I've had this discussion a couple of times with various city council members and candidates in Sunnyvale. Network connectivity should be a community infrastructure, just like roads. The argument I attempted to establish was that "network" was a thing that connected our community, "roads" connect our community. If you can establish that the city puts in the network to every business and home, they can have them all terminate at a city connectivity building (or buildings) and all of the vendors can offer services there, from Comcast to AT&T to Sonic to NetFlix. You pay "network taxes" as a citizen and as a provider which cover the maintenance of the system. Just like taxes cover the cost of roads.
The downside of course is that it makes it easier for the City to tap into your network connection. And perhaps connect commerce tax revenue with transactions originating out of your network port. Sophisticated users would use VPNs or what not to disguise that of course. But it would put all of the vendors on a level playing field.
"Come build us a super-fast network. You'll have to pay for it all. You'll also be required to sell access to your competitors (those guys that didn't pay to build the network) once you're done. We're also favoring companies that happen to be current cell network providers in the city (all two of you). Please respond to our RFP!"
Why is this doomed? I'm from telecom land and this is how it is always done...
The fact that LA is soliciting bids might mean that they provide easements on the entry rights (which are the main thing that prevent rollouts of this nature). The common carriage clause is great and is actually the only way to build networks like this if you want competition. I don't know if you know this, but Fiber is not subject to common carriage laws like Copper and thus the only way to have shared fiber networks is with regulation or commercial interest (with the latter being unsurprisingly limited to the old boys club).
In short, this is actually the way to build a fiber network if you want competition. Alternatively, raise a bond and build it yourself.
Source: I rolled out a fair amount of fiber for Comcast in San Francisco. Each square foot of street we tore up was about $300 and crossing a cable car track was prohibitively expensive. These costs were the main limitations in fiber optic rollouts (pushing the payback period on buildings over 30 years made them unbuildable). In fact, the main advantage Google Fiber got in Kansas City (which was arguably unfair and anti-competitive) was easing of street cutting costs.
I was under the impression that Google Fiber chose Kansas City in part because they had to do little to no underground work. With government red tape cutting being the other part.
Well, pole rights in San Francisco are run through AT&T and the permitting process (while it's supposed to be 30 days) can take up to 180 days to complete.
There are still access rights required for poles because they're considered part of the secure national communications infrastructure.
You'd be surprised at how expensive it can be to lay fiber if the government doesn't want you to do it.
I hope that helps :). AT&T cried foul in KC because Google got a lot of government benefits including space, leasing and access easements. Frankly, they're right, but no one cares because AT&T is evil.
I understand all that having also done this type of work previously. In your original comment you mentioned the KC deal included the "easing of street cutting costs" which should have been very minimal in KC due to the fiber being run overhead. That's all I was trying to address.
In Provo they bought the already-existing Fiber network for $1. It was really a case of the city reaching out and saying, "The current group that runs this is so incompetent we're willing to give it to you, so long as you provide free Internet access for 7 years."
Yes, and that's anti-competitive. I'm not arguing that AT&T was planning to build a network, but just gifting a fiber network to Google isn't exactly fair competition.
Don't get me wrong, I'm in favor of faster fiber as an almost universal ideal, but you can't just give google assets because they're google. That's setting a terrible precedent.
The city already sold the network once for $40 million, which didn't apply to the bond taken to build the network, and then got stuck with it again when Veracity folded. The sale to Google isn't so much a gift as it is a chance to not default on the bond (in theory) and get the service actually running. We can argue over it being anti-competitive but it doesn't appear that there were a lot of companies chomping at the bit to get this network due to the terrible state it was in.
Who knows, maybe it sets the precedent that government can seize assets and allocate them to other people (corperations) in the name of progress. If google blows their monopoly in x years, what's stopping them from seizing it back and giving it to someone else?
They're basically selling the right to be a monopolistic utility vs. a consumer facing monopoly.
