The City of Monticello has put bondholders on notice that the municipal broadband network once hailed as a national model is unable to meet its financial obligations with revenue generated from FiberNet Monticello customers. Instead, city leaders now will discuss how to restructure payment of $26 million in revenue bonds to save the faltering broadband network.

A financial report prepared for the Monticello City Council meeting on May 14th acknowledges that FiberNet “continues to operate at a loss. For the quarter, FiberNet lost around $100,000, not including its 2012 debt payments.”

A blunt letter sent to Wells Fargo Bank in March indicates the City does not have an obligation to continue making up the losses incurred by FiberNet.

I contacted Jeff O’Neill, the city administrator at Monticello for his take on an update. He touches upon some of the issues we’ve heard in the past: the budget has taken a hit starting with obstacles caused by the lawsuit brought against the project at the onset of the initiative. Also they have seen some fierce competition from other providers. But I think it’s interesting to take a look how a community network can and should measure success. Obviously finances is part of the equation – but providing the community with the infrastructure it needs to succeed is another part.

Here’s what Jeff had to say…

When evaluated as a whole, FNM has been wonderful for the community.  As requested by its citizens, FNM has delivered.   The system is performing well with FNM staff and HBC getting great reviews from customers.  The community is benefitting from telecommunication service at a level and cost that is the envy of the nation.  With telecommunication costs  dropping 35-60% since the inception of FNM, the savings to the community are enormous.  This savings and improved performance is certainly a huge plus for the local economy and supports the goal of  job creation.

When measured from a purely profit and loss basis,  original business plan has been impacted significantly by the one year delay created by the TDS lawsuit along with a variety of impacts resulting from the great recession.   Also, the presence of an army of Charter door to door salespeople selling 30 meg internet, all video channels and four movie channels for $59.90 has blunted the growth of FNM subscription rates.    Please note however that FNM subscription rates are actually quite good (Appros 39% of Single/two family) and we have a strong and steady base of customers that continue as FNM customers due to fair prices and great service. These customers have turned away Charter salespeople on multiple occasions.   Some have mentioned that they will not take the Charter deal as doing so would be self-defeating and like cheating against themselves and their neighbors who voted for building the system.

Over one quarter of businesses in the community are using services (120+) and the number continues to grow.  Overall, business and residential citizens in the community are saving millions due to the reasonable prices by FiberNet combined with the drastically low prices by Charter.   The original David and Goliath story ended with the sling of a single rock… this modern day version is ongoing… Monticello is fighting the good fight and doing what it can to enhance financial viability through cost cutting and development of new revenue sources.  We are confident that these business development efforts will ultimately off-set the economic damage resulting from the lawsuit and unbelievable competitive pricing.

 

I know that many people were impressed with Dakota County’s presentation at the April Minnesota Broadband Task Force meeting, especially their one-stop-shop for right-of-way permission. It’s a glimpse at the kind of seemingly common sense approach they take to streamlining processes in Dakota County. I say seemingly because I know a ton of work must have gone into assessing the policy and procedure for each type of application and finding a way to make them work on a common online form.

It was interesting to talk with David about other projects happening in Dakota County and beyond – from the physical layer up through applications.

Here’s a sample of what’s happening:

Metro County Fiber Interconnect

Dakota County met with several other counties (Anoka, Carver, Hennepin, Olmsted, Ramsey, Scott and Washington) and Hiawatha Broadband (HBC) to discuss Metro County Fiber Interconnect. They are working on an MPLS network between all 8 counties, which will be completed by the end of June. MN.IT (formerly OET) is driving the work and will provide private network space that was allocated to each county.

The counties are working together with HBC to find ways to cost-effectively expand their fiber networks. The goal is to make the best use of existing conduit and connections, rather than building from scratch. The counties and local government agencies get to improve infrastructure. It makes the most sense to map out existing infrastructure, map out plans for future development and pool the pockets of funding to build only when necessary and pull extra strands of fiber (or post equipment on towers) whenever possible.

Homeland security, disaster recovery and transportation have been a few of the possible pockets for funding. While the infrastructure clearly supports those goals- the investment is helping in other areas as well.

This underlying layer of physical connectivity has allowed the counties to streamline processes and build new applications that save money for tax payers. Looking at the infrastructure alone, building up this mesh network among counties has allowed different entities to terminate T1 connections – those connections were costing up to $1500/month. Also each expansion is bringing increasing rural area closer to high speed broadband.

