Now that's the way to think! Broadband as bond-fundable __infrastructure__
[http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20060717:MTFH91645_2006-07-17_15-13-15_N11418316&type=comktNews&rpc=44 | Full
article]
By Anastasija Johnson
NEW YORK, July 17 (Reuters) - Hundreds of U.S. cities and towns are
working to build their own broadband networks and tapping the
municipal bond market may be one way to finance such projects.
The Utah Telecommunication Open Infrastructure Agency plans to raise
funds in the muni market to complete its $300 million to $400 million
fiber optic network between 14 cities, according to its executive
director Paul Morris.
The agency already raised $85 million in the municipal market for the
first phase of the project in 2004 and Morris said it plans to sell
more taxable revenue bonds for the second stage.
"We sold taxable bonds because we are a wholesale provider. We build
infrastructure and private companies ride on it," he said. "The cities
that are a retail provider can do it tax-exempt just like water bonds
or sewer bonds."
Although Thomson Financial does not track bond sales for broadband
networks separately, it estimated that between 1995 and 2005
municipalities issued $1.3 billion of tax-exempt bonds for various
telecommunication projects.
BROADBAND BANDWAGON
Recognizing the importance of fast and affordable Internet access for
economic development, more local governments are jumping on the
broadband bandwagon every day.
"Our communities need the ability to stay up with the rest of the
world," said Elizabeth Beaty, executive director of the National
Association of Telecommunications Officers and Advisors. "Local
governments are stepping up to the plate."
At least 250 communities have either announced plans or have rolled
out municipal broadband networks and this number is expected to grow
to 750 over the next five years, according to a Boston-based
telecommunications consulting firm Strategy Analytics Inc.
The firm estimated that by 2010 about 5 percent of all U.S.
households, or about 6 million homes, will be able to access broadband
networks operated by cities, towns and other municipalities.
Tom Elliott, an analyst at Strategy Analytics in Boston, said while
small cities can finance their projects straight out of their budgets
or through debt, large cities are likely to follow Philadelphia's
public-private partnership model.
In May, the Philadelphia city council approved a 10-year agreement
with Earthlink Inc. (ELNK.O: Quote, Profile, Research), which will
build, operate and maintain its citywide wireless network. Chicago,
San Francisco and New Orleans have similar plans and New York City
recently decided to study the feasibility of a citywide network.
COMPETITIVE EDGE
Municipalities need high-speed Internet access to retain and attract
new businesses and allow residents to "telecommute."
"Just like for generations past getting electricity was very
important, now having telecommunications is high on the list of things
that are needed by communities to prosper," Morris said.
Private telecom companies oppose municipal broadband and 14 states
have prohibited or restricted local networks as a result, according to
the American Public Power Association.
Together with other groups the association has lobbied for federal
legislation that would reverse these barriers.
A Senate committee recently approved a telecommunications bill that
encourages public-private partnerships but also allows municipalities
and public power agencies to offer broadband services on their own. A
similar bill has been approved by the House.
Fitch Ratings analyst Karl Pfeil said public power utilities already
have some infrastructure in place and will jump at the opportunity to
offer broadband.
"I don't know if there will be more stand-alone (broadband)
transactions happening, but we may see more electric utilities issue
debt for that purpose," Pfeil said. "If they are allowed to, why not
provide Internet and other broadband services?"
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