ARTICLES

Alternative Approach For Municipalities To Capitalize On Broadband Service

Introduction

Advances in telecommunications technologies afford businesses the opportunity to increase their profitability through the use of, among other things, the internet, teleconferencing and virtual private networks. Not surprisingly, many businesses demand the use of these evolving telecommunications technologies. Not all businesses, however, can utilize these new and desirable technologies because these technologies require broadband facilities which, regrettably, are not ubiquitously offered by their relevant local exchange or other provider of telecommunications services. Businesses are not alone in demanding broadband services. Increasingly, residents are similarly demanding such broadband services so that they may quickly both send and receive information, including music and movies, over the internet. In an effort to address this broadband shortfall, certain enterprising municipalities and other political subdivisions of various states in the United States have installed and operated the "last-mile" broadband facilities, whether fiber or wireless, over which high-speed Internet access, video programming and voice and other data services are provided. Still others are planning to construct and operate broadband facilities.

Despite the laudable goals of a broadband connection in every home and office, like the proverbial "chicken in every pot", some incumbent local exchange carriers, cable television service providers and national wireless service providers have mounted heavy resistance to these municipalities that provide or plan to offer "last mile" facilities and services. These "last mile" municipal opponents have initiated litigation against such enterprising municipalities (and other potential subdivisions of states) in state and federal courts, and have lobbied state legislatures to prohibit such municipalities from providing, either directly or indirectly, voice, video and/or data services. Moreover, ordinary citizens, backed by these "last mile" insurgents, have opposed such efforts on the basis that taxpayer funds should not be used by local or state governments to construct "last mile" facilities in competition with private enterprise, and that such competition by municipalities is unfair since such governments pay no income or property taxes.

Municipalities can avoid such expensive and time-consuming litigation and political challenges, and at the same time accomplish their laudable goals of ensuring broadband connections in every home and office, by simply "partnering" or "teaming" with a private entity that would finance, construct, install, operate and own these "last-mile" broadband facilities. The municipality would have no financial or economic interest in the private entity. The private entity would deploy these facilities, consisting of fiber and/or wireless facilities, in public rights-of-way, easements and on municipally-owned structures. Under this approach, the municipality would facilitate the private entity in obtaining access to these rights-of-way, easements, and municipally-owned structure and in the overall deployment of the infrastructure. The municipality, in turn, would reap the benefit of increased tax revenues and other fees generated from the new businesses and residents attracted to the municipality by an available state-of-the-art broadband system.

The Role of the Private Entity

The private entity would be investor-owned, as opposed to government-owned or controlled. The private entity would not be related to, or affiliated with, an existing telecommunications provider, such as incumbent local exchange carrier or competitive local exchange carrier, cable telecommunications system or a national wireless provider. The private entity would finance the telecommunications infrastructure through private placement of securities or other financing methods including, but not limited to, a combination of equity and debt. The private entity would design, construct and own the telecommunications infrastructure, and deploy this infrastructure throughout the entire municipality according to a set schedule. The municipality would assist the private entity in deploying the broadband system through the "partnering" or "teaming" actions described below.

The private entity would design the infrastructure with sufficient capacity so that voice, video, data and other advanced telecommunications services could be offered. The private entity would strategically deploy through the rights-of-way and easement selection process, the "last-mile" broadband facilities throughout the entire municipal boundaries with the municipality's assistance, so that they would be made available to all inhabitants of the municipality. The private entity would deploy the "last mile" broadband service by installing infrastructure in underground conduits placed in utility or other municipal easements or on municipally-owned structures, or in space on public utility poles and structures made available to the private entity under the federal Pole Attachment Act of 1978.

Although the private entity would develop, own and control the "last mile" infrastructure, it would not offer any broadband or telecommunications services itself. Instead, the private entity would establish an open network policy, whereby it would lease or sell capacity in the infrastructure to any properly authorized telecommunications provider. Utilizing this infrastructure, the telecommunications provider would, in turn, offer a variety of voice, video and data telecommunications services, including advanced services such as IP video and high speed internet access, to all citizens of the municipality. The private entity would pre-lease or pre-sell capacity in the infrastructure, and would not begin the construction and installation of the infrastructure until it had pre-leased or pre-sold sufficient capacity to justify breaking ground.

The Municipality's Role

As set forth above, the private entity, not the municipality, would design, finance, construct, own and operate the broadband infrastructure. The municipality, however, would "partner" or "team" with the private entity, in the sense that the municipality would facilitate the private entity's design, construction and installation of the broadband system. Under this arrangement the municipality's efforts would include, among other things:

  • Appointing a specific person or persons to manage the facilitation process;
  • Working closely through the appointed manager with the private entity to obtain prompt approval for the construction of the infrastructure from municipal planning and zoning offices;
  • Streamlining the municipality's applicable administrative processes utilizing the latest software or other technology available to allow the private entity to timely obtain permits to construct and install the infrastructure;
  • Providing to the private entity reasonable and economic access to municipally-owned, controlled or managed rights-of-way, easements and structures;
  • Coordinating the private entity's deployment of the broadband infrastructure with existing infrastructure and existing providers;
  • Leasing or purchasing or committing to utilize the broadband capacity for municipal internal use;
  • Not discriminating in favor of the private entity in any of the municipality's administrative processes applicable to the construction and installation of the infrastructure; and;
  • Applying prompt and efficient procedures to requests from all telecommunications providers leasing capacity in the infrastructure for franchises, permits, agreements, etc.

Benefits

As mentioned above, municipalities seeking to construct and install their own telecommunications infrastructure for provision of "last mile" broadband services are facing heated opposition from established carriers, cable systems, and wireless carriers employing litigation tactics and legislative efforts to block municipalities from moving forward with such "last mile" system plans. Further, municipalities must finance their proposed ownership of the "last mile" infrastructure and the provision of "last mile" broadband services. In most cases, these obligations require time-consuming and costly public referendums, and the issuance of public debt which must be repaid either from revenues derived from the municipally-provided broadband services or from taxpayer dollars.

The "partnering" or "teaming" approach with a private entity which will construct, own and manage the "last mile" infrastructure relieves the municipality of the financing burdens and the public approval process otherwise required. Moreover, this "partnering" approach eliminates the criticism that government is competing with private enterprise in the provision of broadband services. Further, because of the private entity's open network policy, the municipality can assure its citizens of high-quality "last-mile" broadband service at competitive prices offered by multiple broadband providers. Finally, the availability of high quality, competitively priced broadband services will attract new businesses, including multiple broadband providers, and residents which, in turn, will generate greater tax revenues and fees for the municipality.

Conclusion

Municipal and political subdivisions of a state should consider the alternative of "partnering" or "teaming" with a private entity in providing "last mile" broadband services. Under this approach, the municipality can assure its citizens of the availability of high-quality broadband services at competitive prices without using, and thereby risking, taxpayer dollars to pay for such facilities, or suffering the criticism that it is unfairly competing with private enterprise. At the same time, these broadband facilities constructed through the "partnering" or "teaming" arrangement will attract new businesses and jobs which, in turn, will generate increased revenues and fees for the municipality.

Telecommunications group members are available to discuss the "partnering" or "teaming" approach with any municipality or political subdivision of a state, or interested private entity, including rendering advice on just how to implement the facilitation of ubiquitous broadband facilities. Don't hesitate to contact any of our group members.

For more information call Michael L. Glaser at (303) 757-1600.

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