The current estimate for the completion of a City-owned I-Net is about $8
million, including engineering and project management and construction costs of
a fiber optic backbone that would serve all City and ACPS buildings as well as
the City’s public safety radio network. Amortized over ten years, the annual
debt service would cost around $1 million. The City-owned network would
offer gigabit (high-speed) internet service and would yield immediate
expenditure savings of more than $500,000 annually currently paid to Comcast to
lease dark fiber. Dark fiber refers to the network of fiber optic strands
that the City leases for use as part of the City’s network; the City provides
its own network equipment and staff to operate the leased fiber optic strands.
To help offset these project costs, the City would look to federal E-Rate
funds, revenues from the private sector for fiber leasing agreements, and
future avoided costs.
The E-rate Modernization Order, adopted by the Federal Communications
Commission in 2014, allowed for the program to cover up-front capital funding
of municipal-based network programs like the one the City is
proposing. This one-time funding source, which would need to be awarded
through a competitive process, could yield over $500,000 for the build out.
Additional ongoing revenue streams would come from leasing agreements
or partnerships with middle mile and last mile Internet Service Providers
(ISPs). The City can build additional conduit and fiber capacity into the I-Net
at a small, marginal cost to be offered for lease on the open market for other
entities to use. Depending on the leasing agreements, these revenues could be possibly$500,000
per year. Beyond providing a direct City revenue source, these companies would
also provide much needed alternative service options for City residents and
businesses which can help stimulate the local economy.
Construction of a City-owned I-Net also saves the City money through
future cost avoidance. The current dark fiber lease arrangement, which costs
around $500,000 annually, is known to be well below actual market rates and is
unlikely at current rates to be available in the very near future, as the City
is nearing the end of its current dark fiber lease. To stay with a private
provider (whether dark fiber lease or a managed service model), the City would
reasonably expect its annual costs to increase by several orders of magnitude
in a few years. Even without new revenue streams, the avoided costs associated
with the next dark fiber lease the City negotiates, would likely offset the
City’s cost of capital for this project, as well as provide a major benefit to
the community through the provision of gigabit fiber in the City.
Attached here is a presentation that provides additional details on the costs and benefits of constructing a City-owned I-Net.