Investment & Business

In this section, we examine the issues to consider in looking for funding to develop local/regional NGA projects.  Other sections of this site can help you define aspects of your project that will need to be in pretty fair shape before you can answer the likely questions of potential funders – the project scope, type, what kind of ownership structure and importantly, the business plan.

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Community-driven Funding Models

A number of examples demonstrate how community-driven models can be used to help deliver NGA projects.  There are a number of different approaches that can be employed.

Community Shares – a ‘live’ example from Cybermoor

Cybermoor (www.cybermoor.org) has been a pioneer in community-led broadband action since 2001, operating a wireless broadband network.  Cybermoor is working on a NGA project as part of one of the BDUK pilots.

Cybermoor’s plan is to upgrade its network to use more fibre and has received an offer of funding from the Northwest Development Agency (NWDA) under the RDPE (Rural Development Projects for England) scheme.

This grant is part funding of a £600,000 project: with remaining funding to be provided by Cybermoor, and industry partners. Monies will be drawn from Cybermoor’s own resources and through the issue of Community Shares.  A fund-raising document is currently being prepared and once available, we will post a link to it here.

You can find out more about Community Shares at (www.communityshares.org.uk) where there are many resources and links to guidance on community shares and bond issues, legal issues, forms of corporate structure and governance.

An Open Network Community Solution

Based on international best demonstrated practice for business and operating models for open networks, some time ago CBN (www.broadband.coop) devised an outline solution for community networks, based on the open network concept.  The elements considered in this model are:

  • Mutually owned, open network and network operator: a non-profit-seeking body owns and operates the network on behalf of service providers and the business and residential community, primarily offering access to the active network (“lit” fibre) to service providers, but with an option for other operators to buy access to the passive network. 
  • Multiple competing service providers: different providers offer a range of services to end users primarily in services and content including Internet access, telephone services and other content.
  • Community service provider: one of the competing service providers is a community-owned enterprise effectively guaranteeing the availability of core end-user services to local businesses and residents.

The following assumptions are made:

  • That there are may be public funds available for capital investment, particularly in ‘hard-to-reach’ areas
  • That there should be a mechanism to enable and encourage private investment (possibly through the Enterprise Investment Scheme)
  • That the principle of an open network should be maintained to maximise choice and to avoid any issues of state aid
  • That active user engagement in the management of services is desired as a way to encourage take up and as an aid to sustainability
  • That certain technical elements of the operation and maintenance of the network are of little concern to individuals and the community, provided they are performed competently, and so are more appropriately managed at arm’s length by major stakeholders, and outsourced if necessary.

The following entities could be involved:

  • The public sector in some form, perhaps a special purpose vehicle, or more directly
  • One or more external investors
  • A multi-stakeholder cooperative consortium created to own the network
  • A consumer cooperative (or possibly multi-stakeholder) created to provide services on the network
  • A number of companies providing technical services under contract
  • A number of private service providers using the network to provide services to customers
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Sources of Funds

To investigate the funding issues, let’s imagine a typical project.  The situation we have in mind that you’ve established a local or regional project team and you’re clear on the scope of the project.  You have thoughts on what type of corporate structure you might use and you’re developing the business plan.  You’re mapping potential demand and working out where the customers are, talking to potential partners for the build and you are close to knowing what you’re going to build, where it’s going to go, what it’s going to cost and how services can be offered.  Now you need to raise the money.

The purpose of this article is to help you think through the options, and, hopefully, reduce the amount of time you might waste by approaching the wrong targets for the wrong amount of investments.  There’s an obvious disclaimer that we need to make in that INCA cannot offer investment or financial advice nor does anything on this site constitute such advice.  However, we hope that you can benefit form the experience and knowledge of our contributors.

Our working assumption (supported by evidence from some of our near neighbours in Europe and recent UK experience) is that local/regional NGA projects will require different approaches to funding than more ‘traditional’ telecommunications projects.  For example, many of the community inspired projects in the Netherlands and Sweden were regarded as ‘sub-scale’ and ‘un-economic’ by traditional investors and telecommunications companies; yet these projects delivered high levels of customer take-up and are delivering sustainable returns.

In looking to fund your project, you need to understand the territory and which types of funding might be available; so we define the following seven types of potential investors:

  • Private investors – individuals.  Sometimes known as “Angel investors” they invest in smaller projects at an earlier stage than venture funds and generally work very closely with those they invest in.  Often they are what’s called "high net worth individuals" – people who’ve made money elsewhere and now want to invest it in other areas.  The use of Self Investment Pension Plans and the Enterprise Investment Scheme may be attractive to them.
  • Alternative or community-based forms of investment.  These include cooperative structures such as Industrial and Provident Societies, Community Investment Companies; new forms such as ‘Social Impact Bonds’ and ‘Community Bonds’ are emerging.
  • Private investors – venture funds, venture capitalists.  Generally invest in the equity of established businesses.
  • Corporate investors; companies generally in the telecommunications field that put their own investments into projects.
  • Public investors and government organisations at regional/national level.  We include BDUK in this category, and formerly, the Regional Development Agencies were active in some areas.  Often, their investments are conditional on investments by others – this is called "matched funding".  The picture as far as BDUK is concerned is still developing.  Other initiatives such as Local Enterprise Partnerships, Regional Growth Funds and the Enterprise Zones (announced in the Budget in March 2011) will also have a bearing on your funding strategy.  The picture is changing rapidly.
  • Infrastructure investors (sometimes called “Specialist Investment Funds”) invest in long term ‘utility’ investments such as roads, railways, energy.  In this category, we include the European Investment Bank (“EIB”).
  • Investment institutions (conventional); investors and pension fund managers and banks (both UK and overseas).


We’ve ranked the above broadly in terms of the size of projects that they might be interested in funding – ie as you look down the list the projects of interest tend to get bigger.  That’s not an exact relationship however.

As you can see, from a conventional investment point of view, the main problem facing local and regional projects looking for funding (assuming a sustainable business case can be defined) is that of scale.

It also should be noted that the formation of NGA projects would be regarded by many investors as “early stage” developments or “start-ups”; and these are regarded as high risk by venture or development capital investors.

At the time of writing, it appears unlikely that conventional large-scale investors (the final two categories in the list above) would be prepared to invest in local or regional NGA projects.  There may be some possibility that "framework" agreements, which can aggregate a number of projects into a total size of interest to larger investors, might be possible; INCA is actively working on this idea.

It’s certainly the case that the UK will need to find innovative approaches and structures to addressing the need for investment.

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