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WiredWest to seek towns’ support for broadband loan

CHARLEMONT — Building a fiber optic broadband network to serve about 28,000 households in rural Western Massachusetts will cost around $100 million, and WiredWest may ask member towns to “co-sign” for a 20-year loan of up to $50 million to extend the infrastructure to homes and businesses.

On Wednesday night, WiredWest Executive Director David Epstein and Executive Committee Chairwoman Monica Webb outlined several possible funding strategies to about 40 town officials from the cooperative’s member towns.

WiredWest was formed in 2011 to bring broadband to rural towns that have been bypassed by commercial providers.

Gov. Deval Patrick’s $50 million information technology bond bill request is currently in a state Senate committee, and if eventually approved, it would provide the other half of the money needed for broadband build-out for roughly 45 towns in the region. Webb said they hope the governor will be able to sign the bill into law in the next three to four months.

But that leaves $50 million to be raised for the project that would extend fiber optic Internet connections from the “middle mile” that has just reached many public buildings like town halls, schools and libraries.

“People want to know when they can get the web at home and at their businesses,” he said. “We are looking for money under every rock. We don’t want to wait for Comcast or Verizon. We can raise funds, but we cannot raise a revenue bond, which is an advance on future revenue made by user fees.”

Epstein said businesses can get revenue bonds if they have the credit history and track record to show they will pay the loan back from future income. “What we do think is viable is to offer a GO (General Obligation) Bond with WiredWest, as a quasi-municipal entity, an aggregation of your towns.”

But to get such a loan, WiredWest would need borrowing authorization from some of its member towns.

“WiredWest is not credit worthy,” he said. “We cannot borrow the money, because we don’t have any revenue. WiredWest is like a 17-year-old kid who wants to buy a shiny new car: He needs his parents to co-sign the loan.”

Epstein said about 45 percent of its survey respondents — about 12,600 people, said they would sign up for the WiredWest-built service if it were available. He said WiredWest would need at least a 40 percent subscriber level, so that the response strongly indicates that loan money spent on infrastructure could be fully repaid without affecting town finances.

To give official borrowing authorization for WiredWest, town officials would need two-thirds vote of town meeting and a Proposition 2 1/ 2 debt-exclusion to raise the tax levy limit to the amount vouched for.

If WiredWest borrowed $50 million for half the build-out, its costs would come out to about $1,800 per home. Over the 20-year borrowing period, the cost is about $90 per home per year,” said Epstein. “We think default is extremely unlikely, given the demand for these services.”

“We are not interested in a plan that has $50 million of debt on it,” he added. “The less we have to borrow, the lower our break-even point and the lower the risk.”

Webb says that WiredWest is considering the option of being the service provider, but is also exploring a public-private partnership with an operating Internet service provider.

Other strategies

“We’re aggressively going after federal funds,” said Epstein. He said there is about $4.3 million a year available through the Federal Communication Commission’s “Connect America Fund” that might be used for broadband build-out. He said the fund was originally created to offset phone service providers’ costs in “high-cost areas” like rural Franklin County, where geography and sparse populations makes service more costly to provide. Epstein said WiredWest has been speaking to officials about using this fund for broadband development.

WiredWest submitted a five-page application explaining its broadband plan and asking the funders to “write one check for $25 million,” instead of apportioning the sum in small amounts.

“The FCC funds would be a grant — not a loan. “Epstein said decisions on awarding the grant are likely over the next two months. “They’ve told us they want to put this money toward experiments this coming year,” he said.

“We’re also looking to partner with private-sector service providers for venture capital,” he said.

Webb said the next steps are to complete grant and loan applications to federal agencies, to finalize precise debt terms with the state treasurer’s office, a bond lawyer and a municipal finance expert.

A few selectmen present expressed doubt that the borrowing authorization request would be approved in their towns, which could not afford to shoulder the cost if the loan were defaulted on. Some noted they have many senior citizens who don’t have computers and who probably don’t care if their town has high-speed Internet.

Epstein said having broadband could revitalize towns, attracting younger residents and new businesses. He said older people are increasingly buying iPads and tablet computers. He said broadband access raises the value of homes, and that some home buyers won’t even consider a location without broadband.

He said, as people without high-speed Internet try out the technology at their local libraries, schools or town halls, they are more likely to want the service in their home.

You can reach Diane Broncaccio at: dbroncaccio@recorder.com or 413-772-0261, ext. 277

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