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Being a Gig City: It's All About the Upload

This is the second in a series of posts examining a premier Gigabit Community - Wilson, North Carolina. The first post is available here.

It's all about the Upload. If you are the owner of a small engineering business with dense blueprints to send to your European clients, or a specialized country doctor who depends on the quick transmission of x-rays, a digital film effects company, a photographer or a local broadcaster, your ability to upload your dense information to your colleagues, clients, and residents means business. For Gig City, Wilson in North Carolina, offering gigabit upload speeds to its community is essential to ensure local businesses thrive.

According to a recent Speed.Net report, upload speeds in the United States compared to the rest of the world are dismal. If you live in Hong Kong (60 Mbps), Singapore (47Mbps) and South Korea (44Mbps), you are in the drivers' seat with the fastest upload speeds in a world where time wasted means money. If you are in the U.S., as of February 2014, you're in the slow lane. We rank 41st at 6.69 Mbps. But not if you live in Wilson. With access to Greenlight's gigabit residential upload speeds, living in Wilson means being competitive and working easily with the world's top achievers.

The owners of Wilson-based Exodus FX know this. Digital artists Brad Kalinoski and Tinatsu Wallace found Wilson in their nearly impossible search for small-town affordability but world-class broadband infrastructure. Two years ago, they started a small growing boutique that caters to the visual effects needs of global film and television production companies. When their broadband rates in West Virginia skyrocketed despite the local broadband infrastructure seriously underperforming, the company's survival depended on relocating.

Exodus FX logo

"We had to choose an area that could offer a low cost of doing business, while delivering an infrastructure better than that of other states and countries," wrote Mr. Kalinoski, a three-time, award nominee for his special effects contributions to Black Swan and LOST, the Final Season. "We even considered places like Seattle, Japan, Austin and Kansas City for its Google fiber. But when weighing the cost of living, cost of doing business, diversity and broadband infrastructure, it really wasn't much of a debate." They moved to Wilson."In less than an eight hour period, we pushed almost 18 Gigabyte of data to and from New York, Los Angeles, Canada and to other states. We are finding that the bottleneck is no longer us, it's the client's bandwidth."

"Timing out" and "that bottleneck" drew web-designer and digital musician, Dave Baumgartner, to Wilson as well. "I was doing consulting web design work from my home in Raleigh using Time Warner Cable's "Turbo boost" Internet access, but could not get my file uploads to clients on the west coast to complete because they would time out." This was the fastest residential internet access available in Raleigh. "I would start an upload before dinner, it was still going when I went to sleep, and failed by the next morning."

Dave moved to Wilson which allowed him to serve and provide innovative web design to clients anywhere in the country. "Having a fast and reliable connection also allowed me to test bandwidth-intensive technologies like embedded HD video and audio, and various streaming technologies." (Greenlight does not data cap the way other large incumbents are known to do.) Dave recently recorded a vocal drum track in Wilson for a group based in another state, and then sent the files to their producer in California in what seemed like fractions of a second. He is now in talks to be involved in a recording project where no two performers are in the same state, and a few of them are in Europe. In between all that, Dave and Wilson's Greenlight operations found each other. He is now Greenlight's web designer.

Designing the future is what also attracted Wake Forest fiber optic entrepreneur, and aviation photographer, Dan Holt, to Wilson. He can't move to Wilson because he owns his home in Wake Forest, so he commutes 30 minutes each way to access Wilson's gigabit symmetrical speeds from his satellite office at the City's local business incubator. His vision for the Wake Forest Fiber Optic Initiative started years ago "even before Time Warner Cable released their 30/5 and 50/5 tiers." "I am an aviation photographer, and rely on service like flckr and smugmug (and more recently Google+ and Google drive) to backup my photos. More often than not, each one of my photos averages about 25 Mb each." A couple of thousand of these after a weekend shoot and you have a multi-gigabyte upload. "This would take days to upload... you can only do partial uploads." So Holt found himself juggling his work schedule so he could upload his photos, and projects would sit for six months "Having access to gigabit fiber allows me to upload everything I have in one sitting, allowing me to focus more on editing and selling photos."

