How To Finance a Community Broadband Network When Incumbents Fight Back

By Craig Settles

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Municipal broadband networks may the fastest way for smaller communities — and those in areas without much competition — to bring better broadband to their businesses and residents. These networks aren’t generally popular with incumbent communications providers, which have a history of suing to stop them. However, their tactics have changed.

In 2005, the main goal of large incumbent telcos and cable companies was to try for an outright ban on municipal networks. As the public vigorously fought back, incumbents switched to creative assaults on communities’ ability to find or use money to pay for networks. Eighteen states have restrictive muni network legislation (see map) that makes building a community-owned network impossible or difficult, especially when it comes to funding them.

In some of these states, municipalities can’t cross-subsidize their networks to take money from one city department (public works, for example) to support the network, something cities often do on the sly. This type of legislation ignores the fact that incumbents can cross-subsidize to their hearts’ content. In Utah, communities can use no more than 50 percent of their sales tax revenue to cover their general obligation (GO) bonds for networks, which is the reason why they usually look for other financial opportunities, like the ones SoFi offers. Utah and other states enable communities to build the network, but the laws do not allow them to sell services directly to the public, cutting off a source of revenue that could help operate the networks.

There often appears to be a great deal of inconsistency among the various states’ stipulations. In Maine, the legislature recently fought to prevent communities from using bond measures to fund broadband projects (read my previous article to learn how municipal bonds work). In North Carolina last month, the state legislature killed a bill that would have made general obligation bonds mandatory for funding these projects. Another tactic is implementing legislation designed to trigger referendums. Triggering referendums work in incumbents’ favor because they can bury an election with truckloads of money and false claims.

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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.
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