Debate heats up over city-owned fiber networks
RUFFIN PREVOST Billings Gazette | Posted: Monday, June 4, 2007 12:00 am
CODY - A deal nearing completion to bring a municipally owned fiber optic telecommunications network to Powell is being described by one backer as "the shot heard 'round the world," and Cody may be the next battleground.
Representatives of a Big Horn Basin telecommunications company and a Utah-based consulting firm say they are "very close" to closing a deal to privately finance a city-owned fiber network in Powell.
The Cody City Council meets Tuesday to learn about options for both private and publicly owned networks similar to the one proposed for Powell.
But telecom giants Qwest and Bresnan Communications say there is no need in Cody or Powell for fiber to the home, and question whether cities should become players in the competitive marketplace by owning networks.
Ernie Bray is founder and chief technical officer of U.S. MetroNets, a company based in Draper, Utah, working to secure private financing and provide technical expertise for the construction and operation of a fiber optic network in Powell.
"There are offers on the table from investors that are in the process of being evaluated and finalized," Bray said of the Powell deal, which has been in the works for more than a year.
The plan calls for private investors to purchase $5.5 million in bonds that are partially guaranteed by TCTWest, a regional telecommunications company with headquarters in Basin.
TCTWest would serve as an anchor service provider to bring telephone, cable TV and Internet services to Powell customers, with a six-year window of exclusivity, after which other providers would get network access.
U.S. MetroNets would be paid a percentage of construction costs, around $400,000 based on 2006 estimates, plus performance bonuses for successfully managing the network.
Powell has paid U.S. MetroNets $125,000 toward costs associated with securing financing. That money would be paid back once the network is built, and the city would own the system after 20 years.
"There is no doubt this is the shot heard 'round the world," Bray said of the pending deal in Powell. "We're very excited."
He said it would be the first deal of its kind where outside investors have completely funded a fiber optic network that will be municipally owned.
"And one of the lead investors has expressed a desire to do additional projects," Bray said.
Though Bray didn't confirm Cody as a point of investor interest, he and Powell City Administrator Zane Logan met last week with Cody Mayor Roger Sedam and City Administrator Andy Whiteman to outline the terms of Powell's deal.
"Conceptually, I think it sounds good," Whiteman said, adding that Cody has a municipally owned electric power system that typically offers lower rates than corporate competitors.
Whiteman said he was eager to see the details of the proposal.
"I want to understand the big picture and the fine points so we can assess any potential risks to the city," he said.
Executives from Qwest and Bresnan are expected at Tuesday's council meeting in Cody.
Representatives of both companies attended public meetings last year in Powell, where they spoke against that city's project.
Lobbyists for Bresnan later sought to pass a state law prohibiting cities and towns from owning telecommunications networks, with Qwest also backing the legislation.
Opposition to the bill from the Wyoming Association of Municipalities brought changes to the final law.
As passed in February, the law requires public hearings and a 90-day notice to existing providers allowing them to match any proposed rates and level of service before a city-owned network can be built.
"We feel that legislation takes a valuable step toward leveling the playing field, so we supported it," said Shawn Beqaj, a spokesman for Bresnan.
Jennifer Barton, a spokeswoman for Qwest, said the company backed the bill because "it prevents a municipality from using their resources for competitive business if a private company already provides the same service in a given area. Tax dollars should not be used for this purpose."
The law becomes effective July 1, meaning it would not apply to Powell's efforts. Whiteman said he doubted any deal in Cody could be struck before then.
Beqaj said robust competition already exists in Powell and Cody to provide Internet service, and customers are not asking for fiber to the home.
"What functionality can fiber provide that we don't?" he asked.
"We don't want to provide fiber to the home because it's not necessary. If it was necessary for us to provide the services we have, we would do it," he said.
Beqaj said the "road to municipal fiber projects is paved with failures," noting that many past efforts have not worked out, although he praised any deal that would not put taxpayer dollars at risk.
Barton said the company has invested $15 million in Park County between 2000 and 2005 and "will work with each customer on an individual basis to customize their telecommunications needs."
"The notion of fiber to the home is not a one-size-fits-all solution," Barton said. "When services required fiber, we built the network to accommodate it, and we have done that in Cody."
TCT General Manager Chris Davidson said his company would be interested in seeking a non-exclusive fiber optic network franchise in Cody or becoming an anchor service provider on a municipally owned system.
Davidson said the large telecom players don't see rural Wyoming as a profitable market for such networks, and criticized their efforts to block projects like the one in Powell.
"They go to extraordinary lengths to prevent us from doing something in areas they serve, instead of putting forth the effort themselves to do it," he said.
"They're in a protection mode where they want to keep anything else from happening, and that's what they lobby for, all the way to the federal level," Davidson said.
Davidson has said that while there are multiple companies offering Internet service in Cody and Powell, competition against telephone and cable TV monopolies would offer customers greater choice, lower prices and the convenience of using one company for all three services.
Logan, the Powell administrator who has backed that city's project, has said that the vastly superior bandwidth offered by fiber - potentially 10 to 40 times greater for data uploads in some cases - could attract new businesses.