Holt has hooked up four servers to Greenlight's gigabit speed, which virtualize the home of the future with multiple, simultaneous, Netflix video streams and dense file upload exchanges for his Wake Forest Fiber Optic Initiative. "The future is about video," he stated, citing a study showing 50.2% of internet traffic is video -- Netflix and YouTube - not Bit Torrent." His Town officials now have been able to physically see through Wilson's Greenlight capacity, the economic vision he has for his own community.

Photo courtesy of www.Whirligigpark.org

An economic vision driven by bits of gigs, Whirligigs exactly, means something to Jeffrey Currie, Repair and Conservation Manager of the City's new world-renowned Vollis Simpson outdoor Whirligig Park, Currie drives into Wilson every day from Nash County to manage the taking apart and rebuilding of thirty, sometimes, fifty-foot wind-driven sculptures from a farm in the county to the City's downtown. The vision is to use this wind powered art to help drive the city's economic future with STEAM (Science, Technology, Engineering, ARTS and Mathematics).

"Yeah, we like to use that word STEAM more and more." laughed Currie, as he displayed the hand-held tablets that record the intricate pieces of this gargantuan move. "We needed to know what the Whirligigs looked like before they were taken apart." Greenlight connected the warehouse to its Gigabit network. "We take high-resolution photographs of the sculptures before they are disassembled, scan older images of Vollis' work and just upload them to Dropbox. This lets the artisans have a clear picture of how they should be restored, assembled and painted, because often there is little paint left after 30 years out in Vollis' field."

What was amazing is that Currie described these large uploads like he was flipping a switch. "It's quick," he said, without thinking about it. "We're burning out the computers, not the internet," quipped Don Davis, who takes photographs and who does much of the uploading for the collections section. Greenlight's upload speeds facilitate the rebuilding of this important economic driver in seconds instead of months.

"The media consistently focuses on the download part of the broadband equation, but if your business handles information at any level, your business is really all about the upload. If you can't get your information out, whether it's your quarterly insurance reports to your corporate office, engineering blueprints to your China clients, or your latest digital art creation to New York, you simply can't compete. We are living in an information economy now," said Will Aycock, General Manager of Wilson's Greenlight system.

"The thrust of Greenlight is captured by our three guiding principles,' said Aycock. ‘Supporting the economic health of the community, improving the delivery of city services, and enhancing the quality of life for the citizens of Wilson. This is our gig in Wilson."

Whirligig photo courtesy of www.whirligigpark.org

Processes for a Gigabit Community: Community Broadband Bits Episode 87

More communities are today considering how they can improve Internet access in their community than at any other time. Having a gigabit is quickly becoming the standard - not because we all need 1,000 Mbps but because we know that everything we want to do is possible on a gigabit connection. Video games aren't going to interfere with Netflix streaming or someone working from home.

In this week's Community Broadband Bits podcast, Joanne Hovis joins me to talk about a recent paper stuffed with valuable information for communities seeking opportunities for better networks, whether publicly or privately owned. Joanne is the President of CTC Technology and Energy, which has just released Gigabit Communities: Technical Strategies for Facilitating Public or Private Broadband Constructions in your Community. The paper was financially supported by Google.

We discuss the nuts and bolts of important strategies, including Dig Once type approaches and various ways local governments can use their processes to lower the future costs of building a fiber network.

I don't know of a better paper on this subject - so I strongly encourage people to both listen to the interview and read the paper.

We want your feedback and suggestions for the show - please e-mail us or leave a comment below. Also, feel free to suggest other guests, topics, or questions you want us to address.

This show is 25 minutes long and can be played below on this page or via iTunes or via the tool of your choice using this feed.

Listen to previous episodes here. You can can download this Mp3 file directly from here.

Thanks to Valley Lodge for the music, licensed using Creative Commons. The song is "Sweet Elizabeth."

Being a Gig City: Incubating Small Businesses

This is the first in a series of posts examining a premier Gigabit Community - Wilson, North Carolina.

