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Muni Networks: The Public's Not Buying

Light Reading
News Analysis
Light Reading

SALT LAKE CITY -- Broadband Cities Conference -- Elected officials are excited about municipal networks. Incumbent carriers are fretting about them. But the average Joe still hasn't got a clue, according to several sources at the conference sessions held here.

Instead of battle-planning for the RBOCs and sharing best practices, city managers and network equipment vendors here were addressing a more fundamental problem: How do you convince a bunch of folks in the middle of Utah that they need 100 Mbit/s going to their homes?

DynamicCity Inc. chief marketing officer Ben Gould says consumers will understand the beauty of municipal networks once the word of mouth gets going in neighborhoods where the fiber has already been laid. “Nobody thought they needed DSL before it was available; they were used to dialup,” Gould says.

But even here at municipal broadband heaven, most of the 450,000 consumers passed by the Utah Telecommunication Open Infrastructure Agency (UTOPIA) network’s fiber are not yet clamoring to get hooked up. Out of the 5,000 to 8,000 Gould says are currently reached by UTOPIA's network, only around 500 have signed up.

Municipal networks like Utah’s own the fiber-optic network over which a set of private sector companies run their services to consumers and businesses. DynamicCity is the privately held entity charged with building, managing, and contracting services for the publicly owned UTOPIA network. And while incumbent cable and telephone companies can compete on price, they typically cannot offer the high-bandwidth services that the muni’s fiber infrastructure makes possible.

So why the hype around municipal networks? Much of the hoo-ha has to do with city officials trying to make their fair burgs more attractive locations for corporations. “Chattanooga is moving from a manufacturing economy to a service economy, and we don’t believe we can attract new businesses unless we can provide broadband service,” says Electric Power Board VP Kathy Harriman. EPB is Chattanooga’s public power utility.

Harriman says two large insurance companies headquartered in Chattanooga have been pushing for the city to build a network so that more of its employees can work from home. She says in Chattanooga, (NYSE: BLS) and (Nasdaq: CMCSA, CMCSK) make DSL available almost everywhere, but, she points out, DSL is not broadband.

Residential consumers will eventually understand the appeal of fiber-based access, too, Harriman says. “Even if you’re into entertainment, some of the new applications like high-definition TV and VOD and gaming, people are going to need the bandwidth for those kind of applications.”

Of course, buying into an idea and being able to sell it to the public are two different things. That's why this particular conference -- rather than focusing on pricing, regulatory issues, and network management -- is chockablock with Scandinavian and Asian vendors demonstrating high-bandwidth, collaborative applications, such as telemedicine. This show is virtually a promotional vehicle for broadband access, as if the idea needed a boost.

So, while municipal broadband networks are still trying to get established, the incumbents on the ground here -- Qwest Communications International Inc. (NYSE: Q) and Comcast -- are doing what they can to slow uptake of municipal services by dropping Internet access prices dramatically in specific locations. Why buy 100 Mbit/s when 2 Mbit/s is good enough?

As for the vendors, there's some hope that the buzz around municipal broadband networks will turn into real deployments and then real equipment sales. “Many equipment vendors feel that they can sell to the five or six monopolies and that’s it,” DynamicCity’s Gould says (see Riverstone Provides Sales Update).

— Mark Sullivan, Reporter, Light Reading

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User Rank: Light Beer
12/5/2012 | 3:00:56 AM
re: Muni Networks: The Public's Not Buying
Is marketing the big problem here? Having a network and services is all very well, but as all telcos know that's only part of the story. Maybe these muni guys need some help with their 'outreach'...
User Rank: Light Beer
12/5/2012 | 3:00:55 AM
re: Muni Networks: The Public's Not Buying
[i]Out of the 5,000 to 8,000 Gould says are currently reached by UTOPIA's network, only around 500 have signed up.[/i]

A 10% take rate in a place that doesn't have a lot of tech weenies or a University in town isn't all that out of line with the data for broadband over Cable. $40/month is substantial when you have 12 children to feed and tithe 20% of your income to the church.
User Rank: Light Beer
12/5/2012 | 3:00:53 AM
re: Muni Networks: The Public's Not Buying
In UT, its all about the Church. Locals do not read much. However, if Gordon Hinkley says they can avoid the traffic to Salt Lake and watch Conference at home, they will buy up in droves. He just hits on that chip implanted in their heads. Think of it, the Tabernacle Choir every Sunday! Broadband must therefore be defined to include a decent video stream.

P.S. if UTOPIA includes Provo, you do have BYU.
User Rank: Light Beer
12/5/2012 | 3:00:46 AM
re: Muni Networks: The Public's Not Buying
Most of the networks I know of have developed out of city government or local power companies' IT departments. They have enough competence to build decent networks, but they know nada about selling telecom services. Convincing customers to buy electricity is a whole lot simpler than convincing them into buying 100 Mbit broadband. The skills needed are very different. It's hilarious to see how techie-oriented these providers are - average Joe doesn't care about fiber vs copper.
User Rank: Light Beer
12/5/2012 | 3:00:34 AM
re: Muni Networks: The Public's Not Buying
People don't care about getting 100Mb/s to their
house, they care about applications. Verizon's FiOS
is offering 20 HD channels day 1. That's something
you can advertise. I think secure remote backups of
your home PC would be a service that would sell.
You've got to market the services, not the
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