The Money’s in the Bank

The sale of LUS fiber to the home bonds officially “closed” Thursday both the Advocate and the Advertiser report. LUS sold $110.4 million in revenue bonds to support the construction and intial costs of the network. As in “closing” on your home or car loan what this really means is that the money is in the bank and you can take possession of what you’ve been sold. In this case LUS (and the rest of us) is “buying” the use of the money. Now they can begin spending money.

Expect the pace of things to pick up.

The papers report that spending will begin on planning and on the early construction of items like the warehouse necessary to store construction equipment and the head-end building that will be the electronic heart of the new system.

Attentive readers may wonder what happened to the $125 million that the voters approved two years ago. Why only $110.4 million? The easy answer is that new cost projections are lower as a consequence of the delay are less so they are borrowing less. But while that is central there is a bit more to consider as the following from the Advocate indicates:

The $110.4 million in bonds are based on projections of what it would take to build a system if half the market signed up for LUS service.

The savings in technology and interest cost mean that should LUS exceed that 50 percent share of the market, it could make it easier to pay for further expansion with cash instead of another bond issue, Huval said.

The hope of LUS has always been to make LUS Fiber a utility, that is for LUS Fiber to be a ubiquitously available service run in the public interest. It is part of the history and community orientation of LUS to hope and believe that it will be the dominant provider of telecom services in Lafayette. While that level of subscription is not essential to the network’s success as a business (that figure is in the lower 20% range) a subscription figure above 50% is clearly what LUS desires. Based on subscription rates to other locally-owned, advanced telecom systems that hope is not particularly grandiose. Bristol, Va.’s system has recently had to retool its network at a real additional cost to accommodate higher that expected “take rates.” Consequently LUS has always taken seriously the potential for rapid subscriber growth—especially after having been endorsed by 68% of the voters. Heavy, early, buy-in from the community means a much higher initial cost to be paid for from the bonded money at a time before income really starts to roll in. The cost to run fiber from the street to the wall of your house, install the electronics box there, and connect up your home is a large, fixed cost that the business intends to pay off over time. (Huval estimated that cost at $6-700 recently.)

So part of what it means to ask for less money from bond market than you were authorized to take by the voters is that you believe that you can keep up with the hoped-for take rates at more cheaply as a consequence of lower interest rates and lower equipment and installation costs than you originally thought. This is good news.

The most dangerous moment for LUS might well be the moment of its biggest success. If LUS gets a huge initial subscription bulge that prevents it from showing a quick profit (as it pays off all those expensive but income-producing $6-700 dollar investments in new customers) AT&T, Cox and its agents are no doubt waiting to make use of the incumbent-written “Local Government (un)Fair Competition Act” to try and “prove” that LUS not making a profit (precisely because it is dominating the market) and use clauses in their their law ostensibly inserted to “protect the citizens” to shut down their local competition. LUS has apparently decided that this is not worth worrying about at the 125 million dollar level–only the 110.4 million dollar level. Having to worry about such nonsense at all adds cost to the build and is yet another reason why this special interest law should be repealed.

Oh, by the way…am I the only one to notice that LUS had the authority to take home $125 million dollars—authority directly from the people—but chose to only use $110 million of that authority? That its “excuse” was the best of all fiscally responsible reasons: that it wasn’t going to cost that much so they didn’t want to burden the people with the expense of what would amount to a safety cushion? Where are all the nutcase jobs who were sure that the project was going to be incompetently and corruptly handled? Are any of them rethinking or moderating their stand based on the evidence? (Thanks, I needed to get that off my chest.)

Huval Honored (updated)

Terry Huval, the head of the Lafayette Utility System, is being honored by the American Public Power Association today. As the Advertiser (in a “People in Business” brief not carried online) notes he’s getting the James D. Donovan award which “recognizes those who have made great contributions to the electric utility industry and public power.” The award is named after the first president of the APPA.

Even more significantly, Huval will be installed as of the Chair of the APPA Board tomorrow. Being lauded for your past contributions is one sort of honor. Being put in charge of things by your peers is an honor of an entirely different order.

Congrats to Terry and to LUS….