According to the U.S. Small Business Administration, 85% of all jobs originate from companies with fewer than 30 employees, and 87% of businesses which started through business incubators have succeeded after five years. So Wilson, North Carolina, focused its "Greenlight" gigabit beam on its local business incubator, the Upper Coastal Plan Business Development Center. "Greenlight is driven by three guiding principles," said Will Aycock, the network's General Manager. "Supporting the economic health of the community, improving the delivery of city services, and enhancing the quality of life for the citizens of Wilson." Providing access to symmetrical gigabit speeds has allowed the community's small business incubator to take its services to the next level, to give budding entrepreneurs access to the future today and in a uniquely affordable way.

According to Greg Goddard, Executive Director of the Upper Coastal Plain Council of Government, access to gigabit speeds has meant "Taking our incubation to the next level." Historically their business incubator has attracted "low tech" entrepreneurs: consultants, counselors, state associations, childcare and healthcare providers, people who need work space after normal office hours, even Chic Fil-A administrators, for employee training. The incubator provides a full suite of services including a receptionist, copy and fax machines, phones, 24 hour secure entry, kitchen, meeting rooms, training classes, access to experts, parking, and now, symmetrical gigabit speeds, all for an affordable price. "An 8' by 8' cubicle with those full-suite services leases at $275/month," he said. The goal is to stimulate budding internet-age businesses.

Free Wi-Fi in Wilson

And it has, even for young entrepreneurs elsewhere in the state. For a tech entrepreneur like Dan Holt from Wake Forest, renting space at this Wilson-based incubator lets him be part of the future, and to experience the possible which is impossible at his home in Wake Forest only 30 miles away. Dan is a self-described techie for a local Raleigh defense subcontractor but he likes to be known as founder of the Wake Forest Fiber Optic Initiative.

Dan wanted to put together research for his town government on why they needed to establish a fiber to the home network in Wake Forest. That search led him to Wilson. "They are the only Gigabit City in North Carolina. It's 30 minutes from my home. Not every town has an incubator where you can rent a cubical or office space affordably, giving you access to things like a receptionist, mailroom, fax machine, office space, and gigabit fiber internet. If I were to branch out into any major city, it would be in the $1000's of dollar range, just for the internet service alone. They are passionate" about their Gigabit network in Wilson. "They are mentoring the rest of the state."

Having access to Gigabit speeds in Wilson's business incubator has allowed Dan to connect servers and to mirror "what normal life would be if I had Gigabit access in my Wake Forest home." "The future is all about video," he reiterated. "I have several computers tied into virtual machines I can load up with Netflix and run at the same time." In Wilson, he said "It works." "You can connect easily to places that can take advantage of these upload speeds: DropBox, Google Drive, YouTube, sending large files through Microsoft Exchange. Some websites can't even take advantage of these speeds. The bandwidth at their end is not there."

Wake Forest Gigabit Logo

According to Dan, Wilson is set for the future because of its Gigabit network, and he wants the same for Wake Forest. "If you look at South Carolina, Georgia and Florida, there are no networks like this and it won't stop at 2 gig, it's going to 10 and then multiples." He continues, "As time goes on, as more folks find out about Wilson, the City is going to lure alot of people in from around our region, and from other states. If you look at the broadband maps out there, Virginia is the only state close to DC that comes anywhere near this capacity."

When asked if he'll move to Wilson, Dan responded "As a techie, in a heartbeat," but he owns his home in Wake Forest. For now, his Gigabit City incubator has provided him the ability to explore a public/private relationship with the Town of Wake Forest, a place where he could take his Mayor and IT Director and show them what is possible. He would, he added with a virtual wink, like to show Wilson's gigabit capability to his defense industry boss.

In July 2013, Wilson was honored to be North Carolina's first Gigabit City (community-owned). Folks keep asking us "What is it like to be a GigCity?" We plan to release a series of vignettes on how our gigabit infrastructure contributes to why Wilson is a great place to live, work and play in the 21st Century. For more information, contact Jerry Stancil at jstancil@wilsonnc.org (252) 293-5313.

High Speed in the Blue Grass State: Russellville's Gig

The Logan Journal recently reported that the Russellville Electric Plant Board (EPB) now offers gigabit service to local businesses. The article notes that Net Index, an online tool to measure download and upload speeds, recognizes EPB as the first Gig city in Kentucky. To learn more about the community and its network, we talked with Robert White, General Manager of EPB.

