Investing in Broadband as Infrastructure

We Don’t Have the Money – How Can We Afford Building-out Broadband?

Establishing a broadband network in a community or region with unserved or underserved areas is a significant undertaking and in some cases prohibitively costly. When there is not enough of a private sector business case to invest in those area, a pivot is needed to look at broadband as an investment for the long term – as infrastructure.

Getting broadband into unserved and underserved areas often face a number of unique challenges. Typical challenges for locally-owned network providers (municipalities, utilities) include:

  • Broadband not seen infrastructure, nor as an essential service for the community
  • Lack of budget to fund new works, nor discretionary budget capacity
  • Reluctance to fund broadband investment through local taxes
  • Taxpayer resistance and political risk from citizen objections to municipal spending on broadband, or fear of raising taxes
  • Negative perceptions of municipal or utility involvement in the free market
  • Strong resistance by incumbent ISPs to losing their stated customer base

Planning, engagement, and ongoing outreach to meet these challenges are necessary to avoid pitfalls and ensure success. While the initial focus is often on the investment in the network build, it is equally important to invest in ensuring that the network is sustainable and that your long-term community-based goals are achieved. This requires empirical evidence and objective analysis to demonstrate how the benefits from a network investment outweigh the costs, which is needed to build buy-in around common goals and counter objections that may be based on unfounded claims.

In addition, municipalities and utilities need to understand how to impact demand at a micro-level in order to turn a positive return on investment in an area where there was not enough of a business case for the private sector to invest in broadband. Many network builds have had challenges becoming sustainable because they have taken a build it and they will come approach.

Instead, the value of broadband needs to be personalized to individual businesses, organizations and households to grow the business case for broadband investment. In addition to traditional sales and marketing efforts, increasing take rates and demand for higher value network services requires community engagement, driving demand, and incentivizing implementation – at SNG we call this driving broadband utilization and community benefits. This is an essential element to building an economic case for investing in broadband.

A New Paradigm

A large part of overcoming the challenges requires a paradigm shift in how you think about municipal broadband.

Broadband as infrastructure – First and foremost when considering municipal broadband think of it as essential infrastructure that enables not only internet access, but also provides a platform for innovation and many other services. Rather than being a mechanism focused only on bringing better internet connectivity to the community, a quality broadband infrastructure opens up opportunities for many other new services that benefit the community.

Provide choice through open access – As a municipality your goal is not to become an internet service provider. Your goal is to ensure that everyone in your community can get affordable, quality broadband if they want it. By ensuring that your broadband infrastructure is open access you can provide the needed bandwidth while lowering the cost of entry to even more retail internet providers. You not only avoid directly competing with incumbents, you actually encourage more competitive choice from other providers.

Build based on committed demand – In many cases, the initial investment in municipal broadband infrastructure can be justified by addressing the immediate needs of the municipality itself, connecting municipal facilities as well as community organizations such as schools and libraries. This core network can then be extended more broadly to neighborhoods that demonstrate a committed demand to pay for that investment.

This last concept is a key paradigm shift that turns the traditional model on its head. You create a “win-win” by offering interested property owners the option to buy into the broadband infrastructure from the outset on favorable financial terms. This new paradigm overcomes many of the challenges faced by municipal and utility network initiatives.

The Challenges …

The Answers …

Resistance by incumbent ISPs

  • Strong resistance to losing their customer base
  • Objection to municipal encroachment into the free market
Build an Open Access network

  • Enable and encourage more retail ISP competition
  • Avoid directly competing in the free market
Lack of budget to fund new works

  • No discretionary budget capacity
  • Reluctance to impact local taxes
Deploy based on committed demand

  • Investment paid back – pay as you go
  • Self-financed by property owners
Taxpayer resistance – Political risk

  • Citizen objections to municipal spending on broadband or raising taxes
  • Negative perceptions of municipal involvement
Don’t implicate taxpayers

  • Network paid for by property owners and cost reductions
  • No risk to non-participating taxpayers – all have the opportunity to participate

For an example of this paradigm at work please see how Ammon, Idaho, has implemented this approach.