• Big cable companies and telephone companies have enormous demands on their capital to build out the larger cities in the Country with fiber. They simply do not have the capital to build out tier two, three and four communities at this time.
• When done right, a FTTH system can provide very competitive pricing to existing services, possibly even saving subscribers 25% on combined bills, while providing superior quality services.
• Fiber systems are more efficient to operate and maintain than traditional copper or cable systems
• For communities of less than 20,000 population, the RUS program provides low interest rate loans for building FTTH systems. See “Financing” section below for more on this.

• Owned and operated by incumbent cable or telephone companies.
• Owned and operated by capable and qualified entrepreneurs.
• Owned and operated by capable and qualified entrepreneurs.
• Capable of providing triple play services and more. (e.g., telephone, internet, video, etc.)
• Supported by a financially sound business plan.

MCM focuses on projects in communities with populations ranging from 12,000 to 250,000, (representing $50 - $100 Billion of potential construction over the next 5 years).

If your company is well capitalized, you may need only debt for expansion purposes, and we can help you. However, most incumbents and entrepreneurs in smaller communities are rich in technical skills but do not have the capital needed to build a FTTH system. For this reason, a typical financing package for a FTTH system will require both equity and debt. MCM can, in the right circumstances, raise both the equity needed and the debt.
EQUITY OPTIONS

Equity for a start-up FTTH system is the most difficult part of the financing package, because the equity investor is the one that ultimately takes the biggest risk should a system fail for any reason. It is important to locate an investor who understands the FTTH industry and its peculiarities. Large investors normally specialize in certain industries, and because the FTTH industry is so new to the investment community, there are very few large investors that have been attracted to this area.

MCM works closely with one large investor who has spent the time to educate themselves about this industry, and is actively seeking investments at this time. The developer should keep in mind that just like any other industry, investors putting money (equity) into a start up FTTH system will expect to own a share of the company relative to the amount of cash invested.

Long-term debt must be issued to complete the financing package. Equity investors will require leveraging their equity position by the use of debt, and will not be willing to finance the entire project with equity. Typically a project borrows as much money as possible, at the lowest interest rate possible, then completes the funding with equity from investors.

ONE VERY IMPORTANT RESOURCE TO THE FTTH INDUSTRY IS THE U.S. DEPARTMENT OF AGRICULTURE’S RURAL DEVELOPMENT UTILITIES PROGRAM BROADBAND LOAN PROGRAM. THIS PROGRAM IS IDEAL FOR INDIVIDUAL COMMUNITIES OF 20,000 POPULATION OR LESS, BUT REQUIRES THAT THE BORROWER HAVE APPROXIMATELY 20% OF THE PROJECT IN CASH OR OTHER FIRM EQUITY. MCM CAN HELP YOU RAISE THIS 20% EQUITY, AND HELP WITH THE APPLICATION PROCESS FOR THIS LOW INTEREST RATE FINANCING.

For more information on the RUS financing, click here

If the project that you seek to finance does not qualify for the RUS financing, long term debt must be raised in the open market. MCM specializes in difficult to finance projects. We often bring innovative ideas to the table to assist the borrower in accessing the debt market. One of the most flexible ideas used for this type of financing is the senior/subordinate structure, which is a means of dividing the debt into two different categories, for purposes of obtaining the lowest interest rates for the borrower.

Lenders will require a collateral interest in the assets that make up the Project, including:

1. Security interest in Project assets.
2. Rights to receive senior pledge of revenues and receivables from the Project for debt payments.
3. Security interest in all licenses and contracts.
4. Security interest in all cash balances.
5. Other revenues or security, determined on a case by case basis.

OTHER INVESTOR CONCERNS:

BUSINESS PLAN
Investors considering either equity or debt investments will expect to see a Business Plan that is well thought out and that includes financial projections that are reasonable. A proper Business Plan will include:

1. A history of the borrower’s business experience. If the borrower is an incumbent cable, telco, or FTTH system, financial statements on the current system will be required.
2. Estimated costs for service area build-out with sufficient detail to provide the reader with comfort that real planning has been put into the costs.
3. Estimated build out schedule with projected take-rates by month for the first five years.
4. The Business Plan must speak to incumbent services being offered in the service area and address the pricing of the incumbents compared to the pricing of the proposed FTTH system.
5. An independent feasibility study of the market area is not mandatory but will be very helpful.
6. A complete outline of the marketing plan for the system.
7. Finally, the Business Plan must show investors how they will benefit from this investment, and how they will profit and eventually get their money back with interest.

• Fiber is very dynamic, adaptable, and if appropriate, can be integrated with other technologies (such as wireless, powerline technologies, or radio frequency transmission).
• Fiber transfers data at virtually the speed of light (all other technologies utilize fiber optic backbones so it is unlikely anything faster can prevail).
• Engineering is relatively flexible.
• Systems are designed and built with excess capacity (once the trenches are open, the costs to lay additional capacity is nominal).
• Although some system components have an expected life of 7-10 years, the Fiber (which represents the largest percentage of project costs) is expected to have a useful life of 20-25 years (note that cable technology has lasted 20+ years and copper has lasted 100+ years)

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