The community of 7,000 is the county seat of south central's Logan County. Russellville is located in the center of several other larger communities: Nashville, Bowling Green, Hopkinsville, and Clarksville, Tennessee. Manufacturing has been a large part of the local economy for generations, but community leaders recognize the vulnerability of a narrow economic base. In order to encourage a versatile economy, Russellville invested in its telecommunications utility.

The community wants to encourage small business while simultaneously providing manufacturers the connectivity they need. Leadership sees the ability to remain competitive directly tied to their network. In addition to the economic development opportunities a fiber network can provide, communities like Russellville rely on electricity revenue from large consumers. Retaining the large electric consumers that also provide jobs in the community it a must.

Russellville's electric utility created a strong advantage when it was time to venture into telecommunications. EPB had already established a strong relationship with its Russellville customers, says White, and locals felt they could trust their municipal electric provider.

EPB began offering wireless Internet to the community in 2005; at the time, there was very little choice for wireless or wired Internet. The product was competitively priced and it performed well for wireless service at the time but EPB eventually shifted focus to its next generation high-speed network. The wireless service is still available to customers who subscribed prior to the construction of the fiber network but EPB no longer offers it to new customers. Wireless speeds vary from 1-2 Mbps download and approximately 500 Mbps upload. The area now has several options from the private sector - Verizon and Bluegrass Cellular provide wireless up up to 10 - 15 Mbps.

Russellville EPB Logo

According to White, Russellville's inspiration to build the network was not to compete, but to fill the services gap. He told us:

"We support Logan County residents having the best product. If that means us offering the product, that's fine. If it means the private sector will step up to the plate and serve the areas we can't serve…that's fine as well. We want our residents to be served, whether by us or an incumbent."

Larry Wilcutt, White's predecessor at EPB, began studying the possibility of a fiber network in 2007, but external forces motivated Wilcutt and EPB to seriously pursue the project a few years later.

In early 2010, EPB learned that its power supplier, the Tennessee Valley Authority (TVA), would switch to time-of-use wholesale rates and begin using smart grid technology by 2012. In order to participate in the new technology, EPB needed meters that could communicate with its electrical system operations. EPB installed fiber optics for Advanced Metering Infrastructure (AMI) and for future expansion into telecommunications. A News-Democrat & Leader article from October, 2010 (reprinted at MobilityTechZone.com) reported:

The EPB's goal is to eventually install fiber optic cable to every home and business in Russellville, is installing the cable to every home in the Russellville, city limits -- even those that are serviced by other electricity providers. There are also plans to include some locations outside of the city limits to extend service to the more populated areas adjacent to the city limits of Russellville. 

The article quoted Wilcutt:

"The Board has been working on this project for over two years and we are extremely excited to finally start construction on this project. We want to provide the citizens of Russellville with a system that is second to none, one they will be proud of, one that will entice new investment in the community. Whether that new investment is in the form of capital, technology or people, we believe the City of Russellville and Logan County will benefit well into the future" Wilcutt said.

AT&T Logo

At the time, the best connectivity in Russellville was AT&T's DSL at 6 Mbps download. Satellite Internet was available but was unreliable, expensive, and maximum speeds were 1 - 2 Mbps download.

The community was also starved for quality video service. Suddenlink did not offer HD channels and made it clear that HD service was not planned for Russellville. Large corporate providers had no interest in Russellville so EPB felt it was time to take control of their own connectivity.

Construction of the 99% aerial, 120-mile network began in October 2010; EPB began offering services in December 2011. White presented the results of an audit in November 2013 to the City Council showing that 8% of EPB's total revenue came from its broadband division. The audit also showed that the network was ahead of its projected take-rate with 1,300 active subscriptions out of 4,000 passed homes. 

The network capital costs were approximately $11 million with approximately two-thirds designated for electrical system expenditures. In 2010, the American Recovery and Reinvestment Act (ARRA) offered Build America Bonds (BABs), some of which provide federal subsidies to help communities pay back interest to bondholders. BABs, backed by electric system revenue, provided funding for the entire project and contributed to interest expenses.

