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21st Century Operations Using 21st Century Technologies

Rural Interstate Corridor Communications Study
Report to States

3.0 Cost Estimates

3.1 Construction Cost

The White Paper on the Preliminary Backbone Alignment (see Appendix A) presents an example cost estimate for installation of 48-SMFO cable along the I-90 and I-20 Corridors. The scenario represented in the cost estimate includes fiber optic cable inside one of two 2" HDPE conduits installed by various methods (i.e. trenching, boring, plowing, etc.). In addition, handholes and regeneration stations are also included. Handholes serve as cable pulling locations, junction points to connect branch cables to the trunk cable, and conduit transition points. Regeneration buildings allow for signal regeneration equipment to be housed in the field and act as a demarcation point for connection to other networks. The cost ranges were developed based on input from both private companies and public agencies through development of similar projects in the United States, and generally represent Year 2007 values. These values do not take into account changing economic considerations, nor do they reflect regional cost differentials. The estimated values were provided from multiple sources experienced in numerous construction situations, i.e. rural and urban interstate right-of-way construction conditions. Table 3-1 presents estimated construction costs for 48-SMFO cable backbone. The low unit cost is indicated where construction is relatively straightforward and unencumbered, while the high values would apply under difficult conditions where more expensive construction techniques are required. These values are provided as an order of magnitude construction cost but it is highly recommended that locally established cost estimates for the items below should be used whenever possible when developing an estimate for a specific project.

Table 3-1: Construction Cost for Installation of 48-SMFO Cable Backbone (The cost data included in Table 3-1 is aggregated from several sources, both public agency and private sector, and is based on costs incurred on similar projects throughout the United States. Whenever possible, local cost data should be utilized to provide the best estimate. Sources include: Federal Highway Administration, Minnesota Department of Transportation, Mississippi Department of Transportation, South Carolina Department of Transportation, MassHighway, Gresham Smith & Partners, TransCore, Telvent Farradyne, Parsons Brinckerhoff, Cambridge Systematics, Schatz Underground Cable, LightCore)

Service/Product

Price-Low

Price-High

Unit

Assumptions

Fiber Plowing

$1.25

$1.75

Foot

Assume standard installation method will be plowing. Route mileage for the corridor is from FHWA Route Log

Directional Boring - Rural

$6.00

$7.00

Foot

Assume rural bores average 150’ each

Directional Boring - Urban

$8.00

$10.00

Foot

Assume 10% of total bores as urban bores, average 200’ each

Directional Boring - Rock

$42.50

$271.00

Foot

Assume 5% of total bores as rock bores, average 150’ each

Conduit (2” HDPE)

$0.75

$0.80

Foot

Per foot cost.  Assuming installation of two conduits.

Bridge Attachments

$100.00

$175.00

Foot

Includes 6” steel conduit and labor to attach

Handhole

$575.00

$700.00

Each

48” x 30” x 36”, higher cost value would apply for load rated

Handhole Installation

$600.00

$800.00

Each

Low-high range for installation cost

SMFO Cable - 48 Count

$0.61

$0.80

Foot

Assuming one fiber cable installed in one conduit

Fiber Installation

$3.25

$5.00

Foot

Includes splices, pulling, splice enclosures, terminal panels

Regeneration Building

$280,000.00

$300,000.00

Each

Assumes one building average every 50 miles and one on either end of corridor in State.  Includes pad, power, A/C, racks, conduit

Design

7.5%

10.0%

Percent of construction cost - Lump Sum (L.S.)

Pre-construction design of route and equipment

Traffic Control

3.0%

7.0%

L.S.

For lane and shoulder closures

Mobilization

3.0%

9.0%

L.S.

Contractor costs to provide equipment and services

Construction Engineering

7.5%

10.0%

L.S.

Inspection, oversight, field engineering

Administration

5.0%

7.0%

L.S.

Construction administration services

Contingency

8.0%

20.0%

L.S.

To cover unknowns and peripheral costs

Estimated Cost for Future Value

12.5%

30.0%

L.S.

Future value, 5 to 10 years out, if average inflation is 4%/year

Using the above communication infrastructure cost ranges, and the quantities from the preliminary backbone alignment (including handholes, directional bores, regeneration sites, and bridge attachments as well as the length of fiber and conduit installation), an estimated range of costs has been developed for each State for construction of a communications infrastructure. While the initial cost of deployment to the State DOT can be dramatically reduced through partnerships with private sector parties, there are some unavoidable costs to the State DOT if this approach is used. Inspections are another demand for the State DOT in shared resources projects, especially if the fiber is being built by a third party. The DOT must make sure proper construction techniques are used and that local agency access points are placed where they are needed. Typically, the State DOT will want more access points than a long-haul carrier might specify. This can be a sticking point as the long-haul carriers want to minimize hand holes to ease installation and reduce costs.

The unit costs presented above are estimates only, and furthermore should be considered as representative of the hypothetical alignments only.

