Too Much Fiber?

When communities consider building fiber, one of the first questions a community often asks me is how much fiber already exists in their community and how they can take advantage of it. The bad news I almost always have to give them is that their community probably contains several existing fiber networks that will be of little or no use to them. It seems there is a lot of fiber in the world that is not being put to good use.

So what do I mean by this? What I have found is that many communities have numerous existing fiber networks that have been built for one specific purpose and which can’t be used for anything else. Here are some examples:

  • K-12 Schools. School districts often own fiber networks to connect all of their schools.
  • Colleges. Colleges will often be on a different network than the other schools.
  • Traffic Lights. A number of cities now have fiber systems that feed traffic lights.
  • State Highways. They often have fiber network systems for cameras and electronic message boards.
  • Federal Highways. They build for the same reason as state highways.
  • Commercial networks. It’s more understandable why a network built by a telco, cable company, wireless company, or CLEC might not be available to a city, but most cities today contain a significant amount of fiber built by these companies.

I first ran into this issue in the late 90s when a city in Virginia asked me this question. I was helping them design a fiber network that would connect all of their government buildings. In doing so I discovered that there was already a fiber network built to traffic lights that probably already covered 80% of the network they were going to need – and they already owned it. But in looking deeper, we found that the traffic light network had been built with funds from the state highway department and that it had a prohibition in the funding language against sharing the network for other uses, including other uses by the city. That network was basically off-limits for any other use.

When you consider that building fiber can range in price from $25,000 per mile to place on poles, or $75,000 per mile to bury (in most places) or even up to $150,000 per mile in urban downtowns, it’s crazy to think that such money has been spent without considering all of the other benefits the outlay could have created.

I still see this all of the time and it is very common for a government-built fiber to be off limits to all commercial uses. But surprisingly there are often also prohibitions against other municipal uses. I can understand restrictions against commercial uses, even if I don’t like them. The fear is always there that when the government and commercial entities work together that it creates a chance for corruption. But this kind of fear should not be a reason to automatically write-off the opportunity for public-private partnerships.

I’ve always found that commercial companies are glad to share the cost of building a new fiber route. In the commercial world companies routinely share fibers and they typically create a clear division of the use of fiber pairs on a new route when multiple companies agree to share in the build costs. Governments could save a fortune if they would join into this well-established commercial practice of building fiber for more than one company.

But the restrictions of a government-owned fiber that precludes other parts of the government from using it are just wrong. When highway departments or universities or other big agencies build fiber and then don’t let other government agencies benefit from the expenditure something is very wrong and we have let bureaucracy override common sense. I often hear excuses for the practice such as the need for security, and frankly all such excuses are bosh.

I’ve told cities that there are two solutions when they run into this problem. One is to create a huge public stink so that the agency that won’t share the fibers might be shamed into doing the right thing. But the other fix is longer term, and that is to take full control of their rights-of-way. For example, one long-term fix is to require that anybody who digs a ditch in the ground must include empty conduit which will create a lot of opportunity for cheap fiber over time. But the best fix is for somebody in the city to act entrepreneurially and to get to know the fiber providers in town and develop partnerships with them. That is actually easier to do than you might think.

Will Telecom Investing Become Sexy Again?

Image representing Google as depicted in Crunc...

Image via CrunchBase

Will the fact that Google is investing in fiber make it sexy again to invest in telecom? The last time that there was a big boom in investing in new telecom ventures was the late 90’s. At that time there were dozens of start-up CLECs, a number of which were able to issue IPOs and go public. Every smart investor had some telecom stocks in their portfolio.

But the new CLECs and telecom firms of that time almost all went bust with only a few of them still around today. There are a number of reasons for the bust. The business plans of many telecom startups depended upon arbitrage – using the facilities of the incumbent rather than making infrastructure investments. And many of the telecom start-ups had bad business plans that expanded into too many markets too quickly to do it well. And somehow the telecoms got tied in with the dot.coms and when those went bust the telecoms followed them down the tubes. And investors lost a lot of money and got soured on telecom. The lasting effect of the bust was that it became unsexy to invest in telecom.

And almost nobody has invested in telecom since then. It’s hard to find anybody who doesn’t recognize that the US is falling behind the rest of the world in telecom infrastructure, namely fiber. Since the telecom bust the only ones investing in fiber to whole communities have been Verizon, some municipalities and some smaller independent telephone companies. Verizon’s decision to build fiber was a bold one, but it didn’t drag anybody else along. And Verizon’s fiber build dwarfs all of the rest of the builders collectively. The vast majority of the country does not have fiber but wants it badly.