EPB offers services to every home and business in its service area and hopes to expand further. They expected video to be the lead product, but  Internet service is the most popular. White considers the lack of high-speed Internet in the region the driving force. The commercial gigabit product is new and no customers subscribe yet but local businesses take advantage of the fiber network. One local contractor tells White he enjoys the ability to share documents and bid for projects online without fear of technical glitches. When he used unreliable DSL connections to transmit data, he was perpetually concerned about deadlines and the status of data sent via DSL.

Local public safety agencies, the local library, Russellville City government, and Russellville Independent Schools now use the network. EPB and the Logan County Schools may soon be working together.

Word of Mouth graphic

In addition to providing much needed connectivity to the community, the network provides an increased stream of revenue. EPB submits a payment in lieu of taxes (PILoT) to county and city governments based on electrical and broadband services revenue. As EPB gains customers transitioning away from satellite video service, its contribution to the City increases; satellite providers do not pay a franchise fee to Russellville. At a July 2010 City Council meeting, EPB expected broadband services to add approximately $25,000 in PILoT within the first five years. EPB also pays a separate and voluntary video franchise fee to the local municipality. 

These days, White and EPB are concentrating on raising awareness of the commercial gig product and service to residents. To spread the word, EPB holds regular workshops for the community to explore ways to maximize the the network's possibilities. Commercial gig service is available for $1,499.95 per month.

White and the EPB understand that the private sector must make decisions based on returns. In the case of this publicly owned network, some key returns take the form of benefits to the community. Since EPB lit its network, White and his crew often hear from customers who rave about their service. White says:

"They hate to pay electric bills but they say getting superior broadband services from EPB is all worth it."

EPB's residential fiber Internet services begin at 20/5 Mbps for $39.95 per month with higher speeds at 100/25 Mbps for $69.95 per month. Video services from EPB range from $29.95 per month to $62.95 per month with the option to add over 100 HD channels. Voice packages start at $14.95 per month.

For Chris' recent interview with White, check out episode #82 of the Broadband Bits podcast. 

Burlington's Civic Cloud Collaborative Wins Knight Foundation Award

The John S. and James L. Knight Foundation has awarded a Knight Prototype Fund grant to the Civic Cloud Collaborative of Burlington, Vermont.

The Civic Cloud Collaborative is a group of eight organizations using Burlington's gigabit network to create civic and public spaces. The group describes the Civic Cloud project on their website:

The Civic Cloud will be available for the community to use as a platform for public, non-commercial Internet applications and digital creative works. Several applications will be deployed during an initial prototyping phase of the Civic Cloud. High-definition live streaming will be provided for community media outlets to webcast live public meetings and cultural events. WordPress websites will be hosted for several Vermont non-profits including rescue squads, food shelves, job banks and historical societies. A collection of volunteer-developed applications and a state-of-the-art website deployed to the Civic Cloud will help Big Heavy World preserve and promote Vermont-made music. Lakecraft, an educational, multi-user game aimed at youth and adults that gamifies the Lake Champlain Basin, will also be one of the first applications to run on the Civic Cloud.

Vermont Public Radio also reported on the award. From the article:

“We’re interested in it being a non-commercial space on the Internet,” said Bradley Holt, a Burlington-based developer who heads CodeForBTV, the local chapter of Code For America, an organization for public service software developers.

The cloud service, Holt said, will provide hosting capacity for local community organizations seeking to use the Internet to advance the public interest.

For more, check out the press release from Code for BTV, one of the collaborative members.

Meet Russellville, Kentucky's Broadband Speed Leader - Community Broadband Bits Podcast #82

The municipal electric utility in Russellville has launched Kentucky's first citywide gigabit service on its FTTH network. Russellville Electric Plant Board General Manager Robert White joins us to share their motivations for building a fiber network.

The utility had originally offered some telecommunications services over a wireless system but recognized the need for a more robust fiber system, in part because of the lack of investment in modern telecommunications by incumbent cable and telephone providers.

Now Russellville has much better options for residents, local businesses, and schools. We expanded on this interview with a mini case study of their network.

