The Rancho Santa Fe Association is searching for a company to fulfill its broadband goals, approving a request for qualifications and proposals (RFQP) at its Sept. 3 board meeting. The Association is hoping to add an amenity that has been lacking for a long time in the community by providing faster Internet and reliable connectivity through a fiber-optic network that goes straight to homes.
John Honker, president of Magellan Advisors, presented his fiber feasibility study to the board on Sept. 3. The board engaged Magellan on a $100,000 consultant contract in March, and the company has been working to analyze proposals, determine costs, identify options and guide Rancho Santa Fe to the right decision.
The Association has opted to seek proposals from a broadband company to participate in a partnership model, which is a co-investment in the network and sharing of returns.
An entitlement exchange is given to the provider to use right-of-way easements for the network. Rancho Santa Fe could participate and co-fund the network and gain more control.
“We see this as probably the most appropriate model for Rancho Santa Fe,” Honker said. “It creates the greatest value to the community because there’s some buy-in and stake in the project … It provides feasibility and long-term security for Rancho Santa Fe.”
Through this model, Honker said the Association could also ensure it was providing services that residents really want, a long-term revenue source and more support for property values.
Beyond phone and Internet, the network could bring value-added services such as security and smart home technology.
The RFQP solicitation process will take about 60 days, with proposals being due by the end of October. Once the Association makes a selection for a partnership, the network could be complete in 18 months with some homes coming online faster than others.
In his report, Honker pointed to the reasons why Rancho Santa Fe’s technology is lagging.
“Providers have left Rancho Santa Fe out of their upgrade plans simply because of the low density. Because Rancho Santa Fe is a diverse and spread-out community, it is very expensive to build a network, because there is a lot more infrastructure and not as many homes per mile, which means less revenue,” Honker said. “But we know there is demand. People are very unhappy with their services today and are looking for upgrades.”
In the fiber feasibility study, a number of proposals were considered.
AT&T’s proposal offered small improvements but no significant benefit. It would require a $2.1 million investment from Rancho Santa Fe, with a 1.5 percent rate of return, “not a good investment,” Honker said.
The AT&T plan would not meet the FCC’s definition of broadband, Rancho Santa Fe would maintain no control over the service and there would be no future path to improving services.
Orion offered one of the more expensive proposals, requiring $7.5 million investment for a business the Association would have no control or ownership over. And the proposal would cover only 70 percent of the community.
A more conceptual option Honker presented is for a new provider to come in and invest the full $12 million in the network. The capital expenditure would be pushed to the new provider, but Honker said the provider would probably require a high percentage of community participation and rate cost — about 80 percent participation and rates of at least $150 a month.
“Another issue is the ‘switching’ issue. If the provider is not performing, it might be very hard to replace them,” Honker said. “You may get stuck.”
Honker said many communities across the country are looking to the partnership model that Rancho Santa Fe will now explore. He referred to Chattanooga, Tennessee’s publicly owned fiber optic network, and what Google fiber has done with infrastructure in Kansas City.
Honker said the fiber network is “future-proof,” and with no financial risk to the Association, they could see a 5 percent recurring revenue share for the entitlement.
The RFQP will be placed on industry websites. Honker disclosed that Magellan would be interested in submitting a bid and would expect it to be treated like any other proposal the Association receives.