Bryan Wassom, Alcatel, and Jan McClintock, City of Fontana, were guest speakers.
Bryan presented the case for municipalities creating their own fiber optic broadband network. Smaller, more rural communities that have their own public utilities in the form of electric, sewer, and/or water utilities have led the way in providing their citizens with broadband services. Many of these communities lacked either cable modem or DSL service and concluded that to promote economic development they needed to create their own broadband networks. Now larger communities are beginning to follow their lead. The Fiber-to-the Home Council, www.ftthcouncil.com, maintains a database of municipalities with fiber-to-the-home networks.
Bryan observed that Fullerton's Technology Infrastructure Task Force was correct in recommending that the City require a minimum of Category 5e wiring be installed in all new and reconstructed buildings. Developers should also be required to connect new homes to a fiber optic network, not just strongly urged to do so.
Enough experience has been gained to know how to build a broadband network that is economically viable. Municipalities building broadband networks no longer are pioneers. Construction costs have decreased to the point that revenues from voice, video, and data services are adequate to cover the cost of revenue bonds that are issued in order to build the system. Penetration rates are typically 30% or greater within a few years of network completion and at that point revenues are adequate to cover operating costs and amortize the bonds.
Although some communities provide retail services over their networks, the most successful business model appears to be one in which the municipality serves as a wholesaler of broadband access. In this model service providers are given open access to offer their services within the community. However, in order to attract the larger, more economically stable service providers, the network must be constructed to high standards and have five 9s reliability. In other words it must be "carrier grade".
Telecos have been reluctant to make the necessary investment because their business model requires that they recover construction costs in a shorter period of time. In addition, many telecos and cablecos are encumbered with debt and have been acting to maximize the return from their existing infrastructure and minimize capital outlays. The telecos in particular have lobbied government regulators to maintain the status quo or slow the rate of change. Consequently, they have been slow to upgrade their systems and add new services. However, new services such as voice over Internet protocol (VOIP) are disrupting their main revenue base and forcing them to take some action.
Other arguments in support of a municipal broadband network are: 1) municipalities are closer to their customers and more responsive to local needs, 2) telecos and cablecos have been monopolistic and tend to be less competitive by nature, 3) telecos have demonstrated that they are very reluctant to open their infrastructure to other content providers, 3) cablecos have never been required to open their infrastructure to other content providers, and 4) once a broadband infrastructure is built by a private firm there is little incentive for a competitor to enter the market by building another broadband network. It is important for competitive reasons to keep separate the content provider and the facilities provider.
Analogs to an open access, municipal broadband network are airports and roads. Municipalities build roads and airports that are open to many types of service providers, i.e., trucking companies, airlines, etc. As with airports and roads, operations and maintenance have been successfully outsourced to third-party experts.
If Fullerton were to pursue the municipal broadband option, the next step would be for the City to conduct a feasibility/needs assessment and develop a business plan. Bryan Wassom and Alcatel are willing to assist the City in taking the next step. Jan McClintock, Fontana Information Services Manager, described the process by which Fontana has proceeded in its quest to wire every building in the city with fiber. Jan and her supervisor, Gary Nordquist, have researched and championed the creation of a city-wide fiber network. Many of the older parts of town are not served by DSL. Unlike Ontario, which is building a fiber network only in the parts of town currently under development, Fontana decided not to create a digital divide.
Jan learned that the incumbent local exchange carrier, SBC, would not be making broadband investments in communities with a community rating of less than 13. Fontana has a rating of 7 or 8. This stimulated Fontana to consider building its own broadband network.
Fontana received a Caltrans grant to run fiber to traffic lights in the city and in the process buried conduit in its major streets. Fullerton is in the process of making plans to connect its traffic lights with fiber optic cable. Doing so will result in significant operational savings that will pay for the system over time. The incremental cost of adding additional fibers to this network in order to connect governmental, educational, medical, and other facilities will be nominal.
Nortel won the contract to study the feasibility of wiring all buildings in Fontana with fiber and creating a successful network. The results of the feasibility study were favorable and may be found online at http://www.fontana.org/main/mgmt_serv/fiber/fiber.htm. Alcatel was one of three parties that have responded to a later RFP for the design and construction of the network. The Fontana City Council has not yet approved the project.
Jan reiterated the need for any network to be carrier grade. She stated that some early systems such as the ones in Grant County and Tacoma, WA, have experienced financial problems because they were not. Fontana will aggregate the telecom demands of government, education, medical centers, and major businesses that will serve as anchor tenants in the municipal network if it is approved. Jan mentioned after her presentation that although education is currently paying low rates for Internet access under the E-rate program, the program is changing to permit reimbursement for the purchase of managed services.