News

Gig U. Sparks Broadband Challenges

By Tim Kridel | Columbia Business Times | October 28, 2011

 

It’s been six months since Google chose Kansas City, Kan., over Columbia to launch a 1 Gbps broadband network. The slight still stings, but judging by a Sept. 26 Columbia Business Times Power Lunch, it also laid the foundation for the community to try again.

“We came so close with Google,” Mayor Bob McDavid says. “If Google can do it, why can’t we do it?”

This time around, the catalyst is Gig.U, a consortium of 37 U.S. universities and their communities that aims to encourage telecom operators to build ultra-high-speed networks, potentially 1 Gbps and faster. Why college towns? The consortium says the economic hurdles here are lower and the demand higher.

For example, The University of Missouri’s genetic research labs alone generate 5 to 10 terabytes of data per week, says MU Chief Information Officer Gary Allen. Over a 1.5 Mbps T1 link — a common connection in the business world — uploading one week’s worth would take at least 329 days.

At 1 Gbps, the same transfer would take about 12 hours, which would make it easier for MU to collaborate with local companies that want to use it as a research partner. That’s one example of how city and university officials see super-fast broadband as a powerful economic development tool.

“If we can set up very high capacity networks with those companies, then we provide the university with a competitive advantage in terms of acquiring more federal or corporate research funding,” Allen says.

A 25 percent savings?

But if there’s already ample demand for 1 Gbps speeds, why don’t CenturyLink, Mediacom and other local operators provide it? The answer is they can.

“Mediacom’s network is capable of delivering gigabit service and, in some cases, multi-gigabit service,” Dan Templin, senior vice president for business services, said in a separate interview. “We have customers with 1 Gbps or higher connectivity.”

The catch is that though many local businesses and consumers might want 1 Gbps speeds, the vast majority can’t justify the current price: $3,000 to $5,000 per month here, not counting construction costs that operators sometimes roll into the monthly fee. So for Gig.U to be successful, the players involved will have to figure out how to help operators reduce their overhead costs by a wide margin.

“What kind of help do you need to make the business case to make this happen?” John Gillispie, MOREnet executive director, asked at the lunch.

At the lunch and afterward, city and MU officials wouldn’t specify what they’re willing to provide operators with to help reduce construction and other overhead costs.

“That’s the area that the city has to negotiate in, so they don’t want to tip their hand,” Regional Economic Development Inc. President Michael Brooks says. “I think the city is willing to consider any and all options based on what the companies come in with on their requests.”

The Columbia Business Times spoke with several local operators to identify some possibilities:

  • The city could reduce or eliminate the $1.91-per-foot annual fee that it charges operators when they use municipal rights of way to bury fiber. Operators get that amount credited back toward their gross receipts taxes, but some say offset benefits incumbents far more than newcomers. “If you come in and try to build a fiber plant, you’re not going to be able to sell enough services fast enough to get your gross receipts up enough to offset it,” one operator executive says privately.
  • It could do the same with the $16 annual fee for every utility pole that an operator hangs its fiber optic cables on.
  • The city could provide low-cost or free access to underground facilities so operators don’t have to dig up as many streets to lay cables, a savings of $50 to $200 per foot.

“If you remove all of those costs, I think reasonably you could look at a 25 percent reduction on a per-mile basis,” another operator executive says privately. “If you can reduce those costs by 25 percent, you can reasonably expect to see that kind of reduction in pricing, if not more.”

A third operator agrees that those construction savings could reduce overhead costs by 25 percent. But assuming that translates into a price cut of 25 percent, it still leaves a hefty monthly fee of at least $2,250 for 1 Gbps service.

Some other potential options:

  • An operator could pay Water & Light to install infrastructure if that’s cheaper than using out-of-town contractors.
  • MU could provide network design and consulting services.
  • Both the city and MU own fiber networks, and allowing operators to piggyback on those would reduce the amount of new infrastructure required.

In the residential market, another potential way to cut costs is by borrowing a page from Google’s playbook.

“One of the things we learned in working with Google is that they seriously considered building only to the pedestal or pole,” MOREnet’s Gillispie says. “If you wanted a connection, you had to pay for the fiber run into your house.”

 

Leave a Reply