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Public-Private Partnership Pursued in Pennsylvania

| Written by Hannah Trostle | No Comments | Updated on Mar 28, 2017 The content that follows was originally published on the Institute for Local Self-Reliance website at https://ilsr.org/public-private-partnership-pursued-in-pennsylvania/

Pennsylvania’s state barriers won’t stop this community from improving Internet service for its municipal facilities, residents, and businesses. The City of Lancaster is collaborating with private provider MAW Communications to ensure the community has next-generation technology. Their public-private partnership, LanCity Connect, will offer affordable 1 gigabit (1,000 Megabits per second) service over a new Fiber-to-the-Home (FTTH) network.

Shared Risk, Public Financing

The Lancaster Online has closely followed the development of the partnership from a 2015 Wi-Fi project between the partners to the current citywide fiber plan. Here’s a quick summary of the basic framework of the partnership:

MAW Communications originally built a $1.7 million fiber backbone starting in 2015 with financing from the city’s water fund bond. The city had refinanced its water utility debt, saving some $7.8 million and they worked out an agreement with MAW where the private partner would deploy and own a backbone fiber network. Over the 20 year term of the deal, the city has the right to half the network for city services, including automatic meter reading (AMR) and a traffic control system, with the city being able to renew the deal for four additional terms. Officials have said this arrangement will not impact water rates.

MAW Communications will extend the network to premises, aided by a $1.5 million loan with a 7 percent interest rate from the city’s general fund reserves. The provider will repay the loan over a 13 year period. As long as MAW Communications has an outstanding loan to the city, the provider cannot sell the network without the city’s written approval. Though the loan will help MAW to begin building the network, the costs of connecting homes and businesses would still be prohibitive at $1,000 each if not for another element of the plan.

The city developed a creative way to spread that $1,000 connection charge across a longer time horizon. Lancaster will transfer a $1.5 million loan from the city’s water fund to a Special Revenue Fund for LanCity Connect. If more funds are needed, the city can loan $1.5 million in 2018 and again in 2019 from the water fund. These loans will be paid back via a 13 percent surcharge on LanCity Connect’s rates – this surcharge is expected to last indefinitely.

Business Administrator Patrick Hopkins provided the details these financials in this presentation, which the city government live-streamed on its Facebook page (the presentation runs for about 48 minutes):

 

Savings For The City

The city of Lancaster looks forward to necessary improvements and major cost savings for city services. High-speed connectivity for traffic signals will enable remote monitoring of traffic congestion. The water utility will save $130,000 – $200,000 per year through automatic water meter reading. For internal Internet service costs alone, the city will save $110,000 annually. Police and city officials will be able to securely and freely connect to the network from anywhere in the city.

seal-lancaster-pa.gifAnd of course, the city will see better Internet service for residents and businesses. Local leaders anticipate that the network will improve economic development and generally improve the quality of life locally.

If MAW Communications defaults on the loan repayments, the city may claim ownership of the network and will have liens on other MAW Communications’ assets and revenues. The community may run a risk if another provider like Comcast were to purchase MAW, however unlikely that may be. The city would be repaid the debt but would no longer have a real market for Internet services.

MAW Communications and the city of Lancaster have attempted to strike a balance between risk and reward that benefits the community overall in this partnership. We think they have done a reasonable job given the challenges of creating a partnership in the current environment. For more about collaborations between the public and private sectors for better connectivity, read the report Successful Strategies Behind Broadband Public-Private Partnerships by Christopher Mitchell and Patrick Lucey.

From Free Wi-Fi To Fiber Fast: Recent History

When Lancaster was originally ready to improve Internet access with fiber, the incumbent provider wasn’t interested. Under Pennsylvania law, the main telecom provider has the right-of-first-refusal and Lancaster approached Verizon but they turned down the offer in February 2015. Lancaster looked to other providers and found a trusted partner.

MAW Communications proved its reliability to Lancaster by working with the city on previous projects. The company had provided free public Wi-Fi and installed fiber in the downtown corridor before considering a citywide network.

For the project in downtown, MAW Communications installed the fiber underground through microtrenching — overhead wires are not allowed in the city center. The city pitched in $500,000 to have this fiber installed, and the local ABC affiliate’s video lauded Lancaster as “the first city in Pennsylvania to offer free public Internet access.

At this point, MAW Communications and Lancaster began to look specifically at a citywide network. They created a pilot project, called The Early Adopter Program, to test the possibility of providing Internet service to residents. From the pilot project, 95 percent of the customers described LanCity Connect as “reliable” “high quality” and “useful.”

Building the Network

Over the next two years, MAW Communications will build the network overhead by stringing the cables on the utility poles. The company will divide the city into nine sections and build the network in four phases. See the map of the plan on LanCity Connect’s website.

logo-lanconnect.pngEach phase will feature a registration period when folks can sign up for the new service. After the registration period closes for a particular phase, new sign-ups will not be accepted until the entire network is complete.

The city has an area of about 4 square miles and approximately 21,400 total households. Both partners anticipate quick deployment and attracting customers quickly. MAW Communications estimates 4,000 initial households will take service from the network and a 2 percent annual growth in subscribership. Like an increasing number of communities considering or investing in publicly owned infrastructure, LanCity Connect won’t offer video service, instead focusing only on Internet service.

Rates And Installation

Residents in Lancaster will have four speed tier options:

  • 50 Mbps for $34.99 per month
  • 150 Mbps for $49.99 per month
  • 300 Mbps for $75.99 per month
  • 1 Gbps for $89.99 per month

There will also be a low-income price available for 50 Mbps (price not available yet). This chart compares MAW’s rates to the incumbent’s. The Internet service also requires a router, which costs about $250 through MAW Communications. Residents have three options: pay $250 outright, rent-to-own the MAW Communications router, or provide their own router. All tiers are symmetrical – the same upload and download speeds – which will enable telecommuting opportunities and better service for local businesses that need to share files with clients and colleagues.

Scheduling for installation will begin on April 1st and all phases should be complete by December 2019.

This article was originally published on ILSR’s MuniNetworks.org. Read the original here.