December 19, 2008 10:00 AM
Proposal for the Creation of a Rural Fiber Fund
Over the last week I've been working with a first-rate team of experts in the field of rural fiber deployment on developing the concept of a Rural Fiber Fund that can be including as a part of the upcoming economic stimulus package.
This is the first fruit to be borne of our labors. We'll be working on crafting an in-depth policy paper over the holidays that will be released on January 5th.
But until then everyone should feel encouraged to comment on, add to, and punch holes in this proposal so that we can make the argument so strong so as to seem inevitable.
Without further adieu:
Proposed Addition of the Rural Fiber Fund to the Economic Stimulus Package
ﾠGoal: Wire all of rural America with full fiber networks.
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Why Fiber?
Because "broadband" in the 21st century means fiber. Only fiber has the capacity to support the next generations of big bandwidth applications.
ﾠBecause "broadband infrastructure" equals fiber. It requires the most jobs to deploy, delivers the biggest economic boost, and provides world-class, future-proof connectivity.
ﾠBecause rural communities can't compete in the 21st century with 20th century broadband.
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How Will This Stimulate the Economy?
Deploying fiber creates high quality jobs in its construction and operation.
$1 billion spent deploying broadband infrastructure creates 19,500 jobs - Ken Peres, CWA
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Having fiber promotes economic growth.
$1 billion of new broadband infrastructure adds $10 billion to the GDP - Michael Curri, SNG
ﾠUsing fiber aids rural communities in attracting, growing, and retaining local businesses; becoming energy efficient; improving healthcare and education systems; and more.
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How Does The Rural Fiber Fund Work?
Partial loan guarantees to spur deployment and matching grants to aid in planning.
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Partial Loan Guarantees
A number of shovel-ready projects can start deploying if the government steps in to share the risk with private capital serving as a credit enhancer that improves the quality of loans.
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These guarantees will be based on population density. The lower the density the higher the guarantee so deployers will be incentivized to extend their networks into less populous areas.
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All ownership models are eligible, private and public, in order to foster the most innovation.
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Getting a guarantee requires an applicant to have:
* A management team with experience in deploying/operating fiber networks
* Tangible support from local partnerships committed to the project
* Verified capital sources adequate to construct and operate the network
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Networks built with government-guaranteed loans must:
* Have universal buildout
* Provide unfettered Internet access
* Have plans to provide 100Mbps scalable to 1Gbps of capacity
Matching Grants
Many communities already want fiber but need help financing the planning, surveys, and feasibility studies to move forward. All eligible communities will have access to the matching grants. Particular emphasis will be on projects that take advantage of loan guarantees.
ﾠWhy Partial Loan Guarantees?
They maximize budgetary bang for the buck. Only a portion of each loan is guaranteed and only some of those loans will default and require the actual outlay of federal funds.
ﾠThey effectively leverage and unfreeze private capital markets through the carefully calibrated application of federal guarantees, which have worked successfully in other infrastructure improvement and economic development initiatives.
ﾠThey allow the imposition of important social goals on these networks while also requiring projects to make their business case to the financial markets thereby combining the strengths of government with those of the private sector in economically sustainable partnerships.
ﾠHow Fast Will It Work?
At least $1 billion worth of shovel-ready projects will start hiring in Q1 '09. The remaining billions from the first phase will be allocated as their availability becomes known and network developers adjust their models to take advantage of the Fund's guarantees.
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Pent-up demand for fiber combined with the planning grants program will set in motion a second wave of projects that can come online within in the second half of '09.
ﾠHow Big Should It Be?
The first installment of $10 billion will spur the deployment of all shovel-ready projects, help interested communities begin planning, inspire existing fiber networks to expand, and spark the evolution of rural fiber deployment to no longer rely on government loans and grants.
ﾠThe second installment of $10 billion will be set aside until the first $10 billion is allocated. At that point the program's progress will be assessed as to if further funds are needed and whether or not loan guarantees continue to be the most appropriate, effective mechanism.
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How Do We Make This A Reality?
A Rural Fiber Fund Working Group has been collaborating on the development of this initiative. Our group consists of deployers, consultants, public advocates, and policy experts.