(And I’m looking forward to Huval being the first president of American Public Communications Association in 2014…and having an award named after him in 2024. 🙂 )

Update: The Advertiser has a brief story online (not the one alluded to above) noting this award. There is a nice tidbit from the award citation included in the story:

Huval was recognized for guiding LUS “to the forefront of innovation and change in the electric utility industry.” The successful legal battle that enabled LUS’ proposed Fiber-to-the-Home initiative has earned national attention, and Huval’s leadership on the issue and creative inspiration has led to a groundswell of local and national support and called attention to the importance of public power’s ability and right to offer advanced telecommunications services, the association said.

“Fiber gives transplant desire to return home”

Buddy Guidry, a Lafayette native working out of New York, declares in a letter in today’s Advertiser that Lafayette’s fiber to the home network has led him to plan to move home and start a legal services business here.

I hope he, and many like him, do move home. While it’s easy to notice big ticket, larger businesses like NuComm
the real value (as I’ve commented before) will come from small businesses that will be able to afford fast, efficient, high-tech communications services that are currently only available to large businesses. Sez Buddy:

the one light I see at the end of the tunnel is the fiber-to-the-home initiative. This has given me a desire to move back home to Lafayette and start my own legal services business, which would be less likely to succeed without fiber optics.

How does a legal services firm benefit? I don’t know for sure. But that doesn’t matter since apparently Buddy Guidry does. And you can bet there his remarks are only a small indication of the value “the little guy” will find in the system once it comes online.

More immediately, Guidry is participating in the new, positive “buzz” about Lafayette…and that buzz is building.

Anecdotally: I was in Baton Rouge to celebrate a marriage recently and the crowd was mostly made up of mutual friends who’d graduated from some of the city’s most demanding high schools in the late 80’s and early 90’s. Like many well-educated Louisianians they’d scattered all over the country. From the groom (living in Tucson) to those who’d stayed (and were doing things like being head of “GIS for the state”) the topic of conversation went straight to how “progressive” they’d heard Lafayette was compared to the rest of the state and several said they’d considered moving to Lafayette based on their (vauge) sense that it was a great place to be. Fiber played in, of course, but they also talked about music, a laid-back attitude, food, and cool festivals. That sounded a whole like how my generation, some 15 years earlier had talked about Austin…

Something is going on here and Buddy Guidry’s letter is only the tip of the iceberg.

VOE: “Cincinnati Bell Wireless launches Wi-Fi/cell service”

Voice of Experience Files:

From our new “Voice of Experience” files: Lafayette will want to note that wifi/cellular convergence is emerging at the edges of the cellular business.

LUS’ unique fiber/wifi IP-based network will allow some pretty nifty voice services to emerge. Our utility will be able to put together an interesting Voice ecology that combines VOIP on fiber with its wifi network to allow your personal phone number to reach you in multiple ways, to enable on-the-fly conference calling (with video?), access back to data held online or in your base computer, combined chat/voice/video/SMS connectivity, digital recording, message forwarding to any IP address, and more…

Most LPF readers are, I suspect, care most about the internet and recognize the central role cable TV will play in paying off the system. Relative to those highlights, voice gets ignored. Maybe it shouldn’t be—convergence is moving from talking to commercial products in the voice arena and Lafayette will be positioned to ride the wave as wifi mobile telephony emerges while our system is built over the next 18 months. (What we need is a partnership with a mobile carrier…on which more below.)

The immediate inspiration for those reflections? Margaret Reardon’s blog entry on the launch of Cincinnati Bell’s* new wifi/cell service. (Their local paper has a short article as well.)

The long and the short of it is that your phone will switch seamlessly between the cellular network and approved wifi networks. The service is an add-on 10 dollar a month charge on your wireless bill. Partially offsetting that monthly charge is the fact that any time you are on a wifi network your minutes are free. Really. And that “approved” means approved by you, not Cincinnati Bell. You can validate you personal or work or favorite coffee house wifi network as a connection point. Or you can use Cincinnati Bell’s own wifi network of 300 points without any setup at all. Get near one and your phone call switches over to wifi automatically and your minutes are still free. (Incidentally, Cincinnati Bell offers free access to its wifi network as part of its wired high-speed internet package; I hope LUS will do something similar.)

