Community Needs

What percentage of the population of homes and businesses can get access to broadband when they want it? If there is a relatively high proportion of population with access, e.g. 80% to 90%, then the incremental cost of serving the last 10% to 20% can be very high, especially if this last portion of unserved population is in sparsely populated areas.

Are there large gaps in broadband service availability and what is the nature of those gaps? There may be pockets of residential areas that are particularly difficult or costly to reach with the available technologies, or it may be that the population density in some areas makes the cost of delivering service too high to justify the additional revenues.

What are the factors contributing to the lack of service availability? Is it simply the ISP business case and capital costs, or is it a technology limitation (or both)?

Understanding the issues behind gaps in broadband coverage should also be considered in the context of broadband service quality where it currently exists in the municipality. If the existing technology does not meet the level of high-speed broadband and the cost for extending coverage is high, then investing in extending this technology may not be the best answer.

Service quality can be broken down into two main areas: speed and reliability. The goal for high-speed broadband should be at least 25 Mbps download and 3 Mbps upload speed (25/3). Some technologies can deliver these speeds with little problem today while others cannot (refer to the broadband technology overview for more information). Even when suitable technologies exist in a municipality that can support 25/3, networks may require upgrades to be able to offer services at these speeds.

Communities should engage with existing ISPs to explore what speeds are possible with existing networks and what it would take to achieve 25/3. Ultimately, if the technology and networks can support it, you will want to get some estimates for what it would cost to deliver 25/3. ISPs may not want to provide estimates without a formal request (and risk being committed), but even some broad ranges can help in assessing options going forward.

While speed is important, another key factor in broadband service quality is reliability. While reliability can depend on the quality of the ISP implementation and operations, most well-established ISPs will not have these reliability issues as they are a core aspect of their business. Some technologies, however, are inherently more reliable than others and this is clearly demonstrated by user feedback on satisfaction with reliability of different technologies.

This guide does not intend to prescribe that a specific technology should always be used. When a choice is available, however, it is important to consider the pros and the cons of different technologies. For new network builds, fiber technologies are the “gold standard” for providing connection speed and reliability.

Do you currently have more than one ISP serving part of your municipality? Can your municipality support more than one ISP, i.e. is there a sufficient customer base that each ISP can use to support their business case?

Where a municipality is able to justify more than one ISP there is a natural force for competition. This affects service pricing and affordability. Where there is insufficient market size to enable competition, other steps may be required to ensure that services are offered at affordable and at competitive price levels.

The size of the municipality in terms of households and business establishments, as well as their geographical distribution, is a major factor in determining the viability of the business case for broadband. The size also needs to be viewed from a few different perspectives depending on the community situation in relation to other dimensions.

• The total size, especially for new network builds, is the base for the addressable market for revenue generation and the cost of network build and operations.
• The size of the unserved (or under-served) portion of the municipality, which is required for assessing the business case for extending or for upgrading existing networks.

The population density, or more specifically the number of households and businesses per square kilometer, can significantly affect the business case. Typically in any municipality there is a high density core area with the majority of the population, and lower density areas in the periphery. Generally, the network cost per premise passed increases significantly – as much as two to three times the average – to reach customers in low density areas.

For sufficiently dense areas with good demand for broadband, even small populations can create a positive business case. In practical terms, however, the fixed costs for establishing a network and local operations relative to the incremental revenues and margins can make investing in smaller communities unattractive to ISPs. Even when investing in a small municipality is seriously considered, requiring full coverage to include the lower density and the more remote areas can break the business case.

The larger the municipality or planned service area the better the business case becomes due to economies of scale that offset the fixed costs. Naturally, larger communities with more potential customers are more attractive to ISPs. For this reason, small communities can benefit from partnering with other communities in the nearby geography, where possible, to form a larger market and to create opportunities for better economies of scale. This approach is particularly useful when looking at the options for new network builds, whether by a new ISP or by building your own network.

The demand for broadband services by households and businesses in the municipality directly affects forecasts for service adoption (take rates) and the revenue required to make the business case work. There will be an existing level of demand and service uptake, and demand can be increased positively by effective promotion, both by the broadband providers and by the community broadband proponents.

For new network builds it is important to have realistic service subscription forecasts and plan efforts to bolster demand and achieve the adoption rates as quickly as possible. In cases where there are existing service providers, any new network builds and service offerings will be competing for market share. As a result, take rates for the new network can be expected to be lower. Despite the availability of faster and better service, not everyone will be motivated to change to a new service. Subscription rates and affordability are also factors in broadband user decisions for service selection.

Understanding demand for improved broadband services is also important for broadband projects designed to upgrade existing networks to faster broadband. Generally, increasing the broadband service capacity (where possible) through network upgrades requires some network-wide investments. There is no guarantee, however, that existing customers will upgrade to a better level of service once it is available, especially if it means an increase in monthly costs. If there is minimal incremental revenue available from the enhanced broadband service offerings, then there is little incentive for an ISP to invest in network upgrades.

The topology of the areas to be served influences costs for both wireline and wireless technologies, especially when addressing the more remote and sparsely populated areas of a municipality. Hill and rocky terrains can increase costs for provisioning wireline technologies, whether it be trenching cable or mounting poles. Hill and tree terrains present challenges for wireless technologies that rely on clear line of sight. These topology challenges can be overcome, but at a cost that may break the business case.

For communities that currently have unserved areas and have inadequate broadband, existing ISPs, or potential ISPs where there are none, cannot justify the investment in network builds or upgrades. That status quo situation is not going to change without municipal involvement and commitment.

The options available to communities are explored further in Network Options. Whichever options are considered, the common element is that some level of investment by the municipality will be required, both financial and in human resources and other assets. Therefore, both the willingness and the capacity of the municipality to be involved and committed to bring the needed resources to bear over a period of time, which could be measured in years, is essential.

Successfully pursuing a broadband initiative requires a core leadership as well as broader and active support across the community. There needs to be a shared vision and understanding of the goals and benefits to the municipality and a commitment to making it happen. Only in such conditions can the financial and other resources be garnered, and the capacity to deliver established.