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The October 8, 2002 Issue Provided by System Dynamics Inc.
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IntelligentCities 2002: The Rise of Community Broadband

In "The Tipping Point" Malcolm Gladwell talks about how "ideas and behavior and messages and products sometimes behave just like outbreaks of infectious disease. They are social epidemics." Because we're on the lookout for such things in broadband, we decided to attend IntelligentCities 2002 last week in Chantilly, Va. Focused largely on municipal broadband networks, at first this conference seemed to be about an interesting but - in the global sense - relatively insignificant phenomenon.

By the time we had heard from leaders of projects across the US and Canada, we decided it could become a "big thing". Communities that feel left behind by the incumbent providers are taking matters into their own hands, often with public funding. If this trend continues, smaller and more remote communities may have better broadband service than larger ones.

While the conference described other aspects of "intelligent cities" or "smart communities", the central focus of the conference was "community networks". A "community" may be defined broadly (a town or city) or narrowly (a housing development). Broadband telecommunications is central to all these communities.

The conference concentrated on the North American marketplace. In a speech at the conference, Mike Moone, CEO of Alloptic, contrasted the market drivers in North America from those in many European and Asian markets. Regulatory issues and population densities are two of the major differences.


Unserved Communities

The driving force for communities to organize and act is that incumbent providers (telcos and cable operators) have not offered broadband service and community leaders perceive that they are likely to remain unserved for a long time. Since businesses prefer to locate and people prefer to live where they can get broadband service at a reasonable price, these communities are losing population and their tax base to other more fortunate places.

While this is most prevalent in rural areas with low population density, it is also happening in relatively affluent high-tech suburbs. We have recently spoken with leaders in Lisle, Illinois (near Chicago) and Concord, Massachusetts (near Boston), both unserved and starting to take matters into their own hands.

In communities like Lisle, with a high proportion of technology workers, people feel viscerally deprived of the broadband services their colleagues and friends have and feel stymied in both personal and work-at-home applications. One of the conference speakers, Laurance Lewis, active in getting funding for these types of projects, lives in Lisle and has the problem personally.

People in less developed areas -- like Hutchinson, MN; Sweetwater County, WY; Murray City, UT; or Eastern Ontario's Leeds & Grenville Counties -- see the lack of broadband service as a major barrier to economic growth. These are attractive places to live, with low crime rates, friendly neighbors, clean air and lower stress levels. But without economic opportunities the kids grow up and move to other places and the towns slowly die. Community leaders increasingly see providing broadband as key to their survival.

The incumbent providers are rolling out broadband service in many communities, but have favored some over others. It does make economic sense for providers to focus capital investment on communities with higher population densities and better demographics, reducing capital costs while maximising potential revenue. But that approach makes the other areas even more disadvantaged.

Until recently, people in unserved communities could do little but watch and envy their more favored neighbors. Emerging technologies are giving them the opportunity to take matters into their own hands.


Technology Improvements

Price/performance improvements in two technology areas -- broadband wireless access (BWA) and fiber to the home (FTTH) -- are making community broadband viable. While the cost of deploying traditional infrastructure - SONET/twisted pair for telcos and hybrid fiber-coax for MSOs - is stable or rising slowly, the cost of BWA and FTTH have come down sharply over the past few years. Many companies are working to improve performance and drive down the capital and operating costs.

South Dakota cares about "rural broadband" --> Click for larger pictureAs communities investigate what is possible, they are learning from pioneers who have already gone through the steep learning cycle. A new ecosystem is starting to be built: vendors who have participated in such projects, engineers who have designed them, investment experts who know sources of funding, lobbyists and lawyers who know what roadblocks may be put up by the incumbents. And it is all powered by people who care deeply about preserving and growing their heritage in a particular community, sometimes aided by their political representatives, especially for rural areas.

Fiber and broadband wireless technologies are important to communities because of the bandwidth they provide, but also because -- unlike ADSL and cable modems -- they provide symmetric service. Communities envision many applications -- web hosting, telemedicine, interactive gaming, videoconferencing, etc. -- and want "true broadband" with more upstream bandwidth than today's service providers offer.


Examples of Community Networks

UTOPIA Communities (Great Salt Lake on the left) --> Click for larger pictureIn Utah, community leaders have launched the Utah Telecommunication Open Infrastructure Agency (UTOPIA) -- a project to build a wholesale fiber network connecting all homes and businesses in its 17 member cities with half a million people. UTOPIA is the collective entity formed by the cities to create critical mass and buying power to get economies of scale and atttract service providers to their network. It includes many of the largest communities in Utah; Provo, the second largest, is already building a fiber network on its own, and Salt Lake City is thinking of joining Utopia.

