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Infrastructure

Open Access Network Builders Discuss Ownership Models for Next Generation Broadband Infrastructure

Jericho Casper

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June 4, 2020 — In a Broadband Breakfast Live Online webinar on Wednesday, digital infrastructure experts considered the role of open access networks in shaking up the landscape of internet infrastructure in America.

In particular, questions about who will construct, finance own and operate digital infrastructure needs of the future were thoroughly discussed

Moderator Drew Clark, editor and publisher of Broadband Breakfast, prefaced the discussion by explaining that unlike a vertically integrated model in which one company owns, operates and provides internet service, the open access model disrupts broadband companies’ ability to monopolize the supply chain.

Open access networks allow one entity to own the utility-like infrastructure component, another entity to operate the network, and still other parties to provide a range of advanced broadband internet services.

Several panelists backed the open access model as the answer to funding last-mile connections. Open access networks can have the impact of effectively  lowering the cost of a capital-intensive network infrastructure building process.

Roger Timmerman, CEO of UTOPIA Fiber, detailed how the open access model offers the unique possibility to work directly with cities on what they want and need. Communicating with municipalities to find ways to comfortably finance open access infrastructure has led to the expansion of the open access network, he said.

Each city has a different customer types, landscapes, existing infrastructure and needs, Timmerman added. For example, when UTOPIA Fiber deployed in three different cities, the company decided to use three different business models to provide access. In Idaho Falls, Idaho, UTOPIA Fiber helped support a municipal electrical utility. In Woodland Hills, Utah, the network operator built and operates a network owed by the municipality. In Morgan, Utah, UTOPIA Fiber financed construction, but with a city guarantee of subscribers.

Monica Webb, director of market development and government affairs at Ting Internet, said that there exist a diverse array of ways to finance last-mile infrastructure. Ting expanded to offer fiber service in 2014 and now offers service in over 10 markets.

In some markets, such as Charlottesville, Virginia, Ting owns and operates the networks end-to-end. In other cities, like Raleigh, North Carolina and Centennial, Colorado, Ting leases core infrastructure from municipalities to build onto it, deeper into rural areas.

In other cases, private entities build the infrastructure and Ting offers services on their networks.

A different financing model was introduced by Darrell Gentry, CEO of Next Level Networks. Next Level Networks empowers actual homeowners to own their own networks, paying construction and operation costs.

The company developed a crowd sourcing app to empower residents to band together to build necessary infrastructure where it is most demanded. By utilizing this model, infrastructure builders know there will be a net gain from the beginning of a project.

Panelists agreed in order to fund fiber to the last mile, it is necessary to build into cities first, where network adaption will be high. This will generate the necessary revenue to build into sparser neighborhoods.

Isak Finér, chief marketing officer of COS Systems, emphasized the importance of prioritizing concentrated neighborhoods where demand is greater. He recounted seeing a number of projects stagnate due to being built in the wrong neighborhood.

“When going into an area, we ensure the investment we make will be offset by the revenues we expect,” Webb echoed.

After initially turning a profit, the revenues generated could be cross-subsidized to invest in infrastructure in low threshold communities, Timmerman said.

Other panelists agreed that government funding must play a roll as developing infrastructure will not always result in a financial net positive.

Some panelists said that the private sector fails to fund digital infrastructure in areas where they predict there is little return on investment. Municipalities can play a crucial role in aggregating demand for future-proof open access networks.

In order for cities to take control of their own economic future, now is the time to consider different infrastructure funding options, panelists said.

The Broadband Breakfast Live Online discussion was a preview of Digital Infrastructure Investment, a Physical/Virtual Event taking place on Monday, August 10.

Assistant Editor Jericho Casper graduated from the University of Virginia studying media policy. She grew up in Newport News in an area heavily impacted by the digital divide. She has a passion for universal access and a vendetta against anyone who stands in the way of her getting better broadband.

Infrastructure

Proving Current Speed Threshold As Insufficient A Hurdle For House Bill: Consultant

A House bill raising the minimum connectivity threshold will need to convince lawmakers it is necessary, Steve Perry says.

Benjamin Kahn

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Photo of Perry Bayliss from his firm's website

April 20, 2021—A proposed Democratic House bill, introduced last month that would increase the speed threshold for served communities, will need to sell the idea that the current bar for speed is insufficient, especially as the pandemic has made broadband availability a central issue, according to a government consultant.

The bill would create new categories for federal funding on broadband projects. The new definition of “served,” which was previously categorized as areas with access to speeds of 25 Megabits per second (Mbps) download and 3 Mbps upload, would be updated to bump up the upload speed to 25 Mbps.

