Last week OTELCO’s marketing team made their way to Newry, ME, for the 73rd annual New England Management Institute. The institute is a four day conference for Maine town managers, put on by the Maine Town City and County and Managers Association. While there, Tracy Scheckel, OTELCO’s marketing manager, and Heather Johnson, the director of the ConnectME Authority, gave a presentation on broadband expansion in Maine. Their address covered everything municipality leaders need to know about bringing reliable Internet to their communities, including:
- Return on Investment
- Building a Network
- State Resources
- Recent Success Stories
All the information shared was relevant and important to anyone with the desire to bring better broadband to their community. If you weren’t there to see the presentation, here’s a recap of the presentation because community broadband expansion is something we should all know more about.
Return on Investment
Return on Investment, or ROI, is a big part of any venture. The ROI for an Internet Service Provider (ISP) and a Municipality is going to look very different. For the ISP, it is going to be about a fiscal return. There is a basic example of an ROI for a Fiber Build that OTELCO uses quite often. It is based on the following assumptions:
- $20,000 per mile for fiber infrastructure cost
- $600 per home to deliver service from the street
- 13 homes per mile
- Average monthly cost for the provider to actually deliver the service after installation is $32 per month
- The subscriber pays $65 per month for the service
- Net revenue per home is $33
From these estimates, we conclude that a one-mile build with thirteen homes would bring the total cost of the project to $20,000 with an added cost of $600 for each home that connects to the service. If every home purchases Fiber to the Premise from this build, the total cost per home would be $2,140. A 100% take rate (the number of homes that actually subscribe to the service) is unlikely so let’s say that seven homes actually subscribe, bringing the total cost per home to $2,460. When you divide the cost per home by the net revenue per home ($33), you can see that it will take roughly nine years for the ISP to see break even. That is what the ROI on a broadband build looks like for an ISP.
For a municipality, the ROI is about the growth and prosperity of the community. A municipality is looking at things like:
- Attracting New Businesses
- Drawing in New Citizens
- Economic Growth
- Educational Opportunities
- Quality of Life and Place
- Streamlining the Municipal Process
- Improving the lives of the elderly through telemedicine and added independence
Too often, towns get looked over by ISPs because they are not seen as profitable. Those municipalities are left with slow, unreliable Internet, which hinders the whole community. That is why municipalities may take charge of their own broadband.
Building a Network
Municipalities have two options when it comes to building their own broadband network. They can:
- Go it alone: Essentially, the municipality becomes the owner of the network and general contractor for the design and construction of the network.
- Enter a Private-Public Partnership: The municipality works with an ISP to build, and maintain their network.
Going it alone can be a real challenge for most municipalities. In addition to the hard costs in your budget, you’ll need to add the cost of an engineering firm for design, and a company to actually build the infrastructure. Once it is built, you will have to pay the price of maintaining and the network, including upkeep, customer services, marketing and more. Unless your municipality already runs its own utility company, building, operating, and administering a broadband network is a tall order.
Public-Private Partnerships are beneficial because ISPs already have the resources and expertise that go into building and running network. Municipalities can choose between a local provider or a non-local provider. A local-provider has the potential to save a municipality money because they may already own resources, such as utility poles or central office space, in your area. Non-local providers are still a fine option, they just won’t have the local resources, which can mean more spending for the community. Whichever you go with, a Public Private Partnership can help realize your community’s broadband vision..
The ConnectME Authority is a government agency whose mission is to “facilitate the universal availability of broadband to all Maine households and businesses and help them understand the valuable role it can play in enriching their lives and helping their communities thrive.” They do this by awarding grant money to towns and providers aiming to expand broadband in rural Maine. They are administered by the Maine Department of Economic and Community Development and funded through a .25% assessment on landlines.
ConnectME is an important resource for any municipality looking to develop a broadband network. Already this year they have:
- Redefined their definition of “underserved subscribers” to anyone with Internet below 25 Mbps/3 Mbps, and essentially widening the amount of communities’ eligible for rural broadband funding.
