- After being snubbed by local incumbent providers, Kendall County, Illinois, hired a private company to build a community broadband network
- Pivot-Tech is funding its network via a tax-free revenue bond, which is a first, as far as Pivot-Tech is aware
- The county doesn’t have to kick in any money, which is important to thwart objections by incumbent providers
MOUNTAIN CONNECT, DENVER — Kendall County, Illinois, wanted to deliver a better broadband experience to its residents. So, it reached out to the local incumbent providers which reacted with smugness and arrogance. The county was so put off by the incumbents that it instead pursued a public-private broadband partnership.
Kendall County, about 90 miles west of Chicago, is one of the fastest-growing counties in the United States. But many of the county’s residents have been dissatisfied with their selection of broadband providers, which include AT&T, Comcast and Metronet. So, the county decided to put out a request for proposal (RFP) for a private company to bring some broadband competition to the area. Via the RFP process, the county selected Pivot-Tech in August 2023 to build a fiber network.
Zach Bachmann, a Kendall County board member and chairman of the Connect Kendall County Commission, said before it embarked on the RFP process, the county had conversations with the incumbents. But those conversations were not fruitful at all.
Bachman said the county was willing to work with the incumbents to improve broadband connectivity for residents, but their representatives “were smug.”
“They didn’t come there to be a partner,” said Bachman. “They said, ‘No we don’t have a plan for baseline affordability. No, we won’t connect your anchor institutions. We’re doing our own thing, bye.’”
So, the county decided to do its own thing and issue an RFP.
Financing the new network
The first order of business for Pivot-Tech was to decide how to finance the new network. According to company executives, who spoke on a panel at this week’s Mountain Connect conference, the company looked at a variety of funding mechanisms, but ultimately devised a unique way to fund its project.
Jim Cannon, CEO of Pivot-Tech, said the company set up a non-profit organization as the project company, which in turn offers a tax-free revenue bond. The bond is sold on the bond market by companies that offer mutual funds. The returns on the bond are lower than some other investments, but they can be desirable to investors in high tax brackets.
“It’s quite different than we’re accustomed to normally,” said Cannon. “It’s tax exempt. We’re not paying taxes on running a network.”
Cannon said, “There’s no risk at the county level. We’re not asking the local community to do anything in terms of guaranteeing this money.”
Not asking the county for money is important because incumbent providers don’t like public-private broadband partnerships. Nor do they like municipal broadband because, well, they just don’t like new competition. But funding through a tax-free revenue bond not only thwarts objections from incumbent providers, it also has other benefits for the community. The non-profit can use excess profits to either expand the network or return profits to subscribers to offset their bills.
The county also received $15 million in government grants from Connect Illinois to funnel into the project in order to serve between 3,000 and 5,000 underserved and unserved residents in the county.
Bachmann said the county had to help folks at Connect Illinois to understand the project because it was different than the usual grant application from service providers. “A community broadband network is a little out of left field,” he said. “We submitted in December 2023 and got the notification of award in January 2024.”
The grant awards were another poke in the eye to the local incumbents who had refused to work with the county, because these incumbents had also applied for the same grants.
Pivot-Tech starts with fixed wireless
Construction of the new fiber network is slated to begin this fall. Pivot-Tech is going to run the new network at first, and then later it plans to make wholesale deals with other service providers to lease the open-access network.
To kick-start the project, Pivot-Tech purchased a small fixed wireless operator in the county. “We would have injured that business if we built fiber directly to all his subscribers,” said Cannon. “We decided to buy this fixed wireless provider and pick up 1,000 subs and have the basis as an ISP in Kendell County.”
He said the purchase of the fixed wireless provider also helped with Pivot-Tech’s financing scheme because it’s issuing revenue bonds, so it’s good to actually have some revenue from the start.
Michael Adams, Pivot-Tech’s CTO, said the public-private partnership with Kendall County has high hopes for uptake by subscribers. He cited Utopia Fiber in Utah, which he said has been getting more than 35% subscriber penetration in pretty much all its markets.