Possibilities and questions remain on Big Broadband

Possibilities and questions remain on Big Broadband

CHAMPAIGN — It started as a dream, and to a large extent, it still is.

City officials still can't imagine the full potential of the ultra-high-speed fiber optic cables running underground throughout Champaign, Urbana and Savoy. They'll tell you that's one reason the cables are there — so someone can figure out how to use them.

Even the hackers at the University of Illinois Research Park dreaming up the future of the Internet can't tell you all the ways local businesses, health care organizations or university students and researchers might use the network years from now.

The first $30 million worth of fiber is already in the ground — seven massive rings that serve as the spinal cord of the network and "fiber-to-the-home" that has connected 2,400 households. The original intent of the network was to stimulate economic development and bridge the "digital divide" by providing low-cost Internet to neighborhoods where most people do not have access.

The federal and state government paid for nearly all of it, and for now, that's where the money ends.

But keep dreaming bigger, officials say. There are thousands of households in Champaign-Urbana that aren't connected, and not-yet-imaginable possibilities for attracting and retaining businesses, stimulating development of exciting Web applications and — more simply — connecting people with each other.

Estimators have put the price of building out to the rest of the community anywhere between $50 million and $70 million. Another estimate puts it between $11 million and $19 million. Either way, somebody will have to pay for it. It will need to happen, as officials do not believe the enterprise is sustainable beyond a few years without expanding the network.

It's the question of who pays for it and what they deserve in return that has interested parties fighting over the future of Big Broadband.

Open access?

At the center of the current debate is Gigabit Squared, a private company with an office in Washington, D.C. It's got a $200 million dream and an offer for Champaign-Urbana.

If company officials find that Champaign-Urbana would be an attractive enough location to build a fiber network, they have offered to pay for and operate the tens of millions of dollars' worth of infrastructure. Mark Ansboury, the company's president and CEO, plans to build fiber optic networks in roughly six university communities around the country.

Residents would have to chip in, too. Anyone who wants to be hooked up will need to pay, at a minimum, $500 for installation and commit to buying Internet service for at least 12 months. The service starts at $30 per month, and faster speeds are available for higher prices.

The prices are part of a "competition" local officials have set up to persuade Gigabit Squared that Champaign-Urbana residents are willing to commit to the service, and they promise the connections are worth much more than residents would be paying.

There are three days left in that competition, for which residents can basically vote for Champaign-Urbana by paying upfront, refundable commitment fees. All the details are online at uc2b.net/expansion.

"This is an amazing opportunity to get some of the fastest internet in the country," said Urbana City Councilman Brandon Bowersox-Johnson.

Gigabit Squared President and CEO Mark Ansboury says his company is doing "a demonstration project, but in many cases it's more than that." It's an untested model for building out a fiber optic network to an entire community, but so is every model.

"If we are successful in this, we have no doubt that other people will invest" in other communities and make ultra-high-speed broadband Internet connectivity spread in the United States, Ansboury said.

But local experts are calling it a "terrible idea" and urging city officials to slow down. They would prefer a publicly-controlled infrastructure for broadband service, which was the original model when the cities accepted the federal grant two years ago. Publicly-controlled guarantees open access.

"What we are doing (with Gigabit Squared) is basically giving up on that, because as soon as he puts a shovel in the ground, the idea of publicly controlled is gone," said Peter Resnick, the former chairman of the cities' broadband access committee and who has been very involved in the Big Broadband discussions for years.

If Gigabit Squared were to come in, build, own and operate the broadband network, some are worried that the idea of open access will start to break down. Open access ensures that any service provider may start operating on the broadband network for a fair price and compete.

"There is a challenge with giving the keys of the kingdom to someone else," said John Crutcher, vice president of sales for Pavlov Media.

If open access doesn't happen, the owner of the fiber optic infrastructure has a monopoly on the network.

With Gigabit Squared, it might not be a problem. Ansboury has publicly said he's "a really big proponent" of open access, and he intends to provide it if Gigabit Squared were operating the network. And local officials could write that in to a contract between the cities and Gigabit Squared.

