The state of Washington presents an interesting case of state and local government support for public broadband: 28 of the state’s 38 counties provide utilities to residents through Public Utility Districts (PUD). Of these 28 county PUDs, 14 provide wholesale broadband service to all or many of their residents.
Many of the PUDs leverage a sort of public-private partnership (PPP) in which they fund the build out of fiber networks, and then contract with private retailers to provide Internet to customers. I found this model intriguing, so I began interviewing PUD broadband managers in the state to get a deeper understanding of how it all works.
The other week, Russ Brethower, the Fiber Optic Outside Plant Manager for Grant County PUD, kindly took some time to speak with me about Grant’s broadband service – its origins, trajectory, and his thoughts on the future.
“Grant decided to get into the fiber business in 1999-2000,” Brethower told me. “And so it did a pilot program, and then waited for some [state] legislation to pass to square things away, because the big telecoms – even in towns and counties that didn’t even have copper cable Internet – felt that the state shouldn’t let PUDs and utilities get into telecoms.”
Compromise legislation was passed in 2000, when the state of Washington determined to allow PUDs and utilities to provide wholesale fiber, but not retail. So per state law, all utilities that wanted to provide broadband would be required to find private retail providers to sell directly to customers.
The partnership model works quite well for Grant county. Today, according to Brethower, Grant PUD’s fiber network has 17 private retail providers on its system – considerable private sector competition for a central Washington county with 91,000 people scattered across almost 2800 square miles. And competition isn’t only occurring on the PUD’s network: “We built a lot of fiber in the towns around here – the biggest town has 25,000 ppl – and there we get 28% take rate, which is below our overall take rate, because once we stopped building fiber back in 2005, the phone company started putting in DSL, and the local cable company began offering cable modem service. So now you have 3 legit broadband providers in the populated areas of Grant County, so actually the more populated towns are where we have the lowest take rate. In rural areas, everybody’s on our network.”
Beyond broadband competition, the county’s fiber network has had some positive impacts on economic development: According to Brethower, “The fact that we have fiber [is key, because] we have huge industrial growth in this county – major data centers, a major carbon fiber manufacturer – and none of them would be here if they didn’t have fiber connectivity.”
Of course, this success hasn’t been achieved without some growing pains. While Grant PUD dipped into its ample cash reserves from the revenues from the two dams that it runs in order to build the network, it had a steep initial learning curve with respect to contractors and equipment: “One of the things that happened [early on, during the network build out],” Brethower told me, “was it turned out that none of the big equipment manufacturers [in our area] could perform, including Cisco – they couldn’t handle certain [Internet] traffic. So Grant County went through 2-3 iterations of first and second generation equipment. That was a very big waste of money.”
Early challenges overcome, and a successful broadband model with public wholesale and private retail Internet, Grant PUD seeks sustainability from diverse revenue streams: Right now, “50% of our revenue comes from FTTH, to residences. And probably about 25% from higher level business type services. That could be a home, too – Grant county has multi-million dollar farms run from homes – so we don’t differentiate [between customer types], we just charge by product. We [also] license out dark fiber. Right now a really nice revenue stream for us is carrying cellular traffic. We’re on the I-90 corridor between Seattle and Chicago. Pretty good cellular connectivity runs through our county, so we’re the fiber carrier of choice because we have fiber in the county.”
By combining public and private broadband successfully, Grant County PUD may represent the wave of the future – or, at the very least, a potential compromise solution to the polarizing debate between those who favor and those who oppose local public broadband investment.