We want your feedback and suggestions for the show - please e-mail us or leave a comment below. Also, feel free to suggest other guests, topics, or questions you want us to address.

This show is 15 minutes long and can be played below on this page or via iTunes or via the tool of your choice using this feed.

Listen to previous episodes here. You can can download this Mp3 file directly from here.

Thanks to Haggard Beat for the music, licensed using Creative Commons.

Potential Funding Availability via Race to the Top

Let me start by saying that I don't yet know anything in addition to what I write below. We are all waiting for more details. On January 30, the FCC will take action on the FTTH Council's Gigabit Race to the Top progam. We previously took a brief look at the idea, while focusing on big cable and telephone companies' responses.

FTTH Council expects the FCC to adopt a test program that will start with a call for those interested to submit "expressions of interest." The reason we are noting this now, when we know so little about the program is that they believe the program will move quickly once it is announced, so those who may be interested should start planning for it.

From what we know, this program will be open to community owned networks and will be largely focuses on smaller markets with preference for networks that will be improving connections to anchor institutions in particular.

Below, I have embedded a discussion between Craig Settles and Alyssa Clemsen-Roberts, the Industry Affairs Manager at the Utilities Telecom Council.


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Wisconsin Gets a Gig in Reedsburg

The latest addition to the growing list of gigabit communities is Reedsburg, Wisconsin. For residential customers, the service is available for $274.95/month when bundled or $299.95/month standalone. The network has long delivered gigabit services to local businesses but the residential offer is new.

In a recent press release the Reedsburg Utility Commission (RUC) announced it now offers gigabit service to business and residential customers. From the press release:

“More and more businesses and homes need a faster connection to consume and produce large amounts of data.  Our gigabit network will accommodate those needs well into the future,” said RUC General Manager Brett Schuppner. “Offering gigabit broadband services is very rare in this country and I am proud to be part of a community that is so technologically advanced.  RUC strives to reach new levels of innovation with our 100% fiber optic network serving Reedsburg, Loganville, Lake Delton, and surrounding rural communities.”

Reedsburg is located approximately 55 miles northwest of Madison and is home to 10,000 residents. Reedsburg began dabbling in fiber optic infrastructure in 1998 to connect electric substations and provide Internet service to several public schools. The RUC provides water, electricity, and triple-play to the community. Community leaders took advantage of opportunities over the years to extend the reach of its network, including a 2010 American Recovery and Reinvestment Act (ARRA) award to expand the FTTH network.

Seattle, Gigabit Squared, the Challenge of Private Sector Cable Competition

This the second in a series of posts exploring lessons learned from the Seattle Gigabit Squared project, which now appears unlikely to be built. The first post is available here and focuses on the benefits massive cable companies already have as well as the limits of conduit and fiber in spurring new competition.

This post focuses on business challenges an entity like Gigabit Squared would face in building the network it envisioned. I am not representing that this is what Gigabit Squared faced but these issues arise with any new provider in that circumstance. I aim to explain why the private sector has not and generally will not provide competition to companies Comcast and Time Warner Cable.

Gigabit Squared planned to deliver voice, television, and Internet access to subscribers. Voice can be a bit of hassle due to the many regulatory requirements and Internet access is comparatively simple. But television, that is a headache. I've been told by some munis that 90% of the problems and difficulties they experience is with television services.

Before you can deliver ESPN, the Family Channel, or Comedy Central, you have to come to agreement with big channel owners like Disney, Viacom, and others. Even massive companies like Comcast have to pay the channel owners more each year despite its over 10 million subscribers, so you can imagine how difficult it can be for a small firm to negotiate these contracts. Some channel owners may only negotiate with a provider after it has a few thousand subscribers - but getting a few thousand subscribers without good content is a challenge.

Many small firms (including most munis) join a buyer cooperative called the National Cable Television Cooperative (NCTC) that has many of the contracts available. But even with that substantial help, building a channel lineup is incredibly difficult and the new competitor will almost certainly be paying more for the same channels as a competitor like Comcast or Time Warner Cable. And some munis, like Lafayette, faced steep barriers in just joining the coop.