1. No one else is going to come in after you and lay more fiber, it's just not worth it
2. Your competitors are going to buy from you but you're still the one earning revenue from the network. In a competitive market your competitors will earn their value-add (marketing) and you'll earn yours (infrastructure + servicing)
3. You'll displace existing infrastructure competitors. Immediately. All that infrastructure Comcast built? useless, no one is going to be buying shitty internet from them anymore. If they want to continue to operate in the market they'll come just another marketing affiliate for you, which is a game that has much lower barriers to entry.
4. They say they won't give you any favorable treatment but they will. This is now a high priority issue that the city explicitly said they'll do. Which means you saving millions on just the legal costs of figuring out if its feasible in this jurisdiction. They won't contradict themselves (too much).
- There are about 1 million households in LA (3M+ population but 3 people per household in LA County)[1]
- Assuming the vendor got 75% sign-up for the free tier, that's 750K households
- I'll give them a generous freemium-to-paid conversion rate of 10% (sorry but 5Mbs is fine for many people). That's 75K households.
- I'll be generous and say that most paid households will get some kind of bundle and pay $150/month
MONTHLY HOUSEHOLD REVENUE: $11,250,000
- There are 250K non-farm businesses in LA County. I'm not sure how many are in the city limits, but let's say 25K buy a paid. Since we know ISPs love to gouge offices with higher prices for the same service, let's say they get $250/mo from each business.
MONTHLY BIZ REVENUE: $6,250,000
- Quick search puts Comcast's ad revenue is about 4% of total (Charter is 5%). So I'll throw in an extra $1M/MO in ad revenue from this deal, which I think is generous.
1. You estimated revenues - let's multiply that by AT&T's 5.7% 2012 net income margin [1]. Y1 earnings: $12.7 million.
2. That seems low - let's double your business revenue estimate. Adjusted Y1 earnings: $17 million.
3. Los Angeles-Long Beach-Anaheim real GDP grew at 2.4% a year between 2009 and 2012. Assume that continues into perpetuity. AT&T pays 5.3% and 3.7% on its 2041 and 2029 debt, respectively - let's say you can borrow between those.
--> Present value of cash flows: $0.6 to $1.3 billion. Quadruple your revenue estimates and borrow at 3.75% to hit $5 billion.
CAYENNE:
1. $5 billion to roll out fibre across Los Angeles seems optimistic. The issue is compounded by the city council having no skin in the game, even with regards to bureaucratic inefficiencies (e.g. some land use or environmental commission jamming the entire project for 5 years).
SUGAR:
1. Your revenue estimates look pessimistic - businesses could pay differing rates based on usage and more than 1/4 of the population could sign up. You also don't include government demand. But it's thorough enough to look closer than 4x off.
∴ The RFP in its present form looks more like a political stunt than a serious proposal. Not sure what the LA electoral calendar looks like over the next 3-6 months.
This assumes 100% gross margin. If they are buying a bundle, you probably mean TV, so they are going to have to pony up to the networks. Then they'll have to pay for upstream (I don't think AT&T etc is going to freely peer with a 750k residential/commercial network), then they'll have to pay for all the support costs associated with running a fiber network.
I'm thinking they'd be lucky to be able to use half of $18.5M/MO to pay off their $5B investment. We're now at 50 years! And that assumes they can keep their price high despite technological advancements over the next half-century (imagine paying $150/mo for an internet connection using technology from 50 years ago). Oh, and they have to wholesale it to their competitors. There is 0 chance this is happening with these numbers.
My thought with a bundle was TV, land-line phone/fax (businesses especially still need this), and possibly even mobile service because I'm assuming AT&T and Verizon are on the short list of vendors anyway.
My short list of vendors who are capable-and-possibly-dumb-enough to consider this are: AT&T, Comcast, and Verizon.
On the other hand, some tech companies with streaming deals/services could maybe do this without any bundle. Could even force some networks to get with the times. So my shot list of vendors who are awesome-enough-but-probably-way-too-smart to consider this are: Amazon, Netflix, Google & Apple.
In my experience, Cable/Telco companies don't build fiber networks with greater than 15 year payback, with 30 being the hard cap. I think your math is fairly accurate.
Source: See my other comment, I did fiber rollouts with telcos including Comcast in the Bay Area.
