As originally posted on the Blandin on Broadband blog…
More thoughts on partnering…
Based on the number of prospective Border to Border grants that I have been hearing about, I was thinking about how competitive this grant round will be. This is a new world for both providers and communities. At a recent Blandin Foundation Broadband Strategy Board, one member was smart to remind us “These are not partnerships, they are business transactions.” It would be smart to remember some economic development basics as communities negotiate these deals with providers. As in most site selection competitions, there are many more communities than expanding provider companies. This smaller set has the advantage as they negotiate with multiple communities and know what each community is offering as incentives. Communities, possibly under non-disclosure agreements, will be tempted to sweeten the pot to become a selected community partner of that limited set of providers. With such a new program, the parameters of a good deal are more uncertain than more standard manufacturing or housing development deals.
Many communities will be talking prospective partnerships with CAF2 providers. In some ways, this will require a more sophisticated approach than dealing with a competitive provider building a new Fiber to the Home network. In the latter case, there is likely a feasibility study done by a third-party consulting firm on behalf of and paid for by the community. That consultant generally has a legal and professional obligation to represent the best interests of the community. Prospective costs, revenues, take-rates and pro forma financial statements can be used to determine the financing gap and reasonable local partner share. In addition, the new network will already be able to provide services well in excess of the 2026 state broadband standard of 100 x 20 Mbps and probably up to a Gigabit of service on Day One so future risk is minimized. That network is a permanent community asset.
Striking a deal with a CAF2 provider on an improved fiber-copper hybrid network will be more complicated both financially and strategically. Obtaining financial information from these larger providers may be more difficult and communities will be relying on the prospective partner rather than a third party under contract to the community. In addition, with the larger company, the financial accounting is likely to be complex. Most challenging will be understanding the net result of the network investment. With fiber-copper hybrid networks, delivered speeds will be inconsistent depending on loop lengths and condition of existing copper lines both outside and inside the customer homes. While DEED OBD requires that networks be scalable to deliver 100 Mb x 100 Mb services, significant additional future investment may be required to obtain that network capacity, and unless contractually agreed to, the company is under no obligation to make those future investments. And the same difficult rural countryside business investment case will be present that exists today.
In the economic development world, clawback provisions are often included in incentive packages. If a company fails to meet the goals set in the contract agreement, it must pay back all or some of the paid incentive. Communities should consider inserting clawbacks into their agreements with provider partners. For example, the state’s 2026 goal for broadband is 100 x 20 Mbps to all households in Minnesota. Committing to reach that goal by 2022 or 2026 would be a minimum standard to include in any agreement with a provider partner. Clearly, with gigabit services being increasingly common today, setting a standard of one-tenth of that to be met in ten years seems almost inadequate. More aggressive agreements could be negotiated, including the idea that any local funds would only be committed if all affected residents would have access to the 2026 goal with this project is completed in 2017-18. If the community can not reach an agreement to get the network they need to compete for residents and businesses, it may be best to wait for the next grant round and to seek a different partner.
Bill Coleman’s letter to the editor in the Brainerd Dispatch…
As a rural broadband advocate and consultant, I read Rep. Kresha’s June 2 letter with interest.
I agree that he is one of the House GOP’s leading voices on broadband, but that voice is weak and out of tune with the needs of greater Minnesota.
He is right on his closing statement, “If we want students, small businesses, and local governments to keep pace with the rest of the state, we need this investment to provide high-speed internet access.” Kresha omits that many parts of rural Minnesota do have world-class broadband provided by cooperatives, local governments and public-private partnerships. And the real-world definition of high-speed is now 100 Mb (our 2026 state goal), not 25 or 10 Mb. No or poor broadband means being left behind.
Kresha is also correct that $35 million dollars was close to what the House proposed, but omits that this is far below what the Senate approved ($85 million) and the governor requested ($100 million). Curiously, metro area DFLers were the strongest proponents of rural broadband in the House.
The House also won new “challenge” procedures that protect the very incumbent providers that have failed to deliver rural broadband. These providers can now claim, after seeing all of the grant applications, “plans” to deliver slow broadband. This new challenge process might disqualify competitive providers’ grant applications even if they were deploying 100 percent fiber optic, future-proof networks. The uncertainty of the challenge process will inhibit the number of quality applications.
