Subject: [NEXTEL-1] Work Starts On Largest U.S. Municipal Broadband System

From: [email-masked]
Date: Wed, 28 Jul 2004 15:19:54 -0400

Work Starts On Largest U.S. Municipal Broadband System

Jul 27, 2004

Installation has begun on the largest municipally owned broadband
fiber-to-the -premises (FTTP) project so far attempted in the United
States -- the iProvo system in Provo, Utah. During the next 24 months,
the city of 110,000 residents, and 33,000 homes and businesses will get
a system that offers triple-play and fully symmetrical broadband, wired
for 100 Mb/s service to the premises although initially only 45 Mb/s
will be turned on.

The project promises an entry level of $30 fully symmetrical broadband
at 3 Mb/s both up and down - but the big play isn't broadband by itself.
It's an integrated triple-play service costing between $89 and $110,
depending on broadband speed, that will include 100-channel cable-TV
with video on demand (VOD) and VoIP-based phone service complete with
911 lifeline service. Exact pricing and speed combinations should be
published in another week or two.

The level of success of iProvo is going to provide a benchmark for
literally the entire municipally owned broadband industry. It's also
going to be an object lesson for both incumbent phone carriers and cable
companies. Provo is the stomping ground of Qwest [Q] and Comcast
[CMCSA], neither of which has offered any sort of similar service to
residents of the city, although Comcast did argue against iProvo when
the city council gave its final approval this past January by a 6-1
vote.

The big winner on the broadband hardware side is World Wide Packets,
which this week is announcing it has won the contract to supply its
LightningEdge family of hardware for the system. It will be supplying
access portals, concentrators, distribution systems and the network
management system. The whole shebang is active Ethernet, with a switched
gigabit Ethernet backbone rather than a passive optical network (PON).
World Wide Packets had been working with Provo for three years on the
initial installation and on the iProvo field trials, says Barry Kantner,
vice president of marketing.

Just how much the World Wide Packets contract amounts to hasn't been
disclosed beyond a vague "multiple millions of dollars," but the entire
FTTP project is budgeted by the city at $40 million. That doesn't
include the full cost of the gigabit Ethernet fiber backbone that was
installed several years ago -- not to deliver services to residents but
rather to connect electrical substations and such city facilities as
fire stations. At that time, the Provo city fathers were convinced to
string far more fiber capacity than needed for the city services, just
in case. With the major cost not for fiber, but for the physical labor
of installation, adding the extra capacity "was pennies on the dollar at
that point," says Mary DeLaMare-Schaefer, director of marketing and
customer relations for Provo City Power, which technically is the
government entity that owns the network.

Bargain-Basement Capex

The bottom line, Provo and World Wide Packets figure, is a capex of less
than $1,500 per subscriber. That's in sharp contrast to the reports of
more than $2,000 -- and sometimes $3,000 -- per subscriber that FTTP
broadband installations typically are costing. World Wide Packets makes
a big deal of the lower cost, in good part being due to the use of
active Ethernet rather than PON.

On the broadband service provider side the winner is Video Internet
Broadcasting (VIB), which two weeks ago nailed down the franchise to be
the first provider on the iProvo network. That was hardly a surprise -
the company has been running the city-owned cable television network
since early this year, and last month it was approved to negotiate a
final contract with the city to provide services over iProvo. The
services contract wasn't actually signed until Wednesday night of last
week. At the same time VIB, as had been expected, also signed the final
papers to buy out the city-owned cable system. Other service providers
will have the right to bid for franchises to provide service over the
iProvo network, but VIB starts out by owning a pool of 2,400 cable
customers ripe for conversion to a broadband triple play.

The Take Rate

That's a start of about one quarter of the total number of subscribers
that the city, and VIB figures will be needed for iProvo to be a
success. The business plan is built on a 32-percent take rate, says VIB
CEO Kelly Ryan, adding, "That shows a healthy payback."

DeLaMare-Schaefer adds that in Provo's pilot project, in which 300
single-family homes and almost 30 apartment complexes were wired, the
take rate was even better. "In our demonstration project, we got more
into the 50-percent take range," she says. And that, she adds, was
without even trying to sell the service in the limited area where the
trial was available.
"We did not do much marketing. It was a technology demonstration,"
DeLaMare-Schaefer explains. What happened, she says, "was a ripple
impact." After one end user got faster broadband than ever before seen
in Provo "the neighbor wanted it, then the next door neighbor wanted
it," she says.

No Drop Offs
None of those in the trial, she adds, has cancelled service, other than
a couple of people who moved out of Provo. "A lot of people don't know
what truly high speed broadband capacity is like," DeLaMare-Schaefer
says. "Once you've used it, it's hard to go back."

Kantner adds that, as iProvo gets rolling, he expects word will spread
well-beyond the borders of Provo, and that it will make a difference to
businesses, attracting them to the city. That's exactly the argument
many municipalities make in order to justify the use of taxpayer dollars
to build a system, with the rationale that the increased tax base will
more than offset the cost of the broadband network.

