Commentary: Fiber network not a good deal for Westerly

By MARC BROWN

Westerly’s Town Council is currently considering whether to enter into a contract with SIFI Networks of London to build a $30 million fiber optic network. SIFI is proposing to build the network and the town would lease-purchase it from the company at an annual cost of $1 million to $2.5 million over 30 years. SIFI has promised that a third-party internet service provider will sell broadband packages on the new network, sharing revenue with Westerly to cover the town’s lease cost. SIFI has “guaranteed” it. That guarantee is only backed by the word of the company — a company that hasn’t actually built a single mile of fiber anywhere in the United States. The town can supposedly back out of the contract at any time — but SIFI would then retain ownership of the network, and would be free to use it as they see fit without town involvement.

Steve Blum, a broadband consultant hired to study SIFI’s contract in another community, recently told The Westerly Sun that the town “should assume it will have to be subsidized by some other source, whether it’s a tax or a utility fee…They will not make enough money from operation of the system.” Even a cursory look at the numbers should raise a red flag. Using SIFI’s assumption of 36 percent penetration, the average monthly household bill would have to exceed $200 per month for the town’s revenue to cover the $1.5 million annual lease commitment.

Additionally, The Westerly Sun reported that SIFI has entered into “exclusive negotiating contracts” with at least three communities in the United States, though none have progressed beyond the discussion phase. Most recently, Pacific Grove, Calif., halted negotiations with SIFI after the company was unable to deliver on any of its promises.

Well before the network is actually built in Westerly, the town must enter into an “exclusive negotiating contract” with SIFI. This is described as being an exploratory period for the company. However, if the town decides not to proceed during or just after this timeframe, it will have to pay a $100,000 fee to SIFI. It would be far too easy for SIFI to set unreasonable requirements and just pocket the fee when the town balks. This has been the pattern in other locations, when it became clear there would be a cost to local government.

Continue Reading

About Mark Milliman

Mark Milliman is a Principal Consultant at Inphotonics Research driving the adoption and assisting local governments to plan, build, operate, and lease access open-access municipal broadband networks. Additionally, he works with entrepreneurs and venture capitalists to increase the value of their intellectual capital through the creation of strategic product plans and execution of innovative marketing strategies. With more than 22 years of experience in the telecommunications industry that began at AT&T Bell Laboratories, Mark has built fiber, cable, and wireless networks around the world to deliver voice, video, and data services. His thorough knowledge of all aspects of service delivery from content creation to the design, operation, and management of the network is utilized by carriers and equipment manufacturers. Mark conceived and developed one of the industry’s first multi-service provisioning platform and is multiple patent holder. He is active in the IEEE as a senior member. Mark received his B.S. in Electrical Engineering from Iowa State University and M.S. in Electrical Engineering from Carnegie Mellon University.

Bookmark the permalink.