Fiber-to-the-home (FTTH) and fiber-to-the-curb (FTTC) deployments have already begun popping up around the country-driven by an unexpected source: small-town local governments. Among those municipalities that have built their own fiber-optic networks to bring high-speed Internet access to their constituents are Braintree, MA; Ashland, OR; Coldwater, MI; Harlan, IA; LaGrange, GA; and Wadsworth, OH. Now, major cities are taking note.
Three years ago, Chicago Mayor Richard M. Daley established the Mayor's Council of Technology Ad visors, a group of 70 individuals from the public, private, and academic sectors who were charged with attacking "the digital divide" and bringing more jobs into the city. The result was CivicNet, a public-private project designed to bring fiber to every neighborhood in Chicago.
In a press release introducing the endeavor, Mayor Daley compared the building of fiber-optic networks to the spread of railroads in the 19th century. "If the transcontinental tracks came through your town," he wrote, "prosperity followed. If it didn't, you were out of luck."
Of course, financing a fiber-optic network is easier said than done. "The reason why broadband hasn't succeeded terribly well in neighborhoods around the country is that the return on investment hasn't been there for companies to really take a whack at it," asserts Doug Power, assistant commissioner and director of Chicago's CivicNet project.
For small towns and municipalities, however, the return on investment doesn't have to be as immediate as it does for a publicly owned company. "If you've got shareholders, you have a responsibility to them for a quicker payback," explains KMI analyst Geoff Wilbur, "whereas a municipality can take into account things like the quality of life there. They still want the payback, but they can tolerate a longer payback period or lower rate of return."
While most of the other city-driven FTTH deployments are managed by the town utility company and financed through bonds or loans, Chicago has come up with a plan that will not use any taxpayer money. The Mayor's Council of Technology Ad visors has decided to take an outsource approach.
"We are aggregating, for the first time, the voice and data leased-line business of all the city agencies, the park district, the housing authority, transit authority, city colleges, Chicago public schools, and the city itself," explains Power. "Prior to now, most of us had been on separate networks, so we're aggregating our voice and data leased-line costs, which add up to $31 million a year, and we're positioning ourselves as an anchor tenant."
As anchor tenant, the city will guarantee the winning entity its business for the next 10 years, with an option to extend the contract to 25 years. The city will also provide its spare fiber, space in city buildings for use as node sites or central offices, and the "right-of-way" to existing infrastructure, including ducts, conduits, freight tunnels, and alongside rapid transit lines.
The city hopes that by guaranteeing a revenue stream and allowing the use of its existing resources, the cost of building infrastructure to the neighborhoods will be sufficiently lowered for the winning entity.
CivicNet coordinators put out a request for information a year ago to prove the business case, and the request for qualification (RFQ) was filed this past summer. Forty companies responded to the RFQ. Half of those have made the short list, and they were scheduled to receive the request for proposals (RFP) in December.
Any company on the short list is free to partner with other companies, regardless of whether they are on the short list. Responses to the RFP must address all aspects of the project, claims Power, including building new infrastructure, providing services, marketing, and billing. It is highly unlikely that a single company will win the contract, he adds.
The city envisions a consortium of private companies tackling the project, which, in the beginning, will involve aggregating existing copper and fiber. According to Power, there could also be a significant wireless component to the winning contract as well.
In addition, there must be a carriers' carrier or vendor-neutral element to the project, contends Power, "so other companies will be able to lease dark fiber or wholesale unbundled services from CivicNet at the same fair, reasonable, and nondiscriminatory rates as any other retail user, including the in-house retail user." The folks behind CivicNet do not want to set up a monopoly, partly because they don't want to face "the regulatory wrath," as Powers puts it, of the Federal Communications Commission, but also because they want to encourage competition.
"Part of the intent here is to get high-speed services at competitive pricing into neighborhoods," he explains. "By having a vanilla, vendor-neutral element to this that's available to any telecommunications provider, that should keep anybody from getting too carried away on high pricing."
Whereas CivicNet is a private venture facilitated by the city of Chicago, most community-sponsored FTTH/FTTC deployments involve or are managed by local utility companies. The Ashland Fiber Network (AFN) in Ashland, OR, for example, was financed through a bank loan and built by a combination of city crews and contractors for the local electric utility company.
"We were considering putting fiber up to control our electric facilities," explains Dick Wanderscheid, director of electric and telecommunications for the City of Ashland. "When we started looking at [building a fiber network], we started exploring what other services we might be able to provide on this network that would help pay for some of the costs of the electric operations."
Gainesville Regional Utilities (GRU-Gainesville, FL) has built a 100-route-mi fiber-optic network under the auspices of GRUCom, its telecommunications branch. Because it is a community-financed and -owned utility, the proceeds from its operation are used to fund police and fire protection, recreation, parks, and transportation.
Others have followed suit. Tacoma, WA, claims to be "America's No. 1 wired city," on the strength of its $100-million, 600-mi fiber-optic system known as the Click Network. The City of Palo Alto Utilities (CPAU-Palo Alto, CA) has built a fiber backbone and offers its residents the option to license fiber directly from CPAU or procure services from an independent service provider that licenses its fiber from CPAU.
While such FTTH and fiber-to-the-business deployments are becoming more popular, Wilbur contends that the trend is just beginning. Prices are not yet optimal for widespread deployments, and the level of demand has only just begun to pick up. "When DSL and cable modems are no longer fast enough for what people really want to do with the Internet, that will propel us to the next level," he contends.