Today is the first of hopefully many blogs that looks at stories about ISPs, municipalities and cooperatives who have built fiber networks. My goal is to highlight the wide range of different business plans that are being tackled to show that there are many different paths to success. Not all of these stories will be about CCG clients and today’s story is about Eugene, Oregon who is not a client. If you have an interesting business plan model I’d love to hear from you to be featured in a future blog.
The City of Eugene, Oregon identified a lack of big bandwidth as barrier to their economic success. The city has over 400 tech-related firms and many of them told the city that they did not have enough bandwidth to fully fulfill their potential. Neither the incumbents nor Google expressed interest in upgrading Eugene’s infrastructure and the city worried that they were going to be left behind.
As is often the case the project got started by the municipally owned electric and water utility, EWEB. The project quickly grew into a partnership that also involved the city, the Lane Council of Governments (LCOG), a regional planning and coordination organization) and the Technology Association of Oregon.
The project kicked off with a pilot project that brought fiber to five buildings in Eugene. This first effort was largely funded by the city and used the utility’s existing underground electrical conduit. LCOG contributed a local internet exchange location where carriers could easy interconnect. The utility pulled the fiber to buildings.
The operating business selected was to lease dark fiber to ISPs. A number of ISPs showed interest in using the fiber and from their competition the market price for gigabit speed has settled to an affordable $59 for residents in these buildings and $79 for businesses. The pilot project was deemed a success and in one of the first buildings connected the network grew from a 60% occupancy to 90%.
The consortium decided to move to the next stage and expand the network to about 120 other downtown buildings in the city. One major source of funding for that effort was to be a $1.9 million grant from the Economic Development Administration (EDA). But after a year and a half of trying that grant fell through and the consortium has regrouped and raised the money for the expansion from a mix of local funds, including funding from the downtown Urban Renewal district. This is money that was available to benefit the economically distressed downtown area and is now being pointed at fiber expansion.
Currently the project has connected to 30 buildings with plans to get to as many as 120 in the near future. The city asks for a $2,000 payment from a building owner to demonstrate interest and was pleasantly surprised when a low-tech downtown donut shop ponied up the deposit – demonstrating that companies of all types value fast broadband.
The benefits to the city from this venture are significant. With the dark fiber model, they expect the leases from the dark fiber to cover operating expenses. They had originally estimated that bringing fiber downtown would allow many tech companies to expand and they were hoping the fiber would bring 215 new jobs with average salaries of $74,000. The early successes show that they should easily surpass that goal, and the benefit to the city from more tech jobs is immense.
There are some interesting lessons that can be learned from this venture:
- Without government intervention it seems unlikely that the many downtown buildings were going to get gigabit broadband. We always hear how the incumbent private sector will take care of broadband in business districts – but in Eugene it wasn’t happening.
- The government involvement is bringing affordable gigabit broadband by creating competition between multiple ISPs selling services on the dark fibers. A single broadband provider would likely charge much higher prices.
- An interesting lesson is how hard it is to get federal government funding. The consortium feels like they wasted almost two years by pursuing the EDA grant when it turns out that the project was never going to qualify. There are often hidden hurdles in federal funding that are impossible to overcome.
- The city is seeing immediate economic development with new firms locating in the downtown and a number of existing tech companies now hiring – firms have been able to take on new projects due to the availability of broadband. Rather than spending a lot of effort to attract new businesses, sometimes the best economic development plan is to invest in basic infrastructure that supports businesses that are already in a community.
- And finally, I think the city is discovering that once you solve broadband for part of the community that you create that same demand and expectation everywhere. The city regularly receives requests from the rest of the city to bring faster broadband, and my bet is that they won’t be finished with broadband expansion when this project is complete.