Most of these projects were previously designated as “Phase 3 Awardees,” but the FCC will now supply the funds needed to begin construction through the Connect America Fund.

Providers attempting to wire rural communities to offer broadband service or a competitive alternative to cable and phone companies face unfair tax and pole attachment fees that often give the advantage to existing companies and deter would-be competitors.

Those differences have a meaningful impact on rural broadband providers in states like New York, where wiring rural upstate communities is being made difficult by bureaucratic pole attachment fee policies and wide differences in property taxation that give an edge to existing cable giants like Charter Communications while hampering small start-ups with costly and confusing tax policies that slow down broadband rollouts. For businesses navigating these complex tax challenges, expattaxthailand.com offers expert advice to simplify the process and ensure compliance.

The Watertown Daily Times recently published an in-depth special report on the broadband challenges impacting northern New York, where fast internet access has evaded some communities for more than two decades. That lack of access is becoming a critical problem for a growing number of employers who are now considering exiting those communities because companies like Verizon, Frontier Communications and Charter/Spectrum are refusing to provide 21st century broadband service in rural upstate communities.

One example is Tupper Lake Hardware in Tupper Lake, N.Y., which wanted to expand, but considered exiting the area instead after being stuck using satellite internet access because no phone or cable company offered broadband service in the area.

“It came to the point where if you are going to make a $1 million investment, we actually talked about this, we said ‘do we put our money into this place or do we just pick up and move?’” general manager Chris Dewyea told the newspaper. “It is real. It sounds dramatic, but that is the way it goes. The connectivity speed that we had with satellite internet was not good enough, so that is when we started on our journey to get high-speed here.”

Calling Verizon, Frontier, or Spectrum was fruitless, so the company picked up the phone and called… the Empire State Forest Products Association, a group that has tangled with internet connectivity problems in upstate New York before. The group pointed the company to Slic Network Solutions, owned by the independent Nicholville Telephone Company, which has spent the last several years slowly expanding the reach of its fiber optic network in the north country. Slic currently provides service to about 10,000 homes in small communities like Belmont, Lake Placid, Schroon Lake, and Titus Mountain.

Like many fiber overbuilders operating in New York, Slic has to plan its network expansion carefully, as it lacks the financial resources and staff of a company like Verizon or Charter. Slic’s fiber service is in very high demand, because the alternatives are almost always satellite internet access or appallingly slow DSL service from Verizon or Frontier, neither of which have shown much interest in delivering the FCC’s 25Mbps definition of broadband. Charter’s Spectrum service is available only in larger concentrated communities that can meet the cable company’s return on investment property density test. Many rural upstate communities don’t.

“In most of the places, there really was the option of satellite. Some places had DSL but it was usually pretty marginal,” said Kevin Lynch, vice president of technical operations & chief operations officer of Slic Network Solutions. “There are a few areas, but very limited, that might have had Spectrum.”

Slic is one of several small fiber providers operating in New York, each trying to cover territories larger phone and cable companies have ignored for years. Cooperation in commonplace among some companies operating in similar regional areas to keep construction and operating costs down. Some providers share their networks to extend their reach. Most target commercial or institutional users but will lease out their networks for residential providers. Some of the state’s middle mile fiber networks were built with economic stimulus money or through other grant or government programs. Others are privately funded. Many are underutilized but lack the funds to expand.

Westelcom, based in Watertown, counts Slic as one of its partners. Westelcom currently limits its business to commercial accounts in its six county service area, which includes Watertown, Malone, Clayton, Elizabethtown, Ticonderoga and Plattsburgh. But it is willing to provide wholesale access to third-party companies that want to serve residential customers.

One of the biggest and most surprising impediments to serving “last-mile” residential customers isn’t the cost of construction or the return on investment. It’s New York’s tax laws. Current tax policy requires fiber providers to pay taxes on the value of the infrastructure being used, regardless of revenue. At present, that tax rate can cost between $25,000 and $30,000 per fiber route mile. If it takes five miles of fiber to reach only a half-dozen homes, the provider would owe New York over $100,000 in taxes alone, making it impossible to recoup costs and drain the provider’s finances.

