- Incumbents don't like municipal networks and claim they shouldn't use taxpayer money to compete
- But municipal revenue bonds don't require any taxpayer investment
- And they offer a low-cost way to fund new fiber broadband networks
At this week’s Broadband Nation Expo, a panel will discuss financing fiber networks. And Fletcher Kittredge, chief strategy officer at the service provider GWI, plans to share his expertise, more specifically, on financing public networks with municipal revenue bonds.
“No taxpayer money is involved in municipal revenue bonds, and it’s a really low-cost way for munis to fund networks,” he said.
Whereas a general obligation bond is secured by and paid for by taxes, a municipal revenue bond is secured by and paid for by the revenue of the network. And while incumbents may complain and even sue towns and cities that try to fund a broadband network with taxpayer money, incumbents don’t have that argument when it comes to municipal revenue bonds.
For example, Kendall County, about 90 miles west of Chicago, hired Pivot-Tech to build a new broadband network for the county. And Pivot-Tech decided to fund the project with a tax-free municipal revenue bond.
Kittredge said that with revenue bonds, “You need to make sure you meet all the criteria to do this. There’s some rigor there. You need a network that is up and functioning and producing revenue.”
Fierce Network asked how a municipality that wants to build a fiber network can get something up and running so that it has revenue and can leverage a municipal revenue bond.
“You need to build a capital stack,” Kittredge said. Usually one or more investors put in some equity at the base, and they probably also incur some debt.
“As time goes on, you get cheaper forms of money with lower risk to whoever’s lending it to you,” he said. “With BEAD, the grant acts as the equity and gives the jump start that allows you to start generating revenue.”
Kittredge has worked with ECFiber, a municipal broadband network across 31 rural Vermont towns. ECFiber has received total bond commitments of $63.3 million.
Private companies are also tapping revenue bonds for their financing. “Lots of private ISPs have been securing their debt through revenue bonds,” said Kittredge. “If you look at all the different types of financing, bond financing – when backed by a revenue stream – is a lot cheaper than private equity or banks.”
Some larger, established service providers are also leveraging asset-backed securities (ABS).
For example, the public company Frontier inked a $2.1 billion ABS deal in August 2023, making it the first public broadband company in the U.S. to secure funds backed by fiber-to-the-home (FTTH) assets.
Fierce Network is gearing up for our big Broadband Nation Expo Oct. 9-11 in Washington, DC, where leaders in broadband will gather for the biggest national event to talk about BEAD. Don’t miss the opportunity to meet with your industry peers. Be sure to register here!