But now Google comes along and is boldly investing in fiber in large communities – Kansas City and Austin. What they are telling the world is that there is profit in fiber, profit in infrastructure investing. Kansas City was touted as a trial, but by having announced Austin so quickly it is obvious that Google thinks that their experiment is working. And while Google has made an announcement for Provo, Utah, that is a one-off since they were able to pick up an existing fiber network and customers at a very good price.

I keep hearing that there is a lot of money today on the sidelines, meaning money waiting to get invested in good projects. And this is interesting to me since there is such an obvious need in this country today for new and upgraded infrastructure. In addition to a huge need for fiber networks there is a huge demand for clean energy generation plus the usual things like bridges and roads. Perhaps at least to some small degree the Google decision to boldly invest in infrastructure can be the first step towards unleashing the private equity in the country to invest in infrastructure again. Google thinks such investing can be profitable and obviously it is good for the country. Will others follow?

Two Fiber Networks?

Image of Austin, Texas

Image of Austin, Texas (Photo credit: Wikipedia)

The conventional wisdom in the industry is that two companies would never invest in side-by-side fiber networks to serve residential customers. I have had this conversation many times with clients who were planning to build a fiber network and who were worried about the response of the incumbent providers. Everyone has always believed that the first fiber builder wins because there is not enough margin in the residential market to support two fiber networks. AT&T has shown that conventional wisdom to be wrong by announcing that they will build a second fiber network in Austin as a counter to Google’s announcement to do the same.

This is not without precedent, although on a much smaller scale. The City of Monticello, Minnesota built a fiber network to pass every home and business in the City. The municipal fiber build was prompted by the fact that the City had some of the highest telecom rates in the country. Soon after the City built their network, TDS Telecom, the incumbent telephone company built a competing fiber network.

And as expected, both fiber providers are not faring well. After building fiber TDS decided to win back customers with an aggressive price war. Charter, the incumbent cable company also got into the price war fray. And so customers in Monticello are benefitting from a price war while all of the companies are underperforming.

It is fairly easy to understand TDS’s motivation for building the fiber network and for the price war. The company serves numerous other towns like Monticello and I see their response there as a clear warning to anybody else who is planning on overbuilding their serving territory. It is also clear that they are hoping that the City will give up and leave the fiber business.

And now we are going to see this scenario play out in the much bigger market of Austin. Google already overbuilt one AT&T market in Kansas City and one can easily envision Google overbuilding many other large cities. AT&T’s response in Austin is the same as TDS’s response in Monticello. AT&T has made it clear to Google and others that they are not going to side idly by and watch their major markets go to somebody else.

So it will be interesting to see the impact of AT&T’s announcement. It’s possible that the announcement will cause Google to pause and not build in Austin. Certainly they will not do as well as expected if there are two fiber networks. It’s also possible that both companies will build fiber and we will see side-by-side competition with two fiber networks and the cable company – the kind of competition we have never seen in a major city in the US.

But the real impact of AT&T’s announcement is going to be felt everywhere else. One has to wonder what kind of impact AT&T’s announcement will have on any company, Google included, who is contemplating building a fiber network in a large city. Google has very deep pockets and might proceed anyway, but almost any other company would not be able to afford the much lower returns that come with hard competition.

While this announcement might result in real competition for the citizens of Austin, it also might have the effect of stifling anybody else from trying to build fiber in a large City. This announcement could result in killing anybody from building fiber in large cities due to the fear of a similar reaction. While hearing about two companies wanting to provide gigabit fiber sounds like a good thing, the long-term consequence of this might mean less overbuilding, less fiber and less competition.

And I don’t know that AT&T had any choice. Their only other option was to watch their large markets go to an aggressive competitor. Nobody knows what Google plans to do, but some have speculated that they might build in most of the major cities. Now we’ll just have to watch this one play out, so pull up a chair. This should be interesting.

Faster Fiber

Exceeding the Speed of Light

Exceeding the Speed of Light (Photo credit: IntelGuy)

Researchers at the University of Southhampton have demonstrated a new fiber technology that allows light to traverse fiber at 99.7 % of the speed of light. This is a vast improvement over current fiber technologies that pass light at about 70% the speed of light.

It has long been understood that the glass in a fiber optics cable slows the light signal and that light can travel much faster through air. The new technology creates hollow fiber-optic cable to create a trapped air-pocket for the transmission media.

An abstract of the research can be viewed in Nature Photonics.

As can be expected, it will be a few years before the faster fiber hits the street. But the market is going to want faster fiber since the primary benefit of the new technology will be the reduction of latency on long-haul fiber routes. Researchers also postulate that the first use for the fiber might be as wiring for supercomputers since electricity ‘crawls’ through wiring at about 2/3 the speed of light.