Unprecedented Approach to Funding Broadband Projects Seen as Model for Future, Despite Federal Funding Coming Down the Pike

(Bozeman, MT…. February 27, 2023)—Greg Metzger, CEO, Yellowstone Fiber announced today that the high-speed fiber network he runs was recently awarded the Small Issuer Bond Deal of the Year Award by The Bond Buyer. The $65 million industrial bond deal will finance the construction and early operation of Yellowstone Fiber’s all-fiber optic network bringing ultra- high-speed broadband to Gallatin County (including Bozeman and surrounding rural areas), at no cost or risk to taxpayers. These are areas currently unserved or underserved by major internet service providers (ISPs).

The structure of the transaction coupled with its successful execution is considered a first and is expected to serve as a model that will spawn similar approaches elsewhere in a nation that is starved for 21st century broadband infrastructure and connectivity. The bones of the deal are as follows:

  • Yellowstone Fiber Network (“Yellowstone”) was organized as a 501(c)(3) tax-exempt organization;
  • Yellowstone’s tax-exempt status and the structure of the bond package ensures that the Greater Bozeman area will expend no taxpayer revenue to build out the project.
  • The bonds were to be secured solely by the net revenues generated by the network and an operational partnership with UTOPIA Fiber, the nation’s largest, most-successful Open-Access fiber network. To date, UTOPIA Fiber has nearly a half-billion dollars of projects under its belt;
  • The bonds will have a 30-year term at an all-in borrowing cost of less than four percent (3.92%), secured solely by network revenues, meaning that taxpayers are not on the hook;
  • The bonds will (a) finance the costs of constructing an expansion of Yellowstone’s existing fiber optic network; (b) refinance certain existing debt that was incurred for the construction of the fiber optic infrastructure; (c) provide for capitalized interest with respect to the Series 2021 bonds; (d) fund a debt service reserve fund; and (e) pay certain issuance costs in connection with the Series 2021 bonds. “We’re enormously proud to win this national award. Only in America can a group of businesspeople with an idea create a national model in how fiber networks can be financed. While construction has been hampered by this year’s ‘real Montana Winter,’ we’re hitting our projections putting us on pace to cover operations and bond payments through subscriber revenue, making digital connectivity more accessible and affordable for more Montanans,” said Metzger. Metzger isn’t the only one excited by the award. When the Yellowstone deal hit the market, KeyBanc Capital Markets – serving as sole manager for the Bonds and playing an integral role in crafting the pioneering of this new credit – had an oversubscription of three times and initially

received $196 million in orders. “Investors liked our model, and the public likes our product,” noted Metzger. “It’s true high-speed broadband without any gimmicks.”
Government funding may be a cautionary tale

While the bipartisan infrastructure bill set aside $42.5 billion in BEAD money for broadband deployments, those monies will be tied up in political processes for months. Metzger explained that several industry experts are concerned that funds may ultimately be misappropriated. “All signs point to the BEAD money leading to incremental builds, with most of the money lining the pockets of large ISPs whose future depends on not ‘overbuilding’ their existing outdated infrastructure. Montana has some of the worst connectivity in the nation and Yellowstone Fiber didn’t want to wait for the possibility of a handout, we wanted to create a solution,” he said.

A brighter future is predicted

The Yellowstone Fiber Network is anticipated to connect approximately 22,000 homes, businesses, and public buildings in Bozeman, then rural addresses in Gallatin County after 2025. Businesses will enjoy up to 100 Gigabits per second (Gbps) and residences up to 10 Gbps. Under the Open Access model, Yellowstone Fiber will own and build the fiber infrastructure with Utah- based UTOPIA Fiber as its operational partner. However, Yellowstone will not provide the service. Rather, it will enable multiple private-sector service providers to use the Yellowstone Fiber infrastructure, thus fostering competition.