Town of Mt. Desert
Broadband Plan and Network Designs
Submitted to:
The Town of Mt. Desert
Prepared by:
Tilson
245 Commercial Street, Suite 203
Portland, ME 04101
Phone: 207-591-6427
E-mail: [email protected]
Submitted:
September 25, 2015
Note:
Cost information included in the following report is an estimate based on recent quotes,
historical data, certain assumptions about the project scope and approach, the regulatory
environment and market conditions at a fixed point in time. Given these variables, we
recommend updating the estimate as time passes, and allocating sufficient contingency to
allow for inevitable but unpredictable changes in the cost environment if the project moves
forward.
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Contents
Executive Summary ................................................................................................................................. 4
Defining Broadband................................................................................................................................. 7
Asset Inventory ..................................................................................................................................... 11
Potential Solutions ................................................................................................................................ 16
Solution Summary ................................................................................................................................. 28
Possible Business Models ...................................................................................................................... 29
Economic Impact of the Mt. Desert Network ......................................................................................... 32
Conclusions ........................................................................................................................................... 34
Recommendations ................................................................................................................................ 35
Appendix A: Town of Mt. Desert Fiber Optic Service .............................................................................. 37
Appendix B: Cellular Coverage in the Town ............................................................................................ 38
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Executive Summary
The Town of Mt. Desert engaged Tilson to evaluate current broadband availability in the Town. The
Town’s goal for this exercise is to assess the feasibility of utilizing broadband as an economic
development tool. As part of this engagement, the Town tasked Tilson with first gaining a sense for the
goals of both seasonal and year-round residents, their community vision, and the role of broadband
access in the achievement of these articulated goals. In this process, Tilson examined the telecom assets
currently in place as well as the underlying infrastructure in order to understand the current levels of
internet service in the Town. Further, Tilson met with Town stakeholders and residents in July of 2015 to
understand these residents’ experiences with current broadband access as well as their goals.
Tilson prepared high level designs for four potential solutions that address the residents and
stakeholders concerns voiced at the July meeting. Three options provide incremental solutions that
address specific concerns. The fourth solution, a universal FTTP project, has the potential to deliver
significant economic development benefits. As part of the engagement, Tilson conducted a valuation of
the economic benefits (improved GDP, job growth, tax base growth) associated with the high level
designs.
The key findings of the report are as follows:
1. Current Service/Needs
Tilson commenced this engagement by asking residents and stakeholders for a list of social and
economic development goals in the forum of a public meeting. Many seasonal and year round
residents in the Town of Mt. Desert feel that the Town is underserved by current internet
offerings. Some remote areas are completely unserved by internet services. Specific community
goals included:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
Improved internet service for unserved areas
Improved internet service for small businesses;
Improved internet service to encourage year-round residence;
Resiliency of any broadband solution pursued;
Improving service levels in the near term while planning for a longer term “futureproof” solution;
A universal solution that include all geographic regions of the Town;
Retention of high school and college students in the area through better Internet
access;
Access enabling students of all ages to complete digital and streaming assignments
from home as efficiently as when in school;
A connectivity solution that would spur the local economy and attract business
entities to take up residence in the area;
Providing WiFi as a hospitality amenity in frequently trafficked areas such as village
centers and harbors.
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2. Fiber to the Premise. A universal Fiber to the Premise (FTTP) solution, in which fiber optic
cables are affixed to each home and business throughout the Town, meets most of the
requirements voiced in the stakeholder meeting. The FTTP solution represents an investment in
the future of the Town’s economic wellbeing. The other solutions do not universally improve
access to internet service. This is the only solution with the potential to achieve the Town-wide,
and far reaching goals voiced in the community meeting. Tilson estimates that this solution
would cost between $7.1 and $13.3 million and take three years to deploy.
3. Residential LTE Broadband. A residential internet service offering that utilizes wireless
technology similar to that found in modern smart phones could dramatically improve service in
the areas of the Town that do not have access to Time Warner Cable. Under the Long Term
Evolution (LTE) solution, the Town would partner with a wireless broadband provider who had
access to spectrum in the area. The only internet carrier that currently meets this description is
RedZone Wireless. The technology utilized by RedZone offers speeds and prices similar to cable
broadband providers. Instead of wires on poles, the carrier deploys cellular antennas on towers
and equips customers with routers and modems calibrated to receive the signal. One can think
of this solution as high speed cable internet through the air. The terrain and forest cover of
Mount Desert challenge the reliability of this solution. Therefore, Tilson does not recommend
that the Town fund a universal buildout. Instead, Tilson believes that limited buildout would
provide unserved premises around Otter Creek, Hall Quarry, Seal Harbor, and Pretty Marsh with
cable-equivalent broadband. The total capital costs for such a build range from $500,000 to
$800,000.
4. New Digital Subscriber Link Access Multiplexers (DSLAMs). The vast majority of the Town of
Mt. Desert has access to internet service from FairPoint Communications. FairPoint uses Digital
Subscriber Line (DSL) technology to deliver this service. DSL uses universally deployed twisted
pair copper wire to provide last mile service. Last mile service is the final leg of communications
connection from the network backbone to the end user. This is usually the bottle neck in
internet communication. The speed experienced by the end DSL user depends entirely upon the
distance between their premise and the node where the signal originates. One way to improve
services in underserved areas is to add more nodes, known as DSLAMs. The estimated capital
cost of this potential solution would be $60,000 to deploy two nodes. This solution has the
potential to serve some of the underserved areas, such as Otter Creek, Hall Quarry, and Pretty
Marsh.1
5. WiFi for Village Centers and Harbor Areas. Tilson developed limited solutions for providing WiFi
coverage to harbor and village downtown areas. These solutions are hospitality offerings only,
designed to allow visitors to access better internet service on their phones, tablets, or laptop
computers, while in public spaces. The goal of this solution is NOT to provide residential internet
service. This solution has limited utility and only meets a single community goal. However, it is
also inexpensive and fast to deploy. Capital costs tend to range between $6000 and $10,000.
Deployment can take less than three months, depending on what the community is attaching to.
Private building attachments move quickly, utility pole attachments more slowly.
1
Tilson has sought FairPoint comment on the feasibility of this solution but has not received a response as of the
submission of this final report.
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The table below shows which goals each solution addresses. The more expensive, long-lead time
solutions address more goals. The short lead time, low cost public WiFi solution only addresses the goal
of providing a new hospitality offering.
Fiber to the
Premise
Goal
Solution
Residential
New
LTE
DSLAMs
Public
WiFi
Serve Unserved Areas
Better Serve Small Businesses
Year Round Residence
Resiliency
Near Term Solution
Universality
Help Retain Students
Educational Access
Attract New Businesses
Improved Hospitality
A core goal of the stakeholders who lent input to this study was a desire for improved residential and
small business broadband for seasonal and year round residents. Three of these solutions accomplish
this goal. However, these solutions do not improve service equally throughout the Town. The table
below shows the residential and small business internet service improvements by village. Pretty Marsh
is currently widely underserved, and benefits under any scenario. It is the one village in the Town that
Time Warner Cable does not serve in large part. Outlying premises in Seal Harbor and Otter Creek see
improvement from the LTE and DSLAM solutions but much of those communities are currently served
with Time Warner Cable.