FCC Logo

(An aside: if we are going to pretend that competition can work in the telecommunications space, Congress and/or the FCC have to ensure that small providers can access content on reasonable terms or the ever-consolidating big providers will be all but unassailable by any but the likes of Google. Such regulations should include rigorous anti-monopoly enforcement on a variety of levels.)

Assuming a new provider can secure a reasonable channel lineup, it now needs to deliver that to the subscribers and this is more complicated than one might imagine. From satellite dishes to industrial strength encryption to set-top boxes, delivering Hollywood content is incredibly complicated.

When confronted with this challenge for its Kansas City network, Google evaluated all the options and decided the only option was to build its own technology for delivering television signals to subscribers. Google has the some of the best engineers on the planet and even they encountered significant challenges, suggesting that route is ill-advised for new companies. Even if Google were willing to share their approach, it was written for the Google eco-system and would need significant porting to work for other firms.

Several of the recent triple-play municipal FTTH networks used Mediaroom, a technology developed by Microsoft that was recently sold to Ericsson, which has strong connections with AT&T. All of which suggests that delivering television channels is not becoming easier for small, local networks.

From the tremendous challenges of securing television channels to the difficulty of delivering them to subscribers, investors are aware of the mountain a new entrant has to climb before even starting to compete with a massive firm like Comcast.

Longmont Power and Communications Logo

It remains to be seen whether a network delivering only Internet access (or with telephone as well) will succeed today, but most have believed that television is needed to effectively compete for subscribers (and generate enough revenue to pay for the network). Longmont is bucking that wisdom in deploying a gigabit and phone network throughout its footprint north of Denver and many are watching intently to see how it fares (our coverage here).

The main lesson from Part II of our Seattle Gigabit Squared analysis is the difficulty of a small firm competing against a massive cable company like Comcast and the subsequent reluctance of most investors to fund such firms.

This is not to say it is impossible for small entities to compete, especially entities that can handle a distant break-even point or justify its network by the many indirect benefits created by such an investment - including more jobs, lower prices for telecommunications services, and improved educational opportunities to name three (see our recent podcast on this subject). In most cases, the kinds of entities that are willing to include indirect benefits on their balance sheets in addition to cash revenues are nonprofit entities.

We strongly support the right of communities to decide for themselves how to ensure their residents and businesses have the connections they need to thrive in the 21st century. We also recognize that many cities, particularly the larger metro areas, would prefer not to directly compete with some of the most powerful firms on the planet, even if they are also tops among the most hated. Few local governments relish the opportunity to take on such a new challenge and understandably search for firms like Gigabit Squared that can assist them, reduce the risks of building a network, and shield them from charges of being godless communists by think tanks funded by the cable and telephone companies.

However, we are not optimistic that many communities will find success with this public-private-partnership approach. Indeed, with recent news suggesting that Gigabit Squared left at least $50,000 in unpaid bills behind, the risks of going with such a solution may indeed be greater than previously appreciated.

It is for the above reasons that we continue to believe most communities will be best served by building and operating their own networks, though some may choose to do so on an open access basis where multiple ISPs operate on the network.

That is where we will turn in the final segment of this series. Read that post here.

Big City Community Networks: Lessons from Seattle and Gigabit Squared

A few weeks ago, a Geekwire interview with outgoing Seattle Mayor Mike McGinn announced that the Gigabit Squared project there was in jeopardy. Gigabit Squared has had difficulty raising all the necessary capital for its project, building Fiber-to-the-Home to several neighborhoods in part by using City owned fiber to reduce the cost of building its trunk lines.

There are a number of important lessons, none of them new, that we should take away from this disappointing news. This is the first of a series of posts on the subject.

But first, some facts. Gigabit Squared is continuing to work on projects in Chicago and Gainsville, Florida. There has been a shake-up at the company among founders and it is not clear what it will do next. Gigabit Squared was not the only vendor responding to Seattle's RFP, just the highest profile one.

Gigabit Squared hoped to raise some $20 million for its Seattle project (for which the website is still live). The original announcement suggested twelve neighborhoods with at least 50,000 households and businesses would be connected. The project is not officially dead, but few have high hopes for it given the change in mayor and many challenges thus far.

