Experimentos “in vitro”

Broadband expansion can require significant capital expenditures and, once in place, the infrastructure requires maintenance and operations. This section first looks at potential funding sources for the capital investment and then presents a high level financial summary.

5.1 POTENTIAL FUNDING SOURCES

The federal and state governments offer some potential funding sources. Local governments may also use local resources.

5.1.1 FEDERAL PROGRAMS

USDA Rural Development is chartered to help improve the economy and quality of life in rural America. USDA’s financial programs support such essential public facilities and services as water and sewer systems, housing, health clinics, emergency service facilities, and electric and telephone. Rural Development promotes economic development and quality of life by supporting loan and grant programs. Rural Development administers billions in loans, loan guarantees, and grants each year. The Economic Development Administration (EDA) was established under the Public Works and Economic Development Act of 1965 to generate jobs, help retain existing jobs, and stimulate industrial and

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rural and urban areas of the Nation experiencing high unemployment, low income, or other severe economic distress.

5.1.1.1 FARM BILL BROADBAND LOAN PROGRAM

The U.S. Department of Agriculture’s (USDA) Farm Bill Broadband Loan Program94 _{is administered by the} Rural Utilities Service (RUS) of USDA Rural Development. The program funds the costs of construction, improvement, and acquisition of facilities and equipment to provide broadband service to eligible rural areas on a technology-neutral basis. Direct loans are in the form of a cost-of-money loan, a 4-percent loan, or a combination of the two.

A service area may be eligible for a broadband loan if all of the following are true:

1. The service area is completely contained within a rural area;

2. At least 25 percent of the households in the service area are underserved households; 3. No part of the service area has three or more incumbent service providers;

4. No part of the funded service area overlaps with the service area of current RUS borrowers and grantees;

5. No part of the funded service area is included in a pending application before RUS seeking funding to provide broadband service.

5.1.1.2 USDA RUS COMMUNITY CONNECT GRANTS

The Rural Utility Services Community Connect Grant program95 _{serves rural communities where} broadband service is least likely to be available, but where it can make a tremendous difference in the quality of life for citizens. The projects funded by these grants will help rural residents tap into the enormous potential of the Internet.

By the 2013 rules, to be eligible for a grant, the project must96_:

• Serve a Proposed Funded Service Area (PFSA) where Broadband Service (3 Mbps) does not currently exist, to be verified by RUS prior to the award of the grant. The PFSA is defined as a contiguous geographic area within an eligible rural area.

• Offer service at the Broadband Grant Speed to all residential and business customers within the PFSA.

• Offer service at the Broadband Grant Speed, free of all charges for at least 2 years (starting from the time service becomes available) to each community anchor institution (e.g. public schools, public libraries, public medical clinics, public hospitals, community colleges, public universities, law enforcement, and fire and ambulance stations) located within the PFSA.

94 _{See http://www.rurdev.usda.gov/utp_farmbill.html for more information.} 95 _{See http://www.rurdev.usda.gov/utp_commconnect.html for more information.}

96 _{See the RUS Community Oriented Connectivity Broadband Grant Program Application Guide at} http://www.rurdev.usda.gov/SupportDocuments/utp2013CommConnectAppGuide.pdf.

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• Provide a Community Center located in the PFSA, with at least two (2) but no more than ten (10) Computer Access Points and wireless access at the Broadband Grant Speed (5 Mbps), free of all charges, to users for at least 2 years.

• Not overlap with the service areas of current RUS borrowers and grantees. Several communities in northwest Colorado may qualify for Community Connect Grants.

5.1.1.3 US DEPARTMENT OF COMMERCE ECONOMIC DEVELOPMENT ADMINISTRATION The Economic Development Administration97 _{is guided by the basic principle that distressed}

communities must be empowered to develop and implement their own economic development and revitalization strategies. EDA helps communities address both immediate (e.g. natural disasters, military installation closure, depletion of natural resources, etc.) and long-term economic distress.

EDA’s economic development facilities and public works programs provide funding for construction of infrastructure in areas that are not attractive to private investment. Public works and economic development investments help support the construction or rehabilitation of essential public

infrastructure and facilities necessary to generate or retain private sector jobs and investments, attract private sector capital, and promote regional competitiveness, including investments that expand and upgrade infrastructure to attract new industry, support technology-led development, redevelop brownfield sites and provide eco-industrial development. Most funding is for water and sewer infrastructure but some has been designated for communications projects.

