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FCC Workshop on eRate Funding Shows New Flexibility for School and Library Fiber Builds

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June 18, 2015 – Recent changes to the eligibility rules for the Federal Communication Commission’s eRate program open the door for new fiber connections for schools and libraries using agency funds.

Among the rule changes were the suspension of the requirement that applicants seek funding for large up front construction costs over several years, the equalization in the treatment for schools and libraries seeking support for “dark fiber” services, and allowing institutions to build high-speed broadband themselves when more cost-effective.

What’s more, these were only among the significant changes to the eRate program in December 2014.

Because they closely followed other significant changes in July 2014, it has taken some time for the broadband industry to fully recognize their significance. Moreover, the eRate is only the most recent of the four major components of the agency’s Universal Service Fund to receive an overhaul.

The eRate changes came last year in two traunches. in July, the agency updated its rules to allow great use of technologies allowing schools and libraries to close the so-called “Wi-Fi” gap.

Then in December, the agency a addressed the “Connectivity Gap” by granting schools and libraries significantly greater flexibility in purchasing Gigabit-level bandwidth to meet their growing needs. Additionally, the December order lifted the annual cap on spending eRate funds to $3.9 billion, from the current $2.4 billion.

Although the additional $1.5 billion in funds availability has been well-known, It has taken some time for the industry to recognize the scope of the rule changes for the construction of fiber-based services.

“Last year was a big year for the eRate,” said Lisa Hone, associate bureau chief of the Wireline Competition Bureau at the FCC at a May 20 workshop at the agency’s headquarters in Washington. “The $3.9 billion means that in the 2015 funding year, the eRate is able to fully meet demand, for the first time since 2010.”

The May 20 “Public Workshop On E-Rate Funded Fiber Build Projects” drilled into details regarding the significance of the new fiber rules for eRate.

In a dialogue at the workshop between Jon Wilkins, managing director of the FCC, and Joe Freddoso, former CEO of MCNC, the non-profit fiber-optic network in North Carolina, Wilkins defined the following terms:

  • Lit fiber or lit services are the traditional, conventional, high-speed service, received from an incumbent service provider. The school or library is buying the service at a recurring, monthly charge, but may also need to pay a one-time construction charge.
  • Dark fiber are the physical fiber strands, built and owned by the service provider, but to which the school or library buys dedicated access, for some period of time, to operate for a period of time. This is often done through a legal mechanism known as an Indefeasible Right of Use (IRU).
  • Self-provisioning is when the school or library takes full responsibility for itself to build, to operate, and to maintain the broadband network. While this can be a bigger undertaking, if the school needs to undertake this activity, eRate now supports it, too.

Before the December changes, if a school or library undertook construction of more than $500,000, it had to be spread over three years, said Wilkins. Now, it can all be done in one year.

As with many government funding activities, schools or libraries must come up with some portion of the funds — known as a match — to access eRate funds. Before the December changes, said Wilkins, the match had to be paid in the first year. Now, that up-front cost can be spread among four years.

These are the among the changes that can incentivize schools and libraries to obtain funding for fiber-optic services besides those lit services that are offered through a traditional incumbent. By enabling construction costs to be funded up front, Wilkins said, “eRate provides a much more open ability to select dark fiber or self-provisioning a network.”

Fiber to the Home Council Webinar on Municipal Broadband Solutions Focuses on Open Access Opportunities

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WASHINGTON, May 22, 2014 – In a Wednesday webinar, the Fiber to the Home Council invited broadband planning firm Magellan Advisors to discuss their ways of advising communities seeking to build advance broadband networks.

Guest members included Magellan Advisors President John Honkers and Vice President Kyle Hollifeld. They described their firm as a ‘turnkey’ that offers aid from initial planning stages to implementation of networks, and even helping operators manage networks once they’re established.

“We like to think of ourselves as the guys in the field who see what’s happening every day and bring that back to the consulting side,” said Magellan President John Honkers said. “[We look at] what things work, what don’t work, and how to really manage these projects on a long term basis.”

When constructing broadband and fiber networks around the country, Honkers said that municipalities. private operators, and public organizations have to balance sustainability with community needs.

“[Communities] who have longer return of investment are more difficult to achieve,” he said. ”It’s expensive to get into small business because the revenues they generate [are] not significant enough to sustain a project on its own. On the other hand, shorter returns of investment are more sustainable, but we’re missing out on community needs from a public organization’s perspective.”

Honkers stressed the need for a marriage between those two types of projects – and that private sector operators and public organizations have to be in alignment for a project to work. The parties need to consider the needs of service providers, capitalization issues, and access to funding like grant and loan opportunities.