Right on. And it will 100% go over budget given the amount of work needed, ancient infrastructure, non-compliant landlords and the "I just don't give a shit to change" LA attitude.
I remember two years ago when I was the CTO of a 100 employee company in Beverly Hills just how difficult and annoying it was to get a single 10/10Mbps Fiber link to our offices.
It took 6 months from the date the order was placed to the provisioning. And it took another 2-months to go from 10-20Mbps. It's totally insane that these things take so long and it was 50% the fault of AT&T and I kid you not - 15 employees at AT&T dealing with this - and 50% the fault of the building who didn't even know what Fiber was and thought it was a back link from their telco room to our servers.
Sorry, I didn't see the city dropdown. I was just using the 2.99 persons per household to estimate based on 3M people. I can't edit anymore unfortunately.
> LA expects the fiber buildout to cost $3 billion to $5 billion, but the cost would be borne by the vendor.
> The new fiber network would offer free Internet access of 2Mbps to 5Mbps (possibly subsidized by advertising) and paid tiers of up to a gigabit.
Am I missing something? If the vendor is paying for the network and they're offering free internet, is the only source of revenue advertising and tiers above 2-5 Mbps? Seems like a money-losing proposition to me.
It's a turnkey monopoly for only 3-5 billion dollars, the upfront costs are fairly trivial when you account for the fact that this could be a business that will operate into the next century.
Also, they're free to sell telephone and cable television service on top of internet. I think a few companies have been able to grind out a profit on cable TV.
They are required to sell wholesale to companies provided end user products. It seems the intent is to set the wholesale price for profitability.
Gouging end users by controlling their air supply is one business model. The city is preferring a model where the wholesaler makes a profit at the transport layer and competes in a market at the retail layer. Sounds good for the citizens to me and profitable for company.
If it's doable then why hasn't any ISP done it already? It sounds like the RFP adds costs (open access) but no benefits to the existing situation in LA.
Here's another good and BETTER option -- demand congress to cut 200 Billion dollars/yr from Pentagon spending, re-invest that into nationwide fiber infrastructure(Namely laying the conduit and pipeline for underground wiring) -- then work w/ all telecoms to co-op building out a co-op shared fiber network nationwide...
Personally I don't think any company should eb able to 'own' something that runs along city lines under the street. -- just like they can't own the airwaves..
Imagine just taking 200 billion + some equal investment from Google, ATT, Verizon, Comcast, TimeWarner, etc- - and it'll be owned by the gov't and all 5 major carriers...
Also let users buy in early @ monthly rate they're willing to pay say $5 per month -- which will accrue --so say it takes two years, they'd have $120 in donations to the cause, and a $120 credit for fiber. If they did $100 a month they'd have $2400 in free fiber credit, etc... Let's crowdfund the hell out of this thing and just make it happen... The future is literally waiting on the speed of our broadband pipes.
Semi-relatedly, one of my greatest criticisms of all that stimulus spending of the last several years was how incredibly unimaginatively it was allocated. I've seen figures which indicate gigabit fiber could be rolled out nationally to 95%+ of homes and businesses for $400 billion if gov't paid it all, or $100 billion if done in a private/public partnership. Another figure I've read is that if the U.S. heavy duty truck fleet were converted to run on CNG, we could reduce our oil usage by 20%.
Those would both have been transformational accomplishments, and the $950B or so spent in total could have probably done it all thrice over. Bitterly disappointing.
Great in theory, but I just don't see this happening with the telcos (AT&T and TWC) controlling the entire broadband footprint in SoCal. It's called collusion, look it up.
These two telcos (the worst in the world most likely) base their entire business and offerings on providing high-speed internet of yesteryear. AT&T UVerse service is a step up from traditional ADSL with speeds up to 25Mbps (I get 19Mbps regularly and live about 2 miles from the CO). Telco execs have been quoted as saying "consumer just don't need higher speeds." And most probably do not, the niche consumers (probably the HNers) would love 1Gbps speeds for reasons unknown (perhaps to host their own in-house EC2/S3!) but the niche consumers are the 1% and telcos don't care about us.
The biggest problem with this concept of Gigabit internet in Los Angeles is who will pay the bill, which will most certainly exceed the estimate.
