New Approaches to Fiber Nets Accelerate Activity Nationwide

Mark Ansboury, CEO, Gigabit Squared

Mark Ansboury, CEO, Gigabit Squared

November 30, 2012 – It appears that a tipping point has been reached in the momentum driving deployments of all-fiber networks in the U.S., thanks to mounting evidence from localities with fiber networking experience that there’s a financial case to be made for such projects, even where there’s stiff competition from other providers.
 
Much of this activity marks a break from the past when buildouts were undertaken under direct management of municipalities and utilities or by traditional service providers. Now, increasingly, the cutting edge features partnerships between the public and private sectors as it becomes increasingly evident that there’s a significant payoff in terms of economic development, education and better public utility services as well as ROI on network services.

According to an annual study performed by market research firm RVA for the Fiber-to-the-Home Council Americas, total FTTH penetration in North America now stands at nine million subscribers out of 24.3 million homes passed, with about half the subscriber total accounted for by the Verizon FiOS network. This marks a ten percent increase in home passed since March, RVA reports. From a provider standpoint, there are some 870 with fewer than 30,000 subscribers and only five with more than 50,000.

The number of households with Internet connectivity at 100 megabits per second or higher now tops 500,000, the researcher says. Tests show the median for FTTH download speeds is above 20 Mbps compared to less than 15 Mbps for cable modem users. A handful of communities now boast their residents and businesses can purchase 1 gigabit-per-second, including Chattanooga, Tenn., the first to hit that mark, and Kansas City, Kan., where Google has turned up the first customers on its widely publicized network, which may eventually pass some 150,000 households.

The new trend toward public/private sector initiatives shows signs of expanding the scale of new projects beyond smaller cities and towns. In October, the Mid-South section of Chicago was named the first of six communities to be funded through the $200-million Gigabit Neighborhood Gateway Program, a cooperative venture between The University Community Next Generation Neighborhood Gateway Program (Gig.U) and a year-old private developer Gigabit Squared.

Gig.U, a project spearheaded by the Aspen Institute and 36 land-grant universities, is involved in other privately funded initiatives as well, including one in Maine known as Gigabit Main Street with private operator GWI, which is targeting the communities of Orono and Old Town for its initial buildouts. But the larger story is the groundswell of home-grown initiatives getting underway as word spreads that fiber networking is paying off for many of those who’ve already taken the plunge.

“Activity has increased,” says Michael Brayen, director of business development for the strategic industries division at Alcatel-Lucent. “The message is getting out that there are successful business models to follow that will foster economic development, create jobs, improve education and keep the kids from leaving to find work elsewhere.”

Brayen cites his own travel schedule as evidence of what’s happening all over the country. “I was just in Missouri talking with people there about a project,” he says. “Last week I was in Kansas talking to one of the towns that was a finalist in the Google competition. Next week I’m meeting with people on the West Coast. We’re seeing the same kind of interest in eastern Oklahoma, the Dakotas, southern Louisiana, Wisconsin. They’re all trying to figure out how to build a business model for sustainable success.”

In one recent success story Alcatel-Lucent has been supplying successive generations of passive optical network (PON) technology to Bristol Tennessee Essential Services, the municipally owned electric utility serving about 33,000 electric customers in the town of Bristol and parts of the surrounding county in northeastern Tennessee. BTES, having begun with BPON (Broadband PON) technology, has upgraded the network to GPON (Gigabit PON) capabilities with the latest 10-gigabit-per-second iteration supporting 1 Gbps capacity per connection across the 33,000-customer utility footprint.

Despite competition from Comcast and CenturyLink, BTES has managed to achieve close to 50 percent penetration, generating enough revenue from triple-play services to pay for the network, according to BTES CEO Dr. Michael Browder. “Our business plan originally was to serve just 35 percent of the customers we passed, and we only intended to pass 20,000 of our 33,000 customers,” Browder says. “But after we got started we saw that it was going to work, and we passed all of them without ever slowing up.”

The big win for BTES is the fact that the revenue-generating network strategy satisfies the utility’s need to have a better communication system to respond to power outages, which by some calculations cost industry as much as the power consumed. Now, with a smart grid as well as a gigabit fiber network, Bristol’s combination of reliable power and ultrahigh-speed network access is drawing interest of outside industry, including entities shopping for new locations for big data centers.

“We have this printing facility that’s been printing seven newspapers for six years, and they’ve never had a blip either from electric or the fiber services we’re providing,” Browder says. “Those things sell well to people who are looking.”

The benefits of smart-grid communications were vividly displayed when a cluster of eight tornadoes touched down in the Chattanooga area one day in 2011. The city reported the smart grid saved 730,000 outage minutes in that incident alone, translating to millions of dollars in savings to the local economy.

Browder, who stays in close touch with Chattanooga to compare notes and cooperate on new developments, has become an ambassador of sorts for the municipally backed fiber strategy, getting the word out that it’s possible to make a business success of such a network, even in a rural area where reaching some residents is very expensive. “A lot of those [homes added in the expansion plan] were really rural places who needed the service more than others,” he says.

“We went to school on everybody we could find before we started in the business,” he notes. “They were telling us the good, the bad, the ugly. They were telling us this is what we did that worked. This is what we’d like to do different if we were doing it again. And we provided that same sort of sharing because we think that makes everything better for each of us.”

