PPPs – Issues to Consider

ppp_logoOne of the hottest topic in the broadband industry today is Public Private Partnerships (PPPs) where a commercial ISP partners in some manner with a city or county to provide broadband. The trend is probably being nudged forward by the many communities that are becoming desperate to find better broadband and which are waking up to the fact that they are going to have to put some skin in the game if they want somebody to build broadband.

Many carriers are used to creating partnerships or joint ventures with other carriers. But many carriers have never considered working with a government entity – be that a city, a county, or perhaps a school district. Working with government entities is definitely different than working with commercial companies and below I highlight some of the differences to be prepared for.

This list might sound negative and drive a carrier away from thinking about a PPP. But there are strategies for dealing with each of these issues. And generally, the smaller the government entity, the fewer of these issues probably apply. Working with small towns can be fairly easy while big cities might have every issue listed below, and even more. There are some great PPPs in the country, and today there are more communities willing to commit some funding towards paying for a broadband network. So the rewards for working with a PPP can well be worth the extra effort needed to create a successful partnership. I use the word ‘city’ below very generically, and these same things can be true for any municipal entity.

Politics. Government entities, by definition, are political. The main issue with politics is not that you can’t negotiate a good deal with a willing city, but rather the fear that the city can change over time and in the future the city might turn into a partner very different than the one you partnered with.

Decision Making. Cities cannot make decisions very quickly. The process of making municipal decisions involves a very specific process that often requires public meetings and allowing time for public comment. This is not that much of a hurdle in getting a new partnership started, but after it is up and running, a city will not be a nimble partner that can make a quick decision when needed.

Public Disclosure. In most places there are public disclosure laws that mean that almost everything you do with a city will be subject to disclosure to the public should somebody want to see it. There are states where ‘commercially sensitive information’ can be protected to a degree, but in some states everything can be made public. Generally even any records of negotiating a PPP might be publicly discoverable.

Purchasing Process. Even when you negotiate a PPP with a city, some of them will feel obligated to then send the whole deal out to the public on an RFP or an RFI to make sure there isn’t a better deal available. Cities are often cautious about agreeing to sole-source deals without having gone through the process to see if they could have negotiated a better arrangement with somebody else. This is often a case of CYA in case the deal ever goes sour later.

Different Goals. It’s always important to remember that a city partner will not have to same goals as a commercial partner. They might care, for example, about making sure that there is broadband brought to the poorest parts of a city while the commercial partner cares most about profits and cash flows.

Ownership. Most cities cannot own a share of a corporation or a for-profit partnership. This means that if the city is to be a true partner that some alternate mechanism must be found to compensate them for their contribution to the partnership.

The “Anti-Voices”. Since the process is usually at least somewhat public, you must expect that there will be some citizens who will be loudly vocal against whatever the PPP is doing. This is inevitable because there are some citizens that are against almost everything. This is something that governments are all used to but which might be an eye-opener for an ISP.

You need to keep all of these things in mind when negotiating or working with a municipal partner. At the end of a day a city can be a great partner and there is at least anecdotal evidence that a broadband venture with a city partner will get more customers than a pure commercial venture – due probably to the fact that many people like their city governments and trust them to do the right thing.

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