Nextlink, Ting, Calix dish on the dos and don’ts of fiber funding

FIBER CONNECT, ORLANDO, FL — It feels like broadband funding is flying at operators from left, right and center. But how does an ISP figure out which funding source is the right fit, and what do they need to know about applying for and actually spending that money? A panel comprised of experts from Nextlink, Ting Internet, Calix, Fujitsu and COS Systems tackled the ins and outs of the funding landscape this week at Fiber Connect.

Here are the top takeaways from the session.

Don’t: Expect all forms of funding to be created equal

There are several different sources of funding on the table for operators at the moment. These include public money from local (town and county), state and federal sources, as well as private funding from investment groups. Patrick Mulhearn, director of Public Policy and Community Engagement at Ting, said the choice of which to pursue will depend on what exactly an operator is trying to accomplish – and how quickly.

For instance, public money may not be the best option for an operator looking to just fill in a small neighborhood because public entities are generally looking for a comprehensive strategy to close the digital divide when awarding grants, he said. Mulhearn added public funding might not be the best option for operators looking to build immediately because the grant award process and contract execution can take time.

Nextlink CSO Claude Aiken seconded the point. Public and private money are “two wildly different forms of funding with wildly different strings attached.” Private investors are generally less focused on geographic areas and more on macro company level statistics as well as metrics like profitability, margins and the ability to repay debt. All in all public and private money come with “very different ways of looking at operating as an ISP,” he said.

Do: Engage with stakeholders early and often

Jessica Koch is the Broadband Program Manager at Calix but previously spent nearly 17 years as the Controller at a Colorado ISP. She said that when it comes to public money, there’s usually a multi-step process involved before the grants go out to bid. And if an ISP hasn’t engaged with the local community and policymakers before the application window opens, “it’s too late oftentimes because of the amount of work that goes into planning for and pitching your story for that build.”

She noted that public entities are asking for more and more financial data from applicants to demonstrate the financial sustainability of their projects. They’re also asking for things like subscriber forecasts and cash flow statements as well as evidence of community support for a given project.

But engagement doesn’t end there. Fujitsu Broadband Practice Leader Anthony Bednarczyk said there can be a surprising number of stakeholders involved in projects that use public or private funds. Managing information between organizations and throughout the build process is key, he said.

“No one should be surprised as to where you’re going, what’s required and where you are,” he stated.

Don’t: Expect things to move fast

There’s an old adage that the gears of government turn slowly and that holds true when it comes to broadband funding. Koch noted that when she worked for the Colorado ISP, it took 13 months from the time the ISP received an award letter to the time the contract was actually executed with the state. So, operators looking into public funding should expect something of a wait.

Additionally, Aiken noted that in some cases money isn’t awarded until a project is complete. So, ISPs need to be prepared to fund their operations without that cash until the build wraps.

Do: Read the fine print

No entity – public or private – is going to hand over thousands or millions of dollars to an operator without expecting something in return. And when it comes to broadband funding, those expectations in many cases are quite specific when it comes to things like deployment timelines, revenue and reporting requirements. Public money can also come with requirements related to specific supply and labor procurement processes, the panel noted.

“Know what you’re signing up for...and clearly understand, have a conversation about what it will mean to comply with the language that’s in there,” Koch said. “If you’re not used to taking public money or working with a private investor, the best thing you can do for yourself is to clearly understand the rules of the game before you start playing. It will save you a lot of headaches.”

Isak Finer, CRO of Swedish software company COS Systems, added it’s key for an ISP to ensure they can provide the appropriate data to meet any reporting requirements included in a financial agreement. He noted different entities can have different reporting needs, so having data that can be accessed flexibly and contextualized to provide the required metrics is important.

Top takeaway: Be prepared

All the panelists agreed work on a project begins well before money is awarded. Due to the strings attached to broadband funding, it’s key for operators to try to prepare as much as possible and eliminate as much risk as possible before an award is made.

Aiken said that means making sure an operator’s supply chain partners can meet increased demand associated with a project on the schedule required. Or, if a special procurement process for vendors or labor is required, understanding what that means and setting up the necessary processes to run that procurement. If it’s a large project, it also means looking at the personnel implications of, for instance, doubling the size of an operator’s network footprint.

“Due diligence upfront and preparing for that moment at which the clock starts is going to be absolutely critical,” Aiken said. “There can be all sorts of curveballs thrown during the construction process. You want to eliminate as many of those ahead of time as possible because there are going to be things you did not plan to happen.”

Catch some of our other stories from Fiber Connect 2023 here, here and here