The National Conference of State Legislatures, a bi-partisan group, published Property Taxation on Communications Providers: A Primer for State Legislatures in 2015, outlining a legacy of inconsistent and often outdated state and local taxation policies across the United States that treat communications providers differently on issues like property tax. The group points out New York’s tax authorities treat cable and phone companies very differently than upstart fiber providers. Mobile phone companies are taxed differently as well:

The taxation of communications property varies widely in New York. There are several types of property taxes that are applied in varying ways to the communications sector. While New York does not generally tax tangible personal property, the state considers lines, wires, poles, electrical conductors, fiber optic equipment, and related equipment to be real property. Landline companies and cable companies are subject to a real property tax on “Special Franchise” property which is centrally administered and assessed using the reproduction cost method by the Office of Real Property Tax Services (ORPTS). The Special Franchise property tax applies to equipment located on public property. In addition, Nassau County and New York City have a “split roll” which  requires higher taxes on the “utility” class which includes landline telephone companies. Wireless companies and cable companies are assessed locally for their real property (land and buildings,  e.g., towers)

In plainer English, Lynch points out Slic is taxed about $465 per mile per year in St. Lawrence County, which is “significantly higher” than what cable companies like Charter pay, because they are taxed differently.

In the college town of Potsdam, Slic pays more than double the school and property taxes paid by Charter Communications, even though it serves fewer customers and earns much less. That disparity forces providers to target their networks in more dense areas like inside towns and villages, which means more customers per fiber route mile, reducing the bite of the tax man.

“Broadband infrastructure is considered real property, so it is taxed just like a house when it is in the right of way. So when we attach to these poles which are in the public right-of-way, we pay taxes on it and it is based on construction costs,” Lynch added. “There are a certain number of customers we have just to break even on those two operational costs and that does not include any of the other overhead and the content, the electronics and all that.”

After paying New York, Slic then faces the bureaucratic challenge of pole attachment permitting and fees. Every pole on which Slic attaches its fiber wiring is owned by someone else, typically utility companies like National Grid, Verizon, or Frontier. Some poles are jointly owned and maintained by the phone and electric company in the area. Fees and procedures vary in different parts of the state. There is generally a very costly pole attachment application fee and ongoing pole rental fees, which in this part of New York can run $400 a mile, per year.

Lynch said the costs of pole attachment fees alone can account for up to 40 percent of Slic’s expansion budget, and those initial fees can run between $10,000-14,000 per mile. This is why fiber overbuilders frequently decide on coverage areas based on customer commitments to sign up for service if it becomes available. This allows companies like Slic to secure the financing required to provision the service. But money alone doesn’t buy instant access.

“We apply to National Grid or whoever the pole owner is and say, ‘We would like to attach to these 30 poles on this road,’ and do a pole application and pay a fee,” Mr. Lynch explained to the newspaper. “They come out, they look at each pole and they determine if there is space on the pole, do they need to rearrange the electrical wires so they are in compliance with the electrical code, do they need to move down the phone lines. A lot of times these poles are jointly owned. It will be National Grid and Verizon, so they have to coordinate and then there might be a section that has Spectrum on it, so you have three or four companies that have to coordinate this effort.”

The state adds its own layer of bureaucracy with different Department of Transportation regions, regional economic regions, and Department of Environmental Conservation regions, each with its own rules and procedures. It is common for fiber projects to cross from one region into another, requiring additional paperwork and likely delays. If a project has to cross into the Adirondack Park, the rules and permits required to manage that are byzantine.

The result of all this is usually a significant delay in getting started, but once the paperwork is complete and fees are paid, the work can go faster than many realize.

“In these areas where we are constructing right now, Schroon Lake and Belmont and Lyon Mountain, we are building three to five miles of fiber per week. Our next group of projects that has been funded by New York state is 300-plus miles of fiber,” Lynch said. “And when I say three to five miles per week, that is per area.”

Fiber providers would like to see tax fairness and a lot less bureaucracy. The rules in states like New York may eventually leave fiber to the home service at a distinct disadvantage, because wireless networks don’t face pole attachment complications and pay lower taxes because their real property is generally a cell tower and the fiber line that connects to it. As it stands, some internet providers may gravitate towards wireless internet solutions in rural areas instead of fiber just to avoid excessive taxes and the pole attachment bureaucracy. Most homes and businesses prefer fiber optic service when given a choice, but without some changes to tax laws and a more centralized, less bureaucratic approach to pole attachments, fiber optics may never make financial sense in rural upstate New York.

