By Luigi Calabrese, President.
Those who know me, know of my involvement with the construction and operations of some of the largest fibre optic community based networks in Ontario. This began back in the early 2000’s (really, 98, 99, 2000) with the last project being the Niagara Regional Broadband Network (NRBN) in 2003.
What was the business problem?
It was a pretty phenomenal experience, and it all started with a basic idea. The metropolitan ‘last mile’ was not competitive ,and someone needed to build a stable alternative.
At the time, there was a telco (phone company), and a cableco (cable company) in each market. Both had infrastructure but not all of them had ubiquitous infrastructure, meaning, not all services where available in all markets (I called this the “haves” and the “have-nots”). The best examples at the time were school boards where we had great success. At the time, of say 100+ locations belonging to a school board or library network, only 10 – 15% of the sites had access to the highest and most affordable speeds. The ‘have not’ locations were often relegated to lower speed services.
That’s just how it was.
For those at the time, asking for 100 mbps to a school location meant being visited by sales reps, sales managers, sales engineers and a regional VP who all tirelessly preached the merits of T1 (1.54 mbps) and how improbably or impractical the wish for 10 mbps, not to mention 100 mbps,
In my earlier career, a group that I was a part of had an idea. We thought, let’s get a group of end users in a room, create a common expenditure, and use the value of this grouped expenditure to fund what we felt to be community owned infrastructure. It made sense and it worked. It worked very well.
The Last Mile ….
The “last mile” or “last kilometer” is a phrase used by the telecommunications, cable television and internet industries to refer to the final leg of the telecommunications networks delivering communications connectivity to retail customers; the part that actually reaches the customer. Examples are the copper wire subscriber lines connecting telephones to the local telephone exchange, coaxial cable service drops carrying cable television signals from utility poles to subscriber’s homes, and cell towers linking local cell phones to the cellular network. The word “mile” is used metaphorically; the length of the “last mile” link may be more or less than a mile. Because the last mile of a network to the user is also the first mile from the user to the world when he is sending data (such as uploading), the term “first mile” is sometimes used.
The point being not every one has the infrastructure to hang the ‘last mile’.
For the nostalgic, here is the original launch document.
I am happy to share some numbers that were private at the time. We built about $60 million in network infrastructure, booked over $300 million in full term bandwidth agreements and built tens of thousands of kilometers of fibre out; All this in a record 18 – 36 months.
The role of the local hydro…
These assets at the time were owned by the ‘stewards’ of this transaction – the local hydro utility, owned effectively by the local municipality. These were and still are great operators of networks (noting hydro reliability, by a group of people who really understood the notion of 24/7, and really understood the notion of the need for timely restoral of service) – hence the notion of Community Owned, or Community Based Networks (CBN’s) as they are commonly referred to.
It was a nice project, we all felt good, customers were happy, competitive vendors were mad (which is never a bad thing, as it drove more competition in these markets) and innovative new neutral infrastructure was built. Effectively, we created a third dominant player within a very short three (3) year time span.
Why the hydro’s?
Because it seemed academic at the time.
The Hydro’s tip toed about the topic of getting into the telecom business. In the United States, this was happening in a few markets.
The Hydro’s seemed like a pretty good choice for a few reasons. First, no one was really all that mad at them. The cable companies at the time were not innovating that much and seemed busy coming up with really bad billing ideas to grow business.
If you recall, many of the cable companies added a number of new cable channels under a negative option billing plan. Subscribers opting out of paying for the new channels stood to lose much of their existing specialty channel programming. The participating cable companies were hit by both regulatory and public opinion backlash.
And the phone companies? Well, the same thing. High rates, few choices and no real plans to roll out high speed services outside of dial up and ISDN (64 + 64 kbps services).
The Hydro’s had two areas of immediate interest. First, the idea of connecting their hydro substations with their own fibre optic cable would allow them to cancel all the dial lines connecting all their substations. This would demonstrate to the regulators that it was a ‘private’ network. Once established, the plan was to simply sell off capacity. Doing it this way would fend off any early cries to ‘regulate’ the hydro’s communication asset as a regulated telco service. Being unregulated had a significant effect on pricing and services freedom. It also meant that we would not need a ton of regulatory paperwork. So much easier that way…
A major change to the Electricity Act in 1999 stated that public commissions (PUCs) could no longer operate electric utilities. Instead, private companies were established to undertake this business. As a result most of the hydro utilities were either being sold off to Hydro One or handed back to the Municipality as the major or only shareholder after it was incorporated as a business vs. hydro commission.
It also meant that the cash on hand was likely to be scooped by the municipalities to do really important things like … ugh…I don’t know.
Many of the hydro commissioners at the time had the foresight to build these assets out.
There was also a capacity reason (space on the pole). You can only hang so many attachments on a hydro pole. The risk we identified was that at any point, the hydro may not actually have any room on their own poles down the road once the cable co’s and phone companies occupied all the remaining attachment spaces on a pole.
So, it began.
In hindsight, despite its success, it actually largely failed.
Here is why…
Years later, these entities grew. It was no longer about providing simple one dimensional last mile solutions. It became about attempting to enable enterprise products, competing with local business vendors or existing IT providers (who initially supported them) with products like managed services, VoIP, storage etc. Service levels slipped a bit, teams started to change, there was municipal fragmentation (city 1 did not want to connect to city 2 for various reasons, often political). It created a hole that was filled in again by the ‘then’ incumbents (cableco, telco) who already knew how to work together (i.e. how to price a circuit from one city to another city while crossing over a third).
But that to me is not why it failed….
