Municipal Broadband or Municipal Boondoggle
March 13, 2023 – There’s a City Council Roundtable tonight that includes a presentation on “Municipal Broadband Feasibility and Business Model Options”. Advocacy for municipal broadband has gained a lot of traction among city councillors over the last few years – perhaps even unanimous support – but the issue has always been about financial cost and exposure, i.e. the notion that a huge amount of money might be invested in a technology that might become obsolete with the next wave of innovation.
If surveyed, residents would likely be nearly unanimous in the view that having affordable alternatives for fast Internet access is very desirable – hence a winning position for city councillors to support. What is often not said is that municipal broadband would likely not include Cable TV access (unless you subscribe to one of the new streaming options), and if consumers who now bundle their phone, Internet, and TV access wanted municipal broadband there might not even be a financial benefit in doing so. More significantly, the full capital cost of such an investment is estimated to be $194 million with a City contribution estimated to be $150 million.
KEY STUDY FINDINGS
• The full capital cost is estimated at ~$194 million, incorporating a 30% contingency and inflation over a 5-year construction period, assuming a 40% take-rate.
• A City contribution of ~$150 million is required to establish a sustainable FTTP business from scratch, applying reasonable assumptions under a “base case”. This contribution is the investment the City would need to make for which there would likely be no return. The remaining capex can be supported from net revenues after operating costs.
• Entering into a partnership with one or more entities to lease fiber and run the business would reduce the City’s risks and potentially reduce costs. A partner could potentially leverage existing operations and assets, achieving economies of scale.