Open Access: Ensuring A Successful Public-Private Partnership

During much of the last decade, public-private partnerships have gained popularity as a vehicle for helping municipal governments successfully improve local broadband infrastructure and related services to customers while reducing financial and operational risk to the municipality.

Various business models and forms of broadband partnerships have evolved during this time to leverage existing local resources and address needs represented by different partnership structures.

The most common partnership model involves public financing of fiber-optic infrastructure through grants and tax dollars coming from the municipality. The municipality, as the public partner, becomes the owner of the core broadband infrastructure, with one or more private sector service providers then partnering to build, own, and operate the last-mile broadband infrastructure and manage customers.

The model has been revered because it brings low risk and high reward to a community while incentivizing the private sector to deliver high-quality, affordable broadband services.

The fundamental understanding behind these partnerships is that community-owned broadband infrastructure will continue functioning with the public interest at the forefront. This local control ensures that broadband services remain competitive and affordable, that service levels meet the demands of local customers, and that operations and growth are addressed with the community’s best interests in mind.

The risk with today’s most common partnerships is that once the private partner owns the last mile, the municipality loses control. The question then becomes, will community broadband infrastructure be supported equitably in the community, the same as any other public utility, and the focus remains on delivering affordable service, with customer satisfaction and community needs taking precedence over services from providers motivated purely by profit?

Enable the business of broadband without getting into the broadband business

The perceived risk of a municipality supporting broadband services has discouraged many municipalities from the role they know best – owning and managing shared public infrastructure. In fact, municipalities are capable of owning and managing miles of water line and miles of roads, so owning and managing the “poles and wires” aspect of the fiber-optic infrastructure is a familiar municipal strength.

While many municipalities understandably don’t have the funds, staff, or political will to risk starting up and operating a competitive retail broadband service provider, municipalities must realize that they can be important enablers of broadband in their jurisdictions without operating the business side of broadband.

While municipalities are traditionally well-suited to own and maintain public infrastructure, many are uncomfortable with the unfamiliar territory of marketing and operating broadband services, billing and supporting customers, and generally competing with the private sector in the broadband space.

Therefore, the key to a municipal broadband partnership is simple: Bring together the existing regional broadband suppliers and retailers to operate on the municipally owned network infrastructure following a last-mile wholesale model – known as open access.

With an infrastructure-based approach and a wholesale operations model, municipalities own the assets and partner with one or more retail service providers to provide competitive services. The private partner would supply local staff, equipment and technical resources, and business processes required to provide broadband services to subscribers on the municipal network, while the municipality focuses on maintaining the more physical aspects of the poles and wires throughout the community.

The national telecommunications market is evolving rapidly as record amounts of both public and private funding are helping municipalities build broadband infrastructure in their underserved areas. Along with the influx of public dollars, private capital investors have become bullish on infrastructure as long-term investments, often focusing on new deployments in more dense and profitable markets and even overbuilding existing service providers where attractive investment opportunities exist.

Underserved areas that remain in communities are typically the most difficult and most costly locations to reach, creating the most challenging business cases.

Avoiding potential risks

Communities need to ensure that their private-sector partners, which are typically relatively small local or regional internet service providers, are best suited to address the digital divide in their communities. While such local service providers can be ideal broadband operations partners, they quickly gain customers and market share in newly available areas.

Still, with limited economies of scale, smaller providers can grow ripe for becoming acquisition targets by larger service providers and capital investment firms over time. Plausible scenarios envision a wave of investment firms acquiring underperforming broadband service areas and undervalued broadband infrastructure in the next decade.

In this negative scenario, what began with the admirable goal of broadband being served to the municipality by local service providers can end with broadband services being controlled by an outside provider. Ultimately, the community could be left with one service provider, likely headquartered outside the region and supported by staff who live outside the community.

Not only will this diminish broadband competition in the community, but it will also inevitably increase consumer costs while taking dollars out of the community. This scenario leaves communities with a broadband landscape void of consumer choice, reduced customer satisfaction, less local reinvestment, and fewer opportunities for smart city and community development.

However, the successful community-owned infrastructure model solution mitigates this risk, provides long-term community control, and partners with one or more private internet service providers to serve end users. It’s the only viable solution that ensures communities can meet the connectivity needs of all community members while providing a low capital expense opportunity for smaller service providers to compete for and serve customers they would not previously have been able to reach, all while relieving the burden of costly long-term infrastructure debt from the service provider.

With infrastructure ownership in the hands of a municipality, it frees up local ISP partners to focus on doing what they do best – operate networks and serve customers with local support. This model also allows communities to keep doing what they do best – be stewards of shared public infrastructure and allows them to stay out of the competitive business of operating broadband services. More importantly, for long-term partnership success, the community ownership of infrastructure removes a major element of risk for smaller ISPs that could otherwise easily become ridden with infrastructure-related debt and more easily be gobbled up in acquisition activities.

Fight to maintain broadband infrastructure ownership and local control

Many municipalities aim to deploy modern infrastructure that can deliver adequate broadband services to their currently underserved homes and businesses. These locations are often low-income or rural communities—typically the less attractive places for corporate investment to improve or build new infrastructure. So why, after years of tireless community-driven efforts to improve broadband, are communities willing to hand over the infrastructure assets to the same corporations that have failed for years to deliver services to their communities?

Once the infrastructure gets built with public dollars, communities cannot simply give ownership and control of that public infrastructure to a corporate service provider to reap the financial rewards for decades to come. This is essentially handing over control of local infrastructure and future service delivery to the same profit-minded companies that have left so many communities stranded on the wrong side of the digital divide for decades. 

When a community owns shared public infrastructure assets, as they already do with other utilities and transportation, they don’t pick private sector winners and losers. Instead, the shared infrastructure provides an equal and consistent platform for all activities across that infrastructure.

Communities maintain and grow such shared assets across the long term for the betterment of all community members – residents and businesses alike. So, for the historic levels of public funding available to help build network infrastructure today, communities must own the network infrastructure assets to provide the platform for local service providers to deliver the broadband services that will sustain and grow the digital economies of tomorrow.

Conclusion

In conclusion, public-private partnerships have proven to be a successful model for improving local broadband infrastructure while minimizing municipal financial risk. The key to success lies in selecting private-sector partners committed to addressing the digital divide and having a long-term vision for the community. Municipally owned infrastructure ensures that the focus remains on delivering affordable service that meets the needs of local customers.

By enabling broadband as a public infrastructure, municipalities play a crucial role in improving access without taking on the risks associated with operating a retail service provider. This strategic approach fosters competition among service providers, supports local reinvestment, safeguards against corporate profit-driven motives, and provides opportunities for smart city development and socioeconomic growth, which benefits all community members and propels them forward in the digital society.

Ashley Poling is Senior Sales Executive at COS Systems. This Expert Opinion was originally published by COS Systems, and is reprinted with permission.

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