If you measure solely on the basis of economics, it was a fantastic financial success. Most of the assets built and the organizations who operated them have since sold via a series of consolidations and roll ups. In all, the effective market cap of all of these assets are nearing the $1 billion mark.
It is here that I should note that not all sold, some did not….
But in markets where they did, we are back to having two – a telco (phone company) and a cableco (cable company) – exactly where we were over 10 years ago. And now, if you ask for 10 gig, 40 gbps or 100 gbps, we are ,again, in meetings being visited by sales reps, sales managers, sales engineers and regional VP’s who are preaching the merits of 100 mbps or 1 gig (shared) and how improbably or impractical the wish for affordable 10 gig not to mention 40 gbps was (dare I bring up 100 gig).
The reality is that over a decade later the new ‘big’ speeds are here, 1 gig, 10 gig, 40 gig and now 100 gig and more will come. But today, users are smarter and the equipment is more sophisticated.
Moore’s Law, and why we are always asking for more bandwidth…
Moore’s Law – Named after Intel co-founder Gordon E. Moore, who described the trend in a 1965 paper. Simply put, “bandwidths will double every 18 months”.
I followed it with a more humorous quote from Murphy ’s Law, not sure who invented this one, but it stated that “Anything that can go wrong will go wrong”. Meaning, if you think you will need more bandwidth, you will need more bandwidth.
One (1), 10 and 40 gig speeds are considered fast today ,but wait a few years and they will again be considered standard or mid-speed just like 10 and 100 mbps was considered a luxury item. I remember being lectured by a school board that their bonded 56k lines where more than sufficient, who, within two years of that point implemented 100 mbps.
What is Frontier going to do about this?
This seems academic to us. We know how to create partnerships; we understand political and business structures (for profit, not for profit, cooperative, co-managed etc.). We also understand the notion of the Public Private Partnership (known as the ‘Three P’).
We believe that the needs you have are shared by those around you. Frontier can represent your requirements ‘cooperatively’. We can leverage our national coverage, our regional points of presence (PoPs), our regulatory structure (specifically our Federal Carrier Status with the CRTC) that allows us to get things like:
- Municipal Access Agreements – The requirement agreements with respective municipalities to get access to municipally owned and controlled rights of ways ducts etc. This would include the structure to manage permits, annual related expenses etc.
- Support Structure Agreements – This is a ‘co-use’ agreement to share infrastructure with an existing provider such as a phone company or cable company.
- Co-use Agreements – An agreement sought when private property or developer owned facilities are being used (i.e. large Tier 1 Building recluse where we use a ‘path’ that is shared between buildings).
- Duct Agreements – Any duct anywhere.
So, where do you go from here?
There are not many options. Plenty of people are talking about building new broadband networks and re-engaging some of these end users.
In many cases, the option is easier – fire your vendor but use their infrastructure. For example, let Frontier manage your existing network, let us run interference with the carriers and get you out of the business of trying to figure out your ‘new’ provider.
But when large, near miraculous levels of bandwidth are needed, the idea of “dark fibre” or “customer owned network infrastructure” will become attractive to you.
With “dark fibre”, we can build a highly scalable WAN between locations, such as your headquarters and data center.
“Dark fibre” traditionally refers to fibre optic cable that’s already been laid but is not yet in use. Early on, many telco’s provided dark fibre. Initially, they focused on providing dark fiber to communications carriers.
One of the most cost effective ways to control your bandwidth needs while future-proofing your business is a “dark fibre” solution. “Dark fibre” affords your company a long list of benefits. Including:
- Virtually unlimited bandwidth at a fixed cost. You get fibre optics to the doorstep to help you optimize the costs and control of your network
- A flexible, competitive and customizable configuration to meet your unique bandwidth demands
- The ability to utilize technological advances to better manage your business without reliance on your incumbent carrier for adding services
- The option of capitalizing your network as an asset
- The comfort of knowing that we have partnered with leading equipment providers to assist you in building a complete, redundant and secured network
- Option for private ownership or Cooperative Ownership
I think you will see this one again…There are only so many holes or highways that we can dig and rip open to lay fibre optic cable. There are only so many trenches to build. We should all recognize that we need to share this. The problem is; big carriers don’t share well. The fact is; they don’t really like to collaborate with customers.
They just want to sell you stuff. They also, don’t really like to collaborate with their competitors… for reasons that are pretty obvious.
Time to dig !
The ability to ‘hang fibre’ has become a ton more complex since the time we did most of the early construction. In Ontario, things like the introduction of the Electric Safety Authorities ESA 22.4 Compliance approval, inspection and reporting process has pretty much made hanging infrastructure on a hydro pole next to impossible. Cost aside, the speed to market is pretty much dead. The permiting and approval process to get on a pole is exhausting and unpredictable. It really does signal a call to address the root issue which is the need for a better neutral communications right of way.
Oh ya, one more thing. Neat point to note, it costs money to be on a pole, yet, with our CRTC filing(s), we are afforded the right to bury infrastructure (by way of our Municipal Access Agreements or MAA’s) in a community and are exempt from fees as a common carrier.
After I press submit, I suspect I will get a few different responses.
- Former customers – indicating what each have already said, the time is now
- My competition – colleagues asking for jobs, or announcing my imminent failure (yawn)
- Vendors – offering to sell me the $ 1+ billion worth of fibre cable, GBIC’s and network gear that I will need
We are excited about this topic to the point that we are actually doing something about it.
Stay tuned. It will be a big one. The biggest one yet. But for now, I have a 10,000 square foot data centre that I need to build. (The next one is 100,000).
Like always, if you want to talk about this. Ping my office.