Village
Pretty Marsh
Hall Quarry
Somesville
Northeast Harbor
Seal Harbor
Otter Creek
Fiber to the
Premise
Significant
Significant
Significant
Significant
Significant
Significant
Solution
Residential
LTE
Significant
Some
None
None
Some
Some
New
DSLAMs
Significant
None
None
None
Some
Some
6. Funding Options/ Business Model: While the Town of Mount Desert’s broadband offerings fail
to match its residents’ connectivity needs, it is no more limited than the majority of
communities in the U.S. and the State of Maine. For example, many communities lack a cable
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provider and cellular data service. These unserved communities are the types of places where
subsidy is focused. For this reason, the Town is unlikely to qualify for state or federal funding
sources, and any comprehensive broadband solution will require local capital from public or
private sources.
7. Economic Benefits Analysis: Tilson’s review of the economic analysis associated with an
investment in broadband showed significant potential positive effects on the Town’s economic
activity, including GDP, job creation, wages, tax revenues, and consumer surplus—the measure
of consumer wellbeing. Tilson estimates that a FTTP build could generate between $7.0 and $29
million in additional productivity as well as between $4.0 and $16.0 million in new wages over
ten years. The Town only achieves these benefits if it invests in the FTTP project.
Defining Broadband
It is important to note that the term “broadband” does not refer to any technology in particular. Rather
it refers to data transmission through a medium that exceeds a certain speed threshold. Until very
recently, the Federal Communications Commission (FCC) defined broadband as 4 Mbps downstream and
1mbps upstream. As shown in the table below, that standard translates to a minimum Tier 3 download
and Tier 1 upload connection to qualify as broadband service. In July of 2014, the FCC announced that it
planned to increase the download threshold to 25 mbps. On January 29th, 2015 the FCC formally
redefined broadband as 25 mbps download and 3 mbps upload. This redefinition has the potential to
dramatically increase the number of communities in the U.S. eligible for subsidy. The State of Maine’s
broadband agency, the ConnectME Authority, observes neither standard. The Authority operates under
a 10 mbps download and 10 mbps upload threshold.
From an information technology perspective, it represents the amount of data that a consumer can
download or upload from the Internet in a given second. This is the measurement known as bandwidth.
Greater bandwidth is analogous to a faster connection. Connection speeds are generally measured in
kilobits per second (Kbps), megabits per second (Mbps) or gigabits per second (Gbps).2
In the United States, broadband standards are defined by the Federal Communications Commission
(FCC), which regulates interstate and international communications by radio, television, wire, satellite
and cable. The FCC uses a tiered approach to define broadband based on download and upload speeds
for wireline and wireless technologies:
FCC Speed Tiers
FCC Speed Tier
1st Generation Data
Tier 1
Tier 2
Tier 3
Tier 4
Tier 5
2
Download Speeds
200 Kbps to 768 Kbps
768 Kbps to 1.5 Mbps
1.5 Mbps to 3 Mbps
3 Mbps to 6 Mbps
6 Mbps to 10 Mbps
10 Mbps to 25 Mbps
1 Gbps = 1000 Mbps = 1,000,000 Kbps.
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Upload Speeds
200 Kbps to 768 Kbps
768 Kbps to 1.5 Mbps
1.5 Mbps to 3 Mbps
3 Mbps to 6 Mbps
6 Mbps to 10 Mbps
10 Mbps to 25 Mbps
Tier 6
Tier 7
25 Mbps to 100 Mbps
> 100 Mbps
25 Mbps to 100 Mbps
> 100 Mbps
The rapid advancement of delivered data speeds in the U.S. caused the change in the definition of
broadband. In 2000, only 4.4 percent of American households had a broadband connection (as defined
prior to January 29, 2015) in their homes. By 2010, that number had jumped to 68 percent. Moreover,
since 2010, average delivered speeds in the U.S. have doubled overall, and today roughly 94 percent of
Americans have access to wireline or wireless broadband speeds of at least 10 Mbps downstream. As a
result, the FCC raised the minimum threshold.3 This evolving baseline reflects a growing need for higher
bandwidth as Americans increasingly use the internet and communications technologies in all aspects of
their lives.
In terms of functionality, the following table shows download speeds4 required for a range of common
internet-based activities:
Basic Use
Moderate Use
Heavy Use
(Email, Web
Surfing Basic
Video)
(Basic use plus high
demand functions i.e.
gaming, conferencing, HD
video)
(Basic use plus
multiple high
demand functions)
1 user on 1 device
(laptop, tablet, gaming
console)
1 – 2mbps
1 – 2mbps
6 – 15 mbps
2 users or 2 devices at
a time
1 – 2mbps
1 – 2mbps
6 – 15 mbps
3 users or 3 devices at
a time
1 – 2mbps
2 – 5 mbps
15 mbps
or more
4 users or devices at a
time
2 – 5 mbps
6 – 15 mbps
15 mbps
or more
Figure 1: Minimum Download Speed for Common Activities
For context, a Town resident using a DSL connection can download medium resolution image in a few
seconds. A user with a fiber optic service can download or upload a feature film, architectural drawing,
3
Pg. 4. Four Years of Broadband Growth, June 2013. The White House Office of Science and Technology Policy &
The National Economic Council. http://www.fcc.gov/document/fcc-finds-us-broadband-deployment-not-keepingpace
4
FCC, Household Broadband Guide.
8
or CAD diagram in less than half a second. Download and upload speeds depend on the type of
communications technology service providers utilize. There are a number of different technologies
currently available to residential and business users, which offer varying bandwidth capabilities:5
Technological Speed Capabilities
Technology
Dial-up
2G Mobile
3G Mobile
LTE / 4G Mobile6
Satellite7
DSL
Traditional Cable
DOCSIS 3.0 Cable
Fixed Wireless8
T-1
Fiber Optic
Download & Upload Speeds
Up to 56 Kbps
Up to 100 Kbps
384 Kbps – 2 Mbps
2 Mbps – 18 Mbps
200 Kbps – 2 Mbps
768 Kbps – 7 Mbps
1 Mbps – 10 Mbps
1 Mbps – 150 Mbps
1 Mbps – 1.5 Gbps
1.5 Mbps
Up to 1,000 Gbps. Effectively infinite
The speeds shown above are averages achieved for each technology. Higher speeds are possible for
certain technologies depending on network layout and user saturation. If a user is located close to a
network node, which houses the networking equipment that sends the network signal, and overall
network use at that point in time is low, he will obtain higher connection speeds. DSL subscribers
commonly experience this phenomenon. If a DSL subscriber is located close to the service provider’s
(FairPoint for example) central office or DSLAM he can achieve download speeds as high as 15 Mbps.8
However, as one moves farther away from the central office or DSLAM, download and upload speeds
decrease. Outside of one mile from a central office, it is very difficult to achieve a broadband connection
over DSL. The solutions proposed include the LTE / 4G Mobile, Fiber Optic, and DSL technologies.
Stakeholder Input
Tilson met with residents, business owners, Town administrators, and other stakeholders at the
Neighborhood House in Northeast Harbor on July 14th, 2015. Those gathered at the meeting generally
agreed that the Town of Mt. Desert is underserved by current connectivity, with certain remote areas in
particular especially underserved, and in some cases, unserved. Those present at the meeting agreed on
the following priority areas: access for unserved areas, access for small businesses, access to encourage
year-round residence, and ensuring the resiliency of any broadband solution pursued. Other areas of
concern for some residents included pursuing a solution which would extend the service levels in the
5
Pg. 5. The ConnectME Authority. 2012. Developing Broadband in Maine: Strategic Plan. Available at
http://www.maine.gov/connectme/grants/ntia/planning.shtml.
