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North KC Says Free Gigabit for All

Jason Meyers
9/16/2014

Here's one that should stump opponents of municipal networks: A Missouri city is turning over operation of its fiber network to a local data center and plans to give away gigabit services to local residents after a one-time fee.

On September 2, the City Council of North Kansas City approved a 10-year agreement with DataShack for the operation and maintenance of the city's fiber optic network, known as liNKCity. DataShack will operate and maintain the fiber network, but the city will continue to own the network.

Under the agreement, DataShack will collect revenue for broadband services sold to businesses. But as of January 1, 2015, it will provide existing and new residential broadband customers with gigabit service for an installation fee of $300 (or $100 for 100Mbit/s service, or $50 for 50Mbit/s service). Residents in the city of about 4,000 people won't pay any more for service for the duration of the 10-year deal, according to Mellissa Hopkins, marketing and sales manager for liNKCity.

"For the longest time, our taxpayers have been paying in to fund liNKCity," Hopkins says of the fiber-to-the-home network, which was turned up in 2006. "We decided it was the right time to give something back to our residents."


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DataShack also will provide free gigabit services to city hall, the North Kansas City Public Library, city churches and all public schools within the city. liNKCity offers no applications beyond the ultra high-speed connection, which in a world of over-the-top services can be preferable for consumers who want to make their own choices and is a model more operators are taking. (See Colorado Gigabit Network Shuns Video, Embraces OTT.)

"Basically you have a city smart enough to figure out that if you can find the right business that can benefit by the relationship, it leads to a very interesting public/private partnership," says Craig Settles, an independent industry analyst and host of the online radio program Gigabit Nation. "I've been advocating forever that people need to think outside the box, and this is exactly why. The giving away is genius, because it allows the access to be a loss leader."

The deal certainly is unique, especially in an environment in which many broadband providers and legislators voice fierce opposition to the idea of municipally owned networks. Under the agreement, North Kansas City will share profits and losses equally with DataShack, with any potential losses for the city capped at $150,000, including capital investment. DataShack will assume all costs associated with providing free gigabit services. (See Muni Utilities Take Gigabit Fight to FCC, If Not Muni Networks, Then What? and The Municipal Menace?)

For its part, DataShack views the deal as a way to leverage the network's bandwidth for its own purposes and expand on its service offerings, while at the same time providing a service to a community from which both of the company's founders hail.

"From a financial sense, I don't know that we're anticipating any great windfall, but it's an opportunity to give back to the city," says Brooks Brown, co-founder and managing partner of DataShack. "The city maintains ownership of the asset and can use it as an economic development tool, and we're responsible for operation and maintenance of the asset."

Indeed, Hopkins says the liNKCity network is a draw for residents and businesses, even in a community in close proximity to Google Fiber Inc. 's growing gigabit footprint in Kansas City.

"So far Google hasn't decided to come to North Kansas City, and we've had a lot of residents ask," she says. "Being able to broadcast that you're a gigabit city is a great way to attract residents and businesses. We've attracted a lot of different businesses -- a lot of startups are coming this way as they realize we have this capability."

— Jason Meyers, Senior Editor, Utility Communications/IoT, Light Reading

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tyrellcorp
tyrellcorp
8/30/2016 | 9:16:50 AM
Re: There's no such thing as a free lunch
They profit by selling service to local biz at market rate.  And 2/3 of the town's area is commercial. The ISP gets to ride on fiber already built, the residents get free Gigabit with a little bit of city funds to help with fiber maintenance. Seems like a pretty good arrangement.
seffros
seffros
9/17/2014 | 2:31:19 PM
There's no such thing as a free lunch
"FREE?"  How much, exactly, have the good citizens (and the rest of us, if they got any federal grants) paid since 2006 to build this system?  Then add the $300 per sub, then add the maintenance and upgrade costs that someone is going to have to pay for and you get an analysis that says this is far from "free". Hidden, yes, cross-subsidized, yes, but not free. There's no such thing as a free lunch.
sam masud
sam masud
9/17/2014 | 2:29:24 PM
Moving
Now packing to move to N. Kansas City! If ISPs can provide so-so service and make a fat profit, why can't a muni put residents first and run a network efficiently without gouging customers. I'm pretty sure I've been advocating for a munis even longer than C. Settles :-)

Hey, the government provides Medicare and has an overhead of about 3 percent v. 20-30 percent overhead for the "health" insurance industry. It's a no-brainer!

 
KBode
KBode
9/17/2014 | 12:16:33 PM
Re: Will it work?
Hard to tell without seeing the numbers, but I'm sure the free (or not so free as the case may be) marketing this company is going to get from this will certainly help them gain local name recognition after likely hiding under the Google Fiber shadow.
kq4ym
kq4ym
9/17/2014 | 10:33:00 AM
Re: Will it work?
It will be interesting to see how this free deal works out over time. I suspect there may be some continuing negotiations in a few years as the parties find costs (and losses) higher than expected. There's probably a cleverly worded "out" in the fine print of the contracts that don't saddle either the city or the contractor with undue "unseen" costs.
thebulk
thebulk
9/17/2014 | 2:40:58 AM
Re: Will it work?
@smkinoshita I agree this's will likely attract forward thinking people, but will it attract enough to make a difference. Will the community really see a startup boom because of this network?
smkinoshita
smkinoshita
9/16/2014 | 10:09:34 PM
Re: Will it work?
@Mitch Wagner:  I think it has a decent chance of working.  The loss leader approach is interesting, and I think it'll create a kind of environment that will attract forward thinking people.
jasonmeyers
jasonmeyers
9/16/2014 | 4:58:43 PM
Re: Will it work?
Well, existing users have been paying for less bandwidth for the past eight years, so I would think that getting more for free would be perceived as valuable. As for new customers, perhaps the $300 installation fee will help them perceive the service as valuable.
Mitch Wagner
Mitch Wagner
9/16/2014 | 4:40:41 PM
Will it work?
It'll be interested to see how the free model works. People tend to not value that which they don't have to pay for. It's why spam is a problem, and why cities charge for public transportation even while they desperately want people to use public transportation rather than cars. 

When I read the headline, I thought it said North Korea was providing free gigabit. But this is totally different. 
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