If They Can Do It

ppp_logoI think everybody agrees that we don’t have enough last mile fiber infrastructure in this country to bring high-speed internet to the homes and businesses that want it. For various reasons the large telecom companies have decided to not invest in rural America, or even in any town or neighborhood where it costs more than average to build fiber.

Meanwhile we have a lot of municipalities that are interested in getting fiber to their communities but don’t know how to get it financed. Lastly, from what I read, we have tens and maybe hundreds of billions of dollars of potential investment money on the sidelines looking for solid investment opportunities. It seems like there ought to be an easier way to pull these things together because all of the components are there to make this work – the customer demand, the community desire and the money needed to get it done.

One has to look north to Canada to see an economic model that offers an answer – public private partnerships (P3s). For an example of a working investment model, consider  Partnerships British Columbia. The venture was launched in 2002 and is wholly owned by the province. It’s operated by a Board comprised of both government and private sector members.

The primary function of Partnerships BC is to analyze potential infrastructure projects and then attract private capital to get them constructed. The benefits to the province are tremendous. First, Partnerships BC stops the government from undertaking projects that don’t make financial sense. After all, governments often like to build ‘bridges to nowhere’. Partnerships BC will analyze a project and make certain that it will cash flow. They then attract private bidders to build and operate the most financially attractive projects.

They bring private money in to take the place of tax money and in British Columbia this is getting things like hospitals and roads built without putting all of the burden on the taxpayer. Additionally, projects built with private money cost less to build. We know all of the horror stories of cost overruns on government-built projects and that doesn’t happen when there are financial incentives for the private entities to build things efficiently. In fact, a few hospitals were built so far ahead of schedule in BC that the province was not ready for them.

One of the biggest complaints against government fiber projects in the US is that government has no business operating a competitive business. The P3 model eliminates that complaint as well since it attracts qualified operators to build and run projects. The telephone companies in the US should all be in favor of having a P3 structure here since it would help them to finance new fiber projects. Smaller and mid-sized telecoms have always had trouble finding capital and a P3 fund would bring money that might not be found elsewhere.

And of course, while I have a bias towards funding and building fiber projects, a state P3 fund would fund almost any infrastructure project that has a demonstrable cash flow such as hospitals, water systems, roads, railroads and bridges. I keep reading that we have a multi-trillion dollar infrastructure need in the country which is far greater than the combined borrowing capacity of governments. So we need to wake up and look north and use the P3 idea along with any other idea that will let us dig ourselves out of our infrastructure hole. America is crumbling and P3s are one part of the solution that could be implemented immediately.

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