6
AT&T Wireless currently has the highest tested capacity at 18 Mbps.
7
Current satellite service may achieve broadband level speeds, but the excessive latency or delay precludes the
use of many broadband applications.
8
The Rhode Island company Towerstream offers up to 1.5Gbps.
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near term while planning for a longer term solution, and that any solution be universal and include all
geographic regions of the Town. In addition, the group agreed that retaining high school and college
students in the area through better Internet access was a priority, as well as enabling students of all
ages access that would allow them to complete digital and streaming assignments from home as
efficiently as in school. The group also expressed the hope that a connectivity solution would spur the
local economy and perhaps motivate a significant business entity to take up residence in the area, such
as a Jackson Labs spin off or other similar entity.
In terms of funding a solution, residents further expressed interest in pursuing grants, as well as
business models that included private investment. Overall, there was a strong sentiment of broadband
as a necessity for the Town, and a vitally important public service akin to public roads, electricity, and
telephone.
Major Town administration-stated goals included running fiber from MDI high school into Town. With
the Town of Bar Harbor also having interest in running a fiber line into the school, this would allow for
collaborative accounting and other Town administrative functions.
Education
Education was a major shared concern for the residents of the Town of Mt. Desert. Residents spoke of
the great digital resources for students in schools, which are served by Maine School and Library
Network (MSLN) fiber, but when area students are not in the school—in particular, the more remote
communities such as Pretty Marsh—they lack the connectivity to complete assignments. More and
more, teachers are giving students digital assignments for homework so as to utilize in-class time for
discussion. These students cannot complete online assignments or stream videos/lectures at home. In
addition, the community expressed that streaming video for online adult educational purposes is
difficult to participate in at home, so adults are at a disadvantage as well. For teachers of online classes
in the Town, increased bandwidth is especially important and current connectivity fails to meet this
need.
Telecommuting/Business Needs
The group expressed frustration with current Internet service and described Town neighborhoods with a
mix of residents ranging from telecommuters, to those who would like increased connectivity for access
for adult educational purposes. In terms of reliability and consistency, residents described problems
such as frequent modem resets. Many residents desire Time Warner Cable service but do not have
physical connections to the cable company’s coaxial network. Time Warner’s standard policy is to offer
service installations but at a price point unachievable for most residents.
In terms of telecommuting needs, residents have historically had trouble finding a place with the
necessary connectivity to download and upload documents. The connectivity challenges in the Town are
only exacerbated by the influx of visitors to the area who utilize bandwidth as well. Some part time
residents emphasized that their time in the area was negatively affected because of their inability to
conduct business there due to a lack of connectivity. Once again, the group expressed challenges with
getting their modems to work consistently with current service, with the necessity of frequent modem
resets. For many residents, even when their service does work, the DSL speeds are barely adequate to
do business.
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The Town of Mt. Desert’s connectivity challenges have even proven to be an impediment to attracting
new residents to the Town. A real estate agent conveyed that when buyers approach her and have
particular telecommunications/Internet needs, certain areas of Town are “off limits” to these buyers
due to the lack of connectivity in these areas. For economic development and bringing young families to
the area, the lack of connectivity is a major hurdle for the real estate industry, and the Town. The
primary business needs of individual small businesses in Town were identified as teleconferencing
needs, file upload needs, and credit card processing needs that would all be well served by an
improvement in broadband. In addition, the group named a number of types of small businesses that
would be served by an investment in broadband, in particular, branches of banks, post offices,
realtors/property managers, and non-profits.
Public Safety
Because they are contained in the same building as the Town Office, public safety offices are relatively
well served, since the Town Office has a fiber optic connection, but lack of cellular coverage was also
pointed to as a public safety concern. The group agreed that the difficulty of consistent cellular service
on boats and elsewhere in the Town is a safety issue in the event of emergencies.
Areas Where Broadband is not Needed
The local schools, the Northeast Harbor library, and the Town Office were all described as “well-served”
by Town stakeholders present. Despite the mention of these, the overall sentiment of those at the
meeting was that any investment in a broadband solution be universal throughout the Town and not
just serve particular areas.
Network Funding
In terms of funding an investment in broadband, the group agreed that the benefits of an investment in
broadband would be worth the associated costs. That being said, there was great interest in the
potential for grants to help with any costs as well as private sector investment. In addition, there was
great interest in potentially teaming with neighboring towns in the area (Bar Harbor, Southwest Harbor,
and Tremont) through the League of Towns so as to minimize capital costs.
Asset Inventory
Existing Fiber Optic Cable
One of the initial aspects of planning for the Town of Mt. Desert’s broadband future is to understand the
existing infrastructure present within the Town. In many instances, improving a Town’s broadband is an
issue of service provisioning and not infrastructure. Tilson’s inventory of the telecommunications assets
in the Town found phone and cable offerings that were typical of towns of similar size. However, just as
with other similar Towns, the current offerings are not sufficient to meet the expressed needs of the
community. Further, while significant fiber assets already exist, the primary issue preventing this
existing fiber from being utilized by the Town is that it is not accessible at reasonable costs. The carriers
with fiber present in the Town use that fiber as a middle mile connection to their network nodes. Those
carriers then use copper wire as last mile infrastructure. The following is a summary of the fiber asset
infrastructure already in place from the three providers with varying footprints in the Town: FairPoint,
Time Warner, and Emera.
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FairPoint Fiber Optic Cable
The diagram above shows that FairPoint has fiber infrastructure running near Pretty Marsh, through
Somesville along Route 233, and down routes 102 and 198, terminating in the Village of Northeast
Harbor. Most notably however, there is no fiber running through the Villages of Pretty Marsh, Hall
Quarry, Seal Harbor, and Otter Creek.
Time Warner Fiber
Below is the fiber footprint for Time Warner in the Town. Notably, there is no Time Warner fiber running
to Pretty Marsh, and just as with FairPoint, no fiber running to the Village of Hall Quarry from where it
exists along Route 102. In addition, there is neither Time Warner fiber nor fiber assets of any kind
between Seal Harbor and Otter Creek.
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Time Warner Fiber
Emera
Emera has a relatively small fiber footprint near Somesville, towards the top of the Town border,
extending into Bar Harbor on Eagle Lake Road (Rt. 233). In the area of Somesville, Emera’s fiber footprint
presents an option for connecting a solution to the internet. The industry term for this connection from
a network to the rest of the internet is known as “backhaul.”
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Emera Fiber
Central Offices
There are two central offices within the Town limits. Both belong to FairPoint. One is in Northeast
Harbor and the other Somesville. The image below gives a visual depiction of the office and the map
farther below gives their location. Proximity to the central offices is key for determining the speed
realized over DSL technology. This will be discussed further in the solutions section.
Figure 2: FairPoint Central Office in Northeast Harbor
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Wireless Asset Overview
There are three towers currently in the Town, with a fourth in the area of Otter Creek just recently
approved by the planning board. These towers provide the necessary backbone for deploying an LTE
solution in the areas of the Town without access to Time Warner Cable.
