ISPs, CLECs Thank Qwest's Lawyers

ISPs in Grant County, Wash., are the happy providers to an all-access fiber-to-the-home network being built by the local utility company—ironic, since ILECs were responsible for opening it to competition.

by Jim Wagner Managing Editor, ISP-Lists [May 3, 2002]

Qwest Communications won an important battle for ISPs two years ago (though I'm sure it wasn't intentional) when officials successfully argued in the Washington state legislature to prevent a local utility company from selling Internet services on its planned county-wide fiber-to-the-home (FTTH) network.

Say what you will about the incumbent local exchange carriers (ILECs), it's easy to admire their ability to say one thing while doing another. In essence, their efforts against the Grant County Public Utility Department are an extreme example of structural separation, preventing one company from both selling and owning the same network. Kind of like what the Baby Bell monopolies do right now.

The decision to separate the utility from its envisioned riches ultimately benefited the ISPs and CLECs in the area, who now have at their disposal more bandwidth than they could possibly use. It's quite a turnaround for an extremely rural county with only 74,698 people, most of whom never expected to see broadband in their lifetime.

"Qwest had no intention in coming out here (with broadband). They said our area just wasn't worth the price, and they've got financial troubles of their own right now," joked Allan Cain, owner of Bigdam.net, an ISP located in the Coulee Dam area. "Now that there's a fiber network out here, I see them avoiding this place like the plague."

Qwest's loss is the independents' gain. With 10 ISPs, a CLEC, and a video service provider (VSP) reselling services on the utility's Zipp Network, a growing number of residents are suddenly find themselves with access to VOIP, digital TV, 10 Mbps Internet speeds, and video-on-demand (VOD).

Almost 18 months into a seven-year construction build out, Grant County's public utility department see themselves as the logical choice to roll out what most people consider an essential service—even though incumbent carriers and their highly paid corporate executives see little financial reason for setting up shop in the sticks.

Coe Hutchinson, fiber business manager at the Grant County PUD, said the decision to take on the heavy costs of a fiber rollout comes in part from the lack of basic telephone and cable TV in the county.

"Basically, the private companies have been very slow to build out broadband services in Grant county," he said. "We have homes in the county that do not even have land-line telephone service at this point. Even the places that do have telephone service, the service is limited and you can't get the extra services like voice mail and call waiting. In many places, you can't get an additional phone line."

Originally planning to pay for the deployment with the revenues generated by the services running on fiber, Grant County PUD had to revise its return on investment after Qwest put a halt to any retail dreams.

Hutchinson expects to earn money on his investment sometime in the next 15 to 20 years, an amount of time that's hard for providers to understand in the Internet world, where most new carriers' payback life span is measured in months, not decades.

"For a lot of private businesses, that can be pretty tough," he said. "But for a utility that's used to investing in hydroelectric dams, that's pretty reasonable."

Payback comes in the form of the bandwidth it gets service providers to resell, though the pricing scale is something you won't see anywhere else in the world. ISPs pay $15 a month for every 1 Mbps connection, while a whopping 10 Mbps connection goes for $25 a month. Price scales reach into the gigabyte realm.

ISPs are used to the Bell pricing model, which is tailored to make it as hard as possible for the competition—it costs roughly $30 to $35 per digital subscriber line (DSL) per month, depending on volume. Cable resale estimates (which are mostly theoretical in closed access America) are about the same.

To say the utility's fiber pricing is ideal for ISPs would be an understatement.

Like many ISPs in rural America, Cain leased a couple frame relay lines to provide basic 56K service until the advent of 2.4 GHz fixed wireless technologies. The wireless/fiber combo gives people in the area Internet speeds and services that rival any other place in the U.S. It's enough to make a person want to pack up and move to Washington.

"I don't blame them a bit for wanting to come out here," Cain pitched. "It's a beautiful area and now we've got the best connection on the planet."

Cain is almost giddy with the opportunities the fiber network brings to the roughly 6,000 people in his coverage area. He says that of the 600 or so computer owners in the area, about 500 will be using the Internet services only he provides to the area right now.

Charging $25.95 a month for a 1 Mbps connection, Cain's main problem is coming up with a way to tap into the vast amount of cheap broadband he has at his disposal. With 60 customers using the fiber connection, most subscribed to the $25.95 plan, he's trying to figure out the best way to get businesses interested in the 10 Mbps offering at somewhere between $50 to $80 a month. That's doesn't sound like a tough sell.

Meanwhile, construction continues throughout Grant County, now that the PUD's commissioners have signed off on the 2002 construction schedule.

It's not as easy as it sounds, since the commission fell victim to its own popularity. Issuing a call to neighborhoods wanting to be put on the waiting list for fiber, officials expected only about 25 to respond (35 percent of the homes in a neighborhood need to sign a petition to be eligible). Instead, commissioners got 78.

"It's the kind of problem you like, but now we have commission meetings where people are complaining they won't get it sooner," Hutchinson said. "It's amazing."

One problem's solved, though. The utility won't have to worry about a construction schedule for the next five years.

"The petition program exceeded our expectations for participation," said Tom Flint, one of the commissioners. "We began this program anticipating that we would receive interest from enough communities to round out the 2002 construction plan. We have actually received enough petitions to schedule construction through 2005."

That success translates into more revenues for the ISPs on the Zipp network, as more and more communities come online. And in a small town, where there's usually only one ISP (or two at the most) serving the entire community, it's an attractive proposition for those already offering services.

Now, what's phone number of your local utility? If you get them to start building a fiber network, just make sure your local Bell knows about it—I'm sure they'll be happy to help. It worked for ISPs in Washington state; it could work for you, too.

And remember to say thank you.

— End