The first lesson to draw from this is what we say repeatedly: the broadband market is seriously broken and there is no panacea to fix it. The big cable firms, while beating up on DSL, refuse to compete with each other. They are protected by a moat made up of advantages over potential competitors that includes vast economies of scale allowing them to pay less for advertising, content, and equipment; large existing networks already amortized; vast capacity for predatory pricing by cross-subsidizing from non-competitive areas; and much more.

So if you are an investor with $20 million in cash lying around, why would you ever want to bet against Comcast - especially by investing in an unknown entity that cannot withstand a multi-year price war? You wouldn't and they generally don't. The private sector invests for a return and overbuilding Comcast with fiber almost certainly requires many years before breaking even. In fact, Wall Street loves Comcast's position, as penned in an investor love letter on SeekingAlpha:

We're big fans of the firm's Video and High-Speed Internet businesses because both are either monopolies or duopolies in their respective markets.

Seattle Conduit

Seattle has done what we believe many communities should be doing - investing in conduit and fiber that it can use internally and lease out to other entities. This is a good idea, but should not be oversold - these kinds of conduit and fiber projects are typically deploying among major corridors, where the fiber trunk lines are needed. But networks require far more investment in the distribution part of the network, which runs down each street to connect subscribers. With this heavy investment comes the modern day reality that whoever owns the distribution network owns the subscriber - that owner decides who subscribers can take service from. (We have more conduit tips from previous Seattle coverage.)

Additionally, different conduit and fiber segments may be owned by various entities, including different departments within a city. This may introduce administrative delays in leasing it, suggesting that local governments should devise a way of dealing with it before a network is actually being deployed.

Even if a city wanted to lay conduit everywhere for the entire network (trunk and distribution), it would need to have a network design first. Different companies build different networks that require different layouts for fiber, huts, vaults, etc. Some networks may use far more fiber than other designs depending on the network architect preference. The result is a limit on just how much conduit can/should be deployed with the hope of enticing an independent ISP to build in the community.

In deciding the size of conduit and where to lay it, different types of fiber network approaches are either enabled or disabled (e.g. GPON vs Active Ethernet). In turn, that can limit who is willing to build a fiber network in the community. The same can be true of aerial fiber, attached to utility poles.

Investing in conduit and/or fiber along major corridors may go a long way to connect local businesses and some residents but almost certainly will not change the calculations for whether another company can suddenly compete against a massive firm like Comcast.

And paradoxically, beginning to connect some businesses with fiber and a private partner could make a citywide system less feasible. The firms that are prepared to meet the needs of local businesses may not have the capacity nor inclination to connect everyone. But without the high margin business customers among neighborhoods, a firm that wants to connect neighbors may struggle to build a successful business plan. Additionally, some firms may only be interested in serving high end neighborhoods rather than low income areas.

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This is a major consideration in our continued advocacy for community owned networks. They have an interest in connecting businesses as the first step in connecting the entire community. An independent ISP may only find it profitable to focus on the businesses, though some ISPs share our values of ensuring everyone has access.

In the first Geekwire interview, Mayor McGinn returned to his original position when campaigning - that the City itself should be playing a larger role and investing its own resources rather than pinning its hopes on distant firms.

McGinn noted that “we haven’t given up on the private sector,” but said that if he were continuing as mayor, he’d start garnering political support to build a municipal fiber utility. That’s actually something the mayor considered back in 2010, after a consultant recommended that the City find a way to build an open-access fiber-to-the-premises communication infrastructure to meet Seattle's goals and objectives.

A feasibility study looking at one particular way of building an open access fiber network put the cost at $700-$800 million. However, there were other alternatives that they did not pursue, opting instead for a far less risky (and with far less payoff) public-private-partnership with Gigabit Squared.

Over the next few days, I will explore other lessons. A review of lessons from today:

  • Comcast and other cable companies have tremendous advantages that other would-be competitors in the private sector will generally fail to overcome
  • City owned conduit and fiber helps to encourage competition but is subject to significant limitations
  • Communities should invest in conduit in conjunction with other capital projects but should not inadvertantly weaken the business case for universal access

Update: The Gigabit Squared deal with Seattle is officially dead. Part II of this series is available here.