Tower Owner
New Cingular Wireless, PCS, LLC
New Cingular Wireless, PCS, LLC
New Cingular Wireless, PCS, LLC
Global Tower Assets, LLC
Carrier
AT&T
Unknown
AT&T
Unknown
Height
Unknown
125 Feet
Unknown
130 Feet
Location
Pretty Marsh
Northeast Harbor
Otter Creek
Somesville
The following diagram depicts the locations of the four towers (either existing or approved) in the Town
of Mt. Desert.
15
Tower Locations (Constructed and Proposed)
Asset Inventory Conclusions


While existing fiber assets (Time Warner, Fairpoint, and Emera) run through some of the
villages, this fiber is inaccessible at reasonable costs or due to corporate policy.
In addition, there are a number of wireless assets in the area that could provide the
infrastructure for deploying wireless solutions.
Potential Solutions
Fiber to the Premise
The solution that meets all of the community’s goals, apart from the time sensitive ones, is a fiber to the
premise (FTTP) solution. This technology would provide the Town with all of the bandwidth necessary to
thrive for decades. It represents an economic differentiator that could help the community stand apart
from other Towns in the region.
The following diagram depicts the fiber design for the Town of Mt. Desert. The purple lines represent
the fiber backbone design along the main roads consisting of 144 strand feeder cables, and the other
colors (green (72 strand), orange (48-strand), and light blue (24-strand)) representing distribution fiber
cables along all other side roads to all Town premises and locations. The two yellow placemarks, labeled
“Rmt”, denote the need for remote terminals due to the widespread area the design would cover. The
terms, “feeder” and “distribution” cable are used in a typical fiber optical network, with feeder cable
referring to cable, which extends from the central office along a primary route or from a main feeder
cable along a secondary route to a distribution point. These feeder cables provide connections to a
number of distribution cables, which extend from the feeder cables into specific areas for the purpose of
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providing service to those areas. This design denotes approximately 100 miles of installed fiber optic
cable.
Town of Mt. Desert Fiber Design
The capital costs for this comprehensive fiber design are broken out in the following table:
Fiber Network Capital Costs – Line Items
Each of the items listed above is comprised of the following detailed information:
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Fiber Cable and Materials represents the cost of the fiber (144 strand), messenger strand, inner duct for
buried conduit, fiber enclosures, a central cabinet, and pole replacements estimated.
Labor (aerial and underground) represents the labor costs of placing strand, lashing fiber and
preparation of splice cases as well as trenching for inner duct, and installation of gigabit passive optical
network (GPON) equipment electronics.
Electronics and Shelter represent the cost of a central office for equipment and the electronics costs
associated with a fiber build.
Make Ready capital costs consist primarily of application fees for telephone and electric companies, tree
trimming, and potential pole replacements.
Professional Services costs consist of engineering and drafting costs of professional engineer work for
the initial design.
5% SPT Tax represents the state sales tax on building materials.
Overhead (22%) represents the selling, general, and administrative costs of the vendor deploying the
solution as well as that vendor’s profit margin.
Cost Estimate Detail – Materials
In terms of costs associated with fiber and materials, the most significant costs are associated with
electronics equipment, the gigabit passive optical network (GPON) point to multipoint fiber to the
endpoint), and remote terminals totaling $2.5 million in costs. The second largest materials cost item in
the fiber design is associated with an enclosure. In addition, 24, 48, 72, 144, and 288 fiber count
comprises over $300,000 in costs. This represents almost 100 miles of fiber optic cable. Another very
significant additional cost of the buildout arises from 200-foot fiber drops ($262,500), a 12 x 10 building
with compound ($150,000), Messenger strand (strung along poles to support fiber) ($114,843),
Multiservice Terminals (four ports) (MST-4) at both 100 feet and 250 feet ($111,500), and Fiber Network
Interface Devices (NID) ($100,000), which are the piece of equipment mounted on the home that
receives the signal. Central cabinets ($53,000), inner duct for buried fiber ($52,500), and 35-foot, class 5
thickness, pole replacements ($40,000) round out the most significant materials costs. The table below
details the materials costs in descending order.
Materials Cost Item
Electronics, Gigabit Passive optical Network (GPON)
and Remote Terminals
Enclosure
Fiber Strands (24, 48, 72, 144, 288)
200-foot fiber drops
12 X 10 Building with Compound
Messenger Strand
Multi-Service Terminals (MST-4) at 100 and 250 feet
Fiber Network Interface Device (NID)
Central Cabinets
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Cost
$2,500,000
$411,000
$304,222
$262,500
$150,000
$114,843
$111,500
$100,000
$53,000
Inner Duct
35/5 Pole Replacements
$52,500
$40,000
Cost Estimate Detail – Construction Costs
As for construction costs, the most significant items are the installation of aerial fiber drops (the
connection from the fiber cable on the road to the premise)($1,750,000), installation of gigabit passive
optical network gear ($750,000), splice case preparation ($562,800), lashing of fiber ($247,635) and
trenching for inner duct ($225,000). The bulk of the remaining costs are comprised by placing of strands
($215,365), tree trimming ($120,000), new building compound labor ($60,000), installation of fiber
distribution hub (FDH) ($30,000), and installing fiber in the inner duct ($15,000) and pole replacements
($12,000). The table below breaks these costs down in descending order.
Construction Cost Item
Installation of drops
Installation of GPON gear
Splice Case Prep.
Lashing of Fiber
Trenching for Inner Duct
Placing of Strands
Tree Trimming
New Building Compound Labor
Installation of Fiber Distribution Hub
Install. Fiber Inner Duct
Pole Replacement
Cost
$1,750,000
$750,000
$562,800
$247,635
$225,000
$215,365
$120,000
$60,000
$30,000
$15,000
$12,000
Additional Cost Items
Another very significant cost for the fiber buildout is that attributable to engineering and drafting costs
($467,500), representing the initial, once-off formal design engineering.
The final significant cost considerations are the 5% State of Maine sales tax on materials ($632,100), and
the 22% overhead cost built into the total capital cost estimate ($2,279,705).
Fiber Network Total Capital Cost Details
Capital Cost Item
Fiber Cable, Materials, Electronics
Construction (Aerial and Underground)
Make Ready
Professional Services (Engineering/Drafting)
State Building Materials Tax (5%)
Overhead (22%)
TOTAL
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Cost
$4,171,843
$4,189,050
$1,533,905
$467,500
$632,100
$2,279,705
$13,274,103
Capital Cost Scenarios
Although the estimated capital costs associated with a full fiber design solution are significant, there are
several options available to the town to pare these down depending on which ownership model the
Town selects. The Town may elect to pass the costs of drops (connections from the fiber backbone to
the premise) or electronics (the equipment that transmits and receives signals) to the customers or the
internet service providers. The four options are:
(1) The Town owns everything from electronics to aerial fiber drops (cost: $13.3 million). This
scenario places the least burden on the consumer. The costs of home connection are capitalized
and the ISPs providing service do not pass along the costs of their electronics in their rates. This
solution delivers the lowest cost to the consumer.
(2) The Town does not own the electronics but does own the drops (cost: $9.9 million). Under this
scenario the customer does not have to pay to connect but the ISP buys the electronics. The
costs of the electronics are passed on to the customer through higher service costs.
(3) The Town owns electronics but no drops (cost: $10.6 million). Under this scenario the customer
pays for the connection to their home. Tilson estimated an average cost of $1000 per premise
drop this varies based on the length of the homeowner’s driveway. This cost would suppress the
solution’s adoption among residents.
