Here are notes from this morning’s events.
Started with a welcome from Bernadine Joselyn
People need ultra high speed connections to work. Location is no longer the mantra – now it’s connectivity, connectivity, connectivity… The Blandin Foundation recognizes the shift supports locally led efforts to build broadband.
The strategy board has a vision for broadband: http://www.blandinfoundation.org/documents/Vision_Statement_FINAL_022806.pdf
Big challenges require collaborative solutions. We need to get started – the world is not waiting for us.
Then we went on to a great discussion on OANs
Description from the official agenda:
Panel Discussion: Understanding Open Access Networks
Panelists: Tobey Johnson; Manager of Collaborative Solutions, PacketFront, Tim Nulty; Bulington Telecom
Moderator: Steve Kelly, Director, Center for Science, Technology and Public Policy, Humphrey Institute, University of Minnesota
Learn how open access networks can increase the economic development impact of telecommunications investment
And on with the notes…
Got involved with telecommunications in 1989, when his committee recommended that MN by 2005 get 45Mbit of service. Introduced a telecommunications bill to move towards 45Mbit in 1993, but that clearly didn’t work out.
Now we need to think about greater speeds and that means overcoming barriers of economy and politics.
Tim Nulty from Burlington:
Vermont is a small state – 600,000 people and the most rural state. Burlington is the largest city (population 40,000). Vermont is not well served with broadband. It’s not a rich community.
Burlington had/has cable modem across the city and DSL throughout the city but the city built a network because that bandwidth wasn’t sufficient. They built government network in 2005. In December 2004 got funding for municipal network. In Feb 2006 they signed on first customers. Now is cash flow positive and serves 2000 customers. 95 percent of houses are served. Will be profitable next year.
It’s not impossible. The challenges are surmountable. Time just resigned from Burlington and plans to help other Vermont communities get connected.
How did we do it?
• Focus on what is the goal here. Build infrastructure for the 21 century.
• Make the network – universal, open access, financially self-sufficient and future proof.
• Open access is common carrier – started in the Middle Ages with canals.
• Existing carriers do not like universal, open access so if you want these you have to build it yourself (municipal/public).
• Vermonters are frugal so the network needed to pay for itself.
• Any infrastructure that had clear limits is tough to grow
• You cannot make wholesale network work financially.
• Public network is forbidden in 12 states.
• The bank won’t give you the money with a wholesale plan because it doesn’t cash flow so you need to be able to serve customers asap to pay off debt.
• Creating the infrastructure of a telecommunications business is hard to do in the confines of the city.
• The city is too slow moving to operate a telecommunications business
• Public/private partnerships – he’s not in favor because the different bodies have such differing goals.
• Public has a utility goal to serve customers
• Private wants to make money.
• Both goals are fine – but mutually exclusive.
Tobey Johnson from PacketFront:
PacketFront set out to build FTTH in Stockholm. As network deployed we offered more service and ran into more problems. The more we built out the less it was valued.
What did they learn?
• Needed a way to automate business process
• Needed to mitigate finical risk
• Needed a way to separate service – infrastructure from support
How do we make operation of networks cost effective? How do we align the right business partners?
Entered North America market and realized that the market was different. We developed an open network type model. When you give consumers a choice – they choose. Allowing one organization to focus on infrastructure and another to focus on applications.
Incumbents needed to join the network to remain competitive and found that from a business perspective it made more sense because it allows each provider to focus on their core competency.
Need to align your self with business partners that will make you successful.
Incumbents – have you seen an evolution?
TN: Verizon wanted to get out of New England and was open with that. (Fairpoint is trying to buy them.) Adelphia was disliked and bankrupt so they didn’t matter much. When they were taken over by Comcast it was too late. They tried with regulation to stop Burlington – but have not tried in the marketplace.
One advantage in Burlington is that the market has been too small for the incumbents to focus on them. The major incumbents are ratcheting up for war on broadband. The incumbents here are not as enlightened as in Stockholm.
What did incumbents do with infrastructure in Stockholm?
TJ: They move at carrier speed (slow) and the shift to the open access network was slow. And the change is still going on – gradually. Without a national broadband strategy – it’s tough to see how the incumbents will get involved in an open network. In some ways that affords an opportunity.
On a regional basis, we’ve had better luck with local providers. Innovation is being done on the local level. They recognize that barriers to entry are easier to overcome with the coalition/OAN.
TN: We give away cable channels to publics, and cheap for commercial service. They can carry all cable channels in the world right now. They have lots of space and it is used by local organizations such as schools. That leads to innovation.
What’s the bundle of services that Burlington is selling and at what price?
TN: Basic = basic cable (35 channels), dial tone (not VoIP) need to pay for calls, Internet is $45/month
Standard = cable, phone, Internet $130/month
Top of the line is $180/month
How did Stockholm start selling services?
TJ: User pay model – in some service areas homeowners pre-register for services and once the critical mass had signed up – they went into the area. That worked well.
How did you finance the Burlington project?
TN: Financing in Vermont meant using no tax payer money. The lender owns the network and leases it to the city. They payment is like a mortgage. At the end of the lease the renter can buy the network. If you miss a payment, the lender can repossess.
In reality it’s not that crystal clear but if trouble arises they will negotiate. And the finance doesn’t go into the book as a debt; it’s an operating expense.
What’s been the economic impact on Burlington?
Been offering for business for 22 months – so info is only antidotal. General Dynamics will only move to places with networks like Burlington. Dealer.com went from $12,000 a month bill to $4,000. Web developers started a business couldn’t afford Verizon costs but could afford Burlington and were able to stay in business.
Did you seek state funding in Vermont?
Money is available from RUS. But it was an inferior way of financing – partially because it’s too hard to work with the feds. Also there was an cash equity issue. In the end the financing they had was best.
$40 million is available from Vermont for broadband with a goal of border to border real broadband by 2010. It created a state-owned corporation to assist and promote the funding.