The Infrastructure and Job Investment Act (IJIA) earmarked $65 billion for broadband expansion in the U.S. This represents a windfall for communities looking to leapfrog into the digital era, bridge the digital divide, and harness the economic and quality-of-life benefits of broadband Internet.
But waiting for the federal funds to come down the pipeline could squander a historic window of opportunity and jeopardize the longevity of your project. Acting decisively to raise a diverse mix of private and public funding will ensure your broadband project gains traction—even as IJIA funds are allocated.
Read on to learn the key considerations when seeking investment and the seven most reliable places to find it.
How much will your project cost?
Ensuring the viability of your project, in the long run, requires a clear picture of initial and ongoing costs. Assess the lay of the land and make some key decisions to establish a foundation for investment and partnership.
Get a high-level design to estimate costs
Before you raise capital, commission a high-level design from your master plan or feasibility study (Step 3) to estimate costs accurately. Nothing can bring broadband implementation to a halt faster than unexpected costs.
Consider using a human-led, machine-assisted design process. This can expedite both the planning and implementation phases and make the whole project more cost-effective. Any dollars saved can then be reinvested into the project for expansion and upgrades to get the most mileage out of your network.
Capital costs for network construction
Will the network be aerial or underground? Aerial cable may appear cheaper to install, but be aware of the hidden costs that could rear their ugly heads later on. Exposed cables are more vulnerable to wear and damage, especially in the event of extreme weather. While underground cable may have a higher initial price tag, it faces fewer liabilities in the long run. Obtain a professional assessment to determine the appropriate mix of aerial versus underground networking for your location.
How long will it take to build your network? A longer project will cost more in labor and other variable costs. In addition, broadband users in the neighborhoods served will be eager to take advantage of modern broadband speeds as soon as possible.
Initial operations and maintenance costs
A broadband Internet operation won’t necessarily run on cruise control following network construction. How long will you have to operate and maintain the network before seeing a return on investment (ROI)? If ROI takes more than five years, project feasibility will likely depend on government subsidies for construction.
Your minimum viable take rate will play into cost calculations. This is the percentage of the market share you need to capture to make the project viable. Most projects need a minimum 30% take rate to be financially viable, while some require a 60% or higher take rate. If customers harbor dislike for the existing Internet service provider (ISP), you could be in a position to seize a greater slice of the market share. Addressing issues like slow Internet connectivity, service disruptions, high cost, poor customer service or other complaints will help you win over customers, investors, and partners alike.
Will you be the network owner or operator?
Generally speaking, owning the network as an asset has low risk but low returns, while operating as an ISP bears greater risks but greater rewards. Whichever route you take, working with partners expedites the process. Local utility companies, neighboring communities, and anchor institutions alike can spread the cost and operational burdens. Approaching potential key players as you did in Step 2<insert link to part 2 post> is a great way to start.
Colorado Springs Utilities decided to build a broadband network to modernize the delivery of electric, natural gas, water, and wastewater to the community beginning in 2022. From there, it made financial sense to extend and enhance the utility’s network so the entire city could benefit.
With only an incremental add-on cost, the project will create a broadband network connecting every home and business in the city at multi-gigabit speeds by 2028. Ting Internet signed a 25-year lease and Colorado Springs Utilities will lease the network to other ISPs, further enhancing the cost-effectiveness and viability of the network.
Explore the world of funding options
Capital is available to be had now—but don’t expect it to magically land on your doorstep. Search proactively, and you might be surprised at who rallies to contribute to your endeavor. The seven sources of potential funding below are hungry for effective, win-win partnerships in the wake of the IJIA.
Public funding—government investing in community
Reach out to government offices to find out which programs you’re eligible for. Apply early to get the ball rolling, find out how long you’ll have to wait for funds to arrive, and consider how that time frame affects your plans. Here’s a list to get you started.
Municipal bonds are issued by states, cities, counties, and other governmental entities to finance capital projects. Government offices should be able to guide you through the bond process.
City and county government appropriations are funds that are budgeted for specific purposes. Your government offices can help you learn what funds are available.
Approaching regional councils (RCs), councils of governments (COGs), and metropolitan planning organizations (MPOs) can help connect your project with a broad range of organizations. These bodies facilitate cooperation among an area’s government offices and may have influence over policy and funding.
Private funding—capital for causes and profit
Private organizations may be less inhibited by the administrative red tape and political hesitations of the public sector. They may also stand to profit from cooperation. A strong pitch will start with figuring out how you fit into their organizational mission or business objectives.
These philanthropic organizations exist to invest in causes that make the world a better place. Community, family, and corporate foundations all choose specific types of causes to champion, many of which prioritize diversity, equity and inclusion (DEI) projects to redress underserved communities. As the impact of broadband touches nearly everyone, making a case that is relevant to a wide variety of missions isn’t hard. Foundations can be approached not just for grants, but also program-related investments (PRIs), which are essentially low-interest loans.
Telecommunications companies have a strong interest in modernizing networks to deliver their services. The case study above highlights the desire for ISPs to serve as long-term lessees of new networks. Phone and cable companies also increasingly rely on the Internet as a service channel.
Utility companies and cooperatives
Utility companies ultimately save money with the digital transformation of utility delivery, which requires broadband. Better yet, these companies may already possess the infrastructure to facilitate rolling out broadband networks and services. Why reinvent the wheel when you have partners that are already rolling?
Private equity (PE) firms
If your broadband project will offer a positive ROI, PE firms are another avenue for investment. They may be willing to invest capital for a stake in the returns. Your high-level design will help them decide whether the project is investment-worthy.
The markets you prioritize will largely determine who helps realize your project. Is your goal to bring broadband to a low-income demographic, a high-tech zone, an entire municipality, or rural residents? Being clear about your target market helps attract allies whose missions, business interests, and capabilities support your project.
No matter your plan, be sure to select a primary deployment partner with a skill set that is complementary to yours. They should have the knowledge and experience to guide you through the deployment process from start to finish.
Funding broadband for the long haul
Capital is the fuel that propels a broadband initiative. While the IJIA sets the stage for increased broadband investment, don’t count on those funds alone to get you to the finish line. A broadband project is most likely to succeed with a healthy mixture of investments.
Your sources of capital will depend on your plan. A high-level design with a clear target market can provide an accurate cost estimate, decrease project cost and duration and help persuade investors and partners to get on board.
The funds are out there but don’t wait for them to find you. Actively reach out to public and private sources at all levels to ensure your broadband project has the right blend of investment and partnerships—and to keep serving your community long into the future.
Unsure how to design a broadband plan for your community? Contact us with your questions or visit our news page to learn more about how to take broadband from concept to completion. We're here to help.