How cities can strike smarter deals with private broadband network providers

As localities increasingly look to partner with the private sector to build municipal broadband networks, leaders need ensure they maintain some semblance of control over the infrastructure in order to stave off unwelcome changes, a new report urges.

The report, released this week by the Institute for Local Self-Reliance, a group of community broadband advocates, examines a variety of these partnerships around the country and lays out strategies for communities hoping to strike similar deals to improve their access to high-speed internet going forward. 

In the report, “Successful Strategies for Broadband Public-Private Partnerships,” institute analysts Christopher Mitchell and Patrick Lucey charge that there’s been a good deal of “irrational exuberance” about the potential of public-private partnerships, commonly known as “PPPs.” While they see a partnership with the private sector as an avenue that localities certainly should consider as they weigh the possibility of building a broadband network, they also caution that “PPPs are never without risk.” The also highlight some essential lessons from the experiences of other communities.

“Be sure to build community buy-in and document the outcomes sought,” the researchers wrote. “Vet partners carefully to ensure they will deliver what the community needs. Ensure that the community will continue to have some oversight or leverage over the network that the community will depend upon for decades. It needs to remain accountable.”

Specifically, they suggest government representatives focus closely on what goes into the bargains they strike with companies over network infrastructure and ensure companies can be held accountable. The also recommend communities bargain for both “outright public ownership of some assets” and “a right of first refusal to purchase them in the event network ownership changes.”

But they also argue that “no single condition or term makes an agreement equitable,” and emphasize that finding a company that understands a community’s goals and challenges tends to be equally important in assembling a successful partnership.

“There is no ‘magic bullet,’” the analysts wrote. “Instead, balanced partnerships are the result of honest and respectful negotiation. Partners must understand each other’s priorities and be able to compromise.”

[Read more: Deadline looms for Missouri bill to set municipal broadband strictures]

The report examines partnerships in three cities that seem to have struck that appropriate sort of balance, finding willing partners while also constructing equitable network deals: Westminster, Maryland, Champaign-Urbana, Illinois and Leverett, Massachusetts.

In Westminster, the city decided to work with internet service provider Ting on a municipal network. The two sides hammered out a deal where the city owns the network infrastructure, but Ting maintains it and acts as service provider.

The city agreed to an “initial exclusivity period” with Ting, letting it act as the sole provider using the network for “a period of two years, or until Ting signs up 3,000 customers, whichever comes first.” Then, the network will become “open access,” allowing any service provider to vie for the chance to use it.

“[Westminster leaders] had to finance the network but have long-term security in knowing that the network will remain accountable to the public even if Ting’s plans changed or it was sold,” the researchers wrote. “Owning the network allows the city to ensure universal access and a choice in providers via the open access policy.”

The sister cities of Champaign and Urbana in Illinois took a similar approach. They tapped provider “iTV-3” for a project to help them build an open access “fiber to the home” network, but retained ownership of some network infrastructure as well as a “right of first refusal” for the sale of the rest if iTV-3’s ownership situation changed.

When CountryWide Broadband announced plans to buy the company in February, that provision suddenly seemed quite prescient.

“This requirement gives the communities a seat at the table during negotiations for the future of the network even if they choose not to exercise the option,” the analysts wrote. “Their capacity to make that choice provides them leverage.”

Leverett represents another type of model entirely. Rather than working with just one company to build a network, the researchers found that the small Massachusetts town engineered “a series of bids and awarded contracts culminating in a municipal network leased to a local ISP.”

This gives the town both “additional control and risk,” since it owns all the fiber infrastructure and even sets the prices the ISP can charge while using the network.

“LeverettNet offers a model for a community-owned gigabit model in small cities that are unlikely to face stiff competition from incumbent providers,” the researchers wrote.

But the analysts noted that not all PPPs prove to be so successful. They point to efforts in Philadelphia, Seattle and Chicago that all failed, largely due to what they believe were overly ambitious promises from private sector partners.

“In the end, the old adage ‘If it sounds too good to be true, it probably is’ applies here,” they wrote.

Indeed, the researchers suggest that “when a community hears that a partner has a ‘no risk’ approach, they should be extremely skeptical,” noting that localities that have been willing to take on more risk by fully owning their networks have also proven to be the most successful.

“There is no way to dismiss risk in these projects,” they wrote. “Partnerships should combine the best capacity of the public and private sectors, not serve merely to hide risk from voters.”