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Muni Networks: The Public's Not Buying

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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