A Practical Navigator for the Internet Economy

How Local Communities Can Gain Control of their Communications Future

When will we ever learn that Telecom is but one of a myriad of services best offered over a basic community owned infrastructure? Here and there across the land spots of innovation still survive. And this issue will explore a few of them --  ones that are not well known but deserve to be much better understood by policymakers.

We have a basic choice as to whether our communities can control the channels of their own commerce -- be they canals, roads, and railroads, telegraph, telephone or strands of glass of virtually limitless capacity.  The question of the moment is whether the fiber can be monopolized by the so-called incumbent carriers and used as it is to extract monopoly rents, striping capital from the local economy and sending it to faraway executives and to stockholders who are generally scattered across the globe. Aside from extracting local wealth, there appears to be little positive impact on the communities in which the incumbents operate.   The modern digital networks employee fewer people than the wireline. Regulation was changed between 1992 and 96 throughout the majority of states to allow the LEC to continue to charge for its services at wireline rates even though the cost of delivering them had plummeted.  In order not to decrease prices to users, the states were promised fiber upgrades which never happened.  As we've seen, year after year, through regulatory capture and every other possible marketing ploy, MSO's and Telcos have charted their success by spending huge amounts on maintaining, at whatever cost, their outmoded and inefficient business processes. Processes that are efficient primarily as a means of extracting money from the communities in which they operate.

Fixed Wireless

This issue presents two case studies of possible escape routes from these strangleholds. The first is the fixed broadband wireless network grown by Matt Larson over the past 6 years in Western Nebraska and in Eastern Wyoming and Colorado.  Vistabeam is a business where across several dozen small towns a single person company has been able to grow into one employing between 20 to 40 people to service between 4,000 and 5,000 customers at broadband rates far in excess of what incumbent local exchange carriers offer at a greater price.

As one who was followed the Internet industry for now more than 20 years, I have, of course, been aware of and followed wireless albeit recently not closely. What I have learned since meeting Matt Larson more than a year ago is that what he calls “fixed wireless” is a basic community owned grassroots industry requiring relatively low capital investment that can best in both price and service what is offered by the huge hundred billion dollar a year plus duopolists and MSO industry which in every misleading way has managed to define as “service” what is predominantly monetary extraction from the local community.

The family of the 802.11 radios of 12 to 15 years ago has now, following Moore's Law, expanded hugely.  Its capability of bandwidth and distance and transmission by line-of-sight has gone far beyond for example what was possible in the 1990s when Dave Hughes was doing his work for the National Science Foundation and some of the rural wisps or wireless Internet Service Providers were getting started with a handful of radios and two or three handfuls of customers as well as speeds that kept up somewhat with DSL but certainly could not match CATV available in remote areas. 

However in 2012 Matt Larson's Vistabeam network can deliver true broadband speeds of megabit and greater upload and multi-megabit download allowing for voice over IP and video streaming.   And it can do this, at insulation rates including customer premise radio of $100 to $150, and monthly service rates starting in the $40 range and going into the seventy to $80 range on the upper end.  In short their prices are very comparable to the duopolists and their services likely better.  Certainly they are tailored to their local community in a way that the global hundred billion dollar megalithic corporations could never be.

What is important to the business model of Matt Larson of Vistabeam is that, because he is a local company, he knows the people in the communities that he serves in a way that big corporations cannot and because he knows them well, as his story explains, on many occasions, he can do business with absolute legitimacy at a cost that the big companies could never approach.   He also is able to add bandwidth, slowly and incrementally, as he puts it.   When he extends service he places radios on a new tower that tower will usually see the next town about 5 or ten miles away and, lo and behold, there will be people there who, when they realize he's coming close with service they can't get otherwise at least not at reasonable prices, will go out of their way to help him find a tower in their town to extend his network further.  Tower by tower; town by town.   This issue uses the maps that he made at my request that show tower by tower how he has expanded over a distance of nearly 150 miles east to west and 30 to 40 miles north to south.

The architecture and ecology of his network’s backhaul radios and access point radios placed on towers and connected by routed IP over Ethernet give a outstanding opportunity to go where the customers are.   In a  Lego block like fashion he snaps in one set of customers after another, all the while continuously, and quite steadily, building out at the grassroots level often by word-of-mouth without the need to do expensive marketing campaigns. Looking at the unprecedented dominance of the Corporate State is highly encouraging to see his model of viable local community owned business flourish.

