Neighborly Delivers Open Access Fiber Broadband Infrastructure for U.S. Communities, Without Municipal Bonds
Neighborly connects communities with capital for critical public infrastructure. Since 2012, we successfully deployed capital into a range of inspiring projects nationwide — including schools, parks, libraries, community centers, and the roads and bike lanes connecting such things. This year we have focused our efforts on one project type that we believe is the defining infrastructure challenge and opportunity of our time: open access, fiber-extensive broadband networks to truly connect communities.
We think of the approach as “information infrastructure,” since the outcome is designed to function like our nation’s physical road networks work today — rather than the tangled, uneven patchwork of legacy corporate telecom “roadways” currently serving parts of our nation.
This commitment to information infrastructure also came with the realization that, despite its vital role in funding well-established kinds of community infrastructure, the municipal bond market we worked in — as an industry — was not well-suited to this task. The tight-knit industry is increasingly less reliable as an efficient funding source for newer, smaller infrastructure investment opportunities—especially in communities that lack meaningful market access.
The path we’re on now is the right one for us and for communities across the country, but it also required a large and painful reshaping of our business. As a result, we wanted to share our the thought process behind our decision.
Why focus on information infrastructure?
- We live in the connected economy, under a new economic operating system defined by remote work, distributed teams, and a near-term future proliferation of digital services only available through strong connectivity — for example, distributed healthcare.
- Every industry has, in some capacity, already undergone some digital transformation and therefore already-connected places and people are racing ahead. Under-connected people and places continue to fall behind at an accelerating rate: we see this in the cruel and widening homework gap, the growing workforce skills gap, and in whole swaths of our society becoming more unequal and less in touch with the rest of the world each day.
- Open access, fiber-extensive broadband networks are the 21st century pathways to opportunity: critical for the continued economic innovation of our nation’s places, and the essential information foundation for every future-ready community. They are this century’s equivalent of the roads, electric grids, and water systems that previously defined our nation’s leaps forward.
The ability to participate in an increasingly digital economy, to better direct precious resources, to better connect constituents to services, hinges on ensuring access for all and not leaving millions unable to participate. To help ensure our nation remains competitive with the rest of the world, to ensure access to the global brain, to each other, and to the future of many services — we knew we needed to laser focus on open access fiber-extensive networks for communities.
Why not municipal bonds?
Financing more than two centuries of impactful public projects, the humble municipal bond is the original impact investment. It helped build our nation. But the market today faces challenges that make it too slow and too costly to work for innovative public projects — on the community level — like open access broadband networks.
The path to municipal broadband is also fraught with hazards. Communities undertaking their own networks are expected to manage the full deployment process — spanning technical, legal, and financial matters. In every U.S. municipal network we observed, one or more subtle but key decisions undermined either the technical or financial strength of the asset, and in every case cost the community’s leadership in time, stress, and diverted focus.
For communities willing and able to rely on traditional public finance to build their own network infrastructure, we observed two categories of structural hurdles:
Policies protect incumbent telecom firms.
In many states, it’s either excessively difficult or outright illegal to use public resources to build community broadband networks. This is well documented in the crucial work of ILSR’s Muni Networks.
Industry fees box-out most communities.
Over the course of two centuries, fees have become extraordinarily high and, for the most part, are fixed on a per-transaction basis, regardless of the total value of the transaction. Once all advisory, underwriting, rating agency fees, DTCC fees, legal fees, and other expenses are priced in to the transaction, a community fortunate enough to be able to tap municipal bonds for broadband will overpay for its network by a considerable margin. As a result, today’s municipal bond market is too complex and expensive for most communities to access in a timely, cost-effective fashion.
Moving forward
Neighborly developed a faster, less expensive model to deliver critical information infrastructure communities need, and we’re getting started in key places like South Portland and the Katahdin region in Maine, and in Stockton, California
Utilizing private equity, and deploying techniques learned from fiber-to-the-home (FTTH) models around the world, Neighborly’s full service approach accelerates the deployment of community fiber networks and reduces the burden on local governments.
This model requires zero economic support from communities, and the resulting infrastructure promotes private sector competition: service providers have the opportunity to serve new markets and deliver new kinds of services, without any infrastructure expenditure.
Thank you to everyone already in the fight to better connect folks — we’re excited and honored to be joining you full-time. Thank you to those who have helped Neighborly’s newly focused team understand the magnitude of the invisible challenge facing our nation’s places, and our investors for seeing the path to intelligent infrastructure investment with us. Above all, thank you to the Neighborly team of skilled, passionate people delivering on our mission to connect communities.
Visit Neighborly.com to learn more.
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