Making Broadband Access a Reality

In my previous post, I talked about a set of instructions, which would provide for an easier task when it comes to metropolitan broadband. As you can see below, we're actually closer than one would think to arriving at a repeatable process.

The Public Private Partnership, touted in 2007 as the way forward, where a city provides some mounting assets and fiber for backhaul is no longer sufficient to garner a killer deal from a private sector vendor (like EarthLink used to offer).

Nor is the long-term anchor-tenant-style contract currently in vogue these days a walk in the park. Vendors are asking cities to step up in a major way in long-term service contracts when the private vendor owns the network, and the problem is the pricing on these deals ends up costing the city about what it would if they just built the network themselves. Why rent something when you can own it for about the same price? The argument for leasing over ownership usually involves lower total cost or lower total risk. While we still lack sufficient experience with the anchor tenant model, I don't think the conditions have been met in any projects I've seen (sufficiently low service price coupled with sufficiently high revenue/cost savings opportunity) to allow for project cost recovery, so progress remains slow.

To revisit my post of necessary conditions for broadband cited above, I'd offer this update.

1. Four things needed for Metropolitan Broadband to succeed
a. Suitable Role for Public Sector - catalyst, network user, network owner
b. Incumbent & ISP Buy-In - complementary approach to expand service options
c. Sustainable Business Model - long-term cost effectiveness
d. Effective Technology - must work as promised

2. A deliberate, prudent decision-making process is vital - start quick, but finish slow

3. Start with a market survey to solicit Service, but if it's more expensive than anticipated, or rather, too expensive to craft a winning business model, consider city-ownership

4. Infrastructure projects look at cost, cost recovery, as well as benefits
a. Cost - goal is to provide best service for lowest price
b. Cost Recovery
i. Avoided costs - come from more efficient government services
ii. Enhanced revenue - consider more diverse revenue options for a city
c. Benefits
i. Hard benefits (able to calculate) - money not spent, employees not hired, service contracts scaled back or even canceled
ii. Soft benefits (hard to put a number to) - added services from city government, lower crime rates, increased economic development options, etc.

5. Optimal network cost recovery, lowest investment risk comes from filling up the network fast - achieving full asset utilization

6. "Broadband Access" Approach may well be the best way to fill up the network with information traffic and accelerate cost recovery
a. Complementary to current broadband provisioning
i. Add Mobility to offers, more options for citizens and businesses
ii. Pay-as-you-go for network access (no capital expense)
b. Add large anchor tenants
i. County
ii. ISD
iii. Gas Utility
iv. Local businesses

More on Broadband Access

In the Broadband Access model, a multitude of users take advantage of a new asset but only pay for what they use. The analogy is to a city building a road that all citizens in the community can use. There is no mention of "free" anywhere in here, but that remains an option for a city if it wants to give away some access here or there.

The goal in the Broadband Access model is for the network owner to fill the network to capacity as soon as possible and hasten recovery of costs by reaching out to all interested parties. Rapid cost recovery lowers the project risk. Under an Broadband Access model the city makes an investment in an infrastructure and then recovers its costs over as short a time as possible from two major sources: first, in the form of avoided costs in city operations by leveraging the new network across several departments; and second, in revenue gained from making the infrastructure available to all parties in the city under an arrangement where providers (e.g., current incumbents and new WISPs) as well as large users (e.g., School District, County, Gas Utility) pay for the access they use - the "open" part of Broadband Access.

A key to the Broadband Access model is that a multitude of users can take advantage of a new asset but only pay for what they use. It's worth stressing again...

The goal in the Broadband Access model is for the network owner to fill the network to capacity as soon as possible and hasten recovery of costs by reaching out to all interested parties.

Rapid cost recovery lowers the project risk. The city can manage its operation risks by working with an outsourced provider to manage and maintain the network.

For this approach to work, the city government needs the discipline to root out inefficiency and put the network to good use. It all starts with a city deliberately studying its operations and determining where it can streamline processes and save costs by going digital. And that takes time. The entire community needs to work together to make such a plan succeed, by doing their part and loading traffic onto the network. Better get busy, the race is on!