New York Governor Andrew M. Cuomo announced this week New York State will award $25 million in funding to expand high-speed Internet access in rural upstate and underserved urban areas of New York through the Connect NY Broadband Grant Program. This award brings the total amount of funding awarded for broadband projects during Governor Cuomo’s administration to more than $56 million, the largest statewide broadband funding commitment in the nation.

Unlike many broadband grant programs, New York is primarily targeting last-mile projects that make all the difference for New Yorkers that cannot get broadband service at any price. The federal government and some states have focused instead on funding institutional or “middle-mile” networks that ordinary consumers and businesses cannot access. The Connect NY Broadband Project specifically sought projects that will get residents broadband service as quickly as possible.

Pat Pryor is chair of the Tompkins County Legislature’s Special Committee on Broadband, which is fighting for better service in the Southern Tier of New York. Pryor says the grant will make a real difference because Verizon and Time Warner Cable have refused to expand service where they consider it unprofitable. She told the Innovation Trail the funding will help a wireless ISP in her county that specializes in serving rural areas bypassed by cable and DSL.  (1 minute)
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“Through the Connect NY program, we are bringing high-speed Internet access to all corners of New York State,” Cuomo said. “The projects receiving these grants represent the very best proposals with the most potential to benefit statewide economic and community development efforts. These funds will strengthen New York’s broadband capacity and encourage sustainable adoption of broadband service in unserved and underserved communities, counties and regions across the state.”

Cuomo

Altogether, about 6,000 square miles of new infrastructure will offer high-speed Internet service to 153,000 New York households, 8,000 businesses, and 400 community anchor institutions – many without any means to access the Internet. The projects will also create 1,400 new jobs.

The funding comes as a relief to New York residents who have gone without service for years, denied access to earlier grants in part because incumbent providers inaccurately claimed, through national broadband maps, they already offered full broadband coverage in many New York counties that actually don’t have service.

Tompkins County is a case in point. Verizon and Time Warner Cable, the dominant providers, volunteered incorrectly that almost the entire county was well-served with broadband. That proved frustrating to county legislator Pat Pryor.

“It matters, because a lot of times [the maps are] what grant funding is predicated on,” Pryor told the Innovation Trail. “[Funders say] If you don’t have any unserved areas, why would you need a grant? We’re almost 100 percent covered, why would we need any money?”

Claire Perez has spent more than a year fighting for broadband for her neighborhood in West Dryden, which is just over 1/2-mile from the nearest Time Warner Cable customer. She talked with the Innovation Trail last March about her plight. Despite endless rounds of petitioning the cable operator to extend service, the company would only quote “go-away” prices ranging from $23,000-54,000 to wire her neighborhood and home. Perez, and others like her, may be among the biggest beneficiaries of the broadband expansion program if they are near a Time Warner Cable service area. (3 minutes)
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The specifics:

$24,010 The Smithville Project
This project with Haefele TV Inc. will serve the Southern Tier region. The Smithville project will build fiber optic cable utilizing existing infrastructure. The network will pass 350 homes and provide broadband service with speeds of 7 Mbps download and 1.5 Mbps upload to approximately 100 new subscribers.

$114,015 Ovid and Romulus Broadband Project
This project with Trumansburg Telephone Company will serve the Finger Lakes region. The Ovid and Romulus Broadband Project will provide broadband to unserved areas in company territory in the towns of Ovid and Romulus. This project will enable 110 customers in this area that have no availability to any type of broadband services to obtain high-speed Internet service. The project will also offer discounts on subscription fees, free training and email addresses.

$200,000 Connect Thurman White Space Project
This project with Warren County Economic Development Corporation will serve the Capital District region. Through a public/private partnership, the Thurman White Space project will provide broadband access to 89 households in the northeast area of the Town of Thurman. The Town of Thurman will also offer economically disadvantaged residents access to public computers and enhanced digital literacy training.

