Broadband in Eugene, Oregon

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.

Getting Access to Existing Fiber

Fiber CableFrontier, the incumbent in West Virginia that bought the property from Verizon, is fighting publicly with Citynet, the biggest competitive telco in the state, about whether they should have to share dark fiber.

Dark fiber is just what it sounds like – fiber that has not been lit with electronics. Most fibers that have been built have extra pairs that are not used. Every fiber provider needs some extra pairs for future use in case some of the existing lit pairs go bad or get damaged too badly to repair. And some other pairs are often reserved for future construction and expansion needs. But any pairs above some reasonable safety margin for future maintenance and growth are fiber pairs that are likely never going to be used.

The FCC has wrangled with dark fiber in the past. The Telecommunications Act of 1996 included language that required the largest telcos to lease dark fiber to competitors. The FCC implemented this a few years later and for a while other carriers were able to lease dark fiber between telephone exchanges. But the Bell companies attacked these rules continuously and got them so watered down that it became nearly impossible to put together a network this way. But it is still possible to lease dark fiber using those rules if somebody is determined enough to fight through a horrid ordering process from a phone company that is determined not to lease the dark fiber.

The stimulus grant rules also required that any long-haul fibers built with free federal money must provide for inexpensive access to competitors willing to build the last mile. I don’t know the specific facts of the Citynet dispute, but I would guess that the stimulus fiber is part of what they are fighting over.

The stimulus grants in West Virginia are about the oddest and most corrupt of all of the stimulus grants that were awarded. The stimulus grant went originally to the State of West Virginia to build a fiber line that would connect most counties with a fiber backbone. There were similar fiber programs in other states. But in West Virginia, halfway through construction, the network was just ‘given’ to Verizon, who was the phone company at the time. The grant was controversial thereafter. For instance, the project was reduced from 915 miles to 675 miles, yet the grant was not reduced from the original $42 million. This means the final grant cost a whopping $57,800 per mile compared to similar stimulus grants that cost $30,000 per mile.

According to the federal rules that built the fiber, Citynet and any other competitor is supposed to get very cheap access to that fiber if they want to use it for last mile projects. If they don’t get reasonable access those grants allowed for the right to appeal to the FCC or the NTIA. However, the stimulus grants were not specific about whether this was to be dark fiber or bandwidth on lit fiber.

But this fight raises a more interesting question. Almost every long-haul fiber that has been built contains a lot of extra pairs of fiber. As I just noted in another recent blog, most rural counties already are home to half a dozen or more fiber networks that almost all contain empty and un-used fiber.

We have a rural bandwidth problem in the country due to the fact that it’s relatively expensive to build fiber in rural places. Perhaps if the FCC really wants to solve the rural bandwidth shortage they ought to take a look at all of the dark fiber that is already sitting idle in rural places.

It would be really nice if the FCC could force any incumbent – be that a cable company, telco, school system, state government, etc.– that has dark fibers in rural counties to be forced to lease it to others for a fair price. This is something that could be made to only apply to those places where there is a lot of households that don’t have access to FCC-defined broadband.

We don’t actually have a fiber shortage in a lot of places – what we have instead is a whole lot of fiber that has been built on public rights-of-way that is not being used and that is not being made available to those who could use it. It’s easy to point the finger at companies like Frontier, but a lot of the idle fiber sitting in rural places has been built by government entities like a school district or a Department of Transportation, that is not willing to share it with others. That sort of gross waste of a precious resource is shameful and there ought to be a solution that would make truly idle fiber available to those who would use it to bring broadband to households that need it.