Newsletter: Medina County Economic Development Corporation - Fiber Optics Article

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Fiber Optics Article - Gazette 8/25/06

By DENISE SULLIVAN
Staff Writer
MEDINA — Area Internet providers, who have opposed the county's fiber-optic project in the past, are now considering partnerships.
Although the door has always been open to the incumbent providers for partnerships, a round of meetings in late July was the first in which Armstrong, Time Warner and Verizon representatives "indicated a willingness to cooperate" with the county, Economic Development Director James Doutt said. "The meetings were encouraging," he noted. "They have indicated when a (Request For Proposals) goes out, they will respond."

The $7.3 million project, which has been in the works since 2004, consists of an 88-mile fiber loop that will provide increased broadband connectivity countywide and offer government buildings, schools, libraries, hospitals and businesses a choice of carriers, Doutt has said. It would not be available to residential subscribers.

The county port authority, which will own the ring, will meet Wednesday to finalize hiring Cleveland-based consultant Mark Ansboury to aid in drafting the RFP. Ansboury is the chief operating officer for One Cleveland, a nonprofit organization that operates a fiber network that provides "ultra broadband networking services to its subscribers," its Web site states.

Options for partnering with existing companies include leasing fiber from them, or enlisting their help in the loop's design and construction. Leasing fiber that is currently dark, or unused, would cut down on the amount of strands that need to be added by the county, Doutt noted. "There are areas we'd still need to expand to, or to expand fiber capacity to existing areas, but this would be a help," he said.

Karen Wolff, Armstrong's general manager, said the company "certainly has the capacity to fill current needs." "We've always been interested in partnering," she noted. "We're feeling very optimistic we can partner in some way at this point."

"We're certainly willing to partner with the county," said Chris Thomas, director of government media relations for Time Warner. "We have the network available they could lease. We're just discussing the best way of doing that."

A representative from Verizon could not be reached for comment.

The companies previously claimed the project is unnecessary because they already have an extensive fiber network in the county that offers all needed services to customers. Wolff has said more than 60 percent of Armstrong's fiber network is unused and can be lit when the demand is there.

"We have fiber on every major route in and out of Medina," local Verizon manager Lee Hlas has said. "If a business needed bigger bandwidth, we could put it in for them, they just need to request it."

John Guran, senior director of commercial services for Time Warner has said because of his company's recent takeover of Adelphia, 80 percent of Northeast Ohio is blanketed in fiber by Time Warner.

Members of the fiber-optic task force have never denied a fiber network already exists within the county; however, they claim it is not adequate to offer enough capacity to customers. "Incumbents are selling capacity in small chunks in a retail mode," said Macy Hallock Jr., vice chairman of the task force. "We're talking about the kind of clients with high-technology needs that are buying capacity much larger than a cable company is able to offer." He cited an example of a pipeline entering a building as a way to compare the "magnitude" of information the proposed ring will carry as opposed to the fibers offered by incumbent providers. "There's a half-inch-around pipe coming into the building now," Hallock said. "We're talking about a pipe that's 3 to 6 feet around."

Doutt, along with task force chair James Gerspacher, noted the loop will bring more than just higher capacity. It also will carry more reliability and competition, which will result in a better local economy and fewer taxpayer dollars spent on tech support. "With the existing monopolies, people don't have a choice what they pay," Gerspacher said. "This is inviting competition, so pricing will be market-controlled instead of controlled by a single provider." By having to spend less on technology, governments, schools and libraries can spend taxpayer dollars elsewhere, he noted.

Public sector funding
An opponent of the project, Medina Mayor Jane Leaver, said while she supports the concept as a whole, she does not agree with the loop being funded by the public sector. "I've always thought the smaller the government, the better," she related. Leaver compared this project to the Medina Community Recreation Center, which was completed in 2002. After a levy was rejected by taxpayers three times, the city took out $7.5 million in bonds for its construction. "I absolutely agreed this city needed a rec center," she said. "But there should have been a guaranteed revenue stream, like a taxpayers' vote, or through private enterprise." She noted the city must raise $573,000 annually to repay the bonds. "I'm now a government forced to make a profit," Leaver said. "A government should never be in that position. We can't juggle costs like private companies can." She explained without a guaranteed revenue stream, the project is too risky for county commissioners, who would be responsible for paying the bonds from other funds.

Doutt contends the fiber network will be in the black after three years of operation, based on conservative estimates. Only 10 potential customers were used to form the estimates, when in reality there could be hundreds, he noted. That estimate also does not include fees paid by local providers who would connect to the fiber ring to offer their services, Doutt said.
Should the ring not draw enough revenue to repay the bonds, commissioners would be responsible for making up the money — but it would not be from taxpayer dollars, he related. By law, the money must come from nontax sources, like dog licenses, fishing permits and tap-in fees for water and sewer, Doutt noted.

