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Kentucky Deploys State-Wide Fiber Network Through Public Private Partnership with Macquarie Capital

LEXINGTON, Kentucky, September 21, 2015 – The lieutenant governor of Kentucky, a bevy of state officials and their private sector counterparts here celebrated the finalization of the deal to build a $324 million broadband infrastructure project.

The project, KentuckyWired, is a public-private partnership (also dubbed a PPP) of the state and of the Australian financier Macquarie Capital. It is a 3,400-mile open access “middle mile” network that will span all 120 counties in the Commonwealth of Kentucky.

In planning, financing and negotiating stages for nearly a year, the Macquarie project closed on September 3, 2015. Bonds are set to be issued and construction of the network – albeit in very early phases – has begun.

When completed in 2018, the network will include six fiber rings around regions of the state, and fiber connections to at least one point in every county.

The Kentucky Wired network was the highlight and toast of each of four days at the Broadband Communities economic development conference here.

Kentucky Lt. Gov. Crit Luallen speaking at Broadband Communities conference in Lexington.

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LEXINGTON, Kentucky, September 21, 2015 – The lieutenant governor of Kentucky, a bevy of state officials and their private sector counterparts here celebrated the finalization of the deal to build a $324 million broadband infrastructure project.

The project, KentuckyWired, is a public-private partnership (also dubbed a PPP) of the state and of the Australian financier Macquarie Capital. It is a 3,400-mile open access “middle mile” network that will span all 120 counties in the Commonwealth of Kentucky.

Kentucky Lt. Gov. Crit Luallen speaking at Broadband Communities conference in Lexington.

Kentucky Lt. Gov. Crit Luallen speaking at Broadband Communities conference in Lexington.

In planning, financing and negotiating stages for nearly a year, the Macquarie project closed on September 3, 2015. Bonds are set to be issued and construction of the network – albeit in very early phases – has begun.

When completed in 2018, the network will include six fiber rings around regions of the state, and fiber connections to at least one point in every county.

The Kentucky Wired network was the highlight and toast of each of four days at the Broadband Communities economic development conference here.

It was lauded both for its open access nature and for its unique financing structure: “The KentuckyWired transaction is the first time a PPP has been able to access the tax-exempt market, where that PPP is not eligible for exempt private activity bonds,” according to a Macquarie flyer.

This unique financing structure, in which Macquarie Capital shares with the state both the benefits and the risks of the project, was touted as a model for broadband infrastructure projects throughout the country.

The project will “hopefully be an example for the rest of the United States,” said Lt. Gov. Crit Luallen, speaking at a luncheon on Wednesday. Speaking of Gov. Steve Basheer, she said that “this whole broadband initiative is one of the most significant things he has done in his career, and he has had a long career.”

A Private Sector Company Building a State’s Project

At the core of the project are 288-count strands of fiber-optic wires that will connect Kentucky’s counties, delivering dedicated high-speed fiber broadband to 1,100 anchor institutions. These are generally the schools, libraries, hospital and other government sites across the state.

Although the network is being built by the private sector company Macquarie and a range of national and local subcontractors, the network will be owned and controlled by the state through a newly-created entity, the Kentucky Communications Network Authority.

The state and the federal government provided seed funding. But the vast bulk of the $324 million network will be funded by debt and by equity raised by Macquarie.

In exchange, Macquarie receives an annual concession fee of about $29 million. As the business model for the network came to be defined, this annual funding steam comes from the state moneys already spends on broadband connectivity, now redirected to Macquarie.

IMG_7109Indeed, the exact size and scale of KentuckyWired were determined by “backing into” the annual amount already paid to other companies for lower-speed internet. Now, advocates say, Kentucky will get a better level of service for those government facilities connections — and the state will get the benefit of an open access network.

The important benefits of open access networks should not be understated. Under the American Recovery and Reinvestment Act, the federal government invested almost $7.2 billion into broadband projects across the country. Most of the funds went to fiber-optic infrastructure, and most were for middle-mile investments. Such funding came with the requirement that these middle-mile networks be “open access.” That means that private companies could connect and offer last-mile broadband services within the local regions.

Recovery Act investments in open access middle-mile networks has increased broadband competition, and hence created faster speeds and better service and lower prices. Importantly, these middle-mile networks offer the ability for cities and others to build local Gigabit Networks off of middle-mile connectivity.

The Politics Behind the Beginning of KentuckyWired

Many states benefitted from extensive middle-mile projects in recent years, including California, Illinois, Maryland and North Carolina.

But Kentucky didn’t have the right opportunity at the right time. Indeed, the only Recovery Act infrastructure project awarded exclusively within the state was a modest $535,308 project in Owen County.

