Town needs LGC OK for $4.6M loan for fiber highway

With the passing of its resolution approving an Installment Financing Contract at the Dec. 13 Town Board meeting, the town has taken the first step toward making a broadband highway through the town limits on its 2,700 poles a reality.

To entice broadband companies and to set up a “smart-city” grid, the town plans on shouldering the expense of constructing the fiber network with a $4.6 million loan from BB&T. 

A commercial contractor will build the aerial network for the town. Wide Open Networks, who will potentially run the operation, will provide the capital to build the underground portion. 

“They are consulting with their investors about what they will contribute and the potential return over a 10-year lease period which NC law prescribes. The town is not the only entity exposed to risks,” said Mayor Pat Taylor. “So, even if the LGC [Local Government Commission] approves the loan, this may not move forward.”

The plan is for Wide Open Networks to lease the fiber highway from the town and to run the operation which will involve enticing broadband companies to drop lines from the poles directly to residences.

Before the $4.6 million loan can be finalized, the LGC must give the OK. It goes over the town’s finances and decides if it can handle the long-term investment.

According to the audit presented Thursday night, the town with almost $4 million in its undesignated fund balance and the money it makes from its enterprise funds – specifically its electric fund – it is likely the LGC will give the OK.

The resolution being sent to the LGC says no tax increase will be imposed to fund the fiber highway. The commissioners made this clear at the meeting even though some citizens doubted their word. The resolution reads: “… does not anticipate a future property tax increase to pay installment payments.”

Citizens also questioned the legality of the town competing with private enterprise. Though the NC General Assembly has seesawed back and forth on the issue – now a public/private partnership is allowed. By law (HB129), NC government entities are essentially prohibited from launching new ISP service directly to residents – that window has now closed – but they can partner with a private entity, which is what Highlands is doing with Wide Open Networks.

The town’s Altitude Broadband was launched when the window allowing public entities to launch services to its residents was open. It is grandfathered in.

In addition, people at Thursday’s meeting asked how the town could do this considering the bottom-line.

Commissioner Amy Patterson explained that the town sees this as needed infrastructure, like a utility, and it doesn’t need to make a profit … it needs to offer the service.

Experts say the fundamental reason for public enterprise is it can undertake unprofitable investment where there are community benefits – what economists call positive externalities – that make the investment economically and socially desirable.

The town’s plan is to use its fiber highway as a “smart grid” – not for broadband. The grid will enable administrators to enhance the quality and performance of services such as energy and utilities to hopefully reduce resource consumption, wastage and overall costs.

Meanwhile, the need for fast, reliable broadband is stronger than ever. People want to live in country settings and work remotely – connecting themselves to urban centers on which they rely for their livelihood but where they no longer want to live. This, according to MayorTaylor falls under the category of Economic Development, which he considers important for the town’s future.

In Highlands there is Altitude Broadband, Northland Cable, Frontier and Highlands Cable Group. So, what’s lacking?

According to Nin Bond, owner of Highlands Cable Group, what’s lacking is that not all of the town’s 2,700 poles can hold all of the companies because many of the poles are too short. The 40 inches required between each providers’ line as outlined by the National Electric Safety Code can’t be achieved.

Numerous poles have been replaced with longer poles, but not all of them. This is a long, tedious and expensive process. Consequently, Bond said he can’t grow his system.

According to Commissioner Patterson, part of the $4.6 million being sought will be used to change out all the poles within the town limits that are still too short. The fiber highway will be attached to those poles which will enable private companies to offer service to residents who will be free to choose the company with which they want to do business.

Furthermore, companies can use the town’s fiber highway as a jumping off place to extend outside the town limits which is where connectivity is sorely needed.

The private company, Wide Open Networks, is leasing the town-owned fiber for its backbone “highway” and will be in charge of running that operation. The town considers this a win-win. Providers will no longer have to pay to build the infrastructure – as they are doing now – but will reap the benefits of servicing residents.

Bond said he will still be relying on his own “highway” so the town’s fiber highway and the Wide Open Networks affiliation won’t change anything for him.

He said he has hundreds of customers and scores of others just waiting for his lines to become available. This will be possible once the short poles are switched out and the providers on the poles who are out of compliance are forced to move their lines to accommodate others.

After years of trying to get providers out of compliance to move their lines, the town has amended its Pole Attachment Ordinance to include a strict timeline to comply and if companies don’t, they are charged $100 a day. Furthermore, the town has hired a contractor to work directly with those providers and is expediting the process. 

The town now awaits word from the LGC and from Wide Open Networks.

By Kim Lewicki, Highlands Newspaper

Leave a Reply