Low-tier would be considered areas with between 25/25 Mbps and 100/100 Mbps speeds, and medium-tier would be viewed as 100/100 Mbps to gigabit symmetrical.

Steve Perry of Perry Bayliss, a government relations firm, said at an event hosted by the Fiber Broadband Association last week that there are several key issues with the legislation that he felt would have to be addressed for it to be successful. First, he believed that while he and many other experts are proponents of 100 Mbps symmetrical service, there is still a significant amount of hesitancy on behalf of some policy makers.

Perry is echoing concerns made by Federal Communications Commissioner Michael O’Rielly last month in a debate on the bill. O’Rielly argued that the bill’s threshold parameters would be a tough sell because the upload speed increase would exceed consumer needs. It would also lead to subsidized overbuilding because “most of the nation does not meet the new definition,” O’Rielly argued.

The build would, at its baseline, elevate the minimum upload speed threshold from 3 Mbps to 25 Mbps, making it symmetrical with the download speed.

Perry pointed to a contingent of policy makers that believe 25 Mbps download/three Mbps upload is sufficient. “We have a lot of work to do to overcome this question of whether what we consider to be inferior broadband service is adequate.” He added that this is especially important given the strains added during the pandemic, where everyone is utilizing broadband services more than ever before.

Mapping and overbuilding concerns

Perry also said that the mapping of underserved areas needs to be improved. He said that this has led to many Republicans criticizing the plan, stating that the administration “has put the cart before the horse.” Perry stated that the administration should not move forward on the plan until it has addressed these mapping shortcomings, because otherwise they would be spending money before they even know where the money ought to be allocated to.

A third issue Perry identified was overbuilding. For areas that already have minimal broadband investment, small broadband providers would now potentially be competing with a federally subsidized, municipal service. Perry referred to this as “unleashing investment,” and stated that this is again a sticking point for Republicans, who by and large would leave the development up to private companies.

A number of states currently have restrictions in place to restrict municipal broadband bills. This month, Washington state announced it would be rolling back restrictions on such bills. Meanwhile, some Republican representatives have pushed a proposed anti-municipal network bill in Congress.

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Expert Opinion

Gary Bolton: Satellite’s Polite Conceit of Unserved/Underserved

Broadband Breakfast Staff

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Gary Bolton, President and CEO of the Fiber Broadband Association and author of this Expert Opinion piece

“You keep using that word. I do not think it means what you think it means.” – Inigo Montoya, The Princess Bride

SpaceX Starlink is the latest satellite broadband project to invoke the needs of unserved and underserved consumers to justify Federal Communications Commissions (FCC) licensing. The polite fiction spun by it and other satellite companies, nurtured by today’s short-form news cycle, is that such networks will deliver broadband services to anyone who needs them.

However, a less liberal appraisal recognizes these multi-billion dollar capital-intensive efforts are dependent upon business and government customers for economic survival and will deliver services only to those who can best afford them.

The marketing conceit of “broadband for all” is not new and dates back more than a decade to the launch of the O3b mPower satellite constellation, with “O3b” standing for the “Other three billion” in the world that didn’t have broadband internet. Over the years, the company delivered services to the Cook Islands, Pakistan, and Nigeria along with four of the five major cruise lines fleet, NOAA, and the Department of Defense, listing verticals such as telcos and MNOs, governments, energy and mining companies, cruise and commercial maritime, enterprise, and aviation.

More recently, SES has partnered with Microsoft to deliver Azure Cloud access anywhere in the world, but there are no clear statistics on how many of the other three billion O3b has added to the internet.

“Our vision can change the lives of billions: almost half the entire human population is not yet connected,” OneWeb claims, but its targeted customers are maritime, aviation, enterprise, and government, with 5G worked in for good measure. There’s no clearly articulated path on how selling to big businesses translates into affordable access for billions of unserved and underserved people.

“Because that’s where the money is,” Willie Sutton, bank robber, once stated.

SpaceX executives believe the Starlink network could bring in as much as $30 billion a year, cash the company will use to fund Elon Musk’s ambition to colonize Mars. The company’s March 5, 2021, FCC filing requesting a blanket license for “earth stations in motion” (ESIM) focused on the company’s ability to deliver broadband services to large vehicles, ships and aircraft – going after the same government, maritime, and aviation sectors as O3b and OneWeb.

