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Colorado Gigabit Network Shuns Video, Embraces OTT

Jason Meyers
6/27/2014
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In a nod to the increasing dominance of over-the-top (OTT) services, the first municipal gigabit fiber-to-the-home (FTTH) network under way in Colorado will not include its own brand of video services.

"We're only going to do a double play," says Tom Roiniotis, general manager of Longmont Power & Communications (LPC), the municipally owned utility that is deploying the network. "We see cable as a declining business -- customers can get all the content they want over the top. That's where a lot of the world is heading."

LPC's tack could become the norm for utilities and municipalities eyeing the gigabit opportunity, thanks to both OTT providers and the cost and complexity of providing video.

"Cable TV is a monster to run, but for years cities would moan and complain about the expense, but still do it," says Craig Settles, an independent industry analyst and host of the online radio program Gigabit Nation. "Cities are starting to question the rationale behind that and decide they're going to make the broadband business successful without it -- that video is going to be someone else's headache."

Savvy networkers
LPC announced this week that it will deploy access infrastructure from Calix Networks Inc. (NYSE: CALX), Cisco Systems Inc. (Nasdaq: CSCO)'s routing gear, and transport equipment from Cyan Inc. David Russell, solutions marketing director for Calix, notes that in addition to the lack of video services, LPC is unique for the scale of its deployment and for the technical prowess of its staff, many of whom came from the CLEC industry.

"The past six or seven years in the municipal space have been characterized by more deployments of much smaller sizes -- it's been seven years since one of this size has been built," Russell says. "And there are a lot of good networking skills in that part of the country. We go to many areas that don't have technical talent in abundance."

Indeed, LPC has more experience than many municipal utilities when it comes to building and operating networks. The utility deployed a citywide fiber ring in the late 1990s to both provide connectivity to city buildings and tie its substations together: In an industry in which many utilities are slowly crawling toward modernizing their internal communications networks, LPC has been there for more than a decade.

"We had a smart grid before that term was used," Roiniotis says. "That ring will form the backbone for the citywide FTTH network."

The city retained a systems integrator to start building a hybrid fiber coax network in Longmont in the early 2000s, Roiniotis says, but the company went bankrupt and the project stalled. In 2005, Colorado Senate Bill 152 blocked municipalities' ability to offer broadband services, but provided exceptions to allow it by local election. Longmont citizens voted to re-establish the right for the municipality to provide services in 2011, and in a 2013 election two bond issues passed that granted the utility $40.3 million for the buildout.

The network ultimately will pass 39,000 homes and businesses (the population of Longmont is about 90,000) after six phases of construction, which are slated to begin this August and conclude in the first quarter 2017.

"We hope to have every home and business served with a gigabit passive optical network within three years," Roiniotis says.

The Longmont Timeline

Good for the economy?
LPC will unveil its marketing strategy and branding campaign within a few months, Roiniotis says, and plans to offer Longmont residents 25Mbit/s symmetrical connections for $39.95 per month and 1Gbit/s symmetrical connections for $99.95 per month. While the network is under construction, however, the utility will offer charter member rates of $49.95 per month for the 1Gbit/s service -- a plan that will be transferable should homeowners sell.

"We're asking people to invest in future-proofing their homes," he says.

LPC's motives in building out the network aren't the same as incumbent service providers, Roiniotis insists.

"We're doing it for a different reason than Comcast and CenturyLink would do it," he says. "Cities like Longmont think having a gigabit network is good for our local economy and will help make businesses more competitive. We can use it to market the city and help attract economic investment. We're not going to judge the success of broadband based solely on the balance sheet."

Even if LPC's efforts to stimulate the economy work, however, it could be several years before results are tangible.

"Everyone feels like this is the magic bullet for economic development," says Teresa Mastrangelo, principal analyst for Broadbandtrends LLC . "If you look at successful cities like Chattanooga, it's taken four or five years to see the investment pay off in terms of economic development. It is a catalyst that starts to stir up some alternate ways of how to do business, but I don't know that it alone drives economic development."

— Jason Meyers, Utility Communications Editor, Light Reading

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jabailo
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jabailo,
User Rank: Light Sabre
6/29/2014 | 5:27:21 PM
PUDs
Here in Washington State I've been looking at rural properties.  One of my requirements is Internet connectivity (and satellite unfortunately has too low bandwidth caps).

I've been surprised by the number of remote residences that are served by cable and optical fiber.   What I would do is look up the properties on the National Broadband Map (http://www.broadbandmap.gov/).   I started to see crazy high speeds in some of the most far flung places...1Gbps, Google Speed...and the ISP was listed as something like "PUD District #3".

So, it turns out that due to an act of Congress for rural broadband, the local electrical utilities stepped in where no cable or telco would go and hooked up farmhouses and ranches to the optical fibers on their power lines.   And since there was no economic reason to "throttle" they let them get the full optical fiber speeds!!

