Risk Allocation in U.S. Public–Private Partnership Broadband Projects

Risk Allocation in U.S. Public–Private Partnership Broadband Projects—A Pilot Study

Liang, Yunping / Sharifi, Mohammad

Broadband is becoming a necessity and a type of basic infrastructure facility in the U.S., especially after the pandemic when most of essential activities started shifting online. Traditionally, broadband services are offered by private providers, and a lot of less-populated areas are underserved. Public–Private Partnership (P3) is regarded as a promising approach for addressing the difficulties. Proper risk allocation is crucial for P3 success. However, there are no existing studies dedicated to analyzing the risk allocation in the U.S. broadband P3 market. The overall objective of this study is to thoroughly review existing U.S. broadband P3 projects and to explore how the risks are allocated between the sectors. A checklist containing 23 risk factors was applied. Content analysis was performed on the contracts of six U.S. broadband P3 projects, which represent the whole population as of the end of 2021. After analyzing the clauses and identifying the allocation, an interrater testing was performed as an internal validation. The results show that three common and impactful risks, i.e., inflation, interest rate and public opposition, are not mentioned in any contracts. Generally, the private sector takes the risks of site conditions, right of way, permits, cost overrun, subcontractor, performance, routine operation and maintenance, environmental, and change in law. The public sector generally takes the risks of site acquisition, supply, and residual value. The risks of force majeure, expropriation, and schedule delay are normally shared between the public sector and the private sector. Compared to other relatively mature P3 markets and sectors, certain risks (e.g., permit and change in law) which are normally taken by the public sector are shifted to the private sector, while some risks traditionally taken by one sector, either public or private, are shared in the broadband context (e.g., expropriation and schedule delay). The differences in pattern, together with the missing of critical risk factors, the limited number of projects, and the lack of a comprehensive database, imply that the U.S. broadband P3 is at infancy stage, and there are huge uncertainties in related policies and regulations.