Luallen said that while Kentucky has been forward-thinking in some aspects of technology innovation, “Kentucky consistently ranked at the bottom for broadband. In the latest state of the internet report, Kentucky ranked dead last.”

Kentucky Lt. Gov. Crit Luallen

Kentucky Lt. Gov. Crit Luallen

Likening broadband to electricity, water, sewer and other utilities, she highlighted the necessity of fiber-optic capacity for economic development, for improving health care, for enabling first responder communications, and for enhancing consumer benefits such as better cellular service.

Additionally, the coal-producing prowess of the eastern, Appalachian portion of the state has been badly hampered by growing concerns about climate change, and by regulations on coal.

Democratic Gov. Steve Beshear teamed up with Republican Rep. Hal Rodgers, who represents the region in Congress, about collaborating across party lines to benefit Eastern Kentucky. In the fall of 2013, they created SOAR, Shaping Our Appalachian Region, to find solutions.

“This push for higher broadband was something that emerged from SOAR,” said Luallen. Looking beyond partisanship, the initiative began to focus on broadband as the way to promote investment in a region battered by “dramatic changes in the coal industry.”

In spite of the region’s poverty and remoteness, “broadband can level the playing field despite physical or geographic isolation,” she said. By contrast, “spotty or overpriced broadband stifles entrepreneurship.”

With support from Rodgers, chairman of the House Appropriations Committee, the state received $23.5 million in federal funds, and the Kentucky General Assembly allocated $30 million in state funds last year. It also has support from the Appalachian Regional Commission.

“The remaining funding will come from the private sector, and the starting point for financing is that we began with existing payments that the state is making for information services [connectivity] to universities, public schools and state agencies,” she said. Those funds are between $26 million and $29 million a year.

“Since the state already pays for them, those funds will be transitioned to pay for the network,” providing “a stable foundation” for the middle-mile network, said Luallen. Additionally, as the owner of the network, the state “will benefit from the financial gains one this is fully operation and it begins to turn a profit.”

Macquarie’s Central Role in Building Kentucky’s State Network

Speaking on a variety of sessions throughout the conference, Nick Hann, senior managing director of Macquarie, described the network as providing a “transformative power for the Commonwealth of Kentucky.”

Because of the network’s wide footprint across the state, and because of its open access nature, it will enable multiple “last mile” Gigabit Networks to be built throughout the state.

Panelists Mike Lee, Mike Hayden, Steve Rucker and Nick Hann

Panelists Mike Lee, Mike Hayden, Steve Rucker and Nick Hann

Those are likely to happen next in the state’s major cities of Louisville and Lexington. Speaking at Thursday’s luncheon panel, Lexington mayor Jim Gray asked audience members involving in building Gigabit Networks to raise their hands. Many of them did.

“You all represent the nation’s fiber army,” he said. As a result of their efforts, he said, “Kentucky is at the forefront in the nation with their open access and open infrastructure model.”

Added Aldona Valicenti, chief information officer for the City of Lexington: Fiber optics “is not just about warehouses anymore. It’s about just-in-time everything.”

“We need to invest today so that we can thrive today and in the future,” said Valicenti, who praised the role that Next Century Cities has played in facilitating the city’s and the state’s plans for fiber-optic networks.

In a panel with the public and private officials most directly responsible for the Macquarie partnership, Lori Flanery, secretary of the Kentucky Finance and Administration Cabinet, said that Kentucky was able to avoid the mistakes of other states by visiting and learning from their experiences.

“Twenty years ago, things would have been differently,” she said, referring to the newly-available opportunity to build with companies in public-private partnerships.

“Most states haven’t gotten to the point that they know what their [annual broadband] spend is,” added Steve Rucker, deputy secretary of Kentucky’s technology department. Knowing that the state was already spending at least $26 million annually gave it the ability to plan a network with a payment in that amount.

Lexington Mayor Jim Gray

Lexington Mayor Jim Gray

Hann said that every state in the nation could do something similar: Reallocate what it spends on inferior-quality broadband, and use that to fund a state-wide Gigabit Network.

Although the discussion at the conference was largely on the network’s middle-mile component, Macquarie and its partners also highlighted future last-mile benefits.

“When we first came in and did our analysis, we found a huge amount of last-mile fiber within the state,” said Mike Lee, chief operating officer of Macquarie partner First Solutions.

Unfortunately, the last-mile was scattered and unconnected to a bandwidth-intensive information highway, he said. “They had built themselves a beautiful island. The problem lay not in the last mile, but in the middle mile,” which lacked robust access.