Reducing Government Operations Costs

One of the ways Dakota County has been able to use ubiquitous broadband is their SIP phone system. SIP phones use voice over IP. There are several advantages – first they are like super-sonic phones and work well for videoconferencing. David mentioned that staff in Dakota County is just as likely to meet video videoconference, even while in the same building, because of lack of conference room and convenience of videoconferencing.

Second, the phones work anywhere they can get online. So if you have relocated or have a meeting in another building, your phone still works. In case of a disaster, whole offices can be moved pretty seamlessly to new locations – the phones and computers will work. Dakota County recently moved  3,800 phones to the new SIP system.

The County is looking at virtual desktop options, where much of the interworking and content would live in the cloud, while the desktop is really just a portal to the information. There are some similar advantages to SIP phones, in that the content becomes decentralized and can be accessed remotely – but also virtual desktops should not require the same sort of upgrades as regular desktops (and laptops) require today.

Applications in the Field

Dakota County just doled out 3500 IP addresses to traffic signals across the county. They are used to track stoplights and pedestrian crossings. Good – but I must admit I didn’t really understand all of the implications until talking to David. The stoplights are tracked. The buses are tracked. So the stoplights can speed up or slow down a bus when necessary – ensuring that buses aren’t falling off schedule and grouping together. Also the lights can be tracked and through artificial intelligence will learn to direct traffic as necessary – reducing red lights for the bulk of travelers, saving both time and money. And of course smart appliances like this could be helpful in an emergency or disaster recovery situation.

Next Steps for Dakota County

The next step for Dakota County is sharing infrastructure and technology with area businesses. That is where working with folks such as HBC helps.

The County doesn’t necessarily want to get involved with providing broadband services to the end customer – but they are willing to invest and collaborate so that broadband is available. Again is feeds into supporting the tax bases and providing the services that area business and residents want and need.

Connecting with businesses and nonprofits is the next step for Dakota County. Some counties/communities may not be at the same stage – and for those folks David was also kind enough to share a series of documents that he has used coordinating various parties in public-private partnerships. The hope is that these might become templates or fodder for other counties looking at fiber options.

Agreements Between Partners – Templates

• Joint Powers Agreement for the Development of Optical Fiber Network (between state, county and cities)
• Joint Powers Agreement for the Development of Optical Fiber Network (between state, county and MNSCU)

Board Documents

• Authorization To Execute Joint Powers Agreements For Development, Use, and Management Of An Optical Fiber Network
• JPA with State for Development of Fiber Network
• JPA with State, County and School District

Working with Vendors

• Request for Bids to Build Fiber Network
• Contract for Fiber Network (includes labor and materials)

Rights of Way

• Proposed Fiber Connectivity – Buck Hill Radio Site Tower Shelter (description of how/why fiber to tower will improve communication)

Todd County FIBERBAND 40 people in attendance Nate Burkett, county coordinator goal of meeting -
Inform, gather information from users, find partners, not make decisions

Timeline on project:

• April 2011 – County board approves resolution seeking broadband
• May 2011 – Countywide meeting
• August Blandin grant
• January 2012 – feasibility study completed and presented to county board.
• March 2012 – interest survey through tax statements – 400 responses.
• April – meeting with Arvig to discuss partnership possibilities

What’s next?
Community decision making.

Mark Birkholz – ACS

No current business model works for FTTP now PP partnership might work – evaluate… Breakeven – 25, 36 to 43 years Be ready if BB stimulus funds become available.
Be positioned for USF changes – proposed changes will not help project.
Fiber is the end all – be all for broadband deployment.

John Schultz U-reka Broadband Ventures

Cites the county for moving relatively quickly. John recognizes Blandin, Toni Merdan and Alex Weego.

Starting does lead to action.. Todd County has started!
Marketing study, Build options, Capital requirements, Business modeling, possible next steps.

Residential
96 % of people still have a land line telephone.
53% Internet penetration

• Rural customers less satisfied
• Customers want faster speeds, more bandwidth 74% cable and satellite penetration
• Charter in town
• Dish in rural areas
• Where ACS has capacity, they also offer video

65% “likely” to change providers
same percentage in rural and urban

Expected bundle pricing
39% – $85-100 per month
20% – $101 – 110
18% – more than 110 dollars

Business survey

• 86% of businesses use a broadband connection Only 37% have a web site those not using cannot get broadband 62% would like higher speeds at work
• 100 % want faster service at home

A few Todd County customers have FTTH through ACS or Consolidated Telephone or WCTA.