T-Mobile is the national cell carrier who is widely rumored to be planning the nationwide launch of a similar service, Hotspot@Home, in a few days. (They’ve been trialling it in Washington state.) That makes T-Mobile the obvious candidate for cellular partnership with LUS. The trade-off would be simple: LUS gets a national cellphone partner whose phone will work across the country and who is actively developing new integrated services. (Nobody will buy a wifi service that only works in the city of Lafayette.) T-Mobile gets virtually guaranteed dominance in Lafayette and the environs. (If you do most of your calling from within the city you can easily go with the least expensive calling plan since those calls won’t run up minutes. Who wouldn’t go with cheap–and local?) It could be a great deal.

Voice is something to watch. And Cincinnati Bell and T-Mobile are the actors to follow.

*Cincinnati Bell is one of those “asterisk” companies — part of the Bell system since 1878 but never owned by Ma Bell, it is probably the largest “independent, local” phone company in the nation. This first-in-the-country initiative is further evidence that local ownership of telecom networks is a good thing.

Geeky extra: Both Cincinnati Bell and T-Mobile are using a “glue” technology called UMA (Unlicensed Mobile Access) which allows providers, and to a lesser extent users, to hook into multiple protocols and tools. Most crucially for the current discussion it facilitates seamless handoffs between cellular and wireless networks. But it goes much further than that. If you are masochistic enough to want to follow it out you can start at the rather thin and querulous wikipedia page.

WBS: “Lafayette pioneers a competitive muni-fiber project”

What’s Being Said Dept.

Fiberevolution notices, apparently via the intercession of Dirk van der Woude, Lafyette’s project and comments admiringly on the unique features we’ll be getting. The take:

The level of service LUS (Lafayette Utilities Service) intends to provide is quite ambitious:

  • Symetric service, whatever the level of bandwidth subscribed. It may sound obvious since it’s easy to do over fibre, but it’s not the norm, so it makes sense.
  • Full-speed onnet capability – a very cool feature for community based services such as this one – regardless of teh level of bandwidth subscribed
  • Retail wifi capability, which could prove very popular with SoHos, shops, etc.
  • No hook-up fees and no contract duration. That’s actually quite daring from LUS…
  • 20% savings on triple-play. That’s a price positioning based on the incumbent’s current offer, so it may be not as feasible in 18 months

Still, if my competitivie operator were to offer that, I’d sign this minute!

It’s good to start getting attention for what our network will do instead of only for the battle we won…

Fiberevolution is a newish fiber blog based in France and focused on the business side of the story. It features an emphasis on European telecom. Lafayette’s Cajun and Creole readers should find links to French language blogs refreshing.

Verizon’s fiber-optic payoff | CNET

Food for Thought, Learning from the Big Guys Division:

“Verizon’s fiber-optic payoff;” The premise of this story is that Verizon did right by going with a Fiber To The Home plan…and AT&T/BellSouth messed up by trying to get by on the cheap. Verizon will have the bandwidth and the flexibility to compete more than adequately against the cable companies. But AT&T will not, on the basis of this author’s analysis.

Lafayette can mine Verizon’s experience for insight into how an all-fiber network can compete against the cablecos. Verizon will be several years ahead of LUS in the deployment of a new fiber system and its successes can be followed and its failures avoided. Verizon is, happily for Lafayette, not the incumbent locally. It’s enormous numbers will allow suppliers and developers for its products to supply a place like Lafayette almost as an afterthought–and at reasonable prices since the big-ticket purchaser is the giant Verizon. Even better, the also-rans on giant Verizon contracts will be looking for a place to prove their ideas. If Lafayette’s buyer’s are wise we’ll be able to cut some interesting deals on cutting-edge ideas that badly need a place to demonstrate that their ideas are viable before marketing it to the big fellow. A real danger has always been that LUS would be so far ahead of what the market in other places can provide that useful products would have to be untested and hand-crafted for us. That could be exciting…but expensive. Much better to have a big trailblazer proving basic concepts somewhere else. Then we only have to lay in a better implementation.

