A new kind of muni FTTH network

Municipal fiber-to-the-home networks, particularly in smaller cities and towns and even rural areas, are once again on the rise, due in part to the declining cost of equipment but also to the growing perception that rural America needs better broadband connections to survive in a global economy.

This trend can be bad news for Independent telcos that serve these communities, but it also can present opportunities. Consider Powell, Wyo., a city of just over 5000 people in the northwest corner of the state, 75 miles east of Yellowstone National Park. The city wanted an FTTH network, but its incumbent service provider, Qwest Communications, is not building FTTH except in greenfields.

So Powell entered into an unusual three-way partnership with Tri-County Telephone, a cooperative telco serving neighboring towns such as Cody and Ten Sleep, and US MetroNets, an Independent broadband network facilitator, to build PowelLink, an FTTH network that would leverage the fiber ring TCT already built in Powell to operate as a CLEC.

What makes the partnership unusual is its financial structure: Powell, which operates a municipally owned electric utility, is financing the cost of the FTTH build with general obligation bonds. And TCT, which has exclusive rights to sell triple-play services on the network for the first six years, is guaranteeing the revenue it will pay the city for the first four, regardless of the penetration it actually gets for its services.

“In exchange for using this network exclusively for six years, we essentially guarantee the debt payments for four years,” said Chris Davidson, general manager of TCT. Any shortfall is likely to be in the early stages, he said, “so we may have to eat a little bit of that but not all.”

Ultimately both entities — Powell and TCT — stand to make profits, said Ernie Bray, chief technology officer and founder of USM.

“[TCT's] only exposure is fairly small, and if it is a market they have confidence in that they can go in and get the penetration, which needs to be 35% to 40%, then they can see what their risk profile is here,” Bray said. “It is an opportunity for them, without laying out the cash, to partner with the city.”