Investing in Sustainability

Capitalize your Investment in Sustainable Networks

Establishing a broadband network in a community or region with unserved or underserved areas is a significant undertaking and an investment for the long term. 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.

Municipalities and utilities that step-in to provide broadband in unserved and underserved areas often face a number of unique challenges. Typical challenges for municipal and utility providers 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

Successfully dealing with these challenges requires focus and effort on an ongoing basis. Planning and budgeting to meet these challenges are necessary to avoid pitfalls and ensure success. 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. 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.

Budgeting for Sustainability

Ensuring sustainability and meeting the challenges requires ongoing effort for community engagement and effective market research. In the past these efforts have often been left to sales and marketing activities as an operating expense. This is especially risky at the early stages when these efforts are most needed and when operating budgets are stretched thin.

Budgeting for sustainability should be built into the capital budget for the network from the outset to ensure that you have to capacity to deal with the challenges. Up to 20% of your total capital budget should be allocated to avoid pitfalls and ensure your network investment is a success, for example:

Network investment (includes engineering, design, consulting, network infrastructure, etc.)
$20,000,000
Sales and Marketing (to be capitalized)
  • Market assessment, economic baseline, community engagement, and risk management – this is an investment to build buy-in and start an ongoing process that plans for outcomes and engages the community and its providers to address local broadband gaps.
$1,000,000
  • Local economic stimulus through matching grants to incentivize investment and implementation by local businesses, anchor institutions, etc. in information technology and online business applications, which drives local economic growth, community benefits, and demand for higher value local network services. This is an organic approach to grow local workforce opportunities and to more quickly achieve network sustainability.
$3,000,000
Total financing of network and programming to more quickly achieve a sustainable network, local economic growth, and community benefits
$24,000,000