Public-private partnerships (P3s) have become an increasingly popular option for cities who are looking to connect their residents to innovative and effective broadband networks. A P3 is a contract between a local government and a private organization, in which the two parties negotiate terms to pool resources and share the risk and reward for a project. Other infrastructure projects, such as the Virginia I-495 express toll lanes, have been successfully built and operated via P3s.
There are several benefits to developing a network through a P3. Through a P3, cities and internet service providers may negotiate a plan to bring broadband service to a community in a way that neither party would be able to do alone. For example, a P3 offers an alternative to an entirely government-owned and -operated municipal network, instead allowing a city to build out infrastructure and deliver service without also acting as network operator.
A recent report published by the Benton Foundation (authored by Joanne Hovis, Marc Schulhof, Ashley Stelfox, and Jim Baller) describes three types of P3s: public facilitation of private investment, public funding and private execution, and shared investment and risk. The three models vary along axes of benefit, risk, and control:
Public facilitation of private investment has a low level of assured benefit for cities and allows little control, but promises low levels of risk. Google Fiber deployments fall into this category. City governments accommodate deployment, but Google makes the investment and owns and manages the network.
Public funding and private execution presents a high assured benefit and allows for high control, but a publicly funded venture could also present a high risk for cities. KentuckyWired is an example of this type of partnership. In this project, the state of Kentucky owns the network, but a concessionaire builds, maintains, and operates the network.
Finally, shared investment and risk, the most balanced model, has a high assured benefit and moderate levels of both control and risk. Next Century Cities member city Westminster, Md. and Ting have set a strong example of a broadband network built through a shared investment and risk P3.
Through this partnership, the city paid for and built a community-wide fiber network and leased it to the private provider, Ting. Ting operates the network and has a limited-exclusivity contract to provide service to Westminster’s residents. Westminster’s participation allows the city to benefit from infrastructure that a private provider would not have otherwise chosen to build. The city is able to better serve its residents by providing connectivity, and Ting is able to operate in a new market. Both parties are financially responsible for the project and contribute resources, and both parties benefit in a way that they would not have been able to alone.
The sister cities of Urbana, Il. and Champaign, Il. also formed a successful shared investment and risk P3 in order to expand service to their community. The cities partnered with the University of Illinois and used a broadband stimulus grant to build a middle- and last-mile fiber network to connect 250 community anchor institutions as well as 1,000 low-income homes throughout the region. The project hopes to eventually connect the entire community.
In order to expand the fiber network to the home beyond the first 1,000 homes, the cities formed a P3 with iTV-3, a locally-owned service provider. iTV-3 was given access to the existing middle-mile fiber network that Champaign-Urbana had built, and agreed to build and manage open-access fiber to the home in any area of the community where 50% of the potential customers agreed to subscribe. iTV-3 has since been bought by CountryWide Broadband, who is investing in the network and working to expand its reach.
P3s offer a range of benefits to cities. Most basically, P3s offer cities the opportunity to develop infrastructure and services they might not feel comfortable building alone. This can help cities avoid some of the challenges it a market that they have not historically operated in. First, they distribute both the cost and the risk of developing a network. In Westminster, for example, “both Westminster and Ting share the burden if revenue doesn’t match the debt the city has incurred to build out the network” (Next City).
Additionally, P3s can bring service to sparsely populated areas where providers would not have otherwise deployed high-speed networks. By building out the infrastructure, cities create an incentive for providers to serve rural regions. Finally, P3s allow for a unique and personalized plan that a city can design to fit their community. These partnerships thrive on creativity, and present an opportunity for a city to write a new plan that capitalizes on its strengths and focuses on its needs.
Like any negotiation, P3s require some compromise. Naturally, with shared risk and investment come shared rewards. Cities and private service providers have different goals, and therefore will need to compromise on priorities from time to time.
Cities should consider the following guidelines when looking to form an effective P3:
→ Set clear goals from the start. Deciding on non-negotiables can help a city choose the right partner and make sure they get what they want out of the project. For example, Champaign-Urbana set a valuable example when they decided on three “core principles” — that the network must be fiber, open access, and built to all community members — at the beginning of their project.
→ Be wary of “too good to be true.” Potential partners who claim that there are no risks to their proposal likely aren’t being transparent.
→ Negotiate a level of agency in future decision-making. Maintaining a level of control gives cities leverage down the road, and can minimize risk. For example, in writing their partnership agreement, Champaign-Urbana retained a right of first refusal in the event that iTV-3 sold itself (ILSR).
Resources and Further Reading
The Institute for Local Self-Reliance: Successful Strategies for Broadband Public-Private Partnerships
The Coalition for Local Internet Choice and the Benton Foundation: The Emerging World of Broadband Public-Private Partnerships, A Business Strategy and Legal Guide