(4) The Town owns neither the electronics nor the drops (cost: $7.1 million). Under this scenario
the home owner pays higher monthly fees to cover the costs of the electronics and pays for
their home installation. This would produce the lowest take rate.
The following chart illustrates the varying costs of these options.
Scenario
Make Ready
Fiber Costs
Other Materials
Drop Materials
Labor Backbone
Labor Drops
Project Management
Electronics and Shelter
Overhead (22%)
5% SPT
Total Capital Costs
Everything
1,533,905
304,269
855,074
362,500
2,439,050
1,750,000
467,500
2,650,000
2,279,705
632,100
13,274,103
No Electronics
1,533,905
304,269
855,074
362,500
2,439,050
1,750,000
467,500
1,696,705
470,450
9,879,453
20
No Drops or
Electronics
1,533,905
1,533,905
304,269
304,269
855,074
855,074
No Drops
2,439,050
2,439,050
467,500
2,650,000
1,814,955
503,238
10,567,991
467,500
1,231,955
341,588
7,173,341
As is evident from the above figures, there is significant opportunity for cost savings to the Town,
depending on the structure/options that the Town selects, with a range in excess of $6 million from the
all-inclusive cost model to the model where the town would own neither the aerial drops nor the
electronics.
Tax Implications
As with any potentially municipally funded fiber broadband project, it is important to be cognizant of
the tax implications that such a project can have for taxpayers in the Town of Mt. Desert. As the table
below illustrates, depending on which of the above fiber funding option above the Town chooses (i.e.
owning all elements of the fiber solution, just electronics, just aerial drops, or neither) the annual tax
increases per $100,000 of property value range from about $26 for the $7.2 million bond to $48 for the
$13.3 loan. It should be noted that households in the Town would only incur these costs in the event
that the Town elects to use municipal bonds to finance its broadband solution.
Tax Implications – Municipal Bond (Fiber Build)
Loan Amount
Annual
Payment
Tax Increase
Per $100,000
Tax Increase
Per $500,000
Tax Increase
Per $1,000,000
13,300,000
$957,096
$47.85
$239.27
$478.55
10,600,000
$762,798
$38.14
$190.70
$381.40
9,900,000
$712,425
$35.62
$178.11
$356.21
7,200,000
$518,127
$25.91
$129.53
$259.06
This analysis assumes a loan term of 20 years, annual payments, and an interest rate of 3.75%. The
property value assumptions include a grand list value of $2.0 billion and 2250 premises. This yields a
mean home value of $888,889.
Tilson’s analysis has shown that just because property taxes go up, that this does not mean that
households are worse off economically. There are consequent financial advantages to switching to a
fiber solution, as fiber can serve as a substitute for cable TV service, thus potentially eliminating the cost
of cable subscriptions for households. In addition, under the stated assumptions in this analysis, only
households which are valued at more than $1.4 million would spend more on telecom services annually.
Scenario
Internet
Build Everything $500,000 Home
Build Everything $1,000,000 Home
Build Everything $1,500,000 Home
Status With Fiber Status With Fiber Status With Fiber
Quo
Project
Quo
Project
Quo
Project
$480
$960
$480
$960
$480
$960
21
Annual
Cost
Subscriptions
Cable TV
Land Line Phone
Tax Increase
Net Telecom Costs
$0
$1,200
$360
$0
$2,040
$240
$0
$0 $1,200
$180
$360
$239
$0
$1,619 $2,040
$240
$0
$0 $1,200
$180
$360
$479
$0
$1,859 $2,040
$240
$0
$180
$718
$2,098
Operating Costs
The costs associated with operating telecommunications networks depend on many factors. These
include the number of customers, population density, business model of the operator, capital costs of
the owner, and the preference for unionized vs. non-unionized labor. The following estimates represent
Tilson’s best attempt to estimate what a stand-alone network would cost to run in the Town of Mt.
Desert absent any other consideration. Tilson estimates that a Town-wide network would approach
$600,000 to run annually. The following table details the elements comprising these operating costs.
These costs would be paid from subscriber fees and not taxes.
Operating Cost Item
Pole Attachment Fees
Maintenance & Repair
Bandwidth
Fixed G & A
Variable G & A
TOTAL
Cost
$70,125
$199,112
$36,000
$43,500
$233,200
$581,937
These estimates are based on recent quotes and comparable projects. They are highly variable and
would likely change based on the business model of the operating entity. For example, our model
estimated an annual G&A expenditure of $220 per customer. This is standard for low overhead internet
service providers. Time Warner Cable, by contrast, spends more than twice this figure per customer.
Comcast spends approximately $1150 per customer in SG&A.
Residential LTE Solution
An LTE solution provides residential internet service utilizing the same technology as found in modern
smart phones. Private carriers deploy antennas on towers and beam the signal out to premises in the
surrounding area. At each subscriber location there is a modem outfitted to receive the signal wirelessly.
The solution provides comparable service to cable broadband providers. One can think of it as cable
internet service through the air, instead of over coaxial wire. The advantage of LTE relative to coaxial
cable is that LTE is not capital intensive to deploy. The disadvantage is that the one LTE broadband
provider operating in Maine uses spectrum that degrades rapidly when required to cross forested areas,
terrain, or open water. All of which are common in Mt. Desert.
Tilson does not recommend that the Town invest in a universal LTE solution. This is because cable
broadband is widely available at similar speeds and costs to LTE broadband. The table below compares
prices and speeds for the local cable provider and the State’s LTE broadband provider. If the Town
22
wishes to provide unserved areas with a modern broadband solution quickly, Tilson believes that
colocations on the towers found in Pretty Marsh and Otter Creek could serve those villages. Deployment
on the tower in Somesville may serve Hall Quarry, which does not have Timer Warner Cable service. Due
to the proprietary nature of RedZone wireless’ specifications, Tilson cannot precisely map the potential
coverage of this solution. However, it is unlikely that an LTE array deployed on the Otter Creek tower
will reach many residents in Seal Harbor. An effective solution in the Seal Harbor village would likely
require another tower or other elevated structure, such as a public building or high standing utility pole.
Time Warner Cable
Download Upload Price
2
1
$14.99
6
1
$29.99
15
1
$34.99
20
2
$44.99
30
5
$54.99
50
5
$64.99
RedZone Wireless
Download Upload Price
5
1
$39.00
10
1
$49.00
10
5
$59.00
25
10
$89.00
All Speeds in Mbps
Figure 3: Time Warner vs. RedZone Wireless Residential Monthly Prices
Capital Cost Estimate
The 4G LTE solution can provide cable-equivalent broadband to hard-to-reach areas of the Town. There
are two potential capital cost scenarios. First, colocation of a new antenna array (pictured below) on one
of the three existing cellular towers mentioned previously in the Town. This process consists of installing
new communications equipment on an existing communications tower. Most communications towers in
the U.S. are treated like real estate investments. The owners lease space to multiple carriers and collect
rent on a monthly basis. Second, a new tower build for areas such as Pretty Marsh, Otter Creek, Hall
Quarry, and Seal Harbor where cable coverage is spotty or non-existent. If the Town builds a new tower,
it will also have to install new communications equipment in order to create a solution.
