Aerie network to mass produce city-to-city bandwidth nationwide
By ROBERT PEASE
Construction is underway on the nation's most ambitious broadband network to date-a 20,000-mi nationwide backbone with more capacity than any other single network built in the United States. Aerie Networks (Denver) is installing 8.9 million fiber-mi of alternative-path, city-to-city routes that will connect more than 194 cities, serving a vast majority of the U.S. business market. Completion of the entire network is expected in early 2004.
A key to building any coast-to-coast, multipath fiber-optic backbone often lies in gaining rights-of-way access, particularly if a company intends to deploy and own all of its fiber-optic cable. Many times, it's easier to simply buy or lease an in-place route from another carrier or provider. Aerie, however, intends to build its network entirely from scratch. With that in mind, an extensive rights-of-way initiative was launched- an initiative that netted the company 14,958 mi of rights-of-way from 12 natural gas, oil, and liquid petroleum pipeline companies and communications companies.
"The process of securing the rights-of-way, beginning to end, was about 18 months," says Mort Aaronson, president and chief operating officer at Aerie. "That included a six-month period in which we determined how much of the company they got in exchange. We settled on giving them 30% of the company in exchange for the $150 million of rights-of-way. In the end, what everybody realized-and what actually brought us all together-was that we were all better together than any of us would be individually. So there was some mutual end gain."
The idea evolved while Aaronson was the chief operating officer for KN Energy, the second largest pipeline operator at the time, next to Williams. While looking at the company's rights-of-way system, he realized it entailed a lot of real estate that wasn't being effectively used or leveraged into other businesses. With that in mind, Aaronson sent out a team to hire consultants, one of whom happened to be Peter Geddis, Aerie's chief executive officer and Aaronson's partner.
"Throughout the industry, every pipeline company was a 'Williams-wannabe' that believed you could dig a hole in the ground, drop in a little fiber, and make billions of dollars," laughs Aaronson. "So Pete and I went out with that pitch. We promoted the upside of no capital and operational risk, more miles at play with a telecommunications venture, and not taking a one-time earnings by simply selling the rights-of-way."
The rest is history. Aerie decided to focus on a long-haul, fiber-optic backbone connecting as many business centers as possible across the United States. Unlike carriers that attempt to enable all facets of the business, such as backbone, undersea, metropolitan rings, and access, Aerie saw a new opportunity. It will focus specifically on a backbone network built to serve the city-to-city needs of all the new rings and local connections that are coming on line over the next few years.
"The greatest number of prospects we'll have in a noncompetitive business stance is our sister and brother companies in the industry that are building out those other segments," says Aaronson. "Aerie isn't really building a network so much as a platform to host the network needs of others."
Aerie's basic business plan is fairly simple-find the demand and mass-produce the solution. In this case, Aerie believes the need will be in city-to-city connectivity. Aaronson says there is a definite shortage of bandwidth today in last-mile connections and city rings. But that's also where a huge amount of construction is currently underway, particularly in building metropolitan area networks, putting fiber in the risers, and last-mile connection infrastructure. As these access infra structures are completed, he says, it will inevitably lead to an extreme fiber shortage in city-to-city connectivity. That's the opportunity Aerie plans to leverage with its "mass-produced bandwidth" business.
"Bandwidth is a commodity," says Aaronson. "Commodities are best sold by the most efficient manufacturers of that commodity. The term 'mass-produced,' in our mind, is designed to evoke a meaning similar to that of 100 years ago. At that time, the railroads, pipelines, and roads enabled the industrial revolution. We are manufacturing, or mass-producing if you will, the infrastructure for the application industry. That industry is the new millennium's equivalent of the industrial revolution. Mass production means high quality and lower cost."
The company plans to leverage its massive rights-of-way system, a 432-fiber count in its cable, and rapid advancements in optical-networking equipment to mass-produce bandwidth. This mass production of bandwidth, says Aerie, creates economies of scale that will allow the company to become a very low-cost provider. The cost to produce bandwidth can be lowered due to Aerie's large inventory of fiber-mi, simplified network architecture, and latest fiber-optic technology. The result will be the ability to create new price points for dark and light fiber.
The target for all this bandwidth: every market in the United States with a population of 500,000 or greater. That will extend the network beyond traditional tier one and tier two cities and into many cities neglected by other large national backbones. With the huge amount of available bandwidth, Aerie's network could appeal to the smaller cities where limited transport options often result in higher prices. But there is also another interesting and potentially appealing facet to the company's plan.
Aerie refers to the second part of its business proposition as the "user- defined" network, meaning users can manage, provision, operate, and maintain their own networks. Using a newly designed operations support system with a secure, web-based interface, customers can easily change service levels, check available inventory, and provision new users, say Aerie executives.
"We've boiled our strategy down to just four words-'mass-produced' as it relates to bandwidth and 'user-defined' as it relates to networks," says Aaronson.
Aerie selected Corning Inc. (Corning, NY) as its exclusive fiber supplier. In a contract estimated in excess of $1 billion over the next four years, Corning will supply its LEAF optical fiber throughout the Aerie network. LEAF is an advanced, nonzero dispersion-shifted optical fiber that boasts greater bandwidth potential, longer optical reach, and overall increased system cost efficiency, according to Corning. The Aerie network will maintain a fiber count of 432 for the entire 20,000-mi backbone.
Aaronson saw a "pretty short list" of fiber manufacturers to begin with and says it was easy to narrow it down through several steps. First, the fiber must pass a technology screen, where Corning apparently "led the pack." Secondly, Aaronson says Aerie executives felt very comfortable in terms of relationships, something he believes is critical for a long-term project. Finally, a key issue was availability-simply being able to provide the amount of fiber required for the Aerie network.
"We placed an order for almost 9 million fiber-mi in a market that's not exactly flowing with excess fiber at the moment," says Aaronson. "But we were fortunate enough to find the right technology with the right partner who could work an arrangement to get us 9 million fiber-mi over the next three-and-one-half years. We didn't want multiple vendors, but a single source. Corning gave us all of that."
Aerie plans to have approximately 600 to 650 mi of finished cable and conduit in the ground by the end of this year. As the construction continues and fiber is deployed, Aerie will be shopping for optical and electronic suppliers that will be the best fit for its ambitious network plan. Since no announcements have been made, Aaronson was unable to provide details on operational characteristics of the Aerie network.
"I can tell you that it's very clearly an IP [Internet Protocol]-on-glass network," says Aaronson. "There is no SONET layer and no ATM layer. Both SONET and ATM are pushed to the fringes as flavoring mechanisms at access and egress points."
The network will use the fastest speeds available to run over Corning's LEAF fiber, speeds not yet available, says Aaronson, in gigabit transfer systems from manufacturers.
Aerie's plan is to deploy the most sophisticated fiber available and, when the time is right, install the latest and most technologically advanced optical and electronic equipment on the market. All-optical-networking technology is not out of the question.
"We're absolutely interested in the all-optical-network technology-but not until it's ready," says Aaronson. "It's not as many years off as it used to be. When the time comes, we'll have the capability to take full advantage of the latest generation of optoelectronics and, as pure photonics occurs, it's a fairly simple upgrade when you don't have a SONET or ATM layer in place."
The first two segments being constructed are routes from Chicago to St. Louis, St. Louis to Dallas, and Dallas to Houston. A loop will run from Houston through the Southeast and up to Washington, DC. Since it takes longer for environmental clearance on the West Coast, Aaronson says the ring around the East Coast, from Washington, DC to New York and Chicago, will likely be completed before advancing the network westward.