A week earlier, PC Mag expressed “concern” that urban Starlink deployments would take up satellite capacity “for the rural users who really need it. Starlink will have to manage its signups smartly.” Other publications have repeated the premise that Starlink’s reason for existence is to provide service to the unserved/underserved, so there’s no reason to worry about satellite affecting planned greenfield fiber deployments or network upgrades.

The cold truth is SpaceX is out to make money, so it’s going to sign up as many customers as can best afford the service and prioritize customers bringing in higher revenues such as enterprise, governments, and verticals. Revenue management is the name of the game, not rural users who need it. It is the same business template O3b and OneWeb are following today and Telesat and Amazon will in the future.

Satellite services provide both good and bad aspects for underserved/unserved geographics. In some clear cases, satellite will be the most cost-effective way to deliver broadband to rural locations because the local phone or cable company cannot economically provide a viable alternative. Higher-speed services such as Starlink should also serve as a competitive stimulus for rural incumbents to upgrade networks on a more proactive basis than simply “milking the asset” until things break or customers start leaving to other options.

It remains to be seen if Starlink services will have a large-scale detrimental impact on rural service providers and will depend the concentration of Starlink customers within a specific geographic area.  One or two customers picking up satellite services is unlikely to influence fiber buildout or network upgrade plans, but 10 or more most certainly could, especially if some of those customers are local business and government purchasers.

Gary Bolton serves as president and CEO of the Fiber Broadband Association — the largest trade association in the Americas dedicated to all-fiber-optic broadband. With more than three decades in the telecom industry, Bolton has been highly involved in Washington, particularly on FCC and Congressional proceedings and international trade issues. He holds an MBA from Duke University and a BS in Electrical Engineering from North Carolina State University. This piece is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to [email protected]. The views expressed in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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Fiber

Partnerships And Trust Go Long Way To Securing Financing For Broadband Projects, Panelists Say

Broadband Breakfast panelists wrestle with the challenge of financing broadband infrastructure projects.

Tim White

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Screenshot taken from Broadband Live Online event

April 16, 2021 – Financing broadband projects requires real human relationships among everyone involved, said Broadband Breakfast experts Wednesday.

The weekly panel addressed the challenge of financing broadband infrastructure. Billions of federal dollars are making their way to expand internet access across the country, including the $9.3 billion Rural Digital Opportunity Fund, the $3.2 billion Emergency Broadband Benefit program and the $7 billion Emergency Connectivity Fund. There is significant funding to be spent, but it’s not always as simple as receiving a check in the mail from the government.

Getting the necessary funds to build broadband networks — whether they are private service providers like Comcast, electric co-ops or municipal-owned networks — often requires financing with banking institutions or other means of funding.

“You really want to strike a deal with someone that you can trust, who you think has your community’s interests in mind,” said Christopher Mitchell, director of the Institute for Local Self Reliance’s Community Broadband Network Initiative. “Human relationships are important, and often are a precursor to striking any of these sorts of deals.”

He mentioned unique ways that companies and communities can collaborate to build broadband networks.

For example, he referenced some long-term agreements in Minnesota between localities and CTC – Consolidated Telephone Company. The localities would pay for and own fiber-to-the-home networks that are operated by the CTC. “That can really help for operators that have the capacity to do more work, but may be at their lending or borrowing limits,” Mitchell said.

Internet Service Providers “can work with a community that would take on the debt in order to build the network and then offer, whether that’s exclusive, whether that’s permanently exclusive, or timed-exclusive, that’s one way,” Mitchell said.

Partnering with anchor institutions

Another method is for providers to partner with communities or schools to build networks that are owned by the company but paid for by the community or school with state or federal funding, such as the company Clearnetworx in Colorado.

“ISPs sometimes have to build those relationships and have creative ideas to make these things happen,” Mitchell said.

“When I think about the creation of MBC back in 2004, I think it was really all about leadership and relationship and good timing,” echoed Lauren Mathena, director of economic development and community engagement at Mid-Atlantic Broadband (MBC). On grant processes and getting the necessary financing, she said “the biggest thing is building those relationships and keeping that determination, and if you haven’t started, start today, because it is a process.”

Many smaller banks often lend out for broadband projects, sometimes even banding together if they hit their limits, because they see it as a wholistic community development, explained Tim Herwig, district community affairs officer at the Office of the Comptroller of the Currency.

“A lot of these banks are locally-owned, the bank president, the members of the board, sit in the pew at church next to customers,” Herwig said. “Their kids go to the same schools together, they eat in the same restaurants, they go jogging down the same streets, right? They have a deep sense of corporate community responsibility. They see broadband as a gateway to the financial security and future of the communities where they serve,” he said.