Rural outside ACS
Town/city outside ACS
ACS Service Areas

Total build cost with 100% penetration – $65 million 65% penetration used. ACS competitive pricing model – Staples and Wadena
30 year model – $42 million capital cost and operational costs based on 65% penetration. Includes electronics refresh.

Cash flow positive in year 3.

Intangible benefits

• Savings due to competitive environment – 30%?
• Economic development surrounding the network development
• Significant jobs impact
• Improved governmental and educational services

Jobs – construction and operations and permanent new business and jobs and telework.

Now

• further discussions with ACS
• Sales/education and marketing program to demonstrate 65% penetration Discussions with funding sources – bonding, etc.
• Meet with RUS
• Follow USF discussion and exploit opportunities

Questions -

Recruiting market/education team.

Issues around multiple devices and the use of bandwidth.
Cannot take online classes due to poor broadband.
K12 districts need students with broadband; new online training enabling college courses. Schools need the bandwidth too!
Bundling would be a big saver for residential and business.
Rural people may be/would be willing to pay more.
Move forward as a county .
Wireless did not work when it rains, snows, etc.
Timelines on decision-making.
County goal 20/10 Mb by 2014 in towns, in rural areas by 2016.
Hoping for federal action.
3 year build out to spend $65 million.

Wireless as the solution. Many limitations to wireless; it is significantly cheaper. Fiber is future proof. Copper is definitely limited.

Need to work to get the discussion going across the county, with lots of people participating. Make it easy for the county board to say yes.

So many people want and need broadband. We need a local partner, one with local customer service. People in rural MN understand the needs and value of both rural and city livers.

Discussion about enhanced competition. and the effect on pricing and take rates. Schultz indicated that they need 65% take rate and around $100 ARPU.

Community questions about making things happen. How do we get the word out? How does this work get done?

geography differences – what are they?

New worker in Todd County – tech consultant. Able to get high speed in town. This is critical for business and education. Colleges and high schools are becoming increasingly intertwined. Bandwidth is the link to connect students and educational institutional . Lives in Clarissa. Ready to help get things going using social media and local contacts!

Their next Governance Group meeting is scheduled for June 21. The plan is to invite last mile providers to make presentations on their services. If you know of any last mile providers who might be interested, please have them contact David Minke.

The meeting will start at 9:00 AM in Room 705 at the Anoka County Government Center. Please pass the word along to all those who may be interested in learning more about last mile connectivity including council/board members, EDA members, economic developers, cable commissions, etc.

Sibley County Commissioners voted to move forward with a multimillion–dollar fiber optic broadband project that would bring faster Internet to Renville and Sibley Counties and even individual farms in the area….

The proposed fiber–optic system would be publicly owned, but privately run and connect every home, farm and business in the area to high speed Internet.

Sibley County EDA Tim Dolan says, “Each person has the choice to either opt in or out.”

The involved communities would sell around $70 million in revenue bonds to build the network, which will be paid off with user fees.

Dolan says, “We’ve gone over the 55% mark that are interested in the project which when we do our cash flows and projections gives us profitability for all 30 years.”

Many of the area cities have voted to be part of the network; Renville County has also voted in. Arlington has voted not to participate.

Minnesota Public Radio highlighted the potential impact on rural residents – some of which are still using dialup connections…

Linda Kramer and her family grow corn, soy beans, even a little wheat. The family’s farm is on 1,100 acres in rural Sibley County, about 85 miles southwest of the Twin Cities.

Kramer pays about $60 per month for Internet access that by today’s standards is archaic.

“My husband on the farm needs to send files… He’ll throw them in an email, send it out, let it run overnight, come back in the morning and two-thirds of them haven’t gone through,” Kramer said.

They talk about the community support – as demonstrated by local residents signing up for service…

So far, over 50 percent of the residents said they would take some combination of phone, Internet or cable TV service from the broadband project. In parts of rural Sibley County it’s closer to 80 percent of residents.

The meeting begins at 10 am tomorrow; the vote is expected to happen soon after the meeting begins.

• Jackson – Our first three construction phases have been identified. We intend to have phases 1-3 completed by June, 2012. The entire City of Jackson will be completed by fall, 2012.  Southwest Minnesota Broadband informational material will be delivered to homes according to construction phasing in the coming months.
• Brewster, Heron Lake, Lakefield, Okabena, Round Lake - installations are near completion.