But the future of the network is unpredictable if Gigabit Squared is unsuccessful and goes into bankruptcy or if Ansboury decides in a few years he wants to sell the infrastructure. Resnick worries that a company like Comcast, for example, would purchase the network, eliminate the open access and continue operating nearly unchallenged in Champaign-Urbana.

"I think it's a dangerous path to go down," Resnick said. "I do not think it's without risk."

'Fiber side road'

"Open access" is one of the guiding principles of UC2B, the consortium of decision makers that have the most control over the future of Big Broadband.

The cities say that another requirement of any agreement with Gigabit Squared will be that the company pay an annual fee to the cities and contribute to a "community benefit fund," meant to provide things like computers and training to residents who need them.

Gigabit Squared would need to maintain a local customer service presence and hire a local workforce.

Ultimately, it's a detailed list of objectives set up to ensure the original intent of the federally-funded network — to stimulate economic development and bridge the "digital divide" — will remain intact.

These ideas would be built into any contract with Gigabit Squared, said Mike Smeltzer, director of networking at the University of Illinois who has been one of the chief organizers of UC2B.

"Mark Ansboury, I haven't known him forever, he seems like a nice guy," Smeltzer said. "But maybe he's not. And if he's not, we're going to build things in that protect us."

But it's all negotiable, suspects Peter Folk, president of Champaign-based Volo Broadband. In fact, the consortium has already sold one core principle, he said.

UC2B has a guideline that, if any business wants to build a "fiber side road" that branches off the main backbone of the network, then the fiber branch would automatically become the property of the city.

What Gigabit Squared proposes is a massive "fiber side road." But the company would retain ownership, and officials would not be enforcing their public-ownership policy.

Urbana Alderman Brandon Bowersox-Johnson said that policy is mainly for "simple," smaller expansions, particularly for commercial properties. The Gigabit Squared proposal is more complex, he said.

"The Gigabit Squared thing is really a bigger and different kind of expansion that would need its own terms and conditions," Bowersox-Johnson said.

Folk suspects it's a compromise officials are willing to make when there's potentially $50 million on the table. He and Resnick are wondering what other compromises they might make if they are selected by Gigabit Squared and begin negotiating a contract.

If Gigabit Squared and the UC2B consortium cannot agree on the core values of the network, they think it will be tough for local officials to let $50 million walk out the door.

"We're not going to be able to stand by" the core values, Resnick said. "We're not going to have the political courage to do so."

'Back-room' questions

There are other options, Folk said, and he wonders why the Big Broadband decision makers have not yet begun to explore what else might be out there.

He said "organic growth" of the network is a viable option, where officials build out the rest of the infrastructure gradually with the revenues from the existing piece.

Or maybe a cooperative group of local businesses can help grow the network, he said.

In any case, "a local option will be a massively stronger economic engine than the proposal you have on the table," Folk told the Champaign City Council. He estimates that $7 million will flow out of the local economy annually if the cities give their business to Gigabit Squared, whose owner is from Ohio.

"I would rather see us own the infrastructure in the long run and have private companies provide the services," Resnick said. "And many of those could be local."

Within the past few days, the Urbana and Champaign city councils have expressed a willingness to begin studying what other options might be available. They have made no promises to Gigabit Squared yet, and if they were selected, contract negotiation would not begin until this fall.

Joanne Hovis, a consultant UC2B hired to advise them on its next steps, said the Gigabit Squared proposal — to pay for the network themselves with no investment from the cities, assume the financial risk and offer open access — is unprecedented.

And if the cities were to begin looking for similar offers, they might find companies willing to sell the hardware, but officials likely would not find anyone looking to take on the financial risk, she said.

"If what you're looking for is private investment and private risk, there's not a lot of competition out there, there's not a lot of money looking for this opportunity," Hovis told the Champaign City Council. "So I just hope you don't pass this one by."

But Urbana City Council member Charlie Smyth said he wonders why local officials have seemed willing to circumvent what would normally go through a competitive bid process.

"It may be within the rights of local governments to do an exclusive deal like this, but given what I'm seeing, there's so much back-room stuff that could be accused of going on that it just doesn't pass the smell test," Smyth said.

The "back-room stuff" is the apparent connections between Gigabit Squared and the consultants who are telling city officials that Gigabit Squared might be their best option.