AT&T already has plenty of fiber running to the pole with copper to the household. There are tens of thousands of old buildings in LA that make it impossible or extremely difficult to run fiber to the home. Not to mention, a ton of landlords will simply not care to tear up their infrastructure even if it costs them nothing. There is a VERY serious disease people in LA have which is "We just don't care."
Additionally, the "free" access of 2Mbps - 5Mbps is redundant since these are quite frankly ancient speeds regardless of their price economics. So with that said, if you do a simple analysis of how many customers would actually pay for high-speed (>100Mbps) access vs. the "free hoarders" it would be dismal. And would never cover the costs of the roll out.
Finally, EVEN if the economics made sense, the telcos would simply fight it, create problems for potential bidders, collude enough to force bidders out and continue their shitty business.
This is correct, but you do need to understand that there are technical limitations to twisted pair. Even if AT&T or $TELCO runs fiber to the node everywhere, twisted pair has gigantic line loss issues over long distances. We really need fiber to the prem or frankly we're just messing around.
There's no financial model that will support building fiber networks except the obvious societal benefit. Having fast fiber everywhere is incredibly valuable from both a social and economic perspective. To put it bluntly, GDP goes up when internet gets faster.
Now, the costs will always be wrong for a fiber network. I question why LA would do this instead of building a WISP (wireless ISP) that would deliver speed over radiowave. Forget tearing up all the streets, just put radio towers on the buildings! The costs are lower, the bandwidth is fast and the rollout is asynchronous (you roll the radio towers as you sign people up).
Source: I come from the Internet and stuff. My credentials: Comcast fiber rollout, AT&T sales, Avaya consulting and 2600hz (open-source telco infrastructure).
I completely agree with you - twisted pair has go to go and fiber needs to terminate in the home.
It's actually a embarrassing that this country can neither build a somewhat simple healthcare website and has some of the slowest access speeds in the world.
I remember going to Bulgaria over the years for business and you can get a 100Mbps symmetrical connection for - wait for it - $40 USD.
WISP is an interesting concept and has a better economic model. If you look at proposed 5G wireless speeds, you're looking at 10Gbps+ Even LTE today at 30-50Mbps is better than any non-Gig Fiber to the home (aside from the FIOS service available to maybe 10,000 people in LA)
The biggest problem is and will be AT&T and TWC with their collusion. Government regulation needs to intervene here otherwise private sector simply stands no chance.
Trust me - I want even 100Mbps connection. It's frustrating.
Going back to the concept of a WISP - now that's some innovation if you could make it happen.
There was a company on HN a few months back that made long-range WiFi domed Tx/Rx units that could be mounted on poles, etc.
The problem with WISP deployments is without exclusive use of spectrum (which you have to win at auction from the FCC vs Verizon/at&t/etc) you can't do LTE-type deployments where you can count on a low noise etc.
Beyond that, keep in mind that LTE 30-50Mbps is dependent on the spectrum set on a sector. If everyone ditched the local MSO & Telco for LTE it would get so overloaded that everyone would be saying it sucks and switching back to the MSO.
Generally speaking you are left to deal with licensed microwave in the ~$10k per link for ~260Mbps or unlicensed microwave in 2.4/5.8Ghz where you have to deal with noise from every WiFi router and other random junk. Depending on how many other devices are out there you get less than 1 Mbps to 200 Mbps depending on spectrum availability.
The technology for WISP deployments is fairly mature, to the point that if you are using straight-up WiFi you are doing it wrong.
If you want to learn more, the current market leaders in the US for unlicensed microwave are Cambium (former Motorola)'s PMP series and Ubiquiti's AirMax series. Check them out.
Anyway, there just isn't enough spectrum available to do a robust city-wide WISP network with significant uptake.
> There are tens of thousands of old buildings in LA that make it impossible or extremely difficult to run fiber to the home
Really? Here in Sweden, I haven't seen any problems with running fiber to at least ~80 year old apartment buildings (I recently went apartment hunting, and literally zero of the apartments I looked at didn't have fiber internet)
Indeed, the City is vast, and what people refer to as Greater Los Angeles—which includes most of the grey areas on the first map, like my hometown of Glendale, and a ton more to the east not displayed—is still more vast.
