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Keys to Muni Fiber Success Story in Wyoming: Powellink

Publication Date: 
June 8, 2011
Author(s): 
Craig Settles
Publication Title: 
Daily Yonder

The Daily Yonder recently ran a cleverly titled article by Craig Settles, "Wyoming Town Creates Broadband Bonanza." We have previously written about Powell and its unique public-private partnership approach to an open access muni FTTH network.

Craig offers some more details, including some of the planning:

The planning team went a step further. Broadband feasibility studies typical include asking constituents about their level of interest in Internet services. Powell’s team secured firm commitments from institutions such as schools and hospitals that would not only subscribe to the network but entice their customers to subscribe, too. They contacted businesses about moving or expanding operations to Powell.

With agreements and letters of intent in hand, Powell was able to give Tri-County Telecom (TCT) more credible revenue predictions. “We presented our data and potential institutional subscribers,” states Bray. “TCT then adjusted for what their real costs were and described how the buildout was going to look, what the real breakeven was (and based on what assumptions), when certain goals had to be met and how long it will take to reach certain milestones over 20 years.” Bray calls all of the TCT forecasts, “conservative.”

He also notes that Powellink broke even at the end of 2010, an impressively short period of time.

Short History of Powellink Muni Fiber in Wyoming

I wrote this short case study of the Powell network in Wyoming for our Breaking the Broadband Monopoly report but it never got published on this site. As we noted a year ago, Powell bought its system back from investors last year.

The city of Powell started talking about a fiber network in 1996 but did not make progress for almost ten years. They developed a plan to build a FTTH network and lease it to an outside operator. The incumbents declined to partner with the City and later spent considerable effort to derail the City’s efforts. However, the City found a local cooperative, TriCounty Telephone (TCT), willing to offer triple-play services on the City’s network.

Financing the deal took more time than expected because the City was unwilling to commit public money directly or even as a backstop if the network fell behind on debt payments. While the City worked on the financing, cable incumbent Bresnan and telephone incumbent Qwest tried to convince the state legislature to abolish Powell’s authority in this arena. The legislature did create new obstacles for cities building such systems but Powell was grandfathered in.

In late 2007, the City agreed to an arrangement where TCT would exclusively lease the network and make up shortfalls in debt payments if required for a period of six years. After that period, the network would be open to other service providers as well and it would be the City’s responsibility to cover any shortfalls if needed. If the City chose not to appropriate in that situation, the investors could take the network. Estimates suggested a 33% take rate would allow the network to break even by the fifth year but most expected a higher take rate.

In early 2008, Powell completed the $6.5 million bond financing. As is more common in small builds, they immediately connected a line to the home rather than waiting for the subscriber to sign up. They trenched a fiber to the side of every house regardless of whether they were taking service, putting the fiber in a box on the side of the house. If the occupant signs up, a crew only has to install electronics rather than bringing a line down from the pole. This approach increases the capital cost slightly but can significantly decrease operating expenses as residents subscribe.

powell-sign-community.png

TCT began offering services in early 2009, creating a price war. Bresnan and Qwest significantly lowered their promotional prices in response to the network, ensuring that even residents who do not subscribe to the new city owned network will benefit from it. Bresnan has lowered its prices considerably, offering deals to Powell customers that are unavailable in nearby communities without competition. Incumbent providers often engage in what appears to be predatory pricing – a matter we discuss below in Obstacles to Community Ownership.

Powellink, built with the slogan “Our Fiber, Our Future,” offers much faster speeds than Qwest and Bresnan, both of whom are limited to asymmetrical connections that leave upload speeds at 1Mbps or less. TCT, whose network can offer 100Mbps symmetrical connections, does not fool around with promotional rates and long-term contracts.

Responding to critics of the City’s investment, Powell’s mayor noted that small communities like Powell always have to wait for companies to get around to them:

"It was 10 years ago when people at Qwest said they would be bringing us a fiber-to-the-home system," he said. "I found a letter from 1997 saying, 'It's coming soon.' Obviously, 'soon' for us is different for them."

The network has attracted jobs that require these high speeds – teaching English to students around the world using tele-presence applications. The company intends to hire 100 people, a major economic development win in a community of 5,000.

Powell’s City Administrator, Zane Logan, argues that building a modern network offers much more bang for the buck on the matter of economic development. Some communities work out tax breaks and other advantages for a company that announces it will create a certain number of jobs. In Powell, they instead focused on providing great infrastructure. They started by upgrading the public power system to ensure the highest reliability. Then they built an impressive network, offering speeds rarely available in even the densest urban areas of the U.S. and at prices below existing packages. Now, as Powell expands, developers will pay the majority of costs to expand the network in newly built neighborhoods in the same way they connect sewer systems.

Powellink Photos, courtesy Ernie Bray.

Powell Buys FTTH Network From Itself, For Itself

Powell, a small community in Wyoming, has bought its own network from the investors who financed it [Powell Tribune], eighteen years ahead of schedule. For a short history of Powellink, see Breaking the Broadband Monopoly.

The decision, unanimously agreed to by City Council, came from the realization that the City's reserves were earning very little interest while they were paying a higher interest rates to those who financed the network. So they decided to invest in themselves.

Under the new agreement, Powellink will become a fifth enterprise for the city, joining the electric, water, waste water and sanitation enterprises. The other four enterprises will loan Powellink the $6.5 million, and payments from service providers using Powellink — such as TCT — will go back to the enterprises to pay off the loan.

City Administrator Zane Logan had previously told me that he thought Powellink was a much better approach to attracting jobs to the area than the approach frequently used by communities - tax breaks to companies in return for creating jobs. In the Powell Tribune article, he explained how this approach allows Powell to be more self-reliant.

Logan said he believes the new agreement will help Powell during a difficult economic climate. The state cut its funding of cities and towns this year, and sales tax revenues are down.

“We’re trying to help ourselves and not be dependent on the state,” he said. “The Legislature is saying cities need to take care of themselves, and I like to think that Powell is doing that.”

Local cooperative TCT had the right to another four years of exclusive operation as the sole service provider but gave that up, meaning the network will now be open access. In return, TCT does not have to guarantee revenue to the City (as it agreed to do in each year it was an exclusive service provider).

These changes come about as Cablevision bought Bresnan, the cable incumbent that had radically lowered rates to compete with Powellink. It will be interesting to see how Cablevision continues or changes company policy in Powell.

Photo courtesy of Ernie Bray

ILSR Comments on Publicly Owned Networks to FCC

As the FCC continues to formulate a National Broadband Plan, the Institute for Local Self-Reliance has submitted comments [pdf] about publicly owned networks in response to the Request for Comments #7: "Comment Sought on the Contribution of Federal, State, Tribal, and Local Government to Broadband."

In our comments, we highlight the importance of publicly owned broadband networks by noting many success stories and offering details on networks from Chattanooga, Burlington, Monticello, and Powell, Wyoming. We also offer some comments about middle-mile networks and networks that connect core anchor institutions, like libraries and schools.

Powell Creates a New FTTH Model

Publication Date: 
September 1, 2008
Author(s): 
Ernie Bray - PowelLink
Publication Title: 
Broadband Properties

Powell, a small town 5,500 in Wyoming, has pursued a rather innovative strategy to ensure the community has world-class access to the Internet. In this article, Ernie Bray describes the model and how they put it together. In short, Powell was able to leverage its city-owned fiber optic ring to attract a partner that will help in rolling out a fiber-to-the-home network.