Generally, the problem for broadband deployment elsewhere in the country is the reverse: There is middle-mile competition, but not sufficient last-mile investment.

Hann described fiber-building as a natural extension upon Macquarie’s background as the constructor of roads, bridges, airports and pipelines. “We are building the highway, not regulating which cars or trucks drive on it — all of that will still be determined by the market,” he said on the panel.

“Fiber is such a good fit with the PPP model because fiber is not complicated, not cutting edge,” Hann said, distinguishing the infrastructure from the applications and content that ride on top of fiber wires. “It is a basic utility, a 30-year-plus life asset, and like the electric cable of the last century, or the water line, or the road.”

Drew Clark is the Chairman of the Broadband Breakfast Club. He tracks the development of Gigabit Networks, broadband usage, the universal service fund and wireless policy @BroadbandCensus. He is also Of Counsel with the firm of Best Best & Krieger LLP, with offices in California and Washington, DC. He works with cities, special districts and private companies on planning, financing and coordinating efforts of the many partners necessary to construct broadband infrastructure and deploy “Smart City” applications. You can find him on LinkedIN and Twitter. The articles and posts on BroadbandBreakfast.com and affiliated social media are not legal advice or legal services, do not constitute the creation of an attorney-client privilege, and represent the views of their respective authors.

Drew Clark is the Editor and Publisher of BroadbandBreakfast.com and a nationally-respected telecommunications attorney at The CommLaw Group. He has closely tracked the trends in and mechanics of digital infrastructure for 20 years, and has helped fiber-based and fixed wireless providers navigate coverage, identify markets, broker infrastructure, and operate in the public right of way. The articles and posts on Broadband Breakfast and affiliated social media, including the BroadbandCensus Twitter feed, are not legal advice or legal services, do not constitute the creation of an attorney-client privilege, and represent the views of their respective authors.

Broadband's Impact

Julio Fuentes: Access Delayed Was Access Denied to the Poorest Americans

Big Telecom companies caused months and months of delays in the rollout of the Emergency Broadband Benefit.

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The author of this Expert Opinion is Julio Fuentes, president and CEO of the Florida State Hispanic Chamber of Commerce

Remember when millions of students in dense urban areas and less-populated rural areas weren’t dependent on home broadband access so they could attend school?

Remember when we didn’t need telehealth appointments, and broadband access in urban and outlying areas was an issue that could be dealt with another day?

Remember when the capability to work remotely in underserved communities wasn’t the difference between keeping a job and losing it?

Not anymore.

Education. Health care. Employment. The COVID-19 pandemic affected them all, and taking care of a family in every respect required broadband access and technology to get through large stretches of the pandemic.

You’d think the Federal Communications Commission and its then-acting chairwoman would have pulled out all the stops to make sure that this type of service was available to as many people as possible, as soon as possible — especially when there’s a targeted federally funded program for that important purpose.

Alas, by all appearances, some Big Telecom companies threw their weight around and caused months and months of delays, denying this life-changing access to the people who needed it most — at the time they needed it most.

The program in question is the federally funded Emergency Broadband Benefit program. The EBB offered eligible households — often the poorest Americans — a discount of up to $50 per month toward broadband service, and those households can also receive a one-time discount of up to $100 to purchase a laptop or other computer if they contribute just $10 to the purchase. Huge value and benefits for technology that should no longer be the privilege of only those with resources.

Seems fairly straightforward, right?

It should have been. But FCC Chairwoman Jessica Rosenworcel slammed on the brakes. Why? It turns out that Big Telecom giants wanted more time to get ready to grab a piece of the action — a lot more time. While the program was ready to go in February, it didn’t actually launch until several months later.

That’s months of unnecessary delay.

But it wasn’t providers who were waiting. It was Americans in underserved and rural areas, desperate for a connection to the world.

Here are some numbers for Rosenworcel to consider:

  • As recently as March, 58% of white elementary students were enrolled for full-time in-person instruction, while only 36% of Black students, 35% of Latino students, and 18% of Asian peers were able to attend school in person.
  • Greater portions of families of color and low-income families reportedly fell out of contact with their children’s schools during the pandemic. In one national survey in spring 2020, nearly 30% of principals from schools serving “large populations of students of color and students from lower-income households” said they had difficulty reaching some of their students and/or families — in contrast to the 14% of principals who said the same in wealthier, predominantly white schools.
  • In fall 2020, only 61% of households with income under $25,000 reported that the internet was “always available” for their children to use for educational purposes; this share was 86% among households with incomes above $75,000.

