Copyright 2006 AFX News Limited
AFX.COM
August 13, 2006 Sunday 7:02 PM GMT
From Lexis Nexis

POWELL, Wyo. (AFX) – Hay and beans have fueled this rural economy for years. But it’s fiber of another kind that city leaders believe is key to Powell’s future.

Plans are under way to build a fiber-optic network capable of delivering ultrafast Internet, cable TV and telephone service to virtually every household and business in this community of about 5,300 people.

The goal of the $6 million project is to create another selling point for a community where quality of life issues — good schools and safe streets — are no longer enough of a draw to do business in a place where the nearest major city is 100 miles away in Billings, Mont.

“As a city administrator, I hear the term ‘economic development’ thrown around,” said Zane Logan, the leading voice behind CityNet, which is opposed by local phone carrier Qwest Communications and cable provider Bresnan Communications. “I can’t think of anything more economic-development minded than a fiber-optic network.”

Powell is part of a growing phenomenon, fueled by dissatisfaction in sparsely populated areas where the local phone and cable providers are slower to invest in costly network upgrades that may not be profitable.

At least 40 municipalities and public utility districts around the nation already offer so-called ‘fiber to the home,’ according to market researcher Michael Render. These fiber networks are both more robust and costlier to build than the municipal wireless networks proposed in hundreds of cities, often sparking similar controversy.

The rise of community-backed projects has sparked debate about whether it’s proper for government to compete with private enterprise, and whether broadband technology is a luxury or a virtual necessity that cities should provide, the way they do water or garbage service.

“Is it a commodity where you pay for what you use and leave it to the private sector? Or is it a utility, as important to today’s lifestyle as water and electricity?” said John Anderson, a graduate student at the University of Illinois at Urbana-Champaign who has studied and written about the debate.

“A lot of communities feel it’s in their interest to step in and offer it,” he said.

That was the case in Windom, Minn. Before the city announced plans to build its fiber network, Internet options were limited to frustratingly slow dial-up or finding a wireless hot spot some 20 miles away, said Dan Olsen, operations manager with WindomNet, the farming community’s telecommunications office.

Now, more than a year after Windom built its nearly $11 million network, Qwest also is in town offering competitive high-speed Internet connections, he said. About 1,700 customers subscribe to at least one of the three city services — Internet, phone or cable — and some take all three.

“If you’re a small town out there and can’t get a provider to provide services, what do you do? Give up or get the community involved?” Olsen asked. Windom’s network isn’t profitable yet, though Olsen said it wasn’t expected to be so soon. “We’ve been constantly hooking up and growing and monitoring.”
 
There are challenges: According to Joe Savage, president of the Fiber to the Home Council North America, up to 30 percent of households in a given community must subscribe to a fiber network for the system to begin making money. And it can be hard for budget-strapped municipalities to secure funding, requiring them to use tax money, borrow or partner with a for-profit investor.

However, Render, the market researcher, said he knows of no documented failures in what he considers a still-new phenomenon.

In Utah, the vitality of a network known as the UTOPIA project depends on its potential to grow and attract new customers, said Roger Black, the chief operating officer. Just six of the 14 communities behind the project are now being served by the superfast service, he said. The network must be built out for the others to be brought on, and Black said finding a lender delayed expansion plans by at least seven months. He expects construction can begin soon.

Typically, a municipality will own the infrastructure needed to run a fiber network, Render said. In some cases, a community will run its own system with customers paying the city directly. In other cases, a community essentially leases network space to a service provider that handles customer service and billing.

That’s the approach Powell is pursuing. The city has entered an exclusive, six-year contract with regional carrier TCT of Basin, Wyo., to provide Internet, phone and cable over the network, City Administrator Zane Logan said. Now the city is seeking investors to buy $6 million in municipal bonds to build the network.

The dominant telecommunications providers in Powell argue this initiative is unfair and an example of government needlessly intruding in private enterprise: Representatives from both Qwest Communications International Inc. and Bresnan Communications say their companies already meet customers’ demands with high-speed, high-quality services.

But Logan said the CityNet system would surpass the top speeds from those companies, offering 10 megabits per second for both uploads and downloads at an as-yet undermined price.

Bresnan recently increased its download speeds to 8 Mbps for downloads in many of its markets across the Rocky Mountain region, but uploads remain as slow as 384 kilobits per second. That service costs $46 a month for Bresnan’s cable customers, or can be bundled with phone and cable for $99 a month combined.

“There probably is some place in the country where it makes sense for a community to endeavor to do such a thing because there’s a dearth of services there,” said Jerold Lambert, associate general counsel for Bresnan. “It is hardly understandable or prudent for a community to do that where there’s already an extended marketplace thriving in their community.”

Lambert also suggested there may be ‘legal implications’ related to the exclusive deal. The city says both Qwest and Bresnan were invited to compete for the contract to run the system or, alternatively, to cut a deal to sell their own services over the new network.
 
Qwest and Bresnan each vow aggressive marketing in response to the city’s planned network. Logan said he expects the Powell system ‘will be able to compete’ for customers.

Construction of the network could begin this year if the necessary investors are lined up. The city isn’t committing any money above the $125,000 it provided for a business plan, Logan said, and he expects the city will be reimbursed that cost.

Still, Logan is feeling the pressure: he said he brought the idea to build the network to the City Council late last year, and he’s aggressively promoted it as a vital investment in Powell’s future.

Potential customers seem interested. When businesses and prospective new residents call Sharon Earhardt at the local chamber of commerce, they often follow questions about schools and housing with questions about the city’s Internet service: What does Powell have to offer? Is it fast?

Earhardt fills them in on the existing services and the fiber-optic plan. For people looking to relocate, she said, “technology will be our ticket.”