23
A residential LTE solution can provide unserved areas with internet service comparable to that enjoyed
by Time Warner Cable and at similar prices. In order to implement this solution, the Town would partner
with a residential LTE provider to deploy the necessary antennas, radios, and power equipment on
towers or elevated structures. Given the low population densities of the target areas, the carrier will
likely require municipal subsidy in order to proceed with the buildout. The capital cost estimates for this
solution are as follows. These estimates vary significantly by equipment type, the size of the tower, and
other variables.
The first table below shows the capital costs of installing new equipment on a tower. The Town would
incur these costs whether or not it was collocating on an existing tower or installing the gear on a new
tower. The second table details the costs of constructing a new tower from scratch.
Communications Equipment
Professional Services
$
5,000
Radio
$ 47,000
Antenna
$
9,000
Cabinet
$ 12,000
Total
$ 73,000
Tower Construction (90 feet)
Professional Services
$ 10,000
Tower
$
6,000
Cable and materials
$
2,500
24
Concrete
Site Work
Total
$
7,500
$ 75,000
$ 101,000
If the Town decided to pursue a Residential LTE solution on two existing towers, it would cost
approximately $140,000. By contrast, if the Town wanted to serve two areas that were out of the line of
site of existing towers, new tower construction would be necessary. Under these assumptions, the total
capital cost of building two new towers and installing the necessary equipment is approximately
$340,000.
New Digital Subscriber Link Access Multiplexers (DSLAMs)
The unserved premises within the Town of Mt. Desert are unserved because of their distance from the
nearest network nodes. This is especially true for DSL broadband. Provisioned and realized speeds for
DSL depend on copper route distance and condition of the copper infrastructure. At 17,500 feet from
the central office connectivity speeds diminish to nearly zero. The graphic below shows the distances
from the central offices within the Town. The areas of the Town where residents reported using dial-up
connections, Pretty Marsh and Otter Creek, fall outside these largest rings. Tilson believes that this
distance from the FairPoint central offices partially explains why these communities are experiencing a
lack of service.
One solution to address this lack of services is to build infrastructure that adds nodes to the network.
For DSL networks, these nodes are called “Digital Subscriber Link Access Multiplexers” or DSLAMs. They
convert signals from fiber optic cable to run over twisted pair copper wire. The Town could partner with
FairPoint Communications, the local DSL internet provider, to install additional DSLAMs that could
shorten loop length and improve speeds. One can think of this solution as bringing residents at the end
of Town closer to the internet through the installation of a new node. The installation of two DSLAMs
can boost this signal at a total capital cost of $60,000 ($25,000 each for equipment and $15,000 total for
labor). Any fiber could be constructed at an additional capital cost of $30,000 to $40,000 per mile.
25
While the deployment of additional DSLAMs is not a long term solution, it, can serve as a near-term
“bridge” solution, improving connectivity for very underserved and unserved premises in Pretty Marsh
and Otter Creek. The solution would deploy DLSAMs in those areas. Although FairPoint has yet to
respond to inquiries about willingness to partner with the Town, the company has worked with Maine
municipalities to improve DSL service in the past. These include Otisfield, Harrison, Vinalhaven, Sweden,
Robbinston, Georgetown, and others.9 Operating costs are negligible to the Town. The carrier assumes
them and assumes operational risks..
Public WiFi
As part of the scope of the broadband plan for the Town of Mt. Desert, Town residents expressed desire
for having WiFi in the harbor areas and village centers. This service would allow pedestrians, day visitors,
and cruising passengers to utilize laptop or mobile devices. The goal of this solution is to provide a more
pleasant visitor and resident experience in the Town. The goal is not to provide residential broadband
service. The Town hopes that a WiFi amenity would help generate foot traffic in popular areas while also
encouraging visitors to extend their stays.
The following are the heat propagation maps showing projected coverage of WiFi designs for the various
Town harbor areas as well as the capital and operating cost estimates for WiFi deployment in the
harbors in the Town of Mt. Desert. Each network cost $6,000-$10,000 to deploy. Operating costs are
minimal and are usually paid by corporate sponsors such as banks, hotels, or trade associations. The
following images show the “heat map” or approximate coverage areas for these wireless solutions. This
does not include the costs of operations including “backhaul” which is the cost of connecting to the
internet.10
9
ConnectME Authority, Grants Awarded Through Nine Rounds, 2015.
10
NOTE: Equipment pricing is based on a requirement for a pole-mounted cabinet that would include a small router, some kind
of fiber connection (media converter to gigabit interface converter (GBIC) or other), and power for power over Ethernet (POE).
The installation costs estimated are based on 2-3 hours at each site.
26
NE Harbor - WiFi Heat Map
Somesville – WiFi Heat Map
27
Seal Harbor – WiFi Heat Map
Solution Summary
The following table provides a summary of the four potential broadband solutions available to the Town
of Mt. Desert. Each option solves different problems and has different virtues and detractions. The one
solution that provides the full economic development benefit desired by the Town is the FTTP solution.
The other three solutions are highly tactical and address distinct problems.
Solution Type
New DSLAM
Implementation time
Cost
6 – 12 Months 6 - 18 Months
$60,000 (for
$40,000-$80,000
two DSLAMs) per colocation on
existing tower;
$250,000 for new
tower build
1-8 mbps
10-35 mbps
< 6 Months
$6,000-$10,000
per area to be
covered
Yes
Yes
Yes
1000 mpbs or
higher
No
Many
Operators
Few operators
Many Operators
Many
4-8 years
2-3 years
30 years
Bandwidth
Weather/Geography
Affected/dependent?
Operator Availability
Resilience
Residential LTE
28
Public WiFi
1-20 mbps
Fiber to the
Premise
2-3 Years
$7.0 - $13.3
Million for FTTP
The following table illustrates how each solution meets the community’s goals expressed in the July
Stakeholder’s meeting. None of the solutions meet every goal, but the fiber solution meets all goals
apart from the desire for a near term fix and the desire for improved WiFi access.
Fiber to the
Premise
Goal
Solution
Residential
New
LTE
DSLAMs
Public
WiFi
Serve Unserved Areas
Better Serve Small Businesses
Year Round Residence
Resiliency
Near Term Solution
Universality
Help Retain Students
Educational Access
Attract New Businesses
Improved Hospitality
Nor do all of the solutions serve all of the villages of the Town. The well served areas of Somesville,
Northeast Harbor, and Hall Quarry do not benefit from the LTE or DSLAM solutions. However, the
villages of Pretty Marsh sees significant benefit from those incremental investments. The villages of Seal
Harbor, Hall Quarry, and Otter Creek benefit as well, but only in their underserved areas. Those areas
served by Time Warner Cable and/or FairPoint would not experience any major improvement in service.
The table below rates the approximate benefit enjoyed by each community under each solution along a
qualitative scale.
Village
Pretty Marsh
Hall Quarry
Somesville
Northeast Harbor
Seal Harbor
Otter Creek
Service Improvement by Solution
Fiber to the
Residential
New
Premise
LTE
DSLAMs
Significant
Significant Significant
Significant
Some
None
Significant
None
None
Significant
None
None
Significant
Some
Some
Significant
Some
Some
Possible Business Models
There are a number of possible business model structures for the Town of Mt. Desert to choose from,
each with varying types of ownership, operation, funding sources, operating risk and cost allocation,
29
revenue, and access (open vs. closed). The two options examined by Tilson in this report are: (1) The
Municipally-owned entity; and (2) The Private, philanthropically-minded entity.