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A Rural Fiber Fund policy paper is being prepared for a Jan. 5th release that will flesh out the details of this proposal and include a list of shovel-ready projects from across the country.ﾠ
If you want to learn more, collaboratively contribute, or share info on a shovel-ready rural fiber projects or interested community, please add a comment to this post and we will contact you.
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Comments (13)
Hi Geoff,
Glad we connected today. I wrote about the proposal on TechPolicyCentral.com and look forward to the January 5th policy paper. Talk to you soon.
Posted by Natalie Fonseca on December 19, 2008 2:47 PM
Glad to see someone in D.C. who believes in sensible loans instead of unlimited grants. The current parade ot beggars in fancy suits
I personally advocate fiber, but am far less dismissive of DOCSIS 3.0 cable, a tenth the cost in many locations. Take a close look when you have a chance, or check in with me.
db
Posted by Dave Burstein on December 19, 2008 5:57 PM
The Rural Fiber Fund is an interesting idea. I believe that the term of the loan is equally important to the guarantee. The SBA 504 loan program would be an excellent model for a fiber fund. There, a company gets 50% of its funding from a traditional source, 40% from debentures issued with bonds with a 10% equity investment. Financing is for up to 20 years for buildings, 10 years on equipment. Plus, there are rural SBA 504 development corporations spread around the country, including in rural areas.
I do wonder about the reasoning for the limitation to rural communities with the fiber fund. It seems that many cities have poorer options and broadband prospects than some rural communities. In rural MN, rural coops are already deploying FTTP in very rural settings using RUS funds, universal service funds and their access fees.
Posted by Bill Coleman on December 19, 2008 6:24 PM
Thoughtful idea. One request and two cautionary notes.
Please ensure that emergency response (not just first responders; all entities) is connected to/with this (although the transport layer is only part of that problem).
Suggest you be careful with "universal" when you do the details. Lots of rich people on mountain sides and way off the beaten path (e.g. in Colorado, my old boss' congressional district) can impose huge, irrational costs
Our economy is convulsing due in significant part to the over engineering of capital flows into the real estate sector. Americans are paying a huge price for that. We saw wildly uneconomic investment in fiber capacity in the late 1990s -- blessedly the taxpayers weren't guaranteeing any of that. Let's be cautious.
Posted by David Aylward on December 19, 2008 6:25 PM
Great idea for upgrading a key element of the much needed infrastructure for future generations.
Posted by Hari Hirani on December 20, 2008 3:03 AM
Good focus on fiber to rural areas. We should take the initiative proposed by Congresswoman Pelosi and President Elect Obama to create jobs and build out road infrastructure. The big problem as I see it is that rural areas - Tier 3 and beyond MSA’s - do not have alternative fiber access to the cities and towns only one (the RBOC) or a local cable operator.
To bring down prices of broadband internet to the prices paid by the rest of the country, fiber "transport" needs to be built out from the Tier 1-2 cities to the "rural" areas. Right now rural internet providers in most rural areas are paying monopoly priced special access rates from the RBOCs and ILECs to deliver Internet access from Tier 1-2 MSA’s to the rural areas.
Using the road infrastructure program - where $billions are going to be spent, government should require large "open access" conduit down the newly rebuilt highways with "exit" ramp conduit huts at each exit on the interstate or state highways. The conduit should be large enough to permit 100+ fiber cables. Simple thinking in the scheme of things, very low additional cost to the road projects, and very high return to the rural areas getting the same broadband the city areas have. Fiber is inexpensive, right of way access is either not available or prohibitively expensive.
This is low government intervention, low cost, and high return. With "free" conduit, many providers will then the budget and doable business plan to pull fiber in these conduits and finally wire up America.
Posted by Barlow Keener on December 20, 2008 10:29 AM
Great Idea and I ditto comments by Mr Keener. Might want to add some incentives for those who install/build "open access" fiber infrastructures; greatly assisting service provider in accessing the rural communities.
Posted by John Huggins on December 20, 2008 1:44 PM
Excellent idea, just a note of caution though.
Make sure the end product is mutually owned by the people who will be beholden to its benefits!
It is essential to think ahead to when this great utility infrastructure of FtEH (Fibre to Every Home) is built...