Honkers said: “One of the key things we’ve been witnessing recently is, what existing networks and assets do communities have that can be leveraged to expand fiber and lower the cost of it?”

Hollifield described different types of business models as belonging to “a chain.” The farther up one moves along it, the greater the risks and rewards are for the community. These business models can take on a variety of flavors such as municipal-only, where municipal providers take on sole burden; or municipal-open access, where municipalities or public organizations are negotiating open access requirements with their partners. Those partners can be direct providers or providers coming onto a network as wholesalers or retailers.

Five major business models were discussed, including:

  • “Partner, no assets”
  • “Dark Fiber, single provider”
  • “Dark fiber, open access”
  • “Lit Fiber, open access”
  • “Direct provider”

The first couple of models are less popular and are not very focused on communities taking an active role. The opposite is true for open-access dark fiber and lit fiber, which emphasize cities taking an active role in providing services down to the premises.

“What we see in most communities is cities moving closer to that type of open network by taking an active role in expanding the last mile by bringing it from their backbone,” Honkers said. “Cities are more adept at [reducing costs] if they have existing outside plan operations and are already building last mile operations.”

“They see there’s an obvious advantage because cities and electric utilities have a lower cost of capital that can be used to build and finance this network than could otherwise be done in the private sector,” he added.

He added that public sector network building involves lower costs of capital over a longer period of time. Instead of a three to four-year payback, there’s a 10 to 15-year payback period on municipal financing. This reduces the cost of infrastructure that is later released back out to providers.

Lit fiber networks are also popular in communities that wish to push competition further into their markets, Honkers said. Unlike dark fiber networks, which “partition the network” by only allowing a single provider to service a single customer, lit fiber networks allow multiple providers to serve a network so an end-user – whether a home or a business – can potentially pick whichever service they want through a provider instead of being limited to one.

Hollifeld lastly spoke about direct providers, or municipalities that realize they can provide the greatest service with the greatest benefit all by themselves.

“Their cost of doing business and cost of capitalization is much less expensive than a private enterprise so they can afford to be a direct provider in some cases,” Hollifeld said. “It is a challenge. It has great rewards when it works, and a lot of risk when it doesn’t.”

“Without service providers, there’s not a lot that’s possible,” he said. “When we look at municipal public broadband projects, four out of five are built on an open access, a dark fiber, or some variation of that business model.

Equally important is the political environment.

“We come across this with every project we deal with,” Honkers said. “We’ve gotten to be a lot more political than I ever thought we would be. “Politics plays a huge role in setting policy and also delivering expectations to the community. We have to be wary of how those are going to affect the end results.”

Honkers recounted the story of one of Magellan Advisor’s clients – the city of Palm Coast – which was “pretty underserved when it comes to business broadband service.”

While the city initially began its network building on the premise of telecom cost reduction, the city realized – after building 70 miles worth of fiber throughout town – that a lot of its network resources could be used to advance community benefits.

“So the city quickly just realized ‘hey, we can build to the school districts and we can capture E-rate dollars to build out to these schools at a lower cost,” he said. “The city already had most of the backbone network built, just laterals were needed out to the schools.”

The city ended up bringing 17 schools to the network, providing one Gigabit per second capacity to each school. Before long, the concept was expanded to bring hospitals, counties, and public safety buildings onto the network to create a regionalized broadband network, he said.

Eventually, the decision was made to move beyond local government to businesses by adopting an open-access, lit fiber network.

“Instead of partnering directly with providers, they [Palm Coast] did their needs assessment early on to understand exactly what providers could utilize as incumbent assets and the key to that was plenty of backhaul and plenty of backbone.

“Instead of partnering directly with providers, they did the needs assessment early on to understand exactly what providers could utilize as incumbent assets. [The city of Palm Coast] hosted very little fiber in the ground. in terms of local fiber infrastructure, there’s plenty of backhaul, plenty of backbone.”

“They didn’t have the cost of building fiber,’” he added. “No capital [was] required. The city charged very reasonable local loop costs for access to that network and as a result of bringing that cost down for local fiber, businesses pay significantly less. In this case, it was all a matter of negotiating the deal with service providers to understand exactly what they can bring to the table, what their preferences were, making sure there was alignment with the city’s goals for economic development and bringing that network online.”

The results for Palm Coast were very positive, said the Magellan officials. The city significantly reduced its budget. School, business, and hospital costs decreased by 40 percent. Competition has increased.

The lesson to be learned, said Honkers: “Know your customers.”


