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Summary:

Gigabit Squared broke onto the scene on Wednesday, announcing it would spend $200 million to bring gigabit broadband to six college towns in conjunction with the Gig.U program. But the startup aims higher: It wants to change the economics of delivering fiber to the home everywhere.

gigabit-neighborhood

Gigabit Squared broke onto the scene on Wednesday, announcing it would spend $200 million to bring gigabit broadband to six unnamed college towns in conjunction with the Gig.U program. But this year-old startup doesn’t plan to limit itself to the Gig.U program: It wants to change the economics of delivering fiber to the home for cities across the country. That means potentially more gigabit connections across the U.S.

Mark Ansboury, the president of Gigabit Squared, chatted with me on Wednesday morning about the company and its plans to lower the cost of deploying and operating a broadband network. His goal is to bring gigabit speeds to as many places as possible, and along the way he may join firms like Google, Sonic.Net, Allied Fiber and several municipalities in changing the way broadband is deployed and operated in the U.S.

Bypassing red tape keeps projects in the black

For the Gig.U project, Ansboury is offering to spend up to $200 million helping build broadband in six selected communities. The money comes from a combination of vendor financing provided by companies such as Alcatel-Lucent, Ericsson, Corning and others who are working with Gigabit Squared as well as Chicago investment bank Stern Brothers. Communities that apply are expected to contribute too, but instead of cash they will have to make commitments that will lower the cost and headache of deployment.

Communities should work to offer easy-access utility poles, making right-of-way access discussions fast and painless, and may even commit to becoming primary customers for broadband or helping Gigabit Squared sign up new customers. Google has said the municipality’s willingness to help lower its deployment costs as well as smooth the political process was one of the reasons Kansas City, Kan., was chosen as the place where it would deploy fiber.

So in that way, Gigabit Squared is taking a page from the search giant. However, it also plans to work with cities to develop programs that will take advantage of the network, which is something Chattanooga, the nation’s first gigabit network, is trying to do. Creating programs that use the network will help drive residents to use it and engender support among different members of the community, from teachers to public safety officials.

Ansboury is even happy to bring on local ISPs if they want to come to the table to help build networks, although he does expect the first six projects done with Gig.U will be owned and operated by Gigabit Squared. But he’s not averse to a municipality or other network provider taking over, he said. “We think of ourselves like a developer. We have a road map we’ve created to help deploy these networks. We lay out a path for communities to follow,” Ansboury said.

Can this new model work?

Currently Gigabit Squared employees have experience consulting on gigabit networks, but the company doesn’t operate one. For example, Ansboury was the former SVP and Chief Technology Officer of One Community, which helped build high-speed broadband networks in Ohio. Other executives at the company have a variety of roles in infrastructure development and finance, but not everyone has broadband experience, according to their bios.

Ansboury says the company is involved in some broadband stimulus grant efforts and may even make some investments in those networks, providing the private equity for those public-private partnerships. Like someone who has somehow managed to discover an entirely new way to lose weight, he seems excited to bring his models and theories to smaller cities around the country and put them to the test. Unlike Google or even Sonic.net, an ISP in California that’s deploying fiber on top of its existing DSL network, Ansboury is going big and getting there fast.

But, its unclear how much a city can promise under a model like this (or how much it will matter in the end for Gigabit’s Squared’s ROI). Google’s fiber project hit some delays while the city’s utility and Google came to terms on how and where Google would string its fiber on the poles. There is also always the possibility of messy citizen battles over ugly equipment or rights-of-way the city can’t really ignore. For example, residents in San Francisco have sued to stop the placement of AT&T’s fiber-to-the-curb termination cabinets.

An open network means anyone can access that gig

Ansboury says city involvement is just one element of cutting costs, although he declined to get into the specifics of the cost per home passed or the details of how GB2 would build its networks. He did say there are several elements that will enable Gigabit Squared to not only deploy a network for less but also sign customers and achieve a penetration rate that offers a return on Gigabit Squared’s investment. Part of that return might come from Gigabit Squared’s commitment to running “open” networks, by which Ansboury means he will resell capacity on the network to others.

“We realize that if we want to get high take rates and be hyperlocal, we have to think differently and part of that means you have to change that paradigm,” Ansboury said. “You have to be a triple-play provider with broadband video and voice but that’s not only it. With the emergence of over the top services and big bandwidth sucking applications we are creating an open access strategy that allows for a town to have a something like a digital economic development service model.”

He used the example of Netflix coming in and buying capacity to deliver its service to customers directly and confirmed that other ISPs could buy capacity on its fiber. The model looks like a last-mile network that might be as innovative as what Allied Fiber is trying to do nationally for the middle mile. Ansboury expects we will see the first network in the early part of next year as part of the Gig.U program. The Gig.U project communities have two application windows; one closes in July and the other in November, so interested communities should check it out.

As for why this effort matters, Blair Levin, the executive director of the Gig.U project, summed it up nicely in a chat with me on Wednesday. “The problem isn’t that we don’t have a gigabit everywhere. The problem is we don’t have it anywhere,” he said. “And if we need it, we’ll need it in university towns first so let’s get on with it. It’s too late when we discover we need it everywhere because then we are pure consumers of what everyone else [namely places with existing gigabit networks like the Netherlands, Hong Kong or North Korea] else is producing.”

  1. Pete Kleinschmidt Thursday, May 24, 2012

    “we have to think differently and part of that means you have to change that paradigm,” Ansboury said. “You have to be a triple-play provider with broadband video and voice”

    These guys haven’t strung a single cable yet and they are already in trouble. Trying to provide legacy video and voice at this point in time will be a huge waste of both capital and bandwidth. Yes these services will bring in some short term cash flow (which will look good to the bean counters doing the financing), but in the end the company will be nothing more than just another community CATV provider trying to compete against giants like Comcast and TW. It will get crushed.

    I watched this play out 15 years ago in my community with this company http://www.hbci.com/. It was the same song and dance. They were going to string fiber all across town and provide cheap, super fast Internet to everyone. Then they got distracted when someone decided they needed to provide video and voice as well in order to compete. They ended up burning through millions building a CATV and telephone system and completely ignored Internet service.

    Not only didn’t they invest any money into the ISP end of their business, over 95% of the available bandwidth was taken up by shopping channels. The end result was obscenely slow and unreliable Internet service. It eventually become so bad that I had to sign up for DSL service from my local phone company.

    Even more frustrating is knowing how much opportunity was likely lost for my community. Amazingly this company began just before the dot com boom took off. The cheap, fast Internet that was originally promised could have been a huge resource for many local entrepreneurs. We will never know how many promising new companies could have been built and how many good jobs our young people lost in pursuit of a few more TV channels.

    Perhaps Ansboury knows of some secret new technology that will make things different this time around, but I doubt it. In my opinion the only way this new company will be able to compete with the Comcast’s and TW’s of the world is by becoming exactly what those companies don’t want to be – a dumb pipe. It should concentrate on providing Internet service as fast and cheap as possible in as many ways that they can think of. Not only will the company at least have a chance to turn a profit, its services could be a huge boon to the communities it serves.

  2. Thomas Bleha Sunday, May 27, 2012

    I would be surprised if North Korea has a gigabit network. Thomas Bleha

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