Taxiing towards takeoff in Longmont.
The Longmont, Colorado city council settled for a staff report and a powerpoint presentation that summarized the results of a feasibility study, before voting unanimously to take the next step toward building a municipal fiber-to-the-home system. The nitty-gritty details – business model, raw research data, quantitative analysis and the like – are being kept out of the public domain for now.
The report asked the city council to allow staff to continue moving ahead with work on the project, and in particular to give the city’s finance director permission to develop a financing plan, based on various debt options. The bottom line, according to staff, is that…
Debt service repayment will come from the broadband services revenues. Details on financing will be presented at a future council meeting.
In other words, the assumption going forward is that once the system is up and running in something like three years, it will generate enough operating profit to repay the debt incurred to build it. Other municipal FTTH and cable systems – including Provo City and Utopia in Utah and Alameda in California – have gone ahead on that assumption but did not attract sufficient subscribers. The Utah projects have market penetration in the 15% to 20% range, while in Alameda the city’s share went as high as 30%, before slipping back due to intense competition. Longmont is counting on a 36% take-rate.
Three debt options are on the table: lease-back financing secured by city property, bonds backed by revenue from the city’s electric utility or bonds backed by sales tax receipts. If Longmont’s FTTH financial projections are correct, the system will be self supporting. If not, lenders will get any revenue or property offered as collateral.