The Industry

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.
The Industry

Using Gigabit Broadband

Mozilla recently awarded $280,000 in grants from its Gigabit Communities Fund to projects that are finding beneficial uses of gigabit broadband. This is the latest set of grants and the company has awarded more than $1.2 million to over 90 projects in the last six years. For any of you not aware of Mozilla, they offer a range of open standard software that promotes privacy. I’ve been using their Firefox web browser and operating software for years. As an avid reader of web articles I daily use their Pocket app for tracking the things I’ve read online.

The grants this year went to projects in five cities: Lafayette, LA; Eugene, OR; Chattanooga, TN; Austin, TX; and Kansas City. Grants ranged from $10,000 to $30,000. At least four of those cities are familiar names. Lafayette and Chattanooga are two of the largest municipally-owned fiber networks. Austin and Kansas City have fiber provided by Google Fiber. Eugene is a newer name among fiber communities and is in the process of constructing an open access wholesale network, starting in the downtown area.

I’m not going to recite the list of projects and a synopsis of them is on the Mozilla blog. The awards this year have a common theme of promoting the use of broadband for education. The awards were given mostly to school districts and non-profits, although for-profit companies are also eligible for the grants.

The other thing these projects have in common is that they are developing real-world applications that require robust broadband. For example, several of the projects involve using virtual reality. There is a project that brings virtual reality to several museums and another that shows how soil erosion from rising waters and sediment mismanagement has driven the Biloxi-Chitimacha-Choctaw band of Indians from the Isle de Jean Charles in Louisiana.

I clearly remember getting my first DSL connection at my house after spending a decade on dial-up. I got a self-installed DSL kit from Verizon and it was an amazing feeling when I connected it. That DSL connection provided roughly 1 Mbps, which was 20 to 30 times faster than dial-up. That speed increase freed me up to finally use the Internet to read articles, view pictures and shop without waiting forever for each web site to load. I no longer had to download software updates at bedtime and hope that the dial-up connection didn’t crap out.

I remember when Google Fiber first announced they were going to build gigabit networks for households. Gigabit broadband brings that same experience. When Google Fiber announced the gigabit fiber product most cable networks had maximum speeds of perhaps 30 Mbps – and Google was bringing more than a 30-times increase in speed.

Almost immediately we heard from the big ISPs who denigrated the idea saying that nobody needs gigabit bandwidth and that this was a gimmick. Remember that at that time the CEO of almost every major ISP was on the record saying that they provided more than enough broadband to households – when it was clear to users that they didn’t.

Interestingly, since the Google Fiber announcement the big cable companies have decided to upgrade their own networks to gigabit speeds and ISPs like AT&T and Verizon rarely talk about broadband without mentioning gigabit. Google Fiber reset the conversation about broadband and the rest of the industry has been forced to pay heed.

The projects being funded by Mozilla are just a few of the many ways that we are finding applications that need bigger broadband. I travel to communities all over the country and in the last year I have noticed a big shift in the way that people talk about their home broadband. In the past people would always comment that they seemed to have (or not have) enough broadband speed to stream video. But now, most conversations about broadband hit on the topic of using multiple broadband applications at the same time. That’s because this is the new norm. People want broadband connections that can connect to multiple video streams simultaneously while also supporting VoIP, online schoolwork, gaming and other bandwidth-hungry applications. I now routinely hear people talking about how their 25 Mbps connection is no longer adequate to support their household – a conversation I rarely heard as recently as a few years ago.

We are not going to all grow into needing gigabit speeds for a while. But the same was true of my first DSL connection. I had that connection for over a decade, and during that time my DSL got upgraded once to 6 Mbps. But even that eventually felt slow and a few years later I was the first one in my area using the new Verizon FiOS and a 100 Mbps connection on fiber. ISPs are finally facing up to the fact that households are expecting a lot of broadband speed. The responsive ISPs are responding to this demand, while some bury their heads in the sand and try to convince people that their slower broadband speeds are still all that people need.

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