5.1.2 COLORADO DEPARTMENT OF LOCAL AFFAIRS GRANTS

The Colorado Department of Local Affairs (DOLA) Energy/Mineral Impact Assistance Fund (EIAF) offers Administrative (grant awards up to $25,000), Tier I (grant awards up to $200,000), Tier II ($200,000 to $1,000,000), and Tier III (multi-million dollar, multi-year projects not currently available) grants. More information is available at http://www.colorado.gov/cs/Satellite/DOLA-Main/CBON/1251594715231.

5.1.3 REVENUE

Northwest Colorado communities can use indirect and direct revenues to support broadband expansion.

5.1.3.1 INDIRECT REVENUES

Many public infrastructure projects are supported by indirect revenues like taxes or licensing fees. **Northwest Colorado communities may want to investigate ways to generate indirect revenues to support broadband development. Especially since the region’s resort/tourism centers must support significant broadband demand from users with low tolerance for paying for it (i.e. that is, the visitors

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who expect connectivity but do not anticipate paying fees or other charges to support that connectivity).

5.1.3.2 DIRECT REVENUES

We consider direct revenues to be monies generated by the subscription, lease, sale, or other use of public broadband assets.

A light touch approach is unlikely to result in any direct revenues except from existing assets. Proactive development is likely to result in direct revenues.

Direct revenues are discussed more fully in “Potential Direct Revenue Modeling” section under “Some Financial Stick Figures” on page 133.

5.1.4 OTHER FUNDING OPPORTUNITIES

This section has listed several potential funding sources but does not purport to be a definitive list. Working with incumbent network owners, the region can access FCC and state universal service and high cost funds. Working with schools, libraries, and medical facilities, E-Rate and other subsidy, loan, and grant funds may be available to the region.

We have not discussed bonds or other public financing instruments in this section but they are, of course, a potential funding opportunity. Furthermore, private sector for profit and not for profit organizations may pursue other capital sources.

** As the NWCCOG works to coordinate public and private regional projects all funding paths should be explored and the COG should provide what assistance it can to organizations pursuing funding not available to the COG or its member jurisdictions.

5.2 SOME FINANCIAL STICK FIGURES

Financial planning for regional broadband will depend heavily on intended actions, sources of revenue, and other unknown factors. Nonetheless, we can establish some basic assumptions to help describe financial scope and scale.

5.2.1 ORDER OF MAGNITUDE COST ESTIMATES

Order of magnitude implementation costs focus on either miles of plant deployed (a typical measure for more rural areas) or number of households passed (a typical measure for more urbanized areas). To begin looking at order of magnitude implementation costs, it is helpful to know that CenturyLink’s participation in CAF funding was based on about $1,300 per new address served to upgrade their plant in fairly rural areas. After years of mass purchases and the implementation of other scale mechanisms,

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Verizon was able to lower the cost of fiber to the premises in dense urban areas to $600 to $700 per home passed98_{. More typically, fiber to the premises in areas with suburban densities (about 100 foot} lot frontages) will cost about $1,100 per household passed.

In more rural areas, costs are typically measured by the mile of fiber deployed. Where aerial

construction is available on existing utility poles, costs typically range around $30,000 per mile. Buried construction techniques are significantly more varied but always more expensive. If fiber can be plowed, construction costs can be as low as $60,000 per mile. If ground conditions demand other construction methodologies, construction costs can climb well above $200,000 per mile. Typically, buried construction can be roughly estimated at about $110,000 per mile.

Operations and maintenance costs will depend on the types of services offered. Public network owners may choose to transfer all operations and maintenance responsibilities to leasing entities. If not, at a minimum, the plant must be maintained. Rough estimates for outside plant maintenance are about $180 per mile per year. Operations and maintenance will increase significantly from that level as electronics are introduced, services added, and other functions contemplated.

5.2.2 POTENTIAL DIRECT REVENUE MODELING

Broadband development can result in direct revenues. Public projects can lease facilities, lease dark fiber, lease lit fiber, charge implementation fees, charge subscriber fees, solicit sponsorships, and generate revenue in other ways. Revenue projections are highly dependent on the type of models implemented over the scope of infrastructure.

98 _{Ratliff, Lee (7 June 2010). “Verizon’s FTTH Expansion Stoppage Takes Many by Surprise.” iSuppli Market Watch.} Viewed 1 December 2013 at http://www.isuppli.com/Home-and-Consumer-

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