Something New for Community Broadband

small town main streetToday’s guest blog comes from Milda Hedblom.  She is a telecom lawyer and consultant, a professor at Augsburg College, Mpls., and directs the Telecommunications Forum at the Humphrey School of Public Affairs, U. of Minnesota.  She can be reached at hedblom@visi.com.

The call for bigger, better and cheaper broadband gets louder with each passing year. The call from communities outside the urban footprint is the loudest. For more than a decade lots of energy has gone into finding a rural solution. In rural America the profile of aged wire line networks, spotty or absent wireless service, laughable broadband speeds, high prices and no choice is all too common. Taking their technology future into their own hands, some communities began to build and run networks much like the public electric utilities run by many municipalities. The political pushback has been strong and more than twenty states have been prodded into passing laws that forbid or severely limit municipals from the broadband and telecommunications arena.

Some creative thinking is needed so that communities in need can move forward even when the path of general obligation bonding for municipal broadband development is blocked. One form of creative thinking has been the promotion of public private partnerships which has a nice ring to it. Usually that has been thought about as some combination of community financial support and a willing private provider already in the business or a new private investor joining in an effort to upgrade or overbuild networks. The tricky part is identifying the incentives and the tools that could make a deal.

But there is a new option today called the public benefit corporation and I want to show why it is something new under the sun for setting up a community broadband network. Looking around you see that options are few and they include the municipal owned and operated network, the municipal owned but contracted operator network, the cooperative owned and operated network, the non-profit owned and operated network, and the open access network. Among these it is the municipal networks that have caused industry heartburn and political pushback. At the same time public funding is the most likely source of funds for building community networks and each year a few municipal broadband networks open their doors—except where they can’t.

The public benefit corporation may be a good option for communities wanting to build their own networks–especially where legal limitations hamper community development. The essence of a public benefit corporation is that it combines the best of public and the private worlds by allowing the legal creation of for-profit socially minded businesses. This type of corporation gains the flexibility and protections of a corporation but will obligate itself to serve public benefits which could be named as general or specific benefits. Building and operating a community broadband network could certainly be one of those benefits.

An extremely important fact about this type of corporation is that it could accommodate both public and private investments. Public economic development funds could be loaned to the corporation to help meet startup costs and private investors who want equity could invest. It should go without saying that a solid business plan is essential in any case.

More than two dozen states have put this option into their state statutes and in general the corporation runs under the general law for corporations for the state. The major innovative feature of the public benefit corporation is that directors are obligated to consider the interests of the constituencies to receive the benefits from the corporation’s activities as well as the pecuniary interests of shareholders. This fits very well with the growing trend for socially based investing and could help meet the gap in broadband development across America.

2 thoughts on “Something New for Community Broadband

  1. What I think is most significant about a public benefit corporation is that it is yet one more tool that can be used to bring broadband to a community. There are thousands of communities that are in states that have prohibition against municipally owned and operated broadband. But this is kind of corporation, along with structures like cooperative are two legal ways that can be used to avoid those kinds of prohibitions.

    If the goal is to bring broadband to a community then every option ought to be on the table for consideration. For a public benefit corporation to not trigger the various prohibitions against municipal broadband it obviously could not be owned by a municipal entity. This structure is a taxable corporation, and as such removes one of the big complaints against municipal broadband – that municipal entities gain an advantage by not being taxable.

    Even if your community is in a state that doesn’t allow for municipal broadband you should not give up on community broadband. There are several legal structures that should allow for the community to build and operate a fiber network.

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  2. Pingback: Something New for Community Broadband | Milda H...

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