Such projects have become a region-wide goal for the Tennessee Valley Authority, says John Bradley, TVA’s senior vice president for economic development. The opportunity to draw data centers that have become central to electronic commerce and cloud-based IT operations across multiple industries is a key reason behind this effort, Bradley notes.

“There are exception opportunities for regional growth potential in this industry,” he says. “Data centers provide highly skilled, good-paying job opportunities. TVA’s goal is to help make the region more competitive in attracting and retaining these types of industries and the economic benefits associated with them.”

While the federal government’s $7.2-billion Broadband Technology Opportunities Program (BTOP) has definitely been a factor in sparking interest in fiber access infrastructure, the real force has been the demonstration that such projects can be operated on sustainable business models, Brayen says. “The grants sparked interest a couple of years ago, but more important now is the fact that communities have been willing to share their success stories and talk openly about what they have done,” he says. “Other communities are looking at the success of the models, often at the same time they’re looking at water, sewage, gas and power upgrades.”

While about 18 states have restrictions on local governments’ undertaking fiber projects, court battles to stop such projects have largely failed, clearing a major obstacle to consideration of such undertakings. In one recent case in point, the town of Longmont, Colo., beat back efforts by Comcast and CenturyLink to stop a fiber initiative and is now moving ahead with its first business and residential connections. “Now that the successful models have been socialized there’s a lot more confidence,” Brayen says.

Inadequate service by incumbent providers remains a major incentive. “A community in Wisconsin we’re working with, which I can’t name, sits right next to one of the universities,” he notes. “They’ve waited four and a half years for the incumbents to bring their community into the 21st Century. They and a lot of other communities are watching new business go right past them to others where the facilities are state-of-the-art, so they’re taking matters into their own hands.”

Mark Ansboury, CEO of Gigabit Squared, the startup developer teamed with Gig.U on the Chicago project, describes the new thinking that is creating joint efforts such as the $200-million Gigabit Neighborhood Funding Program. In a recent Web radio interview conducted by Craig Settles, a specialist in broadband development writing for online publisher GigOm, Ansboury says the new strategy stems from his group’s recognition that communities need a roadmap to help them understand how to realize the potential of ambitious fiber networking plans.

“We saw that we have to create a new model that bridges the gap between the public and private sectors, that puts what towns are doing together with private capital,” Ansboury says. “As a digital developer we can help communities put together the right business structure and go out and get capital. In the Gig.U initiative we’re saying we’ll be an investment partner as well.”

There’s no single template, which means every project has to be approached on the basis of local needs and opportunities as well as what the funding resources might be, he adds. “We see a lot of different business models developing,” he says. “With the Gigabit Neighborhood Funding project we want to demonstrate we can work with multiple communities with a lot of different funding models.”

The funds available through the project will allocated differently depending on the local needs and other funding resources. “We could fund one project at $100 million and another one at $5 million,” he says. “We think the real opportunity is with the smaller communities. They’re the ones who have the biggest need, because there’s no one there making those investments.”

As its first chosen project, Chicago is actually at the low end of that scale, with $5 million earmarked from Gigabit Squared as a contribution to bringing fiber and wireless broadband capacity to over 4,825 residents, businesses, schools and healthcare institutions in portions of the Hyde Park, Kenwood, Woodlawn and Washington Park neighborhoods near the University of Chicago. Other funding for the first phase of what could ultimately be a project delivering gigabit broadband access to over 79,000 households and 10,000 businesses includes $2 million from the Illinois Department of Commerce and Economic Opportunity, $1 million from the University of Chicago and $1 million from the Woodlawn community.

“Bringing the University of Chicago, the State of Illinois, the City of Chicago and individual neighborhoods, as well as Cook County together, we’re able to do what none of us could do individually – build a platform for economic development and business creation on the Mid-South Side of Chicago,” Ansboury says. And such strategies raise the incentives for investment from private sources, he adds.

Aaron Gadouas, senior vice president of the investment firm Stern Brothers & Co., agrees. “The Gigabit Neighborhood Gateway Program is a compelling public/private model because both sides are able to leverage the contributions of the other, enabling projects that would not have been completed otherwise,” Gadouas says. “It is a well-conceived and innovative initiative.”

Chicago Mayer Rahm Emanuel hailed the project as “a great first step toward realizing the goal of the Chicago Broadband Challenge – an open, next-generation network for the entire city.” In
September Emanuel announced the city was taking advantage of its water infrastructure overhaul to lay new last-mile fiber to serve 15 new tech zones in commercial and industrial corridors throughout the city and to bring low-cost broadband access to underserved and disadvantaged neighborhoods. He says more development initiatives can be expected in the months ahead.

One indication of what the gigabit infrastructure means to advances in data-intensive applications can be seen in two initiatives that are helping to make Chattanooga a window on the future. Among 56 applications the city has launched since the gigabit network came online is a citywide surveillance system allowing workers to view situations through the eyes of a fleet of helicopter drones. Complementing this from a ground view perspective are new portable devices with holographic scanning capabilities which look across 300 years in all directions to create a 3D image of crime scenes, fires and other developments.