Executive Summary

One of the significant challenges facing network operators today is the high capital cost of deploying next generation broadband network to individual homes or schools. Fiber to the home only makes economic sense for a relatively small percentage of homes or schools. One solution is a novel new approach under development in several jurisdictions around the world is to bundle the cost of next generation broadband Internet with the deployment of solar panels on the owners roof or through the sale of renewable energy to the homeowner. Rather than charging customers directly for the costs of deployment of the high speed broadband network theses costs instead are amortized over several years as a small discount on the customer’s Feed in Tariff (FIT) or renewable energy bill. There are many companies such as Solar City that will fund the entire capital cost of deploying solar panels on the roofs of homes or schools, who in turn make their money from the long term sale of the power from the panels to the electrical grid. In addition there are no Energy Service Companies (ESCOs) and Green Bond Funds that will underwrite the cost of larger installations.

For further information and detailed business analysis please contact Bill St. Arnaud at bill.st.arnaud@gmail.com.

Monday, November 16, 2009

UTOPIA Trailblazing New Opportunity For Customer-Owned Fiber

[Some excerpts from Geoff Daily's excellent blog on Broadband. As you
know this has been a model I have been advocating for some time, and
have tried to deploy in Ottawa with additional twist of bundling the
cost with the customer's energy bill -- BSA]

Geoff Daily's Blog: http://www.app-rising.com/

My blog: http://free-fiber-to-the-home.blogspot.com/

UTOPIA Trailblazing New Opportunity For User-Owned Fiber



An exciting development has occurred recently in the world of fiber
deployment. A new model is emerging in Brigham City, a city of less
than 20,000 in northern Utah, for how user-owned open fiber networks
can be financed and deployed.

It used to be that the only way you could get fiber was if you were
lucky enough to have a private provider lay it or to live in a city
that did it itself. Today in Brigham City, for $3,000 you can buy your
own fiber. And in fact more than 1,600 local residents have already
bought in to this new opportunity.

With that fiber they'll get access to UTOPIA's competitive and
growing ecosystem of service providers, where they get to choose what
services from what providers they want running on their pipe.

While this may sound radically different from how fiber has been
traditionally deployed in the US to date, user-owned open fiber
networks have already been a big success in Sweden, helping them wire
remote mountainous communities with world-class broadband

We also need to realize how potentially brilliant the open fiber
concept is for rural America because of how it allows for competition
to happen between service providers on a single pipe. With open fiber
you can make sure that everyone benefits from having access to a
competitive marketplace of communications services.

But I'm even more excited about what UTOPIA's new model could mean
for the future of fiber deployment.

The biggest problem with the economics of deploying fiber is that you
have to carry a massive debt load and begin paying it off before much
revenue starts coming in. Plus you have to invest a lot of money into
neighborhoods without any real idea of how many people are going to
sign up for service.

The user-owned model totally changes these dynamics. First off, by
having users pay for their own pipes you disaggregate most of the
debt. Just look at Brigham City. They're building a $5.5 million
network and the city's only putting up less than $700,000. So no
massive debt load for the city (or a private provider for that matter)
to carry.

The second major piece of this is that UTOPIA's going to have
built-in take-rates when they build out neighborhoods. Plus churn
should fall to zero since people own their pipes.

Basically the way I see this is as the possible beginnings of a new
third model for fiber deployment in the US. You no longer have to wait
for a private provider to make the investment, or for your city to
figure out how it can overcome all the roadblocks and then actually
execute effectively. Instead users who want service can band together
and find a way to get it now rather than waiting twenty years for
someone else to figure out how to do it.

They have developed a special assessment area model, though, that
allows homeowners to commit to a $25 a month payment over 15 years to
spread out the cost over time.

Another potential trouble spot is how to deal with renters who want
service but landlords who don't want to pay to have it installed.

But while there are questions still to be answered, the keys for
right now is that this model has worked elsewhere, and now at long
last we have someone willing to step out and see if it can work here
in the US.

So I say to UTOPIA: best of luck as you continue on these endeavors!
The rest of the country is watching, and we're all hoping you succeed
as there are millions of us that wish we could get our fiber now but

And to Brigham City: Kudos to you all! We are all cheering you on,
inspired by your commitment to getting yourselves wired with the most
important infrastructure of the 21st century.

Update on the Ottawa pilot


Lessons from the land of cheap broadband in Hong Kong

[Excerpts from CNN article. While HK density is a factor, it still does not account for the huge price differential in Internet pricing between HK and elsewehere in the world. I love the quote "The telecom industry tends to commoditize people. Our strategy is to commoditize bandwidth". - BSA]

Lessons from the land of cheap broadband in Hong Kong


City Telecom's 400,000 customers pay $13 a month for 100 megabit synchronous broadband. And they get a money-back guarantee: If they don't clock 80% of the promised speed, the company pays them twice their monthly fee.

If you live within coverage area of Verizon's FiOS
service (VZ
), you pay as much as $150 a month for up to 50 megs downstream and 20 upstream.

How can City Telecom possibly offer service that's more than twice as fast at less than 10% of the price?

Density is a blessing

It's partly geography and partly vision. While Hong Kong has 7 million inhabitants, only a small fraction of the island's mountainous terrain is developed, which means everyone basically lives on top of each other. The population density is 16,380 people per square mile – versus 640 in Japan and 80 in the US. That makes every customer far cheaper to serve. "We have a phenomenal network built at $200 per home. Verizon is talking about a cost of north of $1,000 per home,"
Lai says. "We built ours at one-fifth the cost."

Of course building the network in the first place required vision.
City Telecom was founded 17 years ago as an international calling-card company by two cousins who plowed in 100,000 Canadian dollars to get started. They could have leased lines to get into Internet-service business the way many carriers do, but that would have meant encountering the same last-mile bottleneck. So, they built their own $400 million network over a decade.

And now the company is on a tear. The largest IP service provider on Hong Kong, PCCW , has about 1 million customers, according to Lai, but is growing at a fraction of the pace. It added only 3,000 in the last six months, compared to 41,000 for City Telecom. PCCW recently slashed its prices to match City Telecom, but still can't come near the speeds. But can City Telecom really make a business out of cheap broadband?

Innovation trumps incumbency

Lai insists the company already has. "The network is cash flow positive since 07. We're debt free with 10% revenue growth and 30% EBITDA growth," he says. "Our stock is up 200% in 12 months, and the market is starting to realize what we're doing."

All that success, Lia adds, is a result of having a Big Hairy Audacious Goal and doing everything possible to achieve it. "The telecom industry tends to commoditize people. Our strategy is to commoditize bandwidth, to make 100 megabits the industry norm in Hong Kong," he says. "Our plan is to win by offering the best service at the lowest possible cost structure. Thirteen dollars is not a lot, but if you scale it and drive your cost base down, it's a beautiful business to be in."

If only some US telecom executives felt likewise.