Greater LA aside, there's no chance in hell they lay fiber to every residence in the Valley (the communities that the 134/101 run through and everything else north of that), there's no chance in hell they lay fiber all the way down to San Pedro. Not for five billion dollars, not for five trillion dollars.
Anyone who has so much as casually observed an LA infrastructure/works project in recent history knows that this ends in tears.
> Greater LA aside, there's no chance in hell they lay fiber to every residence in the Valley (the communities that the 134/101 run through and everything else north of that), there's no chance in hell they lay fiber all the way down to San Pedro. Not for five billion dollars, not for five trillion dollars.
Why wouldn't this happen in the Valley? Genuinely curious as I live there.
How have private attempts to run fiber in your neighborhood played out, historically?
I think about the implementation of this am immediately confronted with unpleasant visions of deranged homeowners associations in Bel Air and Encino losing their damn minds. I imagine city planners and project managers haggling over just how far down the priority list they can push isolated ranches in Sun Valley and Sylmar. And keep in mind that these maps don't reflect elevation, or places like Hancock Park where literally the entire neighborhood is subject to Historical Protection Zoning guidelines, and the residents have enough money/political clout to have Congressional bans on tunneling[1] enacted in their favor.
I can see no reason at all it wouldn't happen in the southern parts of the Valley at least. It's a fairly well-off area with the income and desire for such services.
That's interesting. Can NY pull anything like that through? Verizon practically abandoned FiOS deployment, and even if they expand in a crawling fashion, more competition will only boost the market and will make prices lower (right now Verizon doesn't even offer gigabit bandwidth, and anything that comes remotely close in FiOS plans costs some crazy money: http://www.verizon.com/home/fios-fastest-internet/#fastest-i...). I.e. they charge $300 for 500/100 Mbps plan.
>>The new fiber network would offer free Internet access of 2Mbps to 5Mbps (possibly subsidized by advertising) and paid tiers of up to a gigabit.
Subsidized by advertising? The only way I can think of doing this is by injecting ads into internet traffic. Is that what they're thinking, or more of a 'free starbucks wifi" approach.
And why is this bigger than Google Fiber? Couldn't Google bid on this contract?
"But Google Fiber in its current form wouldn't be considered. "They would have to change their business model," Reneker said of Google. "They only run residential. We're requiring a component for the business. That would be a new market for them."
usually RFPs of this nature are published for due diligence purposes when someone already has a plan ready to go and they need it to not look like a slam-dunk selection process.
It doesn't mean there can't be higher free tiers if it makes economic sense, just that those are the minimum required free tiers. The network will be open access. How about you open a free 100 Mbit ISP of your own ontop of the fiber network?
And to me they sound fine - enough of a connection that those living in poverty aren't cut off from access to social services like job hunting and news, but low enough that anyone who actually wants to get use of the internet will become a customer.
I've had this discussion a couple of times with various city council members and candidates in Sunnyvale. Network connectivity should be a community infrastructure, just like roads. The argument I attempted to establish was that "network" was a thing that connected our community, "roads" connect our community. If you can establish that the city puts in the network to every business and home, they can have them all terminate at a city connectivity building (or buildings) and all of the vendors can offer services there, from Comcast to AT&T to Sonic to NetFlix. You pay "network taxes" as a citizen and as a provider which cover the maintenance of the system. Just like taxes cover the cost of roads.
The downside of course is that it makes it easier for the City to tap into your network connection. And perhaps connect commerce tax revenue with transactions originating out of your network port. Sophisticated users would use VPNs or what not to disguise that of course. But it would put all of the vendors on a level playing field.
[1] http://www.timesfreepress.com/news/2008/apr/22/comcast-sues-...
[2] http://www.annarbor.com/business-review/comcast-att-may-thre...
[3] http://www.reddit.com/r/news/comments/1pn4cl/comcast_is_dona...
[4] http://www.dslreports.com/shownews/Time-Warner-Continues-Leg...