Option 1 – Municipally-Owned Entity
In this model, the network in question would be financed through municipal debt in the form of bonds
at referendum. As such, the capital under this option would be serviced by Town taxpayers, with the
Town owning the network. In terms of the Internet service provider (ISP) under this option, that would
either be a wholesale monopoly or provided by an outside entity if the Town elects to make its network
open access. As for the operations of this type of business model option, there are three options: (1) The
Town can operate the network with its own staff; (2) The Town can contract with another entity to
operate; or (3) The Town could elect to outsource operations of the network to a network utility. In this
model, the Town takes the risk of the network and the revenue of the network is paid first to the ISP,
then the network operator, and finally to the Town.
Under this option, in return for providing capital to a Town-owned network, Town taxpayers receive the
benefit of significantly better Internet service and the economic benefits consequent to this. The Town
receives the benefit of a network operator’s operations as well as the ISP, with the ISP receiving the
business of customers. The network operator, in turn, is funded through customer fees. These
relationships are captured in the following flow chart.
Option 2 – Private Philanthropically-Minded Entity
Under business model option two, the network could be financed through impact capital with capital
service provided through network revenues. The owner(s) of this type of network model would consist
30
of the investors in the form of an LLC, corporation, or B-corp, with the ISP of the network, as with Option
1 being a wholesale monopoly or another entity if the network is open access. Operations of the
privately-funded business model could be handled through a contractor or an ISP. Unlike Option 1, the
investors bear the risk of this network with revenue going first to the ISP, followed by the network
operator, and lastly to the investors.
The relationship benefits for Option 2 are somewhat more complex than for Option 1. In this model,
investors initiate the flow of benefits by providing a donation to a non-profit organization, which would
then provide grant money to the Town owned Internet Corporation. In this way, the investors infuse
capital (debt/equity) into the Town Internet Corporation, which owns the network assets. In return, the
investors receive tax benefits in the form of tax credits and tax deductions from losses as well as the
initial donation. Further, the investors receive a depreciation write off. From the Town itself, the
investors receive interest and principal payments. Under this scenario, the Town obtains the ISP as well
as customers, who pay fees to the network operator and purchase Internet service from the ISP. Finally,
the Town Corporation receives operations services from the network operator. These relationships and
benefit flows are depicted in the following chart.
The following chart summarizes these two options and their characteristics:
31
Business Model Options
Economic Impact of the Mt. Desert Network
Broadband investment can have a dramatic effect on economic development in rural communities.
Among other effects, broadband enhances efficiency and productivity of firms, facilitates commerce,
attracts jobs, increases consumer options, and saves residents money.
Recent studies regarding the economic impact of broadband investment have revealed a connection
between increased broadband availability and economic performance. Research by Professor Sudip
Bhattacharjee, Associate Professor at the University of Connecticut School of Business evaluated this
connection.11
The research, based on five years of data from 169 towns in the state of Connecticut from 2009-2013,
used the following methodology: It took raw data regarding demographics, occupation, broadband, and
housing from various public sources (CERC (Ct. Economic Resources Center)), DOL, and FCC), identified
key variable economic benefits assessing the impact of broadband, including per capita income, median
housing price, and the number of business units to estimate the economic benefit for Connecticut towns
and grouped and ranked the towns based on the benefit achieved.
The research summarized the impact of broadband, finding that five years after each 1 Mbps increase in
internet speed (up to 60 Mbps) resulted in the following average economic gains:
11
Bhattacharjee, Sudip, Presentation: “The Economic Impact of Gig Networks”, Yale School of Management. May 4,
2015.
32
Economic Benefits – Town of Mt. Desert
In the absence of conducting an extensive survey of spending trends in the Town of Mt. Desert over the
past ten years, it is impossible to precisely estimate the economic product of the Town of Mt. Desert
alone. Tilson used the economic data of Bangor, Maine as a corollary. Bangor shares many of the same
characteristics of Mt. Desert.
Tilson employed the “value transfer method” in its analysis. This approach borrows from the research
contained in peer reviewed studies of the economic impact of broadband and applying local data to the
same models. Tilson first gathered census data for the Town of Mt. Desert and the Bureau of Economic
Analysis data for Bangor to establish the economic baseline. Those estimates were then run through
economic models that forecast the impact of new broadband infrastructure on gross domestic product
(GDP), job creation, and enhancing consumer well-being in the Town of Mt. Desert. Tilson believes that
developing universally-available, world class broadband infrastructure in the Town of Mt. Desert has the
potential to increase GDP growth by 10% by 2020.
This estimate represents $6.9 million in additional goods and services over the course of the next five
years. This figure is open to debate, however, a large increase in broadband penetration usually results
in a significant increase in output. In a study of 22 Organization for Economic Cooperation and
Development (OECD) member countries, Koutroumpis et al. (2009) found that an increase in broadband
penetration of 10 percent added 0.25 percent to GDP growth on average.12 In a similar study, Czernich
et al. (2009) found that an increase in broadband penetration of 10 percent added 0.73 percent to GDP
growth on average.13
Impact on GDP
Tilson’s economic modeling examined the effect of an investment in broadband on the Town of Mt.
Desert’s baseline GDP through three different increases of speed: 1) An increase of 1.5 times the current
12
Koutroumpis, P. 2009. The Economic Impact of Broadband on Growth: A Simultaneous Approach.
Telecommunications Policy. Vol: 33, Pages 471-485.
13
Czernich, N., Falck, O., Kretschmer, T & Woessman, L. 2009. Broadband Infrastructure and Economic Growth. The
Economic Journal. Vol: 121, Pages: 505-532.
33
speeds; 2) a doubling of speed; and 3) a quadrupling of speed. The investment in the Town of Mt.
Desert’s broadband network would equate to an increase in GDP of between $7.1M and $28.8M over
ten years. The range reflects the range in realized speed improvement.
Impact on Job Creation, Wages, and Tax Revenues
Assessing the impact of an investment in broadband on job creation in the area, 33 area jobs could be
created by 2020 assuming a quadrupling in Internet speeds. The ten year totals of wages at the three
levels of increased Internet speed are about $4.1 million at a 1.5 increase in speed, $8.3 million at a
doubling of speeds, and $16.8 million with a quadrupling of speeds over the ten years through 2027.
Approximately 10% of these totals would be paid as state and local taxes.
Impact on Consumer Surplus
Broadband investments improve consumer wellbeing. Consumers are not necessarily better off just
because economic output increases. An increase in GDP just means that they are spending more. That
being said, broadband access empowers consumers to both pay less for goods than they otherwise
would have purchased and to purchase goods and services that were not available before. An example
of this is with regard to streaming video, which enables almost limitless viewing for little to no cost.
Without this streaming capability, consumers would pay more to rent films and/or subscribe to satellite
television. In the economic lexicon this phenomenon is known as “consumer surplus”.
For the purposes of this exercise, consumer surplus is defined as the amount that consumers benefit
from purchasing a product for a price that is less than what they would be willing to pay. In a study of 40
million U.S. households with access to broadband, Greenstein and McDevitt (2009) found that
broadband access increased consumer surplus by between $120 and $167.50 per household, per year.14
Tilson’s economic analysis shows that a total increase in surplus over the next ten years of between $3.3
and $4.6 million.
