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Video services

Colorado Gigabit Network Shuns Video, Embraces OTT

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 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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Carol Wilson 6/27/2014 | 10:27:41 AM
Re: The smart play Jason, yes it could become an issue, especially since the "charter" price is being asigned to the home, not  the homeowner. 

But FTTH costs are mostly upfront - the cost of connecting a fiber all the way to the house - and to the extent that the low price point brings more people on to the service at the outset, it makes sense. The quicker you get more folks paying monthly for the service, the faster you justify your upfront investment. 

Unlike the people providing video, they won't have the monthly cost of offering content, so their ongoing costs are much lower.

I'm assuming that, video aside, they will hope to sell other advanced services at some point, or to reduce their costs by lowering peak consumption times for electricity - that's the real payoff of the smart grid. Lower peak consumption means less purchasing of energy or building of power plants. So the business case isn't entirely predicated on those monthly payments. 

I would also suspect that, if folks start using this extensively for telework, companies will start offering a guaranteed level of service (versus best effort) for a little more, or extras such as cloud-based storage or (ironic for a power company) cloud-managed battery or generator service to keep the home office up and running. Just my thoughts. 
jasonmeyers 6/27/2014 | 10:09:02 AM
Re: The smart play Carol - what do you think about the $50 price point and that charter customers will be grandfathered in at that rate? I wonder if that might become an issue down the road in terms of operational costs. 
Carol Wilson 6/27/2014 | 10:00:00 AM
The smart play I think these guys are being very smart on a couple of fronts: By not offering video service, they save themselves the expense and headache of a service that is NOT proving profitable for most smaller operators. Secondly, the marketing strategy encourages early buy-in for the higher speed Internet service. 

Better broadband is the killer service--everything else builds on that. 
jasonmeyers 6/27/2014 | 9:57:07 AM
Now for the hard part It will be interesting to follow the evolution of this network to see how LPC does at network operations and customer service. Muni utilities may not be in the broadband service game to make a profit, but they still have to optimize the efficiency of the network just like any other service provider. Craig Settles noted that utilities are the right municpal departments to run networks "because they already have a structure - trucks, repair people, and customer service representatives. That apparatus is key." 

 
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