As far as not having a "guaranteed revenue stream," Gerspacher said at this stage in the project, signing written contracts is impossible, since there is no fiber ring yet. Contracts will be secured prior to construction, however. "We will know before the first dollar is spent whether we'll have enough users," Gerspacher said. "After we get funding, we will insist on signing contracts before construction starts."

Several organizations and companies have signed letters indicating their intent to subscribe to the ring: Medina General Hospital, Westfield Group, the University of Akron, Medina County District Library, Brunswick City School District, Medina County Schools' Educational Service Center, Optem, Industrial Parkway Partners, SFS Intec and Central Command. Doutt noted two-thirds of the ring's 96 strands will serve governments, schools and other nonprofit organizations, while the remaining third will serve businesses. He said using bonds is not the only source of funding the task force has pursued. A request has been sent for federal grants, and the Ohio Department of Development has several programs the project may be eligible for, Doutt said.

Since the initial planning stages of the fiber project in 2004, the cost has already decreased $0.7 million, down from the originally estimated $8 million, because of increasing technology, Gerspacher noted.

Another of Leaver's concerns is the project's 15-year payoff paired with the rapid changes in technology.
"I'm no expert, but by 15 years, the technology could be outdated," she noted.
Karl Nicholas, a Californiabased technology consultant and former vice president of technology for Corrpro in Medina, said that time span encapsulates six to eight generations of technology. "Technology changes very quickly," he noted.

While some say the fiber project should have been built years ago, Nicholas said if the need is there, it's not too late.
"If there were businesses that already didn't relocate to Medina County because of low bandwidth, then it's probably too late," he related. "But if the demand is still there, then it's not too late."

Hallock asserted fiber optics is still cutting-edge technology, and the proposed loop will be easily upgradeable. "There's a 30- to 50-year lifespan for fiber technology," he noted. "It can easily expand for more and more capacity. We're completely upgradeable."

Wireless technology is also an option, Hallock related. While it cannot provide enough capacity as the backbone of the network, wireless connections could be used as the "last mile," the connection from individual buildings to the loop.
"Wireless has a place, but not for ultra-high capacity," Hallock said. "For people who are one, two or three miles off the ring, that could work."

Municipal broadband
Although the fiber loop is different than municipal broadband systems — municipal systems are city-run and often serve individual residents as well as government and business — they are often funded in the same manner, through bonds.
Two examples of Ohio cities that built broadband systems were met with varying degrees of success: Lebanon and Wadsworth.

Lebanon, which completed its residential network in 1998 and a loop to the industrial park in 2001, spent $15 million on the project, Telecommunications Director Derek Zucco said. The city is currently negotiating the sale of its network to Cincinnati Bell in an attempt to unload its $10 million debt, he related. The purchase must be approved by city voters in the Nov. 7 election.

Each year the network did not bring in enough revenue, the remainder of the bond payment came from other city funds like fire, electric, sewer and general. Zucco pointed to "overly optimistic" revenue estimates as being partially to blame for such a large remaining debt. "It's been a struggle to keep this going," he noted. "It has not been easy."
Even though debt was incurred, Zucco said the city's main goals were achieved: to offer residents better service and lower prices through competition.

Wadsworth, on the other hand, is satisfied with the system it began building 14 years ago. "The primary benefit is the network provides competition," Service Director Chris Easton said. "The more competition and better services, the higher the quality of life people have."

Wadsworth's network, billed at $3 million for the initial 30 miles of fiber in the city, has brought its customers a savings of $15 million to $20 million in tele-communications fees, Easton noted. "That's money that would have gone elsewhere," he said. "Those are dollars that have stayed in the community."

The city has made additions and upgrades to keep pace with the area's growth, Easton noted. Each year the network brings in about $2.5 million, he said. "It's all paid for by the operation of the system," Easton said. "It has nothing to do with tax dollars."

Wadsworth representatives, in addition to those from Medina and Brunswick, have signed letters of support for the project.
"The county's fiber loop would open the door to even more competition for our residents," Easton noted.

The main difference between these municipal ventures and the proposed fiber loop is that the ring, while owned by the port authority, will be operated by private companies. Revenue from the loop will go to the port authority, which can use the money for future economic development projects in the county.

"We are not providing services or competing with incumbent providers, but this will promote competition among them," Doutt said. While the original goal was to begin construction of the ring this year, that timeline has been pushed back until 2007. The next step is for commissioners to vote on the project's funding and to continue exploring potential partnerships with Internet providers, Doutt said.

Leaver said she would feel more comfortable with the project if Internet companies do enter into contracts with the county.
"If the companies enter into this, that would eliminate the risk of private competition undercutting the county," she related. "If they can reach an agreement with existing providers, then that could be the answer to all my concerns."

"We're very encouraged by possible agreements with (existing) companies," said Debra Lynn-Schmitz, president of the Medina Area Chamber of Com-merce, which has formally supported the project. "Hopefully they'll find a way to use what already exists and fill in the gaps as needed. Building from scratch would only delay the process."

Sullivan may be reached at 330-721-4064 or dsullivan@ohio.net.