Service providers face increasing competition from municipalities like Ammon, Idaho, that are deploying their own fiber infrastructures, then charging operators to use the networks to deliver services, and then competing on price and performance.
Fiber, after all, fuels Ammon's growth, said Barry Patterson, technology director for the city. Back in 2008, he said, city managers decided to invest in technologies necessary to start providing high-speed broadband to government-run agencies, such as schools, wells, city pools and police.
Ammon -- which is Idaho's 17th fastest-expanding city and was expected to see growth of 123% between 2000 and 2010 -- is steadily increasing the footprint of the city-owned network that leverages software-defined networking, virtualization, fiber and open source. After its recovery act grant was rejected, the city created a fiber department that received some funding, in part to reduce the premium that government agencies were paying for broadband connectivity, Patterson said.
"We were paying a lot of money every month to outsource connectivity between our buildings in the city," he said. "We started to construct our own fiber between those buildings to get rid of those monthly, recurring costs."
As the city deployed fiber for municipal uses, it recognized the opportunity to leverage the cables for home use, Patterson said. And so, it created the backbone network to support a much larger footprint. Analysis shows Ammon's initial investment will pay for itself in 25 years, he noted, similar to municipal bonds.
When Ammon solicited requests for proposal, only two contractors bid for the trenching work necessary to lay down fiber -- and the lowest bid was $600,000, Patterson recalled.
"We're doing all of the installs internally. We bought a board machine. It's public works people and city technology people and we're doing all of this in-house. The labor costs we cut by 50% compared to the lowest bid… we're doing it for $300,000," he said. "That's one reason we can't do as many homes as we want. We're not going to scale up and try to do the whole city. We can't afford to, number one. And number two, it makes no sense because we'd be left with a whole bunch of people to lay off and a whole bunch of equipment."
Ammon uses software-defined networking to allow residential customers to quickly switch between three -- soon to be four -- service providers available via their four-port router. Users select the service and port, and it then delivers the service -- up to 1 Gbit/s with no contract or cap for $29.99, plus a separate fee for the fiber, said Patterson.
"There is no manual programming of the network. The network is all done in software. The portal is basically a website. The user gets a user name and password and that user name and password are associated with the device in their home," he added. "There's no manual provisioning. We're taking SDN and pointing it to the end-user and giving them part of those controls."
Paying the pipe-r
Today, Ammon passes 369 homes. Most have paid $3,000, either writing a check immediately or asking the city to amortize it in a municipal bond, with the payment added to their tax assessment like any other local improvement district bond, such as a sidewalk or roadways, said Patterson. If the house is sold, the fiber bill stays with the home.
A 20-year assessment at 3% interest costs about $17 or $18 per year, he said. After that, residents pay approximately $16.50 a month to maintain the fiber, he said. In total, residents pay about $60 a month for 1 Gbit/s or around $45 a month for 100 Mbit/s, he noted. Before the municipal fiber deployment, 1 Gbit/s cost around $99 a month, Patterson added.
So far, the voluntary take rate has been 72% across three non-contiguous developments, said Patterson. An opt-in approach avoids legal actions from commercial operators, he noted. (See Build Your Own Broadband Comes Under Attack.)
Providers must compete on service, he said. For example, one now offers broadband-based security. And the region's largest provider, currently not using Ammon's city fiber, expects eventually to use the infrastructure once it has a much larger footprint, he said.
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It wasn't long ago that TV was ranked by subscribers as the most important service in the bundle provided by their communications service provider (CSP). Recent research indicates that for nearly three quarters of subscribers, broadband is now the most important service. Broadcast TV is the most important service to only 15% of North American consumers, replaced by OTT video streaming platforms like Netflix, Amazon Prime and Disney+. In addition, many different competitors are moving aggressively to stake a claim in consumers' homes.
In 2020, CSPs need to fight back by transforming their business models, which are becoming more reliant on a single source of revenue: fixed broadband services.
This webinar will focus on helping CSPs transform their business models by placing a firm focus on delivering a sensational subscriber experience and by offering compelling new services that generate value for subscribers. These actions will reinforce the CSP's strategic position in the home network and position themselves for growth in the next decade.
Key topics include:
Being the first to market with WiFi 6 technology, in response to consumer purchases of new devices over the holidays;
Having the insights needed to proactively resolve issues, often before your subscribers even know that there are issues;
Providing help desk agents with the visibility they need to resolve common subscriber issues more quickly;
Delivering a mobile app, in response to consumer demands for the ability to do some things themselves, rather than having to call technical support; and
Addressing consumer concerns around device security, privacy and control with enhanced security and parental controls.
In this insightful Light Reading radio show, Kurt Raaflaub, Head of Strategic Solutions Marketing, will outline the key service provider challenges, deployment considerations, next-gen Gigabit technologies, and service models to win market share in the rapidly growing MDU market.