$557,000 Essex County Broadband Service Expansion
This project will serve the North Country region. The Essex County Broadband Service Expansion project will provide high-speed broadband service to households that do not have access within the Towns of Jay and Wilmington, passing 1,900 households. The project will also provide digital video services and potentially a competitive telephone service.

$558,940 Otsego County Wireless Network
This project with the County of Otsego IDA will serve the Mohawk Valley region. The Otsego County Wireless Network will partner with a last-mile provider to leverage a county-wide, open access fiber backbone to deploy last-mile, wireless broadband to 24 towns, 9 villages and 1 city in Otsego County, serving approximately 28,000 households, 4,500 businesses and 300 community anchor institution locations. The wireless network will also be made available to any viable organization or service provider that wishes to use it.

$572,000 Hamilton and Herkimer Counties Broadband
The Broadband 1 project with Newport Telephone Company is a multi-region project serving the North Country and Mohawk Valley regions. The project will leverage existing infrastructure to provide broadband service to 230 residents, businesses and community anchor institutions in Hamilton and Herkimer Counties. The project will also enhance emergency services for both counties.

$672,452 Southern Tier Broadband
This project with the Southern Tier West Development Foundation will serve the Western region. The project will expand access to broadband service and increase broadband speeds through a WiMAX (Worldwide Interoperability for Microwave Access) system to towns and villages in the counties of Chautauqua, Allegany, Cattaraugus, and Erie County, passing more than 41,000 households. The project will also partner with local medical clinics to enhance electronic medical records and upgrade hardware and software at libraries in Chautauqua, Cattaraugus, Allegany, Steuben, and Chemung Counties.

$800,000 Allegany County Broadband
This project with Allegany County will serve the Western New York region. The Allegany County Broadband project will create a county-wide platform for providing access to an existing network, delivering broadband to 28 local communities and 17,440 households in Allegany County that are currently without broadband service.

$976,426 Lyon Mountain Broadband
This project with Slic Network Solutions will serve the North Country region. The Lyon Mountain Broadband Project will provide high-speed, low-cost broadband service in the Community of Lyon Mountain to 527 households, utilizing fiber-to-the-home technology. In addition this network will also deliver telephone service, IPTV service, and advance business services over the fiber.

$1,012,366 Bellmont North Next Generation Broadband
This project with Slic Network Solutions will serve the North Country region. The Bellmont North Next Generation Broadband project will provide high-speed, low-cost broadband service in the Adirondack Park to the northern end of the Town of Bellmont. This service will be delivered utilizing 25.3 miles of fiber to the home and wireless technology to connect 124 households. The network will also allow for the delivery of telephone service, IPTV service, and advance business services over the fiber.

$1,636,346 Connect NYC
This project with the New York City Economic Development Corporation will serve the New York City region. By conducting a competition to fund fiber build out to small and medium businesses and in collaboration with private sector Internet Service Providers, the Connect NYC Project will be used to extend the fiber infrastructure available to commercial and industrial businesses in New York City. Business owners who will need industrial dust control protection may consider contacting experts like WeatherSolve for professional installation services.

$1,800,000 MTC Broadband Buildout
The MARK Project Inc. will serve municipalities in the Capital District, Mohawk Valley and the Southern Tier. The project will deliver telecommunications services, including broadband, voice and video services, to 900 residents, businesses, and anchor institutions within the unserved areas of the towns of Conesville, Gilboa, Halcott, Middletown, and Roxbury. The project will also offer broadband connectivity to community anchor institutions within the service area free of charge.

$1,999,584 Parish Broadband
This project with New Visions Communications will serve the Central New York region. The project will utilize existing infrastructure to provide high-speed internet, VoIP and cable television to the Town of Parish, where 72% of the population does not have access to broadband, VoIP or landline cable television. The project will also create 20 construction jobs and 6 permanent jobs.

$2,042,177 Connecting the Capital Region
Hudson Valley Wireless will provide high-speed fixed wireless broadband access to nearly 40,000 households and 2,000 businesses that currently do not have access in Washington and Rensselaer Counties. In addition, the network will enhance public safety operations in the region by enabling redundancy of public safety communications and by allowing municipalities to use a portion of the bandwidth at no cost.