"It appears to me and it appears to the organization that all the consulting firms are associated with Mark Ansboury and Gigabit Squared," said Crutcher from Pavlov Media.

But there was a competition, Smeltzer said. Last year, a consortium called Gig.U conducted a process that would determine which company would be selected to offer this proposal to the 37 university communities that make up Gig.U. The group exists essentially to dream up the future of high-speed Internet.

Volo Broadband and Pavlov Media and other companies were in that competition, Smeltzer said.

"Gigabit Squared came out at the top of the heap by a tremendous amount," he said.

Smyth said he is looking for more transparency.

"I think we need to step back from Gigabit Squared, have them clarify their role to date in what's been going on," Smyth said. "We need full disclosure from all of the individuals from UC2B on their relationship with Gigabit Squared and Mark Ansboury."

Ansboury acknowledged that he has worked closely with some of the consultants the city has hired, but said that's the consequence of working in a new industry.

"This is a small industry and everybody works with everybody eventually," Ansboury said.

Comments

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pattsi wrote on July 27, 2012 at 11:07 am

As suggested, doesn't this situation need much more daylight and community discussion? As argued by both city councils using taxpayer dollars to create proposals to submit  is just keeping options open. If we take this argument to the logical conclusion, why aren't the cities and county exploring actively other design ideas, coop structure, and whether this is what the community wants. What is proposed and has been done with UC2B is not the least expensive means to make a city completely connected. There is an article in today's N-G about the pilot project in Kansas City, done by Google, and the costs to the customers. People ought to read this to get a better idea what this could possibly cost each household here.

FYI, there is a group that is actively exploring ways to create a broadband coop. It would be great to have the cities and county join in.

rsp wrote on July 27, 2012 at 9:07 am

Both the cities of Champaign and Urbana have a history of complaining about the ownership of the water company and Comcast both not being local and talk for a long time about how we should buy the water company. Every time the cable contract comes up for renewal it seems we lose ground. There used to be a local office for Illinois Power, now they are out of town with a new name. Do they really think contracts will not get renegotiated to give better terms to the supplier? Like the car dealership, the hotel, etc. UC2B belongs to this community, it isn't a prize for a group of people to make money off of in backroom deals. 

bkp wrote on July 27, 2012 at 11:07 am

If residents will be paying $500 fees to get on gigabit squared's network they are essentially investing in the network themselves. Will they get to retain their parital ownership (a share in the company)? Of course not, it is being handed over to gigabit squared.

 

A co-op is a much better idea where residents retain partial ownership in the utility.

macnikkorguy wrote on July 27, 2012 at 1:07 pm

If you want fiber-optic Internet connectivity for your home or business, please visit: www.UC2B.net/expansion to learn about an opportunity to expand fiber connectivity throughout our community.

This opportunity is modeled after the 2010 Google Fiber program. A company called Gigabit Squared (GB2) has issued a Request for Proposals (RFP) seeking six university communities where it can partner and invest a total of $200 million building fiber to homes and businesses. Kansas City “won” the Google RFP in 2011 and Google is now making an estimated $2 billion investment in that community. Details of their Internet and television services were announced on Thursday.

There are no guarantees that we will be one of the communities GB2 selects or that if we are selected that we will be able to reach a mutually acceptable agreement with GB2. The Urbana and Champaign City Councils have each endorsed a core set of principles that would be part of any agreement with GB2. If those principles are not acceptable to GB2, there will be no deal.

Gigabit Squared wants pre-commitments of local construction funds and customer revenue. At www.UC2B.net/expansion you will be able to do both. The more households and businesses that commit by Monday, July 30, the better our chances are of being selected. In my 15 years of working on fiber solutions for our community, this is the best opportunity we have ever had. My family is signed up. I hope your family or business will too.

Mike Smeltzer
UC2B Principal Investigator

rsp wrote on July 28, 2012 at 3:07 am

I read all of the expansion plans and I still didn't feel like I learned anything. Contracts are made to be broken, and this all feels too rushed. Like people have been forgetting that the network belongs to the public, and discussions are supposed to be public with the opportunity for input. Input is not announcing you decided to enter a contest. Perhaps in the future they can consider the lotto for capital improvements.

http://www.businessweek.com/articles/2012-05-24/meet-the-startup-that-wa...