Apparently Verizon is succeeding. Thought its stock has taken a hit because of its heavy, long term investment in fiber has suppressed earnings its subscriber numbers are very healthy for the same reason. Its bet on a combination of old-style cable technology, fancy new IPTV for the extras, and fiber to the home capacity is allowing the company success in delivering both a high-quality, reliable TV experience, and fancy new IP services. AT&T, on the other hand, has high stock prices but low subscriber numbers for its new hybrid fiber/DSL that uses unstable IP for all its services. If I were looking at a long-term investment I know where my money would go.

The ticket for Verizon so far appears to be sticking to the absolutely reliable technology on the cash cow—cable TV—and using the capacity of fiber to deliver more channels; especially to deliver more bandwidth-hungry HDTV. In addition they are mounting an aggressive push into IP-based services. Verizon is clear about the need to migrate to a full IP system as soon as the technology is proven and it, and AT&T’s committment, ensures that the kinks will be worked out of IPTV sooner rather than later. All in all Verizon’s success validates the similar decisions made by the technical guys at LUS; the bottom line is that it’s good news for LUS.

Is there a downside for Lafayette? Sure. LUS may not compete with Verizon but Cox does. And as Verizon proves that fiber means deadly competition Cox is more likely to feel the pressure to develop effective ways to expand its own bandwidth and competitive delivery of services. But that’s not all bad of course–for the consumer. The catch for Cox is that Verizon is currently succeeding without competing much on price. LUS will and that and the local loyalty that LUS has gained (and Cox forfeited) makes LUS a much tougher target locally than Verizon is through most of its footprint.

The real loser? AT&T/BellSouth who will have the least capable system in the city and very little room to really compete on price.

“Web site courses to be offered”

Sounds good. From the Advertiser: and the Acadiana Educational Endowment are offering eight-week evening short courses in beginner and intermediate Web sites.

The beginner courses will cover basic Web site issues such as open source software and installation, HTML coding, graphics, file transfer and Web hosting. Intermediate courses will cover more programming-level aspects, including introduction to the PHP scripting language, introduction to the MySQL database, Apache server configuration and modules and a look at content management systems.

Something for everyone. Details on the Advertiser….

Google, Intel, others oppose “No Competition” act

We’ve been following the contretemps on Wilson, NC where the local folks seem to have their act pretty well together. There is substantial local opposition to their states version of our “Fair Competition Act.”

The local paper reports that they’ve been joined in their indignation by wireless giants Alcatel-Lucent and Tropos (who will be supplying Lafayette’s wireless equipment). They joined Google and Intel in complaining about the ways that such state interference suppresses the growth of competition and private partnerships with companies like theirs.

“HB 1587 threatens to undermine the establishment of such partnerships, particularly in rural and high-cost urban areas of North Carolina in which the state’s incumbent providers are either serving poorly or not at all,” read the letter signed by Google’s state policy counsel, John Burchett.

Intel’s letter called erecting barriers to public-sector Internet networks a mistake.

The two companies were joined by Alcatel-Lucent, a networking company in Raleigh, and Tropos Networks, a California-based company that provides wireless networks to cities and towns including Philadelphia and Wrightsville Beach.

Not that local officials need much help in clarifying the purpose of the bill:

Andy Romanet, general counsel with the N.C. League of Municipalities, said … “It would make it virtually impossible to do one of these projects,” … “I call it the ‘No Competition’ act.”

Mark Chilton, mayor of Carrboro, one of the first towns in the nation with free wireless Internet, said the bill would hurt expansion of that system, and would prevent rural and poorer citizens from getting online.

“It’s clear that this is just an industry ploy that everyone and everywhere should have to pay somebody on Wall Street to get on the Internet,” Chilton said.

Its nice to know that there the historical suspicion that what is good for Wall Street’s large corporations is not necessarily good for Main Street has not been entirely least not in North Carolina.

Lagniappe: Jim Baller, whose newsletter on breaking telecom news is indispensable, posts links to all the letters filed in opposition to the attempt to foist a “Fair Competition Act” on North Carolina on his municipal broadband reference page.