Who owns it and in who's interests and do those interests converge or diverge?
By ensuring that the natural monopoly elements of the resultant FtEH infrastructure (the passive layer essentially, though DWDM may require that basic active components will fall under this category also) are mutually owned, then each community can rest assured that their FtEH utility will self-regulate and self-optimise to provide most broadband bang for least buck, on basis of indefinite sustainability - aka for so long as each community chooses.
All the best with your proposal folks and merry christmas :)
Posted by GuyJ on December 20, 2008 4:55 PM
I support the comments of Keener, Huggins, and GuyJ. A new rural fiber funding program should favor open access to encourage a competitive market for end users.
In northeast New York State, we have just completed the detailed technical design for an open access fiber network serving our rural region, including portions of the Adirondack Park. We are shovel ready and hope that we can take advantage of broadband stimulus funding. We would like to be on "the list".
Our project, CBN Connect, will be owned and operated by a non-profit corporation, with a board representing local education, healthcare, government, and Native Americans who are dedicated to sustaining a high quality network and maximizing benefits to the regional populace.
Thank you for your advocacy on behalf of rural fiber build out!
Posted by Howard Lowe on December 22, 2008 9:38 AM
Hi Geoff,
I'm a member of a statewide ultra high speed broadband task force here in Minnesota (the URL behind this comment is a link to the blog I'm maintaining about the experience).
I have been lobbying our task force around the Eisenhower Moment notion, and seem to be getting some traction. Couple questions for ya.
- Can this idea expand to include urban users (especially poor people) as well? There's plenty of crummy broadband in cities, and lots of city streets are going to get opened up with the stimulus package funds.
- Is there going to be model language that we could endorse as a task force? We have a meeting coming up in mid-January.
Posted by Mike O'Connor on December 22, 2008 9:58 AM
Geoff, I applaud your article! It talks about how what to possibly build and what its probable cost might be over time! But a few critical things have been overlooked.
1. Remember the target is the 45% of the population that lives spread over 75% of the land. The target dictates that we must include wireless for some last mile access because of the population saturation per mile does not make fiber deployment feasible...for now.
2. We must accept the thought that it is cheap and more preferable to build a new smart network than it is to fix the multitudes of old ones.
3. If you are anticipating private participation then you must anticipate private ownership. A privately owned Private (every inch of infrastructure is owned exclusively by the owner) provides more benefits for certain segments of the business and medical profession that we currently realize.
4. Rural deployment of "Affordable, High Capacity Bandwidth" (AHCB) is a great concept but how do you get those involved whose economic situation prohibits the ownership of a reliable computer?
These questions all have very positive potential answers that add to the number of new jobs created from this effort.
So Geoff, as always a great article and you are getting closer to the target.
Jerry Baxley
Posted by Jerry Baxley on December 22, 2008 11:30 AM
Hi Geoff,
Here a modest suggestion to additional wordings
"A management team with experience in design/deploying/operating fiber networks and to be built with certified fiber technicians and craft men" etc.
As I see it this document is in favour of AON (instead of PON) and that's is from my point of view a better future proof and more robust solution.
The role of the Local Municipalities or Network Operators to be owners of the basic passive fiber network (FTTF -fiber to the farm) and the active network should be elaborated and discussed. A possibility for property owners and communities, multi family dwellings also to be the owner of their part of the network shall also be discussed.
The network should be open for competition as regards services, like Internet, IP- telephony, IPTV etc.
Government should facilitate a fast build-out of FTTH creating jobs and opportunities for growth by subsidies, taxcuts etc. This should attract minor players and entrepreneurs.
The big players must let go, they can´t both bake the cake and eat it.
Regards from Sweden.
Good luck with the document!
Happy NewYear!
Hans Serrander
Posted by Hans Serrander on December 28, 2008 12:10 PM
Geoff. Great work on this.
Per your note about sharing info on shovel-ready projects... We are completing the planning phase for a five-couty rural fiber initiative in North GA. The planning work was funded through a state grant.
We expect the project to be shovel-ready in the March-April timeframe. Some additional information/news can be found at http://www.dawsonnews.com/news/archive/850/
Posted by Greg Richardson on December 29, 2008 1:12 PM