The consultant who has created the business plan for a proposed countyowned telephone, TV, and ultrahigh speed Internet fiber optic cable (“broadband”) network is very optimistic about its potential for success. Doug Dawson, president of CCG Consulting of Beltsville, Maryland, met with the county board Tuesday, October 13, 2009.
“We believe we build the best business plans in the country,” Dawson told the board. His company has prepared over 200 business plans in the last 15 years, and they thought of “all contingencies” in preparing Cook County’s broadband business plan, Dawson said. They planned conservatively, making low estimates on potential revenues from the system.
Ehlers Inc., Cook County’s financing advisor, has been working with Cook County Information Technology Director Danna MacKenzie on the possibility of bonding for part of the project and wrote in a letter to MacKenzie, “We are pleased to report that the CCG business plan for the proposed Cook County fiber system is one of the most thorough, well-organized, and pragmatic projections that Ehlers has reviewed in the recent past. … There is little chance that any major cost category or revenue variance has been missed. …Our overall impression is that the CCG fiscal blueprint is a conservative projection of market penetration, operating revenues, and capital replacement costs….”
Dawson told the board he would recommend against the project if he didn’t think it was feasible. He estimates the county could eventually make $2-3 million a year if 70-80% of its homes and businesses subscribe to the network.
Dawson’s firm worked with a West Virginia community that put in a “tripleplay” (Internet, phone, and TV) broadband system. Before the network was installed, many household incomes were under $30,000 a year. After the network was installed, a lot of defense contractors moved in and set up shop, bringing jobs paying over $50,000 a year. Communities like this also start seeing their local graduates return after college instead of looking for work elsewhere.
Broadband would allow people to operate small businesses from their homes, Dawson said. It would keep local lodges from losing customers who either don’t come or leave early because they cannot access their work from their vacation site. Broadband would also give the county the ability to offer more bandwidth to local cell phone companies like Verizon so that cell phone coverage could be expanded, Dawson said.
Dawson envisions an educational partnership with the local school system that would offer students a high-tech curriculum and the opportunity to help run the network and videotape and broadcast local events.
Federal financial help
A federal stimulus grant of $34,000,000 is the biggest impetus behind the effort to get broadband to Cook County right now. Up to $9 million would be generated for the project through a 1% sales tax if county residents pass this fall’s referendum, and another $9 million is expected from revenue bonds, paid off over time through user fees.
Some have wondered what kind of risk the county might be taking by bonding. According to Dawson, revenue bonds would not have to be paid back if the county did not generate revenue, although its credit rating would be damaged.
The federal government received many more applications than it had anticipated, Dawson said, and it may be late winter before the county learns whether its application was approved. These grants are specifically intended for communities that could not get broadband otherwise. Neither of the county’s two telephone companies, Qwest and CenturyTel, has taken steps to bring ultra-high-speed Internet to its customers, but if the county owned a fiber optic system, they could purchase space on it.
Who runs it?
If the county were awarded the grant, it would need to start putting elements of the network in place immediately. At the October 14 county board meeting, the commissioners passed a motion outlining the organizational structure of the proposed telecom network.
The board is starting the process of appointing a commission comprised of one county commissioner and several volunteers with technical and business expertise to oversee the operation. Boreal Access would likely administer the network, headed by a general manager with experience in broadband, phone, and TV. Arrowhead Electric Cooperative has expressed interest in managing the outside cable and equipment. Boreal and Arrowhead Electric would contract with the county and be under the supervision of the telecom commission.
Ballot questions
Commissioner Bob Fenwick stressed that while broadband would use a significant amount of the $20,000,000 that could be brought in if the 1% sales tax referendum passes, the county board “stands fully behind the other projects.”
On the ballot will be two questions: one asking if a 1% sales tax should be implemented to fund numerous community projects including broadband, and a second authorizing the county to operate a telephone utility.
According to Dawson, if the second question does not pass, the county would lose about $450,000 in funding from the grant. The county would need to pass another referendum authorizing the phone network but would have several years to do it.
People subscribing to the phone system would be able to keep their current phone numbers. Prices for phone, TV, and Internet are expected to be set a little lower than what most people are paying now.
The federal grant would require completion of the system within three years of the arrival of the first payment, although the goal would be to be done in two years. Construction could start as soon as late spring if the grant is awarded, with the first customer going online about a year from then. Clusters of homes would be the first to get the service.
If the grant is not awarded, another application could be made in a second round of funding.
A price of $200 per home (except for 10-20 with extremely long driveways) and $1,000 per business for hooking into the system has been suggested, although Commissioner Bob Fenwick recommended providing free hookup for all to increase participation.
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