UTOPIA was launched in April 2002 and is now completing a feasibility study. It has the status of an independent government agency and will be able to issue bonds to construct the network, at a cost estimated at $400 million. If successful, it will provide a template for other areas to follow. The Utah legislature has passed a bill (HB149) expressly enabling cities to be involved in telecommunications and it has been adopted as model legislation for other states.

Grant County Public Utility District in central Washington state is well along in deploying its Zipp fiber optic network and is providing voice, data and video services today. When it became clear in 1938 that private industry was not going to deliver electricity to rural Grant County, citizens took matters into their own hands to form Grant County PUD. They have now done so again with advanced communications. The rationale was clear--95% of the cable systems had less than 32 analog channels, only one market had cable modem capability, there was no DSL service, and 3 areas lacked basic telephone service. Today, their customers have competing ISPs, competing digital video providers, better telephone service and lower prices than before.

Grant County represents a group of organizations well positioned to provide telecommunications services. More than 2,000 community-owned electric utilities in the US provide electricity for over 40 million people. Their industry organization American Public Power Association (APPA) says that many are being asked by their citizens to provide community broadband services and 450 already provide some kind of broadband services.

Unlike incumbent carriers, which often aggregate services and act as preferred or exclusive service providers, many community networks operate as "open networks" connecting service providers and end users. Community networks have different levels and meanings of openness. Some such as StokAB.com in Stockholm provide only dark fiber; UTOPIA plans to light the fiber but provide only wholesale transport; Grant County PUD provides many system elements but encourages multiple service providers. The fundamental notion of openness relates to separating the underlying infrastructure from the services provided on that infrastructure.


Financing Community Broadband

Rohde and Binder --> Click for larger picture Several speakers addressed the pivotal issue of financing for community broadband networks. Greg Rohde, the former Asst. Secretary of Commerce for Communications and Information and Administrator, NTIA in the Clinton administration and Laurance Lewis shared details on Municipal Leasing and access to Government Loan & Grant programs in the US.

Michael Binder and Vic Allen described Canada's efforts to accelerate establishment of broadband networks, particularly in rural areas where 45% of Canadians live. A competition for government funding had the dual effect of getting community involvement and creating some innovative plans.


FTTH and BWA

Many of the technology speakers represented fiber-based alternatives for broadband. They pointed out the clear "future-proofing" benefits of fiber in terms of its ability to accomodate enormous growth in bandwdth. We've written previously about the "bandwidth budget" for todays' and tomorrows' homes but took a fancy to Bernard Daines' (CEO of Worldwide Packets) analogy of "minimum daily bandwidth" of 40 Mbps -- like a broadband vitamin!

Despite falling prices, FTTH is still expensive. In some low population density areas like Leeds & Grenville, Ontario, the business economics pointed to broadband wireless as the appropriate alternative. Seeing that "Leeds & Grenville has remained a 'digital desert', isolated from the wired world around us" Upper Canada Networks (UCNet) was formed to deploy BWA services in this rural area between Canada's capital, Ottawa, and its largest city, Toronto.

Xtratyme President John Griffiths --> Click for larger pictureBWA is also the chosen technology for XtraTyme, which has the vision of bringing high speed Internet services to rural America. Founded in 1999, their current locations are in Minnesota but they have recently started projects in Illinois and Wisconsin. Their business model is built on partnerships and community networks. It seems to be working thus far, since they say they are profitable.

Over two days, we saw widespread dissatisfaction with the incumbent providers and their commitment to providing the broadband services communities want and need. We met savvy community leaders who have stopped complaining and started taking aggressive action. We suspect the incumbents perceive the threat to be minor since the projects are isolated and most are in rural areas that are not of great concern. But communities and vendors are gaining experience; if some of the projects come to fruition and succeed, they will set precedents to make it easier for other communities to replicate their models.

Special thanks to James Budwey, IntelligentCities 2002 conference chairman, for inviting us.

( www.hhevents.com/intelligent_cities2002.html ) ( www.alloptic.com ) ( www.utopianet.org ) ( www.gcpud.org ) ( www.appanet.org ) ( www.StokAB.com ) ( www.worldwidepackets.com ) ( www.uppercanada.net ) ( www.xtratyme.com )