FRANKFORT — Negotiations on a project to build a high-speed Internet service network throughout Kentucky are on track, with construction to start in Eastern Kentucky in August, according to state officials.
The schedule calls for finishing the network in Eastern Kentucky by April 2016, then completing the network across the rest of the state by October 2018.
The goal of the project is to improve Internet speeds that lag far behind much of the nation and world.
The U.S. is 16th in the world in average Internet service speed, and within that not-great ranking, Kentucky is 47th in the country, said Steve Rucker, deputy secretary of the state Finance and Administration Cabinet, which is overseeing the broadband project.
What's more, nearly a quarter of Kentucky residents have no access to what the federal government defines as an appropriate broadband speed of 25 megabits per second, Rucker said.
"That is just unacceptable," Rucker said.
The network also could support improved cell-phone service in rural areas.
An Australian company called Macquarie Capital is heading a group of companies to design and build the fiber optic network. Macquarie will operate the system over a 30-year contract, but the state will own it, Rucker said.
The legislature authorized $30 million in bonds for the project and the Appalachian Regional Commission contributed $15 million.
However, Macquarie will pay most of the cost of building the system, estimated to be $275 million to $350 million statewide. The difference depends in part on how much existing fiber can be incorporated into the new system.
To get back its investment and a profit, Macquarie will receive payments from the state for providing Internet service to 1,600 state-government facilities, such as offices and universities. Rucker said the state is already paying other providers for that service, so the money will just switch to Macquarie.
Other than the $30 million from the bond issue, the broadband project does not require any additional state spending, Rucker said.
The project required partnership with a private investor if it was to be done quickly, Gov. Steve Beshear said last December in announcing Macquarie's involvement.
Macquarie also will be able to charge other providers for access.
Macquarie operates a number of public facilities, such as toll roads, in the U.S. It has faced criticism in some places over price increases.
State officials are still working out details of the contract with Macquarie, including controls on rate increases, access costs and how often Macquarie must update equipment to keep pace with needs for greater speed. However, the state will lock in rate increases at a level designed to keep the service affordable, Rucker said.
The goal is "affordability and accessibility for all parts of the commonwealth," Rucker said.
Improved Internet service is one of the priorities of an initiative Beshear and 5th District U.S. Rep. Hal Rogers started called Shaping Our Appalachian Region, or SOAR, aimed at diversifying and improving the economy in Eastern Kentucky in the wake of a sharp drop in coal jobs.
That's why the broadband project focuses first on Eastern Kentucky.
The project involves laying or stringing fiber-optic cable for what is commonly called the middle mile — a high speed link between the global Internet and communities.
There will be a connection point in every county, but the system won't serve individual businesses or homes.
The job of providing that so-called "last mile" service to individual customers will fall to other providers. The system that will be built will act as a wholesaler to those retailers.
The network will be open access, so Internet service providers could include private companies, cities or partnerships. That could create competition and help lower prices. The hope is that with other parties bearing the cost of building the network, retail providers will extend service to places they haven't before.
"We're removing some of the capital expense out of the equation to get to places in the commonwealth that have been unserved or underserved," Rucker said.
Lonnie Lawson, president of the Center for Rural Development in Somerset, said there is still a lot of work to be done in figuring out how to spread broadband throughout counties from the local access points that will be created.
"We've really got to make that our next push" after the middle-mile network is done, Lawson said.
Faster Internet speeds will bring benefits in economic development, education, health care and other fields, officials said.
"Broadband anymore is just like electricity and water and sewer. It is essential," Rucker said.