Despite opposition from incumbent carrier Frontier Communications, a community broadband network initiative in rural Sibley County, Minn. is gaining support. Community Broadband Networks reports that the project has added three new towns to its potential territory, which should help make the project more viable. But it’s still unclear whether project organizers will be able to raise the funding required to construct the network.
Like most people who undertake a municipal broadband network, the people behind the Sibley County project say they are doing so because the incumbent provider is unwilling to undertake such a project. According to Community Broadband Networks, the project organizers have held numerous community meetings and 3,000 households in the proposed 8,000-household serving area have said they would take service if it were offered.
The project organizers are bucking a growing backlash against community networks. North Carolina recently passed a law virtually outlawing municipal networks, joining several other states that already have made that move. And additional states are considering such legislation. Supporters of such legislation say community networks are unfair to existing service providers. Opponents say they would be happy to turn the task of deploying broadband over to the existing service providers if only they would actually do so.
According to Community Broadband Networks, Minnesota already has a law requiring municipalities to obtain a 65% referendum if they wish to own or operate a telephone exchange. But the organizers behind the Sibley project apparently do not plan to operate an exchange. In addition, Community Broadband Networks reports, it’s not clear if the Minnesota statute applies to county-owned projects.
As for funding, Community Broadband Networks reports that the most likely option appears to be non-recourse revenue bonds for nearly $70 million. The author explains that: “These are bonds that are issued to private investors and will be repaid with revenues from the subscribers. If the network were to fail to produce enough revenue to make the debt payments, the towns and county would have the option of making up the difference from tax revenues but would be under no obligation to do so.”
The report notes that the county and towns would be required to come up with a debt service reserve fund of $4.5 million to cover any shortfalls and to make the project appealing to investors.
The Community Broadband Networks post did not discuss how project organizers plan to raise money for the reserve fund or what, if any, proposal the Sibley county network organizers expect to put in front of voters. Whatever move organizers make, they’re likely to encounter opposition from Frontier, which has questioned the viability of the project.
Community networks have had mixed success. A report from the Institute for Local Self Reliance last year profiled successful projects in Kutztown, Penn.,; Bristol, Tenn.; Reedsburg, Wisc.; Windom, Minn. and others. But some other projects have encountered problems. For example, a project in Lake County, Minn. ran into trouble when the cost of a planned bond issue turned out to be higher than expected. The county had not expected to use public dollars for the project but found that was an unrealistic expectation.
Incumbent carriers in areas such as Sibley County typically say they have not deployed broadband because they have not been able to justify the investment. It will be interesting to see whether companies such as Frontier are more willing to take on broadband deployments in areas such as Sibley County now that the FCC is transitioning today’s voice-focused Universal Service program to focus instead on broadband.