With a $900 million state surplus, $100 million in broadband funding would have been historic. A shared commitment to long-term broadband funding by state leadership would have been historic—$35 million is merely a small step forward towards a well-connected Minnesota.
Community Technology Advisors Corp.
As originally posted on the Blandin on Broadband blog…
With the $35 million of broadband funding now signed into law, both communities and telecom providers are beginning the process of project development. Some have projects lined up, engineering completed, business cases prepared and partnerships in place. Others are just getting started in their project planning. I suspect that the Office of Broadband Development will have plenty of projects from which to choose. Deciding how to choose in advance of releasing program guidelines and application forms may be the OBD’s toughest job!
Here are some questions with which they might be grappling…
- Should OBD funds be used to solve rural Minnesota’s broadband shortcomings for generations or should shorter term “something is better than nothing” projects be considered?
- Should projects like the previously funded Alliance Communications – Rock County partnership that provide a ubiquitous, long – term broadband solution using OBD, county and provider funds, provide the standard project framework funded by DEED?
- When is it appropriate to fund incremental projects that only edge out and make the hardest to serve areas even more difficult
- What does “scalable to 100 Mb” really mean?
- Is a CAF2 fiber to the node deployment with 8,000 foot local loops that defers the majority of FTTH deployment expense into an uncertain future, really “scalable?”
- Should OBD require a claw-back enabled commitment from all grantees to actually deliver to the 100 Mb standard by 2026
- What are the essential elements of a public – private partnership?
- Does a simple support letter from a unit of government count as a partnership?
- Is a project funded almost exclusively with a combination of federal CAF2, OBD grants and local government funds a partnership or a government giveaway?
- What is the minimum percentage of equity or borrowing that should be required of private sector providers?
- As the percentage of government funds increases in a project, what other benefits should the public sector receive
- With the limited funds for projects in underserved rural communities, where should the focus be?
- Facilitate and showcase a limited number of FTTH communities?
- Fund targeted investment in open-access networks that serve anchor institutions, downtowns and business parks?
These are not easy questions. For my part, I would advocate that limited state dollars should be used to fund long-term solutions in projects that provide ubiquitous coverage using a fair balance of public and private funds. In underserved cities, the funded projects should create strong platform for economic development, innovation and an expanded network backbone.
Bill Coleman is celebrating with his clients – the Chisago Lakes team in the America’s Best Communities competition. Bill has been facilitating the community participation and process over the past year in partnership with a great community leadership team. Chisago Lakes is now one of eight finalists competing for $6 million dollars in prize money to be awarded one year from now. Chisago Lakes plans include broadband and technology, energy as economic development, future workforce, branding and marketing, trails and healthy community components. Contact Bill to learn more.
See more at the Blandin on Broadband blog.
As originally posted on the Blandin on Broadband blog…
As the legislative session passes the midway point, it seems like a good time to review the hot broadband topics. These are my own personal reflections on the discussion.
The question of how much money should be appropriated is still open. The Governor and the Senate have each talked about $100 million and the House’s starting bid was $35 million. Doing the simple math might indicate a fund of $75-80 million.
The Governor’s Broadband Task Force recommended two new broadband goals. I am extremely disappointed that the 25/3 Mb by 2022 goal seems to be taking priority over 100/20 Mb by 2026. There are three reasons why this is extremely disappointing.
First, the current state goal is 10-20/5-10 Mb. 25/3 would mean an embarrassing decrease in upload speed in our goal from 2010 to 2022. Second, tying our state goal until 2022 to the FCC current definition of minimum broadband speed is deflating. The FCC’s definition has increased thirtyfold over the past eight years. What might it be in 2022? Third, some now dismiss the 100 Mb goal is “aspirational.” By definition, all goals are aspirational. Some are challenging, others are too easy so as to be meaningless.
There is also controversy around broadband access versus broadband based economic development. We need both. A rural industrial park without fiber is now by definition, deficient. There are many ripe opportunities to get fiber installed in critical locations through public private partnerships.
