Demand Aggregation. For Attracting a Private Partner or Cost Justifying Your Own Fiber Build. BBC Summit - Austin, TX - April 6, 2014

Transcription

1 Demand Aggregation For Attracting a Private Partner or Cost Justifying Your Own Fiber Build BBC Summit - Austin, TX - April 6,

2 Your Panel Mike Smeltzer Urbana-Champaign Big Broadband - UC2B University of Illinois at Urbana-Champaign Joanne Hovis CTC Technology and Energy & NATOA Will Aycock Greenlight Community Broadband, - Wilson, NC 2

3 What Do You Want To Do? Meet your community s telecommunications needs for today and tomorrow Promote a competitive telecommunications environment in your community Next generation infrastructure Fiber to the Premise - FTTP Businesses, Anchor Institutions & Homes 3

4 How do you get there? Incumbent providers competing? A competitive provider introducing competition? A municipal investment in infrastructure? 4

5 The Utopian Scenario Two or more incumbent service providers Well-managed and well-funded service providers Willing to invest in Fiber-to-the-Premise infrastructure Not a reality in most communities Other than Austin.. 5

6 The Next Best Scenario A single competitive service provider Willing and able to invest in fiber Willing and able to compete with the incumbents Willing to work collaboratively with your community 6

7 The Municipal Scenario A municipally-financed fiber build Could be operated as a municipal utility Greenlight is totally publicly owned and operated Works best when you already have municipal utilities - especially electric Could be publicly owned infrastructure that is privately operated UC2B is headed this direction 7

8 The Money for Scenarios 2 & 3 Either your City Council or a Private Partner will want to know How to pay the one-time fiber construction costs How fund the fiber maintenance and operations The planning exercise is similar for both scenarios 8

9 Some Planning Questions How many networks will you build and operate? Who will operate the network(s)? How will you aggregate demand? How and where will you over-subscribe? How will you get Internet bandwidth to your community? How will you address competition and open access on your network(s)? 9

10 How many networks? One big centrally managed network that serves everybody Lots of smaller networks that are locally managed by the organizations they serve Both can be effective - depending on your circumstances 10

11 One Big Network Central Management More efficient use of fiber and personnel and more cost effective to operate Questions you need to answer: Does your networking staff have the right skill set? Do your potential customers trust your networking staff with their networking and their data? Are you willing to ramp up to operate a 24-hour, 365-days-a-year network operations center? 11

12 Examples of One Big Network DCnet - District of Columbia Greenlight - Wilson, NC LUSFIBER - Lafayette, LA 12

13 Aggregating Demand Two types of demand Intranet Demand Data traffic within your community Internet Demand Data traffic that leaves your community How you handle Intranet aggregation affects Internet aggregation 13

14 Aggregating Intranet Demand Connect all of your municipal locations to each other at gigabit speeds with fiber Just one or two Internet connections that are shared by all public safety and municipal locations Connect all of your schools to each other at gigabit speeds with fiber Just one or two Internet connections that are shared by all public and private school locations 14

15 Aggregating Intranet Demand - 2 Connect all of your local banks locations to each other at gigabit speeds with fiber Just one or two Internet connections that are shared by all of a given bank s locations Connect all of a major landlord s MDU locations to each other at gigabit speeds with fiber Just one or two Internet connections that are shared by all of that landlord s tenants at multiple locations 15

16 Aggregating Intranet Demand - 3 Also works for medical organizations, park districts, insurance companies, cell phone towers and many more. Allow any organization that has multiple locations in your community to use the fiber to link their locations to each other. It allows those organizations to aggregate their Internet demand, and helps them cost justify the onetime and recurring costs of using the fiber. Provide this as a service or lease dark fiber to them. 16

17 Aggregating Internet Demand Basic Internet Economics Buy one or two large Internet pipes at a low cost per unit of bandwidth Sell lots of smaller Internet pipes at a higher cost per unit of bandwidth Use Statistical Multiplexing to rationally oversubscribe your bandwidth 17

18 Over-Subscription It is nothing new, but it explains a lot Airlines do it Health Clubs and Gyms do it Traditional Telephone Companies do it Internet Service Providers do it 18

19 Airline Over-Subscription The simplest form of over-subscription Fixed number of passenger seats going from Chicago to Austin from 1:00 to 3:00 PM Statistically, we know that some percentage of ticket buyers will not show up Last minute changes of plans Missed or delayed connecting flights Makes sense to oversell a few seats 19

20 Health Clubs & Gyms Hundreds of members, but only 10 treadmills More complicated over-subscription The times of day change The length of visit per member is variable Still possible to predict usage Equip and staff to meet almost peak demand 20

21 Traditional Phone Companies Traditional long distance trunk lines More local customers than long distance wire pairs Erlang formula can compute needs Based on average number of calls/hour Based on average length of calls Worked well except for 2 days a year Mother s Day Father s Day 21

22 Internet Service Providers More complex than any other example The time of day and length of use both change The actual bandwidth used over time changes The number of connected devices per customer varies Yet massive over-subscription still works Hard to predict You must be able to add bandwidth easily and quickly 22

