How would Ottumwa pay for a broadband network?
OTTUMWA, Feb 14, 2013 (Ottumwa Courier - McClatchy-Tribune Information Services via COMTEX) --
In the past several months Ottumwans have learned what broadband could do for the city, but their biggest question still looms: How would we pay for it
Megan Framke, Ottumwa Economic Development Corporation initiative manager, noted that the fiber optics/broadband initiative is still in its infancy, and no decisions have yet been made.
In March, Craig Settles, broadband and fiber optic community assessment consultant working with OEDC, will return to Ottumwa to discuss the results of a community survey he conducted that looked at how Ottumwans use the Internet.
In the meantime, Settles said there have been several ways other communities across the U.S. have jump-started and funded broadband networks to give Ottumwa an idea of how a broadband network could be funded down the line.
"Self-funded programs or some sort of combination of paying for the core infrastructure and having the people who use it pay to have it brought out makes a lot of sense," Settles said.
There are many ways to get from A to B, he said, and it's important that taxpayers understand that there are options.
"Iowa is no stranger to public-run networks," he said. "Iowa has a city-run network in Cedar Rapids [in place since 1996], and Indianola has a network, and the public utility runs it there."
Settles recently completed a survey of general Ottumwa residents as well as John Deere Ottumwa Works employees to get a feel for how they use the Internet.
"A number of people said ... well, we're OK with broadband, but we think the people who use it or benefit the most are the ones who should carry the heavy part of the burden of bringing it in," he said.
This is becoming a common philosophy: Communities, within themselves, share the cost of bringing in the infrastructure and paying to use it.
Other communities, including Steuben County, Ind., have used their local nonprofit organizations (co-ops, corporations or community foundations) to bring in the network.
"Then businesses or homes pay for that last reach from the fiber ring to their doorstep," he said.
In Steuben County, the community foundation sells network access to businesses for $225 per month, 35 percent of which covers network operations. The rest goes into a fund to support local economic development projects.
But securing a nonprofit designation takes six months in and of itself, Framke said, so the possibility of broadband coming to Ottumwa is just taking baby steps, with research and surveys currently being conducted.
Out of those surveyed in Ottumwa, 35 percent said they want to be able to work from home, partially or totally, Settles said.
In Utah, residents could opt to pay $3,000 (either up front or in payments) to run a fiber cable from the broadband network directly to their homes.
More than 31 percent of residents of the first town presented with this offer subscribed, with the majority of those paying up front.
"Those who want it can pay for it," he said. "This allows people to look at the nuts and bolts of it and ask, will this add to the value of my home Will I re-coup that $3,000 when I sell my house in several years "
Kansas City has enjoyed that phenomenon, with homeowners hooked up to the broadband network now seeing increased property values.
"There's a 3 percent increase in what they can ask for because the home, in essence, is wired for the future," he said. "That cable is like having an extra garage built or an extra bedroom added to the home. It improves the home value by extending the assets of the home itself."
But just because cities like Kansas City and Chattanooga, Tenn., have a gigabit network doesn't mean everyone wants or needs a gigabit, he said.
"What's important is if ... you have 100 businesses and 300 to 400 homes or a couple thousand homes doing the heavy-duty work," he said. "We're not talking just entertainment."
From an economic development standpoint, Settles said a broadband network is an asset for cities, community foundations and economic development corporations because it draws in businesses.
Communities can either bring in fiber cable that's "lit" and ready to go or to bring in the cable without the electronics and capability to reach the Internet (commonly referred to as dark fiber).
"Then you can let people come in and build on it what they want," he said. "When you hear people talk about dark fiber, they're bringing it in so that then other service providers can provide the service to get them to the Internet."
Most local governments "don't want to be in the business of providing services," Settles said, so they'll make the network open access, allowing providers to compete in that arena, which then results in manageable prices and innovation.
Ways to fund, manage a network
Broadband consultant Craig Settles said there are several ways to manage and fund a community broadband network.
Organizational structures other communities have used include:
--City or county owns the network
--Public utility owns the network
--Community creates a nonprofit organization to build, run the network
--Community creates a co-op specifically to run the network
--Community uses existing nonprofit to build the network
--Telephone, electric or other co-op transitions into broadband business
--Public-private partnership runs the network
--Community business people form a broadband company
Funding options other communities have used include:
--Issuing municipal bonds
--City government provides resources (such as vertical assets) for the network
--Community invests for stake in business via purchase of promissory notes or stocks
--Community residents and businesses pre-pay for network buildout
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