There was even discussion about providing state grants for wireless services meeting a very low 10/1 Mb standard. In my opinion, state funds should only be used to support projects with long term, useful benefits, not quick fixes that won’t satisfy anyone very long. Where providers are installing fiber, these areas are set for decades no matter what the standard. These networks can also support any emerging wireless technologies. The current 100 Mb scalable standard (upgradeable without extraordinary delays or costs) seems reasonable to me.
These are my thoughts. I am sure others have a different point of view.
Yesterday Bill Coleman spoke to the Minnesota House on HF 2381. You can hear his testimony below.
Bill had prepared notes as well…
Good afternoon Chairman Garafalo and members of the committee.
Thank you for this opportunity to testify before you today.
I will quickly address three related topics:
• The difference between broadband goals, broadband standards and the broadband marketplace
• The impact of the CAF2 program on rural places, and
• The need for rural communities to be able ensure their own broadband future.
Regarding goals, standards and the marketplace.
In 2010, the federal government set a 100 Mb goal which is still in place. In comparison, since 2008, the FCC standard for broadband has accelerated from 768k to 25 Mb, a thirty-fold increase in eight years.
The broadband task force is also recommending a 100 Mb by 2026 goal as well as an interim goal of 25/3 by 2022. If the 25/3 goal is adopted, Minnesota would gain notoriety as the only state that has adopted a lower upload speed goal in 2016 than they had in 2010.
In comparison, the marketplace is moving faster than either the federal or state goal. Companies are deploying Gigabit and greater broadband in both the Twin Cities and greater Minnesota. This change is enabled by new technology of course, and in the Twin Cities by some level of competition.
In rural Minnesota, cooperatives like Paul Bunyan, CTC and others offer Gigabit speeds. Hiawatha Broadband and Midcontinent do as well. So Gigabit broadband is not just a Google dream – it is a reality. Those communities without Gb services know that they are falling behind in economic competitiveness and quality of life.
The 25 Mb FCC broadband standard is of little use as a current benchmark or goal, especially for state broadband funding. Looking forward, if we were to apply the same growth rate to the FCC standard over the next 8 years as the previous eight, the 2024 FCC standard would be 750 Mb.
CAF2 is a program that will provide band-aid improvements to broadband services in some rural areas, but alone, will not provide a ubiquitous long-term solution. To quote Jason Dale, president of Cooperative Network Services, a collaborative of Minnesota’s Gb providing cooperatives, “these large companies will deploy essentially the same technology as was deployed by broadband cooperatives 15 years ago, probably causing them to fall even further behind the current rate of change.”
While DSL can provide speeds in excess of 25 Mb to homes within a half-mile of the electronics, those living two miles away will see their speeds top out at 10 Mb or worse, depending on the condition of the copper network.
Based on these incumbent providers’ investment track record, the CAF2 program may be these area’s last significant technology upgrade for a generation. Can you imagine the shortcomings of a 10/1 Mb connection in 2022? And areas ineligible for CAF2 may not get any improvements at all.
The right of first refusal concept is comparable to an arranged marriage, a concept almost as old and out-of-date as DSL technology. Many rural Minnesota communities have experienced the reluctance or outright refusal of these incumbents to invest in greater Minnesota over the past decade or longer. Efforts to develop public-private partnerships have been rebuffed before even mildly serious discussions could take place.
Communities must to be able to select their partners based on shared mutual interests and goals. Considerations would include the quality of the planned infrastructure, its long-term economic development potential and the reliability of the partner over the long term.
The ability of a rural community or county to create a partnership with a provider to deploy a world-class, Gb capable network should be encouraged, not prohibited. Monopoly providers delivering inadequate services should not be protected from competition.
A world-class broadband network is defined by more than just speed delivered to a particular location. Communities must ask: Does the network go everywhere and connect everyone? Do we have the networks that tech savvy people in all industries desire and require? Can the local economic developer reach a provider decision-maker while working with prospective economic development prospects? Are those who live in outlying areas – farmers, doctors, entrepreneurs, retirees, tele-workers, students, and vacationers – able to connect to do what they want and need to do to enjoy a vibrant rural lifestyle?
Because those that can’t connect will go elsewhere to live and work. And others will never come. As greater Minnesota works on another significant challenge – to grow and maintain a skilled workforce – those places without broadband are already at a significant disadvantage.