- Set a statewide broadband target of 100 Mbps/10 Mbps
- Published, in partnership with the Maine Department of Economic Community Development, a “State of Maine Broadband Action Plan”
- Announced their intent, with the DECD, to go after a share of the $600 million of federal rural broadband funding
- Toured the state hosting discussions on broadband expansion funding
ConnectME obviously does much more than just grant money to help with broadband builds. They also provide multiple resources for towns looking to take on these projects.
There are many successful broadband stories across the country. During their presentation, Heather and Tracy touched on four communities that either have or are in the process of strengthening their connections.
- Leverette, MA: Leverett is a town in western Massachusetts with approximately 811 residents and business address over 43 miles of road. With a $40,000 planning grant from the Massachusetts Broadband Institute, Leverett went to work building a broadband network for their community. After the citizens overwhelmingly approved a 20 year general obligation bond for construction, the Leverett Municipal Light Plant (LMLP) was formed to own the network. In Massachusetts, many municipalities own and operate individual electric plants. Recently the state adjusted legislation to allow for the operation of broadband networks by MLPs. During construction, the LMLP worked to educate and build interest in the Fiber to the Premise project. By the time the project was complete in 2014, 65% of residents had pre-subscribed for service, today the take-rate is in excess of 86%. Leverett hired separately a Network Operator and an ISP. After a couple of years, the town decided to leave the original ISP and look for a new one. OTELCO was awarded the contract and has been serving the community since 2017.
- Baileyville and Calais, Maine: Downeast Broadband Utility is a nonprofit that is bringing high-speed broadband internet to rural Maine communities, such as Baileyville and Calais. Open-access dark fiber infrastructure allows Baileyville and Calais, ME to invest in a future that bridges the gap between rural communities, and technological and economic growth. Downeast and the communities of Baileyville and Calais have done a lot of upfront work to create excitement and interest in the network. Downeast spent time on the ground, talking to community members about their plans so that when it came time to vote on funding for the project, it was met with overwhelming support. Right now, they are at the pole attachment phase and it has been a struggle for them getting on the poles, as it can be for many of these projects. One thing municipal leaders in these communities have stressed to others in their position is flexibility. “Be really detailed with an action plan” advises one leader “but be ready to change it.”
- Cranberry Isles, ME: The Cranberry Isles are five Island towns nestled into the coast of Maine. When the Isles only ISP decided to leave the rural Islands were faced with two choices, have no Internet at all, or build their own Network. The result of that choice was the community banding together to stay connected. They voted to accept a $1.3 million bond, which is where things got interesting for the Isles. After they had voted on the bond, the USDA came in to let them know they had already been awarded $1.3 million in grant funds. It is safe to say that the grant made their whole project that much more affordable.The Isles partnered with Axiom Technologies and started building their broadband network. The thing about being a group of islands off of Maine is you are unique, and therefore you have a unique set of needs. To meet those unique set of needs Axiom and the Cranberry community had to come up with some creative build out solutions. In many places, to avoid issues with existing utility poles and possible pole fees, they put up special 20ft poles that are made of Kevlar. On one Island, that has no electricity and therefor no utility poles, they are running fiber along the ground. The Cranberry Isles is a great example of a community who wouldn’t let anything stand in their way.
- Islesboro, ME: Islesboro is almost 100% connected at this point, and now stands as one of Maine’s first successful rural broadband projects. Islesboro is another Island off of the Maine coast, and just like the Cranberry Isles, it faces a unique set of challenges. Recently, ferry prices to and from Islesboro went up, and now more than ever residences are looking to capitalize on the benefits of broadband to reduce their need to commute back and forth from the island. This strong broadband connection has opened a lot of doors for Islesboro residents. Whether it be telehealth, telecommuting, online classes, or simply making the island more attractive to the summer population, broadband is going to make life on Islesboro that much simpler.
Broadband expansion is an important issue across the country. Whether you are a town manager in Alabama, or a farmer in Maine, broadband can make a difference in your life. If you want to learn more about Municipal Broadband, download OTELCO’s Broadband 101 primer. The more people that become involved in this discussion the faster we can connect the whole country to reliable broadband.