Kantner's message to other cities is that "if you don't have this
capability, there's going to be a large sucking sound of businesses
moving into Provo."

>>Barry Kantner, World Wide Packets, 509/242-9000; Mary
DeLaMare-Schaefer,
iProvo, 801/852-6867; Kelly Ryan and John Moore, Video Internet
Broadcasting,
509/754- 2600<<

BBF's Take On The Situation

The eventual success - or failure - of the iProvo project will provide
would-be government broadband operators with an invaluable checklist of
how to do things.  Broadband Business Forecast and its sister
publication Fiber Optics Forecast already reported on the failure of
some municipal broadband projects that might have survived if they had
the checklist in hand.
The checklist also is of use to broadband equipment providers when they
make their sales pitches, because iProvo shows what can be done in real
life without unreasonable capex.

Finally, it gives competitive telephone and cable carriers a picture of
what they're up against when they venture into a city with its own
broadband network, and it points the way to what they have to offer if
they want to prevent a city from undertaking such a project.

The key points on the checklist, based on what BBF understands, include:

Technology - if the backbone isn't at least multiple channels of 1 Gb/s
Ethernet, forget it - and the hardware must be designed to aggregate
into 10 Gb/s eventually. World Wide Packets and others touting active
Ethernet over passive networks have a showcase in Provo to prove their
point. That's a point that the highly publicized multi-city Utah Utopia
project has already taken note of. Utopia was started well-after iProvo
and, despite some erroneous press reports that iProvo is based on the
Utopia model, the truth is that the Utopia folks have been frequent
visitors to the iProvo test bed.  Utopia still is in the final
paperwork-and-approval stages, but it already has decided it will also
be active Ethernet. World Wide Packets did not win that contract, to
Kantner's chagrin. However, he says his company stands ready to come to
the rescue should Utopia's suppliers fail to deliver as promised.

Backbone economics - Provo has a big advantage because of the use of its
backbone for municipal purposes other than delivery of triple-play
broadband to residents of the city. Other municipalities getting into
the business should look at that carefully, because it could be a
make-or-break economic factor for success. Private carriers - such as
Qwest or Comcast - would do well to try to cut a deal with
municipalities to provide similar services to what iProvo is providing
to the city of Provo in order to help defray the cost of the backbone.

Triple-play architecture - VIB is not going to try to pump data, voice
and video over the same pipe. It will have a trio of pipes, according to
VIB CTO John Moore. Even those with the "slow" 3 Mb/s data service will
be getting a video pipe of somewhere between 10 Mb/s and 15 Mb/s. A
separate feed for VoIP, meanwhile, makes it easier to implement QoS for
voice calls, Moore says. The three pipes are, however, linked, which
means things like caller ID messages can be set to pop up on the TV
screen.  The "Last Mile" - It's still not clear just how large a
broadband pipe end users are willing to expense. For 2004, 3 Mb/s is
probably enough to satisfy most folks, not counting bandwidth needed for
video. Over time, as consumers are offered more bandwidth-consuming,
value-added services they find attractive, the amount of bandwidth for
which they're willing to pay will inevitably increase. The provision of
symmetrical broadband, rather than the often niggardly upload speeds
typical of most broadband service providers' offerings, is also likely
to drive the growth of some of those applications. High-quality video
telephony is one that comes to mind. In Provo, one resident
participating in the field trials is a doctor who has discovered the
value of high-speed symmetrical service, DeLaMare-Schaefer says, in
order to do such things as consulting on digital x-rays.
Broadband video services - Delivery of lots of channels, in high
definition if desired, is simply basic service, nothing any cable
company can't do. The VIB system goes far beyond that, into VOD and the
ability to deliver extensive local programming. In addition, the system
benefits from the incredibly cheap price of data storage these days.
Moore says VIB is using a technology where the one-time cost of storing
a movie is only $5.50 (not long ago it was in the hundreds of dollars).
That opens the door to profitable 99- cents-per-movie VOD - less than
the cost of gas to drive to the nearest video-rental store these days.
VoIP 911 and QoS issues - VIB along with other carriers that sign up
with iProvo (and pay that company, of course), will be able to guarantee
QoS.  The quality is supposed to be the same as standard telephony - but
that remains to be seen. Virtual VoIP companies (did we mention Vonage
and similar companies?) that try to ride the broadband stream for free
can't offer that.

Likewise, other VoIP providers are going to have to cut a deal with
iProvo if they want to offer workable 911 to their customers. What Provo
is doing is providing an optical- electrical interface to each home --
with battery backup -- that will complete 911 calls even in a power
outage. The VoIP phone numbers, moreover, are being registered in a
standard 911-accesible database so emergency services will know from
where a VoIP call comes, just as if it were a standard TDM call.  iProvo
users also will have the ability to access their VoIP lines via standard
Internet connections from anywhere in the world but, of course, in that
case, the 911 service won't work (did we mention Vonage and similar
companies?).

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