the electric demand.
One common argument against deploying this type of service is the cost of retrofitting each meter. Most municipalities don't have extra money lying around to make these improvements. This problem also has a very simple answer: performance-based contracts. There are companies that will come into your community, analyze where savings can be realized and present you with a contract that will let your community take advantage of the company building or rebuilding your infrastructure for a percentage of the savings realized over a set period of time.
Revenue-Generating Services/Applications
Municipal networks can carry many services capable of bringing in revenue, either for the municipality or for the entity responsible for managing the network. As mentioned earlier, the better "quality" a network is, the more services you can bill for.
Many standard offerings are well known, including Broadband, VoIP and even a television like service, but a number of lesser-known applications should be included in your financial justification, including video security, remote medical monitoring and perhaps the most societal-changing service to become available in the near future -- telework. Municipal networks can also let people who can't attend a community event - everything from a school board meeting to a grandson's Little League game - enjoy and participate from home.
The motivation for building one of these networks has never been "Build it and they will come." The correct justification has always been "Build it or they will leave." I would suggest it's your job to make sure the decimation that happened to communities along Route 66 when the Interstate Highway System was finished doesn't happen to your community. Don't let the information superhighway bypass your community.