New York City and State Each Craft Broadband Policies; City Nixes Muni Wi-Fi

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Broadband Census New York

Editor’s Note: This is the fourth in a series of articles surveying the state of broadband, and of broadband data, within each of the United States. The complete list is at Or visit the Broadband Wiki. Help build this wiki by making a contribution to

August 7 – New York City should not create a comprehensive municipal wireless network, but should instead take targeted actions to increase the public availability of high-speed internet service and encourage broadband adoption, city officials said last week.

Among those actions include finding ways to get private providers to push fiber-optic wires into more parts of the city, including many industry parks that are currently unserved, officials and a consultant said at City Hall on July 30.

The likely rejection of a municipal wireless network comes at a time when other major cities that had dallied with the concept – including Philadelphia and San Francisco – are having second thoughts about the advisability of city-wide public Wi-Fi.

Instead of seeing wireless as the key driver to bridging the digital divide, the current hot topic in universal broadband is now fiber optics, judging by the New York City report.

“Our way of thinking is even though you are seeing a ton of activity in the wireless world, all of those have at their core a physical infrastructure component – a fiber component,” said city consultant Chris O’Brien, a partner with Diamond Management and Technology Consultants, speaking at City Hall.

“If you look at the future fiber is going to be the thing most in demand, because it is the thing that everything rides on,” said O’Brien. “The city should be looking for ways to encourage fiber deployment.”

Deputy Mayor Robert Lieber said that New York City welcomed Diamond’s report and would likely support its recommendations.

“Using technology and supporting its use among New Yorkers to improve the accessibility and efficiency of government and improve quality of life has been a hallmark of the Bloomberg Administration,” Lieber said in a statement provided by his office. Lieber serves under Mayor Michael Bloomberg and is responsible for economic development.

In addition to pushing fiber into more parts of the city, including industrial parks, the report calls for the city to increase broadband adoption by low-income households, to support competition, and to increase the number of wireless access points in high-density parts of the city, as well as public parks.

Lieber, O’Brien and City Council Member Gale Brewer each spoke at the July 30 briefing, which was following by a meeting of the New York City Broadband Advisory Committee. Established by 2006 legislation authored by Brewer, the advisory committee aims to use the Diamond report as a springboard to crafting detailed broadband policies.

“The city feels very enhusiastic about the suggestions,” said Mike Kelly, an aide to Lieber. “We are looking to craft a comprehensive set of initiatives that will tackle the digital divide issues.”

In addition to New York City, New York State is also in the midst of a comprehensive review of state-wide broadband initatives.

As with the New York City effort, the state approach seeks to ensure that high-speed internet service is available for all.

The New York State Council for Universal Broadband was formed in December 2007 and has begun holding quarterly meetings to develop a state-wide policy on broadband.

“In an age when our competitiveness depends on fast and easy access to information, too many communities in New York State still lack sufficient broadband access,” said Governor Paterson said in March, when the city announced a series of 2007-2008 broadband access grants.

The largest three grants went to New Vision Powerline Communications, Inc. ($1.3 million), to develop a broadband over power line inititiave in Onondaga County; Tech Valley Communications ($938,000), to work with municipal agencies and non-profit groups in Albany County to expand free internet services; and the Mount Hope Housing Co. ($776,000), to offer one year of free broadband access to residents of Bronx County, in New York City.

Although the state-wide effort is still in the midst of developing policy parameters, one group of technical experts and advocates calling themselves the Open Infrastructure Alliance (OIA) welcomed the governor’s plan and called four a four-part platform of their own.

OIA would fund universal broadband deployment by stripping broadband providers of hundreds of millions of dollars in “public interest perks given to incumbent telecom companies viewed as utilities, where now those companies are operating in a competitive market;” by proposing that the state collect its own detailed broadband data; by urging “a comprehensive examination of the successful broadband models to follow and models to avoid,” with a particular eye toward international successes; and by seeking to light up dark fiber currently not in use.

Another group actively following the New York city and state broadband initiatives is the Internet Society of New York. Joly MacFie, secretary of the society, said he felt there was merit to the city’s goal to “set up partnerships with groups that already work in [low-income and underserved] areas, and the technology companies, to look for funding” to drive universal broadband.

O’Brien, speaking at the New York City forum, said he was happy that the city has not gone all out on municipal wireless. He said that two years ago “muni wireless was a really hot topic. The city said, rather than doing what others [were doing], we are going to do a fact-based study and figure out what the coverage issues are like here.”

“Determining the most effective and feasible ways to increase broadband accessibility among New Yorkers is a priority,” Lieber said. “The findings of the consultant study and the ongoing input of the Broadband Advisory Committee will provide valuable insight as we look at what role the public and private sectors should play in promoting broadband accessibility throughout New York City.”

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