The How of Broadband

Infrastructure Peering

The How of Broadband

By Hunter Newby, CEO  |  May 01, 2011

This article originally appeared in the May 2011 issue of INTERNET TELEPHONY.

Last month the “Why of Broadband” was covered. There are several motivations for investing in a real broadband network, but the state of North Carolina did everyone a favor by spelling out with clarity the financial implications to the state if the investment is not made. The reality for North Carolina in analyzing an investment in broadband was not the return on the investment that would be realized in terms of dollars and revenue generated as a result of the effort, but rather that if the investment is not made the state stands to lose everything it already generates in tax revenue.

It is a matter of protecting the base that is the justification for the investment. Only from that vantage can the investment be understood and authorized. Once the reasoning for the investment is understood the proper network system, including the design as well as the business model, must be created and implemented. The model is not as simple as just “building a dark fiber network” and must be taken seriously for the outcome to be positive. There are three major components to how a broadband network for a community should be built to increase the probability of success. They are:
1. How the model works (philosophy, product, pricing)
2. How it gets financed
3. How it gets built (the design and construction itself) Just as in the case of the why, it is best to use examples of what others have already done to prove out to the interested and willing what path they should follow.

The simple reasons for this are that no one typically ever wants to be first, and they always want someone else to blame if anything goes wrong, but also as a function of nature there are patterns and these patterns are typically of those things that came before and actually worked successfully, so there is real merit in following. 

Although there are several good examples around the U.S. and world, Axcess Ontario serves as a starting point for an outstanding model for others to follow. 

Axcess Ontario is a public benefit corporation that built, owns and operates a 200-mile, open-access, dark fiber ring around Ontario County, N.Y. It is affiliated with The Finger Lakes Regional Telecommunications Development Corp., a not-for-profit development corporation. Axcess Ontario leases dark fiber to network operators of all types. It has agreements with at least eight network operators including Iberdrola USA, which owns the Rochester Gas & Electric utility company; the Ontario Telephone company, which is the ILEC in the area; Verizon Wireless; Time Warner (News - Alert) Telecom; as well as others. Lease terms range, but for example the Iberdrola deal was for 20 years. Axcess Ontario’s startup costs were originally budgeted at $7.5 million. This capital commitment was generated through the Ontario County Office of Economic Development/Industrial Development Agency, a quasi-government agency created by the state to generate economic activity. Businesses in Ontario County pay the agency for various services, the revenue from which pays for initiatives like Axcess Ontario.

Through an agreement with the ILEC, Ontario Telephone Co., worth approximately $2 million. Axcess Ontario was able to justify the construction and actually come in under budget at $5.5 million. Axcess Ontario received no state, or federal funding.

What motivates buyers of dark fiber and to specifically use the Axcess Ontario network?“This investment will allow Iberdrola to provide improved services to businesses and residents throughout the community,” says Dan Hucko, director of media relations at Iberdrola USA.“The agreement also allows our company to hold the line on costs. If we did not have access to the fiber ring, we would either have to invest in the infrastructure ourselves, increasing our capital costs, or see our monthly telecommunications costs rise dramatically.” These factors are identical to those that motivate all operators of various network types that seek dark fiber to control costs and improve services.

Where the customers, needs and business model all fit the dark fiber networks should and must be built. With the right mix of the ingredients above the investment makes sense.

Ontario County clearly understood the issue the county faced in trying to maintain its base and also provide a platform for growth. The solution was the creation of Axcess Ontario. Its existence has caused the creation of revenue in a non-competitive manner with network operators, but creates competition between them for network service offerings which improve the quality and price that the businesses and end users in the county are provided. This is the chemistry of the best possible solution.

Hunter Newby, CEO Allied Fiber (News - Alert) writes the Infrastructure Peering column for TMCnet To read more of Hunter's articles, please visit his columnist page.

Edited by Stefania Viscusi