Are gigabit networks like the ones in Kansas City and Chattanooga simply isolated experiments? Or are they just the first in what will be a broader trend?
A year or so ago many people would have argued that Google’s ultra-high-speed Kansas City network and EPB’s Chattanooga network were unlikely to be replicated on any broad scale. But momentum seems to be growing behind the idea that gigabit networks could be more widely available – if the right set of conditions exists.
Research released yesterday from the Fiber-to-the-Home Council suggests at least four conditions that are critical for a successful ultra-high-speed network deployment. These include a need for real stories about real benefits for communities with ultra-high-speed networks, solutions to technical and administrative issues such as how to get the right technical expertise, buy-in from a wide range of stakeholders, and of course financial feasibility.
The FTTH council yesterday gathered together a range of stakeholders to offer advice on each of these areas on a webinar titled “Fiber Findings.”
Of particular interest was a presentation from Blair Levin, executive director of Gig.U – an initiative aimed at bringing ultra-high-speed networks to university communities. Levin tackled what many people would argue is the most critical success factor for gigabit networks – financial feasibility.
“Every major economic development and period of progress is driven by a group that looks at the current math and figures out a way to change that math,” said Levin. “A number of cities have already or are trying to figure out how to change the math.”
Levin flashed a slide showing a formula for how potential investors determine the feasibility of a project. The formula essentially showed that a project is only undertaken when the potential revenues or other benefits to the investor exceed the capex, opex and risk associated with the investment.
“There are a lot of people who are beneficiaries of [a network] upgrade,” Levin said. But in most cases “only one entity is invested in it.”
Gigabit projects have succeeded where beneficiaries of a network upgrade have recognized that if they can help minimize capex, opex and/or risk, they can change the investment equation for investors. Also on yesterday’s webinar, Pam Curtis, assistant to Mayor Joe Reardon of Kansas City, Kan. noted that one of the reasons the city was able to attract Google was that it minimized some of the fees Google would have to pay to build its infrastructure in exchange for obtaining free services to schools and government buildings.
Levin cautioned, however, that successful gigabit networks are not about finding uses that consumers will pay a premium for. “It’s not about how to build BMWs and charge a BMW price,” said Levin. “It’s about how to build a Maserati and charge [for it] like a Camry. That’s what Google did in Kansas City.”
3 thoughts on “Gigabit Networks: Maybe They’re Not So Crazy After All”
We are a small operator. It doesn't take much hand wringing to understand (as a small operator) that we have to change our "decision making paradigm" and learn that the investment can't be our own, WE WILL HAVE TO ESTABLISH PARTNERSHIPS with other risk taking parties to expand broadband to small rural communities let alone rural areas.
The cost of deploying fiber optic or hybrid networks capable of delivering those speeds is prohibitive in rural markets where the population is geographically dispersed. Once you solve that problem then you have to tackle the middle mile transport to rural markets. Gigabit networks will enable rural carriers to continue to offer the services that our customers request. The increasing number of connected devices along with the latest round of ultra hi-def TVs will cause consumer bandwidth demand to rise. We won't need gigabit networks for our residential customers for years but gigabit networks will allow us to scale to meet their needs.
I work for a small telco/ISP in rural America. I can tell you that our RUS regional agent said that we were the only company in his two-state area with a loan application at RUS. That's amazing.
What's more amazing is that our loan application was submitted in 2010, and only approved within the last two months. To me it's inconceivable that it takes RUS over 24 months to review an application from a company that's been in business for over a century with no issues – except for the uncertainty created by the FCC. (Maybe it was just "job security" for RUS employees to take so long with the review since they have such a lack of applications?)
Another thought: Just because our loan was approved doesn't mean our Board of Directors will "draw down" on it. They are still waiting on the FCC to clarify many aspects of the NBP.
Frankly, I'm surprised the 69% number is so low – I would have expected it to be much higher.