Background From Reedsburg, Wisconsin: Community Fiber Pioneer

David Isenberg, of isen.blog, has published a short history of Reedsburg's community fiber network that he previously wrote for the FCC when they were gathering evidence of successful networks they would later ignore in formulating a plan to continue the failed status quo of hoping private companies will build and operate the infrastructure we need. Nonetheless, one cannot say that smart people like David did not try to help the FCC overcome its obsession with national carriers who dominate the conversations, and whose employees often work periodically with the FCC in what we call the revolving door (which itself, is a reason the FCC has been captured). Back to Reedsburg; it is a small community approximately 55 miles northwest of Madison that just happens to have far better broadband service than just about anywhere else in Wisconsin. David writes,

RUC first entered the telecommunications business in 1998, when it constructed a ring to tie its wells, its five electrical substations together and to provide Internet access for its high school, middle school and its school administration building. In planning the ring, the city asked Verizon and Charter if they would build it, but they were not responsive. RUS built a partly aerial, partly buried 7-mile ring of 96-strand fiber at a cost of about $850,000. Internet access was provided by Genuine Telephone, a tiny subsidiary of LaValle Telephone Cooperative which ran a fiber from LaValle, about 8 miles NW of Reedsburg.

As they were building the ring, local businesses asked to be connected as well. Reedsburg took the path that so many communities have followed, start by building for yourself and expand opportunistically. Of course, this requires that you originally engineer the network so it can be later expanded, which is good practice regardless of your future plans. Reedsburg used bond anticipation notes, a financial mechanism that few others have used in building similar networks.

A local bank loaned the initial $5 million in bond anticipation notes for planning and construction. Then RUC issued an additional $8.5 million in bond anticipation notes to complete the project. These are instruments that are ultimately backed by the city’s taxpayers; they must be converted to asset-backed revenue bonds within five years.

In building the pass, Reedsburg ran the drops right to the side of the house, a practice that now seems fairly common in smaller builds (by which I mean less that 10,000 premises or so). This lowers the future costs of having to send trucks out individually to connect a home to the pass.

The plan was not just to pass every household in town, but to run an actual fiber drop to every house. As fiber was built out, empty NID boxes were placed on each home with the fiber drop cable coiled inside; NID electronics were installed when service was turned on. Preceding construction there was a mail campaign followed by a door-to-door campaign to get permission agreements signed to construct the fiber on private lands. By Mr. Mikonowicz account, only about ten home owners refused to give permission to supply a drop and a NID box.

David discusses the take rates, which I won't reprint here as I have already taken more liberties in quoting his text than might be polite. However, I do want to quote one last piece -- the one in which he notes that the network pays for itself even if one does not include the many positive externalities such as much better customer service, economic development from having affordable 100Mbps symmetrical service available, the much faster connections schools have at much lower costs (which David does not actually mention), etc.

The network turned EBIDTA-positive in 2007 and cash flow positive in 2008. Today, after debt service and other costs, including salaries, video content charges, Internet access, 911 contribution and other costs, there’s about $500,000 per year for network expansion. Expansion planning includes two small residential developments just outside of town.

And as a final note, Reedsburg did receive a broadband stimulus award that will allow it to accelerate network expansion in the surrounding community.