Here are a couple of the sessions that I thought would be interesting to folks outside the industry as well as those in telecommunications:

• Beyond the Demarc: The Revenue Opportunity Inside the Digital Home
• Revenue Generating Opportunities for the Digital Marketplace
• Putting a Wall Around the Cloud? Security in the Cloud
• The Cloud Has a Silver Lining: Becoming the Service Provider of the Future
• Central Office Strategies for Speeding FTTH Service Turn-up Requirements
• What Impact Will Over-the-Top Video Have On My Bottom Line?
• The Evolution of Mobile Technologies 2G to 4G LTE
• IPTV for People Who Aren’t Engineers
• Managing Customer Service Via Apps

Cloud, video and apps seem to be some strong themes, which would indicate to me that they will be broadband drivers in the future. Sadly I was unable to attend the session on customer service apps, which sounded really good.

I was able to attend the session on public-private partnerships: Making Public/Private Partnerships Work for You – and Your Revenue Stream with John Schultz, U-reka Broadband Ventures. I thought that would interest a wide swath of readers and I was able to capture it on video. John talked about his experience working to develop partnerships with local communities.

I was also able to talk to some of the MTA members – specifically about telework. I’m very excited to talk more about that – but will make that a new post, hopefully for Monday.

The article highlights the trials and tribulations with some of the ARRA funded broadband projects…

Eighteen local construction projects won federal grants and loans as part of the Recovery Act of 2009 totaling almost $229 million. They come in all shapes and sizes. Some will be owned by the public, while others will be built and run by small phone companies and electric coops. And they are at various stages of completion. The federal government’s Recovery.gov website lists 14 as less than 50 percent completed, two as more than 50 percent completed and two as not yet started.

Many have proceeded without hitches. But others have faced obstacles like difficulty obtaining building materials, opposition from incumbent providers, cost overruns, frustratingly slow bureaucracies and trouble clearing environmental hurdles.

What’s funny is that the discussion in the article reflects fuzzily one of the sticking points in broadband adoption. It’s happening, but is it fast enough? We’re just talking about deployment here, not speeds. Ironically, another recent article in MPR raised the speed issue asking if wireless in rural areas was an improvement to existing broadband options in rural areas or rather a stop-gap measure that might delay a larger solution. I might ask a similar question here – are we seeing improvements or are we seeing federal funding getting in the way of other investments? I think we’re seeing improvement – at least in the 16 (out of 18) projects that have been started.

It’s true that some projects have run into hiccups – for the reasons listed by reporter Jennifer Vogel. (For a more comprehensive list of what’s happening with projects, you can check out the Minnesota Broadband Task Force Report (Dec 2011); it includes a table that details progress of ll of the projects that received ARRA funding.) Some projects are actually ahead of schedule. (According to the Task Force report, the Southwest Minnesota Broadband Services is ahead of schedule.)

I might not look at whether the glass is half full or half empty with these federally funded projects – but I might celebrate the fact that the glass is filling! Lac qui Parle County (one community listed as waiting for fiber) may be stalled, but they are moving forward – as are most of the other projects mentioned. Federal funding (and I think results of federally funded mapping) has spurred other communities, such as Kanabec, Redwood Falls and Sibley Counties to take a more serious look (and/or strides) towards broadband deployment. The stimulus funding has stimulated broadband projects and an interest in more!

Finally I have to sing the praises of Blandin Foundation-led Minnesota Intelligent Rural Communities (MIRC) project. Yesterday at the Task Force meeting we got to hear about the federally funded project and its impact on one community – Benton County. Here are a handful of their measures of success;

• More than $20,000 in-kind match
• More than 200 businesses assisted
• More than 500 residents assisted

Benton County is just one of 11 participating MIRC communities – and some MIRC activities reach beyond the select demonstration communities. The project is making a difference in the quality of life in the area; it’s also boosting a demand for greater broadband, which will help support deployment efforts, which as the MPR article points out – can be a bumpy ride – but I’d emphasize that it’s a bumpy ride forward.

According to MPR’s Ground Level, the project has been postponed…

So far, there have been four votes. Three communities–Buffalo Lake, Winthrop and Renville County–have voted yes. The city of Arlington has voted no. Sibley County commissioners were supposed to vote yesterday, but instead opted to postpone a decision. Sibley County is the entity that would bring farms into the customer base. A no vote wouldn’t kill the project, said Mark Erickson, Winthrop city administrator and project champion, but it would make it more city-based.

“Sibley postponed and wanted more commitment cards and buy-in from the townships,” said Erickson, who interrupted a meeting with local township representatives this morning to talk with me. “I think we have a way forward.” The project’s success hinges on having enough customers to make the bond payments, but it’s hard to know how many customers the network will have before it’s built.