3.2 Maintenance Cost

An important aspect of developing and deploying communications projects is the proper maintenance of the system. A maintenance plan has two important categorizes: 1) Preventive Maintenance is keeping property and equipment in good state of operation and preventing failures, and 2) Responsive Maintenance is the action taken by an agency or department to any reported equipment or system malfunction. Both preventive and responsive maintenance have standard industry-accepted ranges of associated costs for maintenance.

No attempt is made in this report to estimate the system maintenance costs a particular State will encounter as costs, existing staff capabilities, existing State resources, other maintenance needs, and capabilities of local contractors vary so greatly. However, based on the above considerations, an estimate of the time and staff required should be calculated that can be used to determine the number of staff hours required per device or mile of infrastructure. Based on those hours, the number of staff required in a given year can be calculated and added to the costs of the spare equipment, tools, and vehicles to determine an approximate budget for yearly maintenance.

3.3 Monetary Value of Rights of Way

Section 5507 of SAFETEA-LU directed the Secretary of Transportation to "identify . . . [the] monetary value of the rights of way necessary for" the installation of high-speed telecommunications infrastructure. While it is difficult to offer a definitive answer to this directive for corridors with such disparate characteristics, it is evident that the nature of Interstate Highway rights-of-way offers unique advantages for deployment of HST infrastructure. A 1999 white paper for the Western Governors' Association (WGA) pointed out that,

While the telecommunications industry has sought a consistent approach for accessing all highway rights-of-way, the State departments of transportation and highways believe that limited access highways must be managed under unique State laws and constitutional provisions related to State highway trust funds, restrictions on use, and safety and maintenance requirements. Given these characteristics, they believe the limited access highways to be assets where access bears additional responsibility and should serve to enhance the State's transportation and telecommunications objectives (Western Governors' Association, Challenge Paper: Telecommunications Access to Highway Rights-of-Way).

The American Public Works Administration (APWA) offered the following information for valuing the use of street rights-of-way for telecommunications purposes:

A number of alternatives or variations have been considered to establish fair market value for street right-of-way. . . .The approach could be described as an easement analogy with the valuation being calculated as follows:

[Land Value of right of way by unit area] x [length of area occupied] x [width of area occupied] x [rate of return] x [factor to recognize degree of alienation of area] x [use factor] (American Public Works Association, Valuation of Street Rights-of-Way for Telecommunications Facilities, November 1998, http://www.apwa.net/documents/organization/row-va1.pdf

The APWA goes on to discuss the general issue of valuation:

The bottom line really is what the right-of-way is worth to the user. What is the user willing to pay in the competitive environment? Unlike real property, there is not a lot of history to go on in street right-of-way. Until very recently, access to the street right-of-way has essentially been given away. It is only now being seen as a scarce resource. As well, recent examples of charges for access have generally been on a percent of revenue basis rather than a linear charge, so it is very early to interpolate a linear value or to determine whether in the long term, those charges are high or low compared to the market.

While several examples exist of resource sharing arrangements that have been beneficial to State Departments of Transportation and other public sector partners, the economic landscape has changed significantly from the heyday of the "Dot Com" boom in the late 1990s and the first years of this decade. The expectation was that telecommunications traffic demand for electronic transactions would grow almost limitlessly. In the private sector; wireline demand would be spurred by new telecommunications firms and services; wireless demand would grow along with personal communications services and demand for cell phone capacity in established networks. At the same time, public sector agencies would require more bandwidth for inter-agency and intra-agency communications and data exchange, both for ITS communications and for other purposes.

The Telecommunications Act of 1996 (TCA) recognized the right of public agencies to control the use of their rights of way and to charge fees for compensation, as long as the access granted was non-discriminatory and posed no barriers to entry. At the same time, FHWA and AASHTO policy guidance encouraged the installation of fiber optic infrastructure within highway rights of way. However, AASHTO guidance on the opportunity presented by resource sharing agreements emphasized that there are limits to the attractiveness of public-private partnerships ("Guidance on Sharing Freeway and Highway Rights-of-Way for Telecommunications;" American Association of Highway and Transportation Officials, Washington, DC 1996). The AASHTO guidance pointed out that, "While shared resource ventures offer an excellent opportunity for the public sector to meet their transportation communications requirements cost-effectively, the opportunity is not without limits. The reason: shared resource ventures are market-driven. In practice, this has two implications:

  • Time: Market conditions dictate private vendor interest in developing a partnership and the timeframe available;
  • Value: There is no inherent value for access to highway ROW or any other public property; private sector willingness to pay for access derives from the telecommunications revenue potential for private firms, tempered by the cost of competing ROW that might be available to those firms." (ibid, p. 2)

A similar point regarding timing is made in a discussion of the "Connecting Minnesota" project. The National Council for Public-Private Partnerships notes that,

In an unregulated environment, and without the incentive offered by the State through Connecting Minnesota, private sector long-distance communications companies generally would not consider investing beyond a minimum amount of infrastructure, and would then only do so on the most financially lucrative routes. By offering one-time access to Minnesota's Interstate system to a private communications system developer, the State was able to leverage highly desirable routes in exchange for development of fiber-optic on less desirable routes, but routes that nevertheless are important to government and communities located near them. The value of the program is estimated at over $125 million in private sector investment that meets both public and private sector needs, with an annual benefit to the State of at least $5 million savings in current telecommunications costs-though immeasurable, life-cycle savings for the public sector and economic development benefits for rural Minnesota are clearly evident (National Council for Public-Private Partnerships; http://www.ncppp.org/cases/minnesota.shtml, accessed 10/23/2008).