I encourage you to set aspirational broadband goals, like the 100 Mb goal that was adopted by the task force. It would then seem smart to require that all state funds be used only to reach the 100 Mb goal and not the current 25/3 FCC standard. Ensure that state funds are well used and create a long-term platform for rural vitality. Thank you.
As originally posted in Blandin on Broadband…
Nothing has confused rural community broadband policy discussion more lately than the FCC CAF2 funding program. $500 million dollars to rural Minnesota over the next six years is the good news; a minimum 10 Mb/1 Mb standard is the bad news. CenturyLink, Frontier, Windstream and Consolidated Communications (formerly HickoryTech in Mankato) will use these funds to extend DSL service deeper into their rural networks by extending fiber to the node. The ability to deliver high speed Internet via DSL is extremely distance sensitive, that is, that if you are within 3000 feet of where the fiber ends, you can get broadband that meets or exceeds the FCC 25 Mb/3 Mb standard. If you live 9,000 feet or just less than two miles from where the fiber ends, you will receive 10 Mb/1 Mb. Old, deteriorated copper will further reduce the carry capacity of the service. Emerging technologies that providers like to talk about – vectoring and G-Fast are only effective to supercharge that first 3000 feet and have no impact on the longer loop length customers.
At the recent broadband industry conference, there was conversation around using future DEED Office of Broadband funds in combination with the FCC CAF2 funds to gain better services throughout rural Minnesota. I have mixed feelings about that since loop lengths would have to universally shortened to 3000 feet to even reach the FCC standard of 25/3, but what about our new proposed state goal of 100 Mb/20 Mb by 2026? At what point does it make sense to stop upgrading old networks to build new virtually unlimited capacity Fiber to Home networks? We have all faced that choice with old cars. The decision to rely on an old car often leads to the same situation that many rural Minnesotans now find themselves – stranded on the side of the highway when you most need to get someplace in the worst possible weather.
In this discussion, I have already had incumbent providers cringe when these issues are discussed. Yet there is never a clear declaration of intent or shared plan to reach the state broadband goal of 100 Mb/20 Mb nor any data on what rural Minnesotans will receive in the next five years from CAF2 investment. The physics of broadband are pretty clear – 9,000 foot loop lengths yield 10/1; 3,000 loop lengths yield 25/3 or more. Geometry is also pretty clear; to go from 9,000 loop lengths to 3,000 loop lengths is a lot more expensive and still leaves no clear path to the 100 Mb broadband standard.
Let’s hope policy makers insist on an open and honest conversation on this critical topic.
As originally posted in the Blandin Broadband eNews…
Congratulations to the BBC’s, the alumni communities and their stakeholder groups for the recently awarded Blandin Foundation grants. Overall, there’s a great group of projects to be implemented across rural Minnesota. It is amazing what a relatively small grant of $10,000 or less can do in the hands of a dedicated community.
The next Grant deadline is in March. We are available to help you create a competitive application that will have a positive impact your community. Let us know what you’re thinking and we can help guide the process of creating a great project.
If you’re a BBC that has used its entire allocation from Blandin foundation, consider seeking funding from other sources, either internal to your community or from outside. We have seen many successful projects with limited (or no) budget; they are the result of good collaboration and creativity.
Let us know how we can help!
Chisago Lakes - a collaborative community just north of the Twin Cities, has been named as a semi-finalist in the America’s Best Communities program sponsored by Frontier Communications, Dish Network, the Weather Channel and Co-Bank. The community now has a one-in-five chance to win a prize work $1 million dollars or more. The effort has been led by the Chisago Lakes Chamber of Commerce and the Chisago Lakes Area Community Foundation. They have created work teams and plans in Energy, Technology, Trails, Tourism/Arts/Culture and Health. With amazing leadership and community commitment, this group has created a sense of inter-community collaboration that has been the dream of area community leaders for decades. The rewards to the community were immediate and are ongoing with or without the prize money.
Community Technology Advisors, assisted by Treacy Information Services, facilitated the community planning and promoted the effort through social media. It has been an exciting and fulfilling project to see community members work so hard and so collaboratively. Good luck to the Chisago Lakes team as they pursue their plans and design their presentation that will move them into the finalist category in April!