23 Over-Subscription Basics The larger the pool of customers the better Hundreds, or thousands of customers support higher over-subscription ratios The farther from the customer the oversubscription happens the better This is where the broadband technology deployed makes a difference This is where fiber cables beat copper cables 23

24 Fiber Over-Subscription Fiber can move the over-subscription point far from the customer Copper cables have distance limits that force neighborhood over-subscription, fiber does not A community of 150,000 can be aggregated over fiber in just 1 or 2 core locations The connection from the customer to the aggregation point at the network core can support 1 Gbps - Gigabit connectivity 24

25 The Cost of Internet Cost of Upstream Transit Bandwidth Cost of getting from a Transit point (Chicago, Dallas, Atlanta, etc..) to you Cost of local distribution infrastructure Cost of Support and Operations 25

26 Upstream Transit Bandwidth Getting less expensive all the time One 1 Gbps connection - $2,500 a month 500 customers - $50 a month each 1,000 customers - $25 a month each 5,000 customers - $5 a month each One 10 Gbps Connection - $10,000 a month 5,000 customers - $2 a month each 10,000 customers - $1 a month each 26

27 Transport to the Big City This can cost more than the bandwidth Having access to your own fiber helps greatly Regional non-profit networks help reduce costs ICN in Illinois MERIT in Michigan KINBER in Pennsylvania Many others 27

28 Local Distribution Fiber is your only obsolete-proof option Fiber is distance insensitive You can always put faster electronics on either end of the fiber The electronics only last 7-10 years anyway The fiber could be good for 40+ years Your grandchildren can always pull new fiber into the conduits you bury today 28

29 Lots of Smaller Networks Requires more fiber strands Requires more high-level networking staff Requires less trust of other networking staffs Moves responsibility to the connected organizations Less threatening to the existing IT staffs at the connected organizations This was the UC2B model 29

30 UC2B s Many Networks Model UC2B has eleven organizations that lease dark fiber on UC2B s rings to provide services Some are ISP s - Some are public entities They all help pay to maintain the fiber UC2B s only responsibility to them is to keep the fiber operational Each organization operates its own network Some hire local networking firms to do that 30

31 Leasing Dark Fiber Lease dark fiber to all of those organizations with multiple locations in your community Indefeasible Rights of Use (IRU) Contracts A complex 20-year lease that can be capitalized by the lessee - this is important to organizations that pay taxes Significant one-time charges that help pay for construction Recurring fiber maintenance charges that will help pay for fiber maintenance Not threatening to the IT staffs of those organizations - they control their own networks 31

32 Lease Dark Fiber - 2 Short term dark fiber leases Cannot be capitalized by lessee Recurring fiber usage charges Recurring fiber maintenance charges 32

33 IRU Math One-time IRU costs are charged by the strand-mile Depending on your fiber architecture and the network design of the organization: An organization might want from 1 to 4 strands on a ringed architecture to reach its locations An organization might want from 1 to 4 strands from a central hub to each remote location on a hub and spoke architecture 33

34 IRU Math - 2 The strand miles can add up quickly For a 20-year IRU, the one-time charges: $750 per strand mile in rural areas where it is inexpensive to build $3,000 or more per strand mile in urban areas where it is very expensive to build UC2B s rate was $1,500 per strand mile 34

35 IRU Math - 3 There is a cost trade-off between fiber strand counts and the electronics that connect to the fiber. The least expensive electronics use one strand to send and one strand to receive - two strands per location. More IRU strand-miles, but easier to trouble-shoot More expensive electronics can both send and receive on a single strand of fiber using different colors of light. Fewer IRU strand miles, but you need to be able to test multiple colors of light and it is harder to trouble-shoot. 35

36 IRU Math - 4 Fiber maintenance is typically charged by the route mile $200 to $400 per-route-mile per-year is typical Additional strands do not typically increase the maintenance charge on a given segment Sometimes every 6 strands leased triggers a new maintenance charge on a segment Discourages hoarding and reselling 36

37 UC2B s IRU Experience UC2B raised close to 20% of the cost of its fiber backbone by pre-selling IRU s That was in just a 45-day window With more time, we could have come closer to 40% or 50% - based on the organizations who have since moved their Intranets to UC2B fiber. 37

38 Now Sell Them Internet Once an organization has connected all of its locations with your fiber to aggregate their Internet demand, selling them a big Internet connection is simple and cost effective. Even if you have to bid on the connection, you will be optimally situated to provide the service inexpensively. 38

39 Competition & Open Access Do you provide enough competition? Will you lease dark fiber to competitors? Will you provide wholesale services to competitors? Do you need to start thinking like incumbents? To be sustainable you may have to - at least a little 39

40 Are you ready to aggregate? Do you have GIS-based maps? Can you work with someone locally to create them? Locate all your multi-location potential customers in the GIS system. Get someone with a fiber networking experience to design a fiber plant, based on the locations you want to connect. Diversity and rings are good. Get the fiber lengths from the GIS system and do the construction and the revenue math. 40

41 The Greenlight Model Will Aycock 41

42 Other Communities Joanne Hovis 42

43 Questions 43