The three corridors under consideration here offer significant potential advantages to private sector partners in terms of the coordination of utility accommodation policies, "one-stop permitting," and other steps designed to cut red tape and facilitate cooperation. However, even among the three corridors reviewed for this study, it may be that private sector partners would have limited interest in participating in a shared resource project.

3.4 Potential for Public-Private Partnerships

It should be noted that different States in the various corridors under study have quite different policies toward public-private or public-public projects (PPP), also referred to as "shared resource" projects. Furthermore, no matter how straightforward a shared resource project may seem, such projects take time to develop and see through to the end. There are multiple decision-makers and stakeholders within a DOT that must be satisfied, as well as in other stakeholder agencies like the department of administration and often the governor's office. The efforts to advertise, negotiate, design, and construct a communications backbone through a shared resource project can easily take several years. Dedicated staff that can act as project champions are needed within the DOTs to ensure success. Adding to the complexity is that communications infrastructure is not an area that DOT staff normally design, construct, or inspect.

In December 1999, the Federal Communications Commission (FCC) issued an opinion on the Minnesota agreement that cast uncertainty on the concept of shared resource projects. The FCC "decline[ed] to find Minnesota's agreement" with a telecommunications contractor "consistent with the Telecommunications Act." In the wake of this decision, the FHWA was able to craft guidance that made it easier for State DOTs to reach agreements with telecommunications contractors that adequately provided for competitive neutrality ("Guidance on Longitudinal Telecommunications Installations on Limited Access Highway Right-of-Way," Letter from FHWA Executive Director A.R. Kane, December 22, 2000, http://www.its.dot.gov/telecom/tele_srguide.htm, accessed 11/10/2008). This made it easier for State DOTs to reach resource sharing agreements that would provide protections for the DOT, contractors, and competitors.

Nevertheless, it remains a fact that the current economic and fiscal environment is very challenging. Together with the mature status of the national high-speed telecommunications backbone infrastructure, the current economic climate suggests that there might be limited interest on the part of private telecommunications companies in a major expansion of such facilities, absent some compelling value proposition for the private sector partners.

3.5 Corridor Cost Estimates

The following tables summarize cost estimates developed for the preliminary backbone alignment for the I-90 and I-20 corridors. Given the advanced status of the telecommunications infrastructure initiative in the I-91 corridor, it was determined that preparing such a cost estimate for that corridor would not be productive. More detailed tables can be found in Appendix A, the Preliminary Backbone Alignment white paper.

3.5.1 I-90 Corridor

Table 3-2: Range of Cost Estimates for I-90 Corridor

Corridor State

Low (U.S. Dollar 2007)

High (U.S. Dollar 2007)

South Dakota (413 miles)

$26,696,593

$47,926,833

Minnesota (276 miles)

$17,968,439

$32,784,644

Wisconsin (109 miles)

$9,058,626

$16,975,041

 I-90 Total  (494 miles (Cost estimate includes only sections of I-90 Corridor that do not currently have fiber optic backbone installed.))

$53,723,658

$97,686,518

The I-90 corridor presents relatively few geographic challenges to construction. Aside from a handful of locations where river crossings would require either directional boring or bridge attachments, the terrain is suitable for low-cost construction techniques. Utility accommodation policies are generally favorable for deployment.

3.5.2 I-20 Corridor

Table 3-3: Range of Cost Estimates for I-20 Corridor

Corridor State

Low (U.S. Dollar 2007)

High (U.S. Dollar 2007)

Louisiana (190 miles)

$13,566,489

$25,087,452

Mississippi (155 miles)

$10,620,150

$19,511,982

Alabama (215 miles)

$15,275,221

$28,701,956

I-20 Total (560 miles)

$39,461,860

$73,301,390

The I-20 corridor does not present overwhelming physical barriers to construction, despite the prevalence of wetlands and river crossings. More significant is the diversity of policy approaches to utility accommodations within the Interstate highway rights-of-way. In general, Louisiana has a liberal policy regarding utility accommodations, encouraging resource sharing for utilities to place communication infrastructure on Interstate highway right-of-way, including wireless towers. Mississippi and Alabama, however, have not engaged in shared resource projects, and current policies limit the ability of utilities to access Interstate highway right-of-way.

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