$2,162,656 Schroon Lake Next Generation Broadband
This project with Slic Network Solutions will serve the North Country region. Slic Networks Solutions will provide high-speed, low-cost broadband service to 457 households in the unserved areas of the Town of Schroon and the Town of North Hudson. This service will be delivered utilizing fiber to the home technology. Slic will also provide wireless hot spots for frequently visited public locations including the public beach in Schroon Lake.

$2,216,000 Tompkins and Cayuga Counties Last Mile Coverage
This project with Clarity Connect Inc. is a multi-region project serving the Central New York and Southern Tier regions. This project leverages existing tower infrastructure to provide broadband services to the unserved portions of the Towns of Ulysses, Enfield, Newfield, Danby, Groton, Lansing, Ledyard, Genoa, Venice, Scipio, Niles, Sempronius, and Summerhill in Cayuga and Tompkins County. The project will also upgrade DSL services increasing existing speeds.

$2,407,049 Yates County Open Access Fiber Network
This project with Yates County will serve the Finger Lakes region. The Open Access Fiber Network will build and operate a fiber-optic ring with spurs to remote areas within the County of Yates. This network will serve as a backbone foundation for the development of community-based broadband initiatives. The open access fiber network will be 68 miles long, passing 10,400 households and available for use within each town it routes through.

$5,266,979 Statewide Broadband Expansion
The Statewide Broadband Expansion Project is a statewide project serving 9 regions. Time Warner Cable will deploy robust high-speed Internet service to 4,114 households in the Capital, Central, Finger Lakes, Mid-Hudson, Mohawk Valley, NYC, North Country, Southern Tier and Western regions of New York State. The project will also provide residents with access to digital TV, telephone services and security services.

Time Warner Cable is blaming an increase in pole attachment fees in upstate New York for increasing the cost of doing business, despite the fact those increases will not apply to the cable company.

National Grid, which also does business as Niagara-Mohawk, is raising rates for third-party companies to attach new lines to the poles the electric utility owns.  The power company says it is the first rate increase since 2007, and covers the cost of engineering, safety reviews, and ongoing infrastructure costs.

The Albany Times-Union quotes Time Warner Cable spokeswoman Lara Pritchard’s reflexive complaints about the rate increases.

“Inevitably, any price increase to poles will impact our costs to bring service,” Time Warner spokesman Lara Pritchard said Monday. “At this time, we have no plans to adjust fees. We periodically assess all of our associated costs to do business, as any company would, and this would factor into that assessment.”

If so, it should be by a factor of zero because the pole attachment fee increases apply only to companies seeking to place new lines on utility poles, not those maintaining or replacing existing cables.

The New York Public Service Commission approved the utility’s request for a change in their “Make Ready” rates, which cover costs associated with new projects. Existing companies, including Time Warner Cable will continue to pay a locked-in rate of $11.13 per pole, which represents no change.

Verizon acknowledged as much, noting the company’s existing fiber and copper wire lines are exempt from the rate hike.

But not every company is being held harmless from the rate increases.

Major projects to extend fiber broadband service to rural Franklin and St. Lawrence counties in upstate New York could be at risk because Niagara Mohawk, the dominant power provider in the region, is raising the rates to place fiber on some 22,000 poles required for the network.

Slic Network Solutions, the Development Authority of the North Country and Ion HoldCo LLC are facing at least $3.5 million in higher pole attachment expenses the utility said nothing about when they reached an agreement with National Grid in December.

Taxpayer grant money is backing the projects, including Slic’s 136-mile network covering parts of Franklin County and another 660-mile project in St. Lawrence County.  Ion operates a fiber optic broadband backbone that extends throughout upstate New York.

Keith J. Roland, an attorney with the Herzog Law Firm representing the three companies, has filed a formal complaint with the N.Y. State Public Service Commission, calling the rate increase “unjust, unreasonable, excessive, and unlawful.”

Roland says the increased costs, which he calls “arbitrary,” could threaten the viability of the projects.

“Without access to those poles, SLIC, DANC and Ion and almost any other telecommunications, cable TV and Internet provider in rural area of Niagara Mohawk’s territory would be driven out of business or effectively be precluded from doing business,” the complaint states.