Last week’s announcement that a $200 million broadband investment fund is in play courtesy of Gigabit Squared is part of a quiet trend of communities searching for new ways to fund broadband.

Technologies such as desktop PCs, local area networks and mobile applications moved from their infancy to full-blown industries thanks to venture capitalists, investment firms and angel investors who drop big-to-huge bucks on promising startups. For better or worse, these investors drove industries to maturity. Expect the investment scenario for broadband to be different.

Few view broadband networks as startup businesses, but maybe more should. Many communities believe broadband is critical infrastructure, the same as water, electricity and highways. Enlightened communities also know these networks are business operations, even when in pursuit of the common good. The networks must generate revenue, though the financial goal for community-run and muni-run networks is more sustainability for the infrastructure rather than profit.

Gigabit Squared views broadband networks as technology ventures in need of investors and investments, but in a different vein than VCs. Gigabit Squared CEO Mark Ansboury explains that the company targeted private companies for investments that have a business stake in the growth of networks rather than aloof VCs only concerned with the IPO payday.

Gigabit Squared is similar to angel investors who value bringing their time and expertise into the thick of things to help startups. However, the amount of each investment in a broadband network is higher, and the experience the company brings is broader than what comes with typical angel investments.

Think different – more than a slogan.

These towns called on someone who cared about their broadband quality.

“Non-traditional” business  investments in broadband have been around for a while. Early in 2011, Corning, Inc. invested $10 million to three rural upstate New York countiesto build a fiber network, including the county from which Corning operates.  “We saw this as an investment not only in the community’s future, but in Corning’s future,” says Corning’s Dan Collins.

This “we win, the community wins” philosophy was showcased at last week’s Freedom to Connect conference in Washington, D.C., as a session panelist described how his software company is investing an undisclosed amount to build a fiber network throughout San Leandro, Calif,. Pat Kennedy, CEO of OSIsoft, says his company needs gigabit speed to continue to grow and compete effectively. Kennedy feels that, as a longtime resident, property owner and successful business in the city, he should give something back to the city. Lit San Leandro is his investment. How many communities could move their broadband projects forward by finding more such investors?

Here’s another example. Four friends in Emporia, Kan. who until several years ago held management roles in a successful small local telecom company, had become very unhappy with the poor quality of broadband in their town of 30,000. The large incumbent refused to upgrade its network to address the community’s needs. So the four started a new company – Valu-Net, LLC – with $500,000 of their own money. Then they proceeded to raise an additional $6.3 million from investors who had to put in at least $50,000 to participate.

This is more traditional tech startup fundraising. What wasn’t typical were the investors. Co-founder Rick Tidwell states, “The people who put money in … you wouldn’t expect to have this much to invest. There were small business owners, farmers who’d done well. Mostly average Emporia residents who invested because they believe in the founders and believe that it [the network] eventually helps the community.”

Issuing municipal bonds to fund networks is on the wane because of politics and the poor economy. But what if communities flip the script, take government out of the picture (directly), create a nonprofit corporation that is owned by local citizens and businesses, and replace bonds with promissory notes. You would have ECFiber in Vermont. To date the not for profit corporation has raised over $2 million for a fiber network selling $2,500-notes to rural residents who average two notes per purchase.

Make a deal for better broadband.

Flip the script again. IPOs are the stuff of legend in the tech industry. In England, Broadband for the Rural North, LTD (B4RN) sold enough shares of stock to finance its initial network buildout. The main fact is when communities think outside of the box, good things can happen.

Control vs capital.

While these are definitely winners, from the perspective of those who champion the public good, the level of success is directly dependent on control. As with traditional tech startups, whether you take investment money – and from which investors – often comes down to how much you give up in exchange for the money.

How much communities control and direct the use of the network depends on who calls the shots. As Ann Millspaugh, Online Community Manager for EdLab Group, said after listening to Ansboury last week, “