Municipalities continue fiber push

Conduct a quick search on Google News and you�ll likely find at least a dozen fiber-to-the-home (FTTH)-related announcements from cities across the country in various stages of fiber deployment. On Dec. 20, 2007, for example, the Powell City Council in Powell City, WY, unanimously voted to authorize a $6.5 million bond to finance a citywide FTTH network. The next day, the Albany Democrat Herald reported that installation crews from the Scio Mutual Telephone Cooperative in Scio, NY, were in the final stage of development, running fiber from the backbone network, down driveways, and into the homes of its 1,450 co-op members. And on Jan. 8, 2008, citizens of the farming community of Hannibal, MO, met to explore the possibility of building their own network. Said State Sen. Wes Shoemyer (D-Clarence) in that day�s edition of the local Quincy Herald-Whig, �We face challenges like they did with rural electrification.�

Powell City, WY; Scio, NY; and Hannibal, MO are not exactly NFL cities, and yet they are representative of the kinds of communities that continue to be at the forefront of fiber deployment in the U.S. In the past, regulatory issues have plagued this market segment, and while there are still several states that prohibit or limit municipalities� rights to offer telecom services, the sector appears to have reached an equilibrium of sorts. For now, states appear to be waiting for federal legislation, which many believe will come in 2009.

So if there is one overriding trend in municipal fiber deployment today, it may be simply this: Municipalities and public utilities recognize the value of broadband, and they continue to explore the possibility of delivering these services to their constituents.

According to Michael Render, president of RVA Market Research (www.rvallc.com), municipality and public utility district customers currently compose about 3.5% of total North American subscribers. He believes there are about 40 municipal FTTH providers in operation within the continent, with another 10 coming online this year. �It�s not huge, but it is an important sector,� he says. �And there seems to be a resurgence of interest right now.�

Render attributes this resurgence to the continued lack of broadband in certain regions of the country (as in the case of Hannibal, MO) as well as customer dissatisfaction with the broadband services that are available. Ironically, highly publicized initiatives by the country�s largest providers�Verizon and AT&T�have created greater demand on the consumer side.

When asked if it were possible to make generalizations about the kinds of networks municipalities are likely to deploy, Render reports seeing a mix of PON and active point-to-point deployments. �Personally,� he says, �I don�t think the architecture has had any positive or negative effect on the success of these systems so far. It�s been more marketing approaches and business plans and so forth.�

That said, many of the municipalities who do go into the telecom business share certain key characteristics. First, their FTTH deployments are typically tied to an existing telemetry initiative. Consider the case of Clarksville, TN, one of the newest municipal networks to come online. The Clarksville Department of Energy (CDE) has built out an FTTH network, using equipment from World Wide Packets (www.wwp.com, which Ciena recently announced an intent to purchase), both to reduce its operating costs on existing utility services as well as to deliver voice, video, and data services to its 55,000 business and residential customers. CDE says it receives almost 130,000 meter orders per year, each requiring the dispatch of a technician. Its new fiber network will enable it to fulfill most of these orders remotely.

Second, municipalities typically enjoy greater social inclusion than their Wall Street counterparts. They are the primary source for electricity, water, and other utilities and have a long, established relationship with the community. Many of the FTTH-enabled cities in Tennessee, for example, are members of the Tennessee Valley Authority (TVA), the nation�s largest public power company with 8.7 million residents served via 158 locally owned distributors. These communities have a long history of public ownership; in fact, the TVA this year celebrates its 75th anniversary.

But would-be municipal network operators face their share of challenges as well, and they typically rely on consultants and, increasingly, equipment vendors for assistance. Two such vendors, Calix (www.calix.com) and Hitachi Telecom USA (www.hitel.com), have adopted radically different philosophies, though both were designed to aid municipalities with the admittedly formidable task of delivering services over optical networks.

When approached by municipal employees or city councilors, David Russell, solutions marketing director at Calix, says that his company first urges them to partner with a third party that has already built an FTTH network elsewhere before they embark on building a network themselves. �The reason for that is just the general belief that people who are already doing it have the technical skills and the wherewithal to do it efficiently,� he says. �Our company has a lot of independent telephone companies as customers, and many of those are very interested and very willing to go into other communities and help them get fiber to the home.�

In fact, he sees these kinds of partnerships as a growing trend in the industry. �We believe that a lot of municipalities won�t actually build fiber networks,� he maintains, �but they will ask other service providers to come in and overbuild their town. We see this happening increasingly.�

Fort Wayne, IN, is perhaps the most notable example of this trend. Not only was former Mayor Graham Richard successful in convincing a third party to build an FTTH network and provide services in his community, but he actually managed to convince Verizon to do it. The carrier currently offers its FiOS service to 65,000 households and small businesses in the Fort Wayne and New Haven region.

Not all municipalities are so lucky, however. The folks at Hitachi Telecom recognize that municipal customers face unique regulatory, funding, and time-to-market challenges. The vendor�s Source-to-Subscriber program, officially launched at NXTComm last year, is designed to help municipalities and public utilities with everything from feasibility studies to financing to securing content and deploying the physical infrastructure. Hitachi says it has partnered with third parties to offer a neutral approach, one that is not so Hitachi- or even technology-centric.

�Spec-sheet-to-spec-sheet is a lousy way of selling,� says Rick Schiavinato, Hitachi Telecom�s vice president of sales and marketing for the non-RBOC space. �The whole idea [of the Source-to-Subscriber program] is to sell the application and promote the application and look at fiber to the home as a revenue-enabling platform and not as a big expense upfront,� he explains.

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