I think this is hilarious, because there are still areas of hi-tech Seattle that can't get broadband or anything above a couple of Mpbs!!

 
Carol Wilson
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Carol Wilson,
User Rank: Blogger
6/27/2014 | 10:44:32 PM
Re: The smart play
Actually, the nails in this coffin started going in about three or four years ago when rural telcos started shutting down their IPTV or cable services in favor of making it easier for their customers to buy higher tier broadband offerings and some kind of OTT video. This included bundling Roku boxes or other OTT devices and, in at least one case, offering to help customers install digital antennas to pull in off-the-air digital TV signals. 

Video has been a loss leader for many IPTV providers for almost 10 years now and some of them -- a growing number - are deciding it's just not worth the headache. 

The capex investment can be high and the cost of content just keeps going up and up. And that's a cost you pay per user on a monthly basis. The big guys may be able to negotiate somewhat but as we've seen recently in the high-profile battles between cable and satellite providers and various content giants, even Time-Warner Cable and DirecTV take a hit when they take on big content. 
smkinoshita
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smkinoshita,
User Rank: Light Sabre
6/27/2014 | 9:58:18 PM
Re: The smart play
@Carol Wilson:  I agree, but my thoughts went to the question of if "Is this is going to be a new trend?"  I'm sure I'm not the first person to question the future of video service and I'm just wondering if this is the first nail in the coffin.
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
6/27/2014 | 5:23:23 PM
Re: Smart move
Ryan Welch - True, but there are other ways to get the word out: Text messages,robodialers, even cars going down the street with loudspeakers. 
Ryan Welch
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Ryan Welch,
User Rank: Lightning
6/27/2014 | 4:28:28 PM
Re: Smart move
Mitch, I only mostly agree with you on that second point. Yes, cable TV has become an entertainment service more than anything, however, there is still the matter of local public saftey broadcasting. Admittedly, that's not a very big slice of the pie, but as I see it, that obnoxious BEEP BEEP BEEP and pop-up alert ticker is still a sure-fire way to disseminate information about local emergencies (ie severe weather, amber alerts, evacuation orders, etc). Argueably, all of that information is also available online, but only if you're looking for it; whereas with TV, the information is put right in front of you.

Still, I do see that cable TV is slowly being edged out by OTT video. The network operator could strike an agreement between the local authorities and the OTT services to integrate those same public alerts into their content at the local level.
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
6/27/2014 | 2:10:11 PM
Smart move
This is a smart move. Broadband is necessary to attract business, even if the service itself is unprofitable or even loses money. 

Cable TV is entertainment, not something government should be spending taxpayer resources on. Let the people get TRUE BLOOD on their own nickle. 
RBR
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RBR,
User Rank: Light Beer
6/27/2014 | 1:39:56 PM
Data first is where all local access roads lead
Excellent article(s) Jason, you've brought good insight on several fronts.  I've held the single play data first option is best for small operators and where non-national footprint operators will eventually arrive.  Not enough margin in Video or Voice to warrant organic investment; best to partner with 3rd parties.  Current client is getting $70 ARPU and +40% penetration with a FTTH broadband only play and now approaching neighboring RLECs (and AT&T) for them to provide IPTV and POTS across our network.  Not the ARPU we had as triple play providers, but lower OPEX and Churn yielding stronger ROI.  Truism, first one in with fiber is the lasting.
jasonmeyers
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jasonmeyers,
User Rank: Blogger
6/27/2014 | 1:13:24 PM
Re: Economic Development via Gigabit Networks
I agree on all counts - and in Longmont, municipal buildings and some schools are already connected via the existing fiber network, so many residents are already used to it.

When I told Tom from LPC that I wish I could get a gigabit connection for $50/month, his response was "That's what we like to hear -- move to Longmont."
TimDowns
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TimDowns,
User Rank: Light Beer
6/27/2014 | 12:30:16 PM
Economic Development via Gigabit Networks
Jason

Interesting article about Longmont, which as you point out is unique with its business model. Why would they take on the headache of an in-house video service when there are plenty of signs of OTT video surging in the hearts of consumers? There's Aero, but also Hulu, Roku and more. 

Secondly, a gigabit network to homes and businesses is required nfrastructure for visual communications, not video. Think high definition telemedicine, business collaboration, distance learning -- if you live in Longmont five years from now, you'll want these types of services more than you'll want to ESPN 2.

Finally, on the subject of economic development. I would think that the key driver for a city such as Longmont may not be new economic development, though that is always good. The question is, if the city doesn't make this investment, and the carriers don't make this investment, citizens will have a choice to live somewhere else. Like Chattanooga.

 

TD
mendyk
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mendyk,
User Rank: Light Sabre
6/27/2014 | 10:51:18 AM
the anti-Aereo
Wow -- Longmont is blazing a trail that will become well worn over the next decade. It's all about OTT service delivery, not making sure customers are being forced to pay for 15 ESPN talking-head channels.
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