Co-operative Owned Open Access Fiber

Our second case study is with Tad Deriso Chief Executive Officer of the Mid-Atlantic Broadband Cooperative. MBC is a fascinating example of how some public spirited citizens of Virginia moved to build resilient infrastructure in the southern part of their state.  In the year 2000, as the Internet bubble was deflating, the Danville, Virginia area near the North Carolina border missed out on the building of a $500 million AOL Online data center because there was no acceptable fiber-based, redundant infrastructure that could handle the data needs of the newly flourishing commercial Internet at the beginning of the new century.

What to do? The state of Virginia had a multimillion dollar amount of money from the national tobacco suit settlement that it was prepared to invest in infrastructure for economic development. This was to be focused on the southern part of the state where the tobacco farmers had their tobacco farms -- farms that were dying as the large tobacco companies went elsewhere for their product.   There was also a situation where furniture makers and textile production companies were closing in rapid numbers and laying off thousands of people as globalization was shipping the local economy offshore. But the people involved saw the importance of the Internet and fiber-based data networks and the basic necessity of having these as an open-access infrastructure to offer private sector telecom providers to serve businesses that wanted to open new facilities somewhere between, say Washington DC and Atlanta Georgia, and would do so if the labor force was there, electricity was affordable and there was a modern, non ILEC controlled, internet infrastructure. While Internet was available, along the Virginia-North Carolina border, the cost for a T1 was likely 10 times what the cost would be in the Virginia suburbs of Washington DC.

The Virginia Tobacco Commission was a public agency set up to do the policy work of figuring out how to spend the settlement money wisely on behalf of the citizens of southern and southwestern of Virginia.  Old Dominion Electric Cooperative funded a consulting study for a fiber network in 2001, at a time when the importance of such a network was beginning to be very much appreciated.   But this was also a time when viable business models were not yet well understood. Working with Earv Blythe and some others at Virginia Tech who were involved in Internet 2 and the more importantly the creation of National Lambda Rail, Tad Deriso as an outside consultant got the needed expert help to put together a viable plan and business model for an open access fiber-based network formed on a co-operative basis and therefore run for the good of the communities.  The Co-op would offer a level playing field of uniform, flat-rate transport pricing for telecommunications providers who wished to become effectively tenants at a retail level of a telecom shopping mall based on modern fiber infrastructure set up under the name of Mid-Atlantic Broadband Cooperative.

Discussions begun in 2001, and by 2004, MBC was formed using $6 million in grant money from the Tobacco Commission and a matching grant from the Department of Commerce at the Federal level, to begin the building of a Fiber Network in the 20 County area of south central Virginia.  The network was a mesh, connected together by multi service access points where network users could peer with each other and house their equipment. Most importantly with the continued advice of Virginia Tech, MBC had received approval to buy an IRU of 2 strands of dark fiber from Washington, DC with pops in Richmond Virginia and  Charlotte and Raleigh, NC and finally Atlanta.   As they correctly surmised, a local fiber network without unlimited fiber access to major peering points on the global Internet backbone would not be of much use.

For lighting the backbone fiber between Washington and Atlanta, they became an early customer of Infinera, a company whose reconfigurable optical add drop multiplexers enabled them to provision bandwidth growth for new customers quickly, easily, and with maximum cost-effectiveness. Carrier-Class electronics from Nortel/Ciena were used to power the network at the local level and gain the ability to offer 10 Mb, 20 Mb, 50 and increasing increments of 50 Mb per second Ethernet all the way up to a gigabit. Delivered as Ethernet over SONET, it provided a level of carrier-class reliability that was not available in this region of the State. 10 Gb waves along the backbone gave them a granular ability to match customer data needs in a way that the SONET-based networks of the incumbent telcos could not.  Furthermore, because the network was purely wholesale and open to all comers, the incumbent phone companies were not able to convince local politicians that they were being discriminated against.

MBC lit its network and gained its first member (customer) in the fall of 2006.  It has grown steadily ever since.  New grants and, especially BTOP grants for installation in southern and southeastern Virginia and to Virginia K-12 school systems, have enabled MBC to extend its reach very significantly. It has chosen to put its access points predominantly in industrial parks which it has branded as GigaParks.   It has acquired a very impressive range of some 45 to 50 telecommunications providers as members that use the telecommunications services provided by MBC.