High cost challenges

“The big challenge in a lot of these markets for rural operators is the economics of providing service in high-cost areas just don’t pencil out,” said Jeff Johnston, lead communications economist at CoBank, a private bank that focuses on services in agriculture and infrastructure for rural areas.

In addition to getting the upfront funding to building the infrastructure, there is also the operating costs to consider, and for some areas that’s not feasible without extra support, he said. “It’s one thing to get support up front to build a network in a high-cost area, but there’s on going expenses to managing the network,” he said.

Johnston also mentioned financial issues that may occur in federal reverse auction programs such as RDOF. “They’re great programs, first of all, but I also think operators going into these reverse auctions don’t overextend themselves,” he said. “Be realistic in what you think you can do operationally and financially.”

For MBC, which operates in Virginia, they pair funding with state and federal programs, such as the 1998 national tobacco settlement through the Virginia Tobacco Region Revitalization Commission, Mathena said. “We’ve been able to pair state and federal grant applications together, so that we’re using state dollars to help build that match, so that’s not just coming from MBC’s revenue,” she said.

Our Broadband Breakfast Live Online events take place every Wednesday at 12 Noon ET. You can watch the April 14, 2021, event on this page. You can also PARTICIPATE in the current Broadband Breakfast Live Online event. REGISTER HERE.

Wednesday, April 14, 2021, 12 Noon ET — “Less Than a Billion: Financing Broadband Infrastructure”

  • Congress has appropriated $3.2 billion for the Emergency Broadband Benefit and $7.2 billion for the Emergency Connectivity Fund, and more is being discussed. But internet projects still face financial constraints and regulatory hurdles in navigating the maze to obtain broadband infrastructure financing. This panel will consider funding and cost issues from the perspective of a broadband builder. How can broadband entities most effectively deploy private and public financing to meet increasing high-speed connectivity needs?

Panelists:

  • Jeff Johnston, Lead Communications Economist at CoBank
  • Tim Herwig, District Community Affairs Officer at the Office of the Comptroller of the Currency (OCC)
  • Christopher Mitchell, Director of the Institute for Local Self Reliance’s Community Broadband Network Initiative
  • Lauren Mathena, Director of Economic Development and Community Engagement at Mid-Atlantic Broadband (MBC)
  • Drew Clark (moderator), Editor and Publisher, Broadband Breakfast

Jeff Johnston is a lead communications economist in CoBank’s Knowledge Exchange research division, where he focuses on the communications industry. His work revolves around identifying emerging technologies, business models, risks and opportunities within the industry, and providing strategic analyses to both internal and external stakeholders. Prior to joining CoBank in 2018, Mr. Johnston was an equity analyst covering the tech, media and telecom sectors. Jeff has also held various senior management positions in the telecommunications industry. He earned his Bachelor of Science degree from York University and he is also CFA charterholder.

Timothy Herwig is a District Community Affairs Officer with the Office of the Comptroller of the Currency (OCC).  He is officed in Chicago.  Among other responsibilities, Herwig advocates for community reinvestment by providing technical assistance to banks interested in financing rural broadband infrastructure and rural ISPs looking for private sources of debt or equity financing.  The OCC is an independent bureau of the U.S. Department of the Treasury. The OCC charters, regulates, and supervises all national banks, federal savings associations, and federal branches and agencies of foreign banks.

Christopher Mitchell currently serves as the director of the Institute for Local Self Reliance’s Community Broadband Network Initiative. His work focuses on helping communities ensure that the telecommunications networks upon which they depend are accountable to the community. He was honored as one of the 2012 Top 25 in Public Sector Technology by Government Technology, which honors the top “Doers, Drivers, and Dreamers” in the nation each year.

Lauren Mathena is the Director of Economic Development and Community Engagement at Mid-Atlantic Broadband (MBC). In her role, Mathena serves as a regional ecosystem builder and represents MBC to a variety of local and state partners, including Southern Virginia’s economic developers who rely on MBC’s network for business attraction, retention and expansion. She is currently leading program development for the SOVA Innovation Hub, a 501(c)3 non-profit created in early 2020 with investments by MBC and Microsoft TechSpark.

WATCH HERE, or on YouTubeTwitter and Facebook

As with all Broadband Breakfast Live Online events, the FREE webcasts will take place at 12 Noon ET on Wednesday.

SUBSCRIBE to the Broadband Breakfast YouTube channel. That way, you will be notified when events go live. Watch on YouTubeTwitter and Facebook

See a complete list of upcoming and past Broadband Breakfast Live Online events.

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