WiredWest Regional Broadband Solution
Each town will pay for, build and own a fully operational, standalone network within their town boundaries. This includes: the physical hut(s); the OLT gear in huts; fiber on poles; polelicenses; drops to premises; and ONTs in premises. WiredWest will make recommendations about network design and choices to facilitate regional connection and operation. The operating agreement will require all towns that are part of the Coop to install the compatible equipment, to ensure interoperability and the same standard of service.
After the initial build, each town is responsible for funding any additional capital construction in the town, e.g. additional drops to new subscribers, expansion to new premises, etc. Towns would need to maintain some capex funding in a reserve to be tapped as needed to fund new drops or line extensions, or an authorized borrowing. These funds are different than the depreciation reserve.
WiredWest will own the electronics in the huts that are needed to connect the town to the larger network (e.g. SFP, adapters – see diagram).
Towns will give WiredWest nocost IRUs to use fiber within each town to create the shared network and a nocost IRU to WiredWest to place the shared network assets in the huts.
Towns must also pay for any legal work and engineering to determine town network boundaries and negotiation of IRUs. The IRU’s will survive a town withdrawing from the coop.
In situations where fiber that originates in town A, serving a customer in town A, but passes through town B, towns shall provide an IRU at no/nominal cost of use among themselves. Alternately, premises that are easier to serve from a neighboring, participating town can be considered customers of that other town. Legal costs and potential engineering work will be borne by towns impacted.
Joining the Regional Operation
In order to be part of the regional operation, towns must sign an Operating Agreement with WiredWest. The individual town MLP’s have the authority to enter into contracts, but it’s recommended that the Operational Agreement should also be reviewed and approved at a Town Meeting. When 20% of the premises in town are receiving Internet service, then the network is considered to be operational in that town. The contract term begins at this time.
After the initial construction period, towns that have not already joined may submit a petition to join, which must be approved by ⅔ of the board. There may be some charges for equipment, connection, or other costs.
Towns may not withdraw within five years after the town is operational (see above), perhaps longer if a service contract requires a longer period. Towns must give one year’s notice before withdrawing due to municipal finance cycle. Towns must plan for the upcoming fiscal year.
No invested funds are reimbursed and no penalties are assessed. Any transition costs will be billed to the towns.
If the town withdraws from the coop, partway thru the term of service, no customer contractual penalties will be charged. The contracts would be assigned to whoever takes over the broadband service for the town.
Each town has one vote. Every town has an equal voice in decision-making.
At startup, each town’s contribution towards shared infrastructure capex and initial operating funds needed by the coop will be proportional to their premises counts as of the start of the project.
WiredWest will contract a vendor to bill the customers and they pay WiredWest or another vendor who handles collections. Towns do not have to do their own billing or collections. Subscription price and all perservice charges will be the same to all customers of the coop. Towns may impose a surcharge on their customers that will be billed by WiredWest and flow through to towns. The surcharge will be itemized separately on the customer bill. The surcharge can be a mechanism to have subscribers fund debt service, but may be used to cover other broadband related costs. Towns should minimize the use of surcharges as the increased cost to subscribers may decrease the take rate and reduce income.
Wired West will hire all necessary vendors to handle operations and maintenance. Subscription income is first used to pay all operation and maintenance costs and fund operating reserves. That includes all pole related costs (licenses, insurance and bonding) but does not include debt service or depreciation reserves.
If there are operating losses, either service rates will be increased (with the consent of the board) and/or towns will be assessed for the shortfall.
If additional funding is needed to meet operating costs or for other reasons, contribution requests must be approved by 2/3 of the members, based on 1 town 1 vote. Additional funding requests would need to be approved at town meeting. If towns are assessed a fee, it can be raised through taxes (affecting all residents) and/or through subscriber surcharges (affecting only people who take service).
At the end of the year, based on prior year’s audit, the Board will vote on how much of any excess earnings to retain and how much to make available for distributions back to the towns. Such distributions will be allocated proportional to topline revenue per town. Towns must have a minimum take rate of 50% to qualify to receive distributions.
Each town is responsible to fund their own depreciation reserve per legal requirements. This will be an additional line item on each town’s annual budget. Since each town owns their own assets, they are responsible for paying the replacement costs of the equipment. The nonrecurring capital costs ( e.g. engineering, pole surveys, pole remediation, etc.) are not subject to the depreciation reserve. According to state law, towns must begin funding their depreciation reserve in the FY in which the asset is placed into service.
Glossary of Terms
CAPEX, a capital expenditure or capital expense
Capex is an expense where the benefit continues over a long period, rather than being exhausted in a short period. Such expenditure is of a nonrecurring nature and results in acquisition of permanent assets. It is thus distinct from its counterpart, Opex, or recurring expense.
FY, a fiscal year
IRU, an Indefeasible Right of Use
An IRU is a permanent contractual agreement that cannot be undone, between the owners of a communications system and a customer of that system. The word “indefeasible” means “not capable of being annulled, or voided, or undone.” The customer purchases the right to use a certain amount of the capacity of the system, for a specified number of years. IRU contracts are almost always long term, commonly lasting 20 to 30 years. These contracts obligate the purchaser to pay a portion of the operating costs, and the costs of maintaining the cable, including any costs incurred repairing the cable after mishaps. The right of use is indefeasible, so the capacity purchased is also nonreturnable, and maintenance costs incurred become payable and irrefutable.
MLP, a municipal light plant
A law unique to Massachusetts, created over 100 years ago, that allows towns generate their own electricity after voting at town meeting 2 times (MGL 164, Section 34). MLP towns may legally form cooperatives made up exclusively of MLP member towns (MLP 164, Section 47C). WiredWest is an MLP Coop.
ONT, an Optical Network Terminal
A small electronic interface component placed on the outside premises connected to the Internet with optical fiber. An ONT is used to terminate the fiber optic line, and to demultiplex the signal into its component parts (voice telephone, television, and Internet), and provide power to customer telephones. As the ONT must derive its power from the customer premises electrical supply, many ONT have the option for a battery backup, to maintain service in the event of a power outage
OPEX, an operating expense, operating expenditure, operational expense, operational expenditure
Opex is an ongoing cost for running a product, business, or system. Its counterpart, a capital expenditure (CAPEX), is the cost of developing or providing nonconsumable parts for the product or system. For example, the purchase of a photocopier involves CAPEX, and the annual paper, toner, power and maintenance costs represents OPEX.
SFP, a Small FormFactor Transceiver
An SFP is a compact, hotpluggable transceiver used for both telecommunication and data communications applications. It interfaces a network device motherboard (for a switch, router, media converter or similar device) to a fiber optic or copper networking cable. SFP transceivers are designed to support SONET, gigabit Ethernet, Fiber Channel, and other communications standards. Due to its smaller size, SFP obsolesces the formerly ubiquitous gigabit interface converter (GBIC); the SFP is sometimes referred to as a MiniGBIC.