In a half dozen or so cases, including a recent large Microsoft Data Center, they have landed multi-hundred million dollar business center accounts ranging from data centers to call centers to handling the needs of back office customer support centers, advanced manufacturing facilities, and other businesses. I have not seen a recent total accounting of the economic development that they have brought into their territory in nearly 6 years of operation.  However based on material I have reviewed, I have identified the total number of new jobs  as between 2,500 and 3,000 and the amount of new money invested in the state’s economy is approaching $2 billion. Quite outstanding. And interestingly enough the model is being copied by a state of Maryland Broadband Cooperative.  The open access fiber-based wholesale model is generally regarded as the most viable non monopolistic economic approach to this necessary investment.

They have enabled the number of Internet service providers, including wireless Internet service providers, to use the network infrastructure in a way such that Internet service from a cable company (MSO) or from AT&T or Verizon is not the only alternative for the citizens of Virginia.  Interestingly enough, companies in North Carolina or a company anywhere that wants gigabits and above all optical transport between Atlanta and Washington can also join MBC as a member and pay the stated wholesale price for wavelengths, SONET or Ethernet services entering the Internet at any of the Pops  from Washington to Richmond to Charlotte to Raleigh to Atlanta. Companies are beginning to do this. MBC certainly is an idea whose time has come and apparently it is being copied by some of the other middle mile grant applications for BTOP.

Erik Cecil has suggested a very interesting and reasonable approach that would involve the creation of this kind of open access infrastructure and other areas of the country in such a way that the investment could not be gamed by the incumbents capture of the local regulatory system. “We've got to fund communications as infrastructure rather than funding a "network".   Communications is an input into the entire economy; it is not simply an input into itself.  Once we disaggregate the funding of the network infrastructure from what happens on it, then we'll be able to find all sorts of new money to put in it.  It's like the Mayor of Bayfield said - he did not want to make a dime on the communications business - he didn’t care; he wanted fiber optic in his town because he knew business would come; when business arrives his entire tax base goes up; he makes money - everyone's happy.   This is a mindset shift - we have to quit thinking of "telephone" or "internet" or "broadband" and just focus on putting conduit in the ground and fiber on the poles and then get out of the way - just like roads.   No city wants to be in the car business or any other business but they all want roads.  Ditto for communications infrastructures.” 

Policy Economics and technology of Fiber Business Models

The final sections of this issue include an edited excerpt from NANOG discussing the politics and policy surrounding the BTOP funded network in Maine called the Fiber company, one whose policy is to sell access to dark fiber only.  The discussion points out as well that there is so much money in the e-rate that some companies exist to build e-rate only fiber nets.

The final discussion is from the “arch-econ” list and offers a detailed critique of Australia’s National Broadband Network.  Milo Medin who is overseeing Google’s Kansas City build offers a strong critique of the Australian approach. The discussion is an outstanding example of the complex interaction of policy, economics and technology.


Executive Summary

How Local Communities Can Gain Control of their Communications Future

Fixed Wireless                                            p. 4
Co-operative Owned Open Access Fiber        p. 6

The Rise of Fixed Broadband Wireless

Matt Larsen and Vistabeam

1997 Becoming an ISP                                    p.  9
2000 Selling Out                                               p. 11
Laramie Wyoming Wireless 2002                   p. 12
WISPA Begins 2003-2004                                    p. 13
Running a Wisp in 2004 - 2005                            p. 15
2005 – Building Backhaul All Over                       p. 18
Technology Evolution and Vistabeam Size             p. 19
2008: Ubiquiti and Network Architecture               p. 21
The Crash and Aftermath – Ubiquiti’s airMAX          p. 37
Fiber in Colorado and Competition Over the Long Term p. 41
Scaling the Ownership of Independent Wisps             p, 45
Global Opportunities and Future issues                       p. 47

A Near Term Critical Issue - Smartphone Bandwidth  p. 49

Prospects of Incumbent Broadband Versus FixedWireless  p. 50
Ubiquity Comes Out With Game Changer   p. 53

Mid Atlantic Broadband Cooperative

A Venture that Should Become a Model for the United States

An Economic - Electronic Development Corridor for Southern Virginia  p. 58
An Open Access Network                                         p. 63
Wholesale Service Only                                             p. 65
Business Model Refinement and Equipment Selection  p. 69
Network Nodes at MSAPs                                    p. 70
Infinera                                                              p. 73
Growth and Prices                                        p. 76
Major Customers                                        p. 82
GigaParks                                                     p. 85
Strategic Issues                                            p. 94

MBC Customer List                                        p. 95

The Politcs and Policy of Fiber
Some insights into Maine Fiber Co                   p. 97

Differing Opinions on the Best Fiber
Business Model in the United States
and Australia’s NBN                                      p.105