“Cheap wi-fi too slow”

“Cheap wi-fi too slow” so says :

Bill Tolpegin is vice-president of planning and development for the municipal networks unit of Earthlink, a US-based company that built municipal wi-fi networks for cities including New Orleans, Philadelphia and Anaheim and has been asked to devise plans for networks in San Francisco, Houston and Atlanta.

This is in line with Lafayette Pro Fiber’s long-held position—wireless broadband as currently conceived is not a viable substitute for a wired network. But that’s a pretty shocking comment coming from a major player in the muni wifi business who has been selling wifi as if it were a subsitute (not an addition) to a powerful wired system–What Tolpegin is saying is that his companies networks are too slow. Why? The answer is instructive for Lafayette:

He says the wireless mesh technology advanced as enabling wi-fi to quickly and cheaply cover wide areas can only do so at very slow speeds…

The mesh is slow because it relays data from access point to access point, he says. As traffic hops over these networks the available bandwidth is quickly consumed relaying data back onto a faster, wired network, greatly reducing the bandwidth available for each user.

The only way to get around this problem, Mr Tolpegin says, is to create “injection points” on mesh networks where data is transferred to a different network in order to relieve the wi-fi mesh of the need to carry all data, all of the time.

Translated: mesh networks need to consist of less mesh and a higher percentage of nodes that tie directly into the high-speed, wired, backbone. Mesh technologies, which promised a cheap infrastructure built on few–hence cheap–backbone connections isn’t panning out in practice.

There’s more:

Earthlink has struggled to find commercially viable ways to make the task easier. “Nobody has high-bandwidth, low-cost networks that deliver,” he says. “They are not telling the truth, not even the WiMax vendors.”

The answer, he says, is far denser deployment of wi-fi access points.

So Earthlink’s hard-won experience tells people two things about building high-speed wireless networks:

  1. minimize the mesh, work as close to the wired backbone as is possible
  2. maximize the density of the nodes

Lafayette’s unique situation—with the wifi provider running a massively capable fiber network down every street—allows us to take a slightly different perspective on these truths. Because we will make an extremely capable network available to every user at a very reasonable price there will be little pressure to make the wireless network in Lafayette struggle to provide “dsl” or “cable” equivalent capacities for fixed uses. We’ll have fiber at our fingertips for in-home and business use. Should we want wireless inside our house we can easily provide it for ourselves. The wireless network can be “freed” to be the wireless, mobile extension of the full network—not a low-priced substitute for it.

With LUS both the fiber owner and the wifi provider, it relatively easy for Lafayette to follow Earthlink’s advice about minimizing the mesh. Earthlink has to pay, every month for every drop off the hardwired network and for the bandwidth it consumes. Lafayette will only have to pay once for the hardware drop and the incremental cost of using that bandwidth will be very nearly zero to the extent that taffic remains within the LUS network . Earthlink and LUS will be in radically different fiscal postures and the advantage is all to LUS (and her customers). In fact, LUS already appears to be planning to minimize the mesh in its network—the intial order was for a 1:1 ratio between fiber fed nodes and “radio-only” nodes. (The story says that Earthlink is struggling toward a 2:1 ratio between backhaul feed nodes and radio-only ones.)

Earthlink’s advice about node density is, no doubt, also a good one. I’ve no idea how densely LUS is planning to pack our network. But it is worth noting that what they are buying with denser placement is faster speeds–wifi speeds fall off dramatically as you move away from the node. Because Lafayette’s wireless mobility system will not be burdened with being an adequate subtitute for a DSL or cable system—as it is when it is introduced as a cheap alternative to those products—we’ll be able to consider a density that works best for wireless’ unique mobility functions. Currently those applications center around data and voice and require less bandwidth than video. (Though video, albeit small video, appears to be coming.)

All in all Lafayette’s decision to emphasize building a fiber network as the best choice for a community network seems more prescient every day. Wireless is not an ideal technology for your primary network; its best role is to be hung off an advanced wireline network to serve those mobile purposes fixed wireline connections cannot fill. And, as an additional, ironic benefit it turns out that the most economically sustainable way to get a cheap, truly high-bandwidth wifi network is to commit to building your own fiber to the home network first.

Lafayette is doing it right.