And all of these numbers cut across other key issues such as health care and maintaining employment.

Access delayed was access denied to the poorest, most isolated Americans during the worst pandemic in generations.

Allowing Big Telecom companies to get their ducks in a row (and soak up as many federal dollars as possible) left poor and rural Americans with no options, for months. Who knows how many children went without school instruction? Or how many illnesses went undiagnosed? Or how many jobs were terminated?

This delay was appalling, and Chairwoman Rosenworcel should have to answer for her actions to the Senate Commerce Committee as it considers her nomination for another term as commissioner. Rather than expedite important help to people who needed it most, she led the agency’s delay — for the benefit of giant providers, not the public.

Hopefully, the committee moves with more dispatch than she did in considering her actual fitness to be FCC chairwoman for another term.

Julio Fuentes is president and CEO of the Florida State Hispanic Chamber of Commerce. This piece is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views reflected in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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Texas High School Students Enter the Fight for Better Connectivity

Students in a Houston-area school district hosted a panel on connecting schools and libraries as part of a national event on bridging the digital divide.

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John Windhausen Jr., founder and executive director of the Schools, Health & Libraries Broadband Coalition

WASHINGTON, December 1, 2021 – Generation Z students are making their mark at a Houston-area school district by adding broadband access to the list of issues they are actively working on.

The high school students in the Fort Bend Independent School District organized a panel conversation on internet access in education as part of Connected Nation’s national event titled “20 Years of Connecting the Nation,” and were able to host some high-profile guests in the world of telecommunications.

The November 17 panel included John Windhausen Jr., founder and executive director of the Schools, Health & Libraries Broadband Coalition, Chris Martinez, division director of information technology for the Harris County Public Library, Heather Gate, vice president of digital inclusion for Connected Nation, and Meredith Watassek, director of career and technical education for Fort Bend ISD.

Nine percent of residents in Harris County, where Houston is located, reports that they do not have a connected device at home and 18 percent say they do not have access to an internet connection. These gaps in access are the focus of the panelists’ digital equity efforts.

With Windhausen and Martinez present on the panel, a key point of discussion was the importance of helping libraries to act as anchor institutions – institutions which help enable universal broadband access.

Watassek pointed out that she has been helping oversee distance learning in Fort Bend ISD for six years, starting such a program to enable teachers to teach students in several of the district’s buildings without having to drive to each one, and has seen that with time and learned experience it is possible to work through distance learning logistical issues that school districts around the nation are currently facing.

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Broadband's Impact

New York City Broadband Housing Initiative Gets First Completed Project

The initiative is part of New York City Mayor Bill de Blasio’s $157 million Internet Master Plan.

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BlocPower CEO Donnel Baird speaks at a press conference at Melrose Housing. Photo provided by BlocPower.

November 30, 2021 – BlocPower, Metro IAF, People’s Choice Communications, and pillars in the Bronx community in New York City gathered Monday at the Melrose Housing development to celebrate the first of five New York City Housing Authority community Wi-Fi projects completed by BlocPower.

Community members and other stakeholders were welcomed by Rev. Sean McGillicuddy, pastor of Immaculate Conception Church and leader at Metro IAF. “As the pandemic has shown us, internet is not just a luxury, it is a necessity,” he said. “We have internet now in Melrose Housing and we are celebrating with hundreds of Immaculate Conception Church parishioners.”

The build out to Melrose Housing and Courtland Avenue was part of New York City Mayor Bill de Blasio’s $157 million Internet Master Plan, with a goal of connecting 600,000 additional New Yorkers considered underserved. A third of those underserved people are residents in New York City Housing Authority communities.

With these two projects completed, Melrose and Courtland Housing can now provide internet to their more than 2,500 residents spread across 1,200 apartments and ten buildings.

“We are incredibly excited today to bring this much-needed, low-cost wi-fi alternative to Melrose and Courtlandt Avenue,” said BlocPower CEO Donnel Baird. “What began as the by-product of our efforts to convert New York City’s aging, urban buildings into smarter, cleaner more eco-friendly ones, installing community-owned urban wi-fi networks has now become an important part of BlocPower’s expanded mandate – to help close the digital divide in America’s underserved communities.”

P.C.C. technicians were able to install antennas on roofs and wi-fi nodes on each floor. To have a sufficient workforce to accomplish this task, BlocPower trained local New Yorkers through the company’s “Pathways: Civilian Climate Corps” program.

Going forward, P.C.C. will be responsible for maintaining, billing, and customer service. Melrose and Courtland residents will, in turn, elect a board to represent them in matters of data governance, use of proceeds, and quality of service issues.

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