Conclusions
Residents and stakeholders in the Town of Mt. Desert feel that the Town is underserved by current
connectivity, with certain remote areas in particular especially underserved, and in some cases,
unserved. The Town as a whole would like to improve connectivity in the near term, keeping in mind
that the Town’s ultimate goal would be a future-proof solution that provides great broadband
universally throughout the Town.
Tilson envisions four potential broadband solutions for the Town, which could be employed either in
concert or separately, depending on the area to be served: (1) Residential LTE and potentially new tower
builds at a cost between $300,000 (for just colocation on existing towers)-$800,000 (for colocation plus
14
Greenstein, S. and McDevitt, R. 2009. The Broadband Bonus: Accounting for Broadband Internet Impact on U.S.
GDP. NBER Working Paper No. 14758.
34
two new towers)—a solution which could take up to one year to deploy; (2) WiFi for the harbor areas,
which could be deployed in less than 6 months at a cost of $40,000; (3) Two digital subscriber link access
multiplexers (DSLAMs) to boost the existing copper infrastructure at a cost of $65,000; and (4) A future
proof universal fiber to the premise option, costing between $7.1 and $13.3 million depending on the
costs the Town chooses to own. This fiber solution could take 2-3 years to implement.
In terms of funding a potential broadband solution, while the Town of Mount Desert’s broadband
offerings fail to match its residents’ connectivity needs, these offerings are no more limited than most
other communities in the state and the nation. Thus, the Town is unlikely to qualify for subsidy and any
comprehensive broadband solution will require local capital from public or private sources.
Recommendations
1) Next Steps Options 1-3. The Town should assess the four solutions on their technical merits for
alignment with Town goals. If the Town decides to pursue a DSLAM or LTE solution, the first step
is to initiate conversation with an operating partner. In this case, FairPoint or Redzone Wireless
respectively. If the Town wishes to pursue a WiFi solution, the Town may implement the
solution in partnership with many carriers. Axiom Technologies is a popular carrier in the state
for WiFi solutions. The first step it to determine operational funding. This is often accomplished
through corporate partnership.
2) Next Steps for a Fiber Solution. To achieve the Town’s goal of a future-proof, universal solution
serving all residents equally, the full fiber optic build would ultimately be the best choice,
however, it would take 2-3 years to deploy. As part of next steps, the Town should determine if
it wishes to proceed with a network and to determine the scope of that network. Following this
the Town will need to select an operating model for the network and sponsor a request for
proposals (RFP) for a general contractor to build the network or a request for information (RFI)
to select a partner for the chosen network solution.
3) Partner with Surrounding Municipalities. Many municipalities in the region have expressed
interest in similar fiber-based. The Town of Bar Harbor is undergoing a very similar broadband
planning process and may wish to partner on design and implementation. This may create
economies of scale in network operation. The marginal cost of operating a two Town vs. one
town network are relatively minor. However, there are few economies of scale in the capital
cost estimate.
4) Finalize Financing. Tilson believes that it will be difficult to attract subsidy to the Town because
the Town is well served compared to many municipalities in the state and within the US. If the
Town pursues a solution, financing will come from either private impact investors or municipal
capital. The Town’s first step is to determine whether it wishes to pursue a private or public
capital campaign.
35
Case Study – Islesboro Maine
In order to describe the next steps in the engagement, it is useful to look at comparable projects that
have set a precedent. One such project is found nearby on the Town of Islesboro Maine. Islesboro
presents a similar case study to the Town of Mt. Desert. Their community is far along in the
development of a municipally owned, universal FTTP network. Like the Town of Mt. Desert, Islesboro
has a strong seasonal community as well as a relatively small year round community. The Town faces
similar demographic challenges and has similar economic development goals. These include attracting
young families to the Island, assisting small businesses, and encouraging telecommuting. The Town
hopes that the FTTP solution will largely address some of these challenges. The graphic below shows the
project progress and timing through engineering, which is ongoing. The project is currently in the
engineering and site acquisition phase with implementation scheduled to start early next year.
The Town conducted its feasibility study in late 2013 and early 2014. After conducting that study, the
Town began an RFI process to select a private partner who would implement the solution described in
the study. Ultimately the Town selected GWI and negotiated an operating agreement with the
Biddeford-based ISP. This model required the Town to own the network and assume the financial risk. In
36
exchange, GWI agreed to stringent service, uptime, and provisioning requirements. Once the operator
was selected and an agreement established, the Town passed a bond referendum to fund the design of
the network. Tilson is currently designing the network. Once the Town has a firm fixed price for network
construction, it plans to raise the remaining capital through a public referendum on a general obligation
bond. The Town expects that the 46 mile, 850 premise network will cost $3.0 million to build. The Town
has invested approximately $100,000 in consulting fees through three stages and $200,000 on site
acquisition and engineering services prior to raising the full amount.
Appendix A: Town of Mt. Desert Fiber Optic Service
Maine municipal buildings tend to be fairly well served for broadband. This section describes the Town
of Mount Desert’s current internet service situation. The solution currently employed by the Town is an
example of a local town’s expensive connectivity solution for a small connection of a few buildings, as
well as the dramatic escalation in these costs from year to year.
The Town of Mt. Desert pays approximately $40,000 annually for connectivity between buildings,
consisting of fiber running to its Town Office. They push Internet out to the other buildings via Virtual
Private Network (VPN). The previous year the cost of this service was about $22,000. For the Town of
Mt. Desert, the primary cost is the fiber rental to the town office. The monthly charges to the other sites
in Town are around $280- $320 per month. The town office has a 50 mbps symmetrical fiber connection.
All other locations are connected via the provider’s managed VPN. They have speeds of 35 down and 5
upload with the exception of the two fire departments which have 15 down and 2 upload. The Town
investigated fiber for all locations about 2 years ago and it was about another $11,000-$12,000 annually
above and beyond what they are paying currently. Pursuing a municipal fiber project, gives the Town
control over its internet service costs.
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Appendix B: Cellular Coverage in the Town
The primary purpose of this study is to plan for residential and small businesses internet service.
However, we also analyzed cellular coverage throughout the Town. The following details the selfreported coverage areas of the major carriers in the Town of Mt. Desert. There are few tools available to
the municipality for improving cellular coverage. This is largely due to the concentration of spectrum
ownership among a few corporations.
Self-Reported Coverage
Verizon, U.S. Cellular, and AT&T each report the following 4G LTE coverage areas on their respective
websites. Each carrier reports that it has coverage gaps in the villages, with Seal Harbor and Otter Creek
consistently receiving the worst coverage across all carriers.
U.S. Cellular
U.S. Cellular’s coverage map shows 4G LTE quality coverage in Pretty Marsh, Hall Quarry, and the Village
of Northeast Harbor, 3G in the Somesville area, with the primary unserved villages once again being Seal
Harbor and Otter Creek.
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AT&T
AT&T shows 4GLTE (dark orange) coverage quality throughout MDI. However, AT&T acknowledges some
drop off in coverage quality in the Seal Harbor and Otter Creek Village areas. Resident anecdotes
suggest that this map overstates the coverage. Several residents mentioned difficulty receiving service in
the Seal Harbor, Otter Creek, and Northeast Harbor areas.
Verizon
For Verizon, service is hit-or-miss in the areas of Pretty Marsh, Somesville, and Hall Quarry. For the
Villages of Northeast Harbor, Seal Harbor, and Otter Creek, there is no coverage.
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