A new not-for-profit organization is taking a fresh approach to aiding municipalities in building broadband networks, creating an unusual public-private partnership built primarily on community involvement. Public Benefit Broadband is still in its pilot stages but its goal is to create a reliable means of funding public networks that draws on cooperation and support from local officials, businesses consumers and service providers.

Ultimately the organization would like to see a new kind of funding develop, but that goal is down the road a ways, said Tim King, executive director of PB Broadband.

"It is the ultimate objective to create a new bond industry, and issue Community Technology bonds," said King. "But that's still just a vision right now. We're just getting started."

PB Broadband grew out of Ion Consulting, a group that for 10 years provided consulting services to municipalities, among others, in the telecom area. The not-for-profit group has actually been around since 2002, quietly working to set up state consortia and identify pilot communities and is only now moving into the spotlight.

"Everyone was starting to talk about collaborations between the public and private side, and we thought that if a public-private assembly was what was right, that's what we should do," said King. "In order to address the problem, which is always money and always seemed to be politics, it would make sense to create a national partnership. In our approach, the public partner is Public Benefit Broadband, a non-profit entity, which was created to take the public-private approach nationally."

While respecting the strong impetus many municipalities have for building broadband networks to attract or secure economic development, King said his experience leads him to question the wisdom of local governments tackling the challenge of building a government-owned network.

"You don't do this with municipal bonds," he said, pointing to the primary means many cities have of funding their network construction. "If we don't develop a new model, it will unravel. All these deals are undermined over time. The real problem is money and we can't raise money if we don't have scale."

Locally funded networks can be undermined by politically savvy incumbents who, at the very least, drag out the process interminably and rally local opposition, King said.

"I don't know of one deal that does not have the political buttons being pushed by those entities that are being threatened," he said. "It doesn't take much to light the fuse of public debate. That is part of the game plan and that creates delay."

When projects drag on, the possibility grows that local elections disrupt things further. "You may wind up with a new mayor who loves the incumbent," King commented.

That's one of the reasons PB Broadband's goal is to build time limitations into its business plan. "If you cannot get from vision to market entry in 12 month period of time, historically it begins to unravel," he said. "You raise citizens' expectations when you announce. The appetite of citizens to keep hugging you is limited. In pilots, we haven't achieved this. But going forward, we intend to."

PB Broadband's initial projects are in Pennsylvania and California, where it has successfully established state consortia--the California Broadband Consortium and the Pennsylvania Broadband Consortia--which serve as aggregators to local community networks. The state consortia seek funding from state and federal grants and from private investors. The PBC received a grant from the Appalachian Regional Commission, and has been raising money from investors, and applying for RUS funding as well. Somerset County will be its first pilot network. Beaver County and Potter/McKean Counties are also pilot projects.

In California, Fresno is the first pilot project.

Local governments who want to become members of the consortia go through a rigorous 10-point business plan process that PB Broadband conducts to determine feasibility.

In the first step, PB Broadband does local market research, determining first the amount of money being spent on voice, data, video and wireless in the given area.

"That is the revenue baseline of the market value," said King. "One of the things most political people don't understand is how much money is spent. In Somerset County, Penn., (one of the pilot markets) there is $83 million being spent a year, and they are underserved by broadband today. That will grow to $120 million in 10 years."

The vast majority of that money--about 85%--exits the local economy to create shareholder value for large incumbent service providers based elsewhere. One of the goals of local governments, said King, is to keep more of that money in the local economy. To determine if this is possible, PB Broadband does affinity research in the local area, via statistically valid polling that determines if at least 30%--considered the break-even point--of local residents would buy service from a local entity if one existed.

PB Broadband also searches for potential local partners, including service providers.

"If we don't have private sector partners that would play, there's no business case," said King. "The big mistake of the past was talking to partners before you do your research. We have researched the local market in advance and we have the basis of a business case that is very threatening to them or very appealing. We need a minimum of eight potential partners to go forward, and that can include ISPs, wireless guys, incumbents, the cable company, the provider from next county, and even equipment vendors."

PB Broadband is finding local ISPs ready, willing and eager to participate, as they are often being squeezed by incumbents' falling prices for broadband service. Larger incumbents are not jumping on board--yet. King believes PB Broadband projects could prove a mechanism for larger incumbents to phase out their rural areas--but that's another longer-term goal.

After the full 10-point business plan has been executed, the local entity can decide to become a PB Broadband member, and at that point, the not-for-profit organization gets paid based on its performance in raising funding, and delivering on its promises, said King.

As his organization is able to increase the number of local projects to a volume that creates economies of scale and processes that are replicated in each area, he hopes to build enough confidence in the investment community to launch a Community Technology bonds program.

"We know that this bond play is still highly suspect," King conceded. "The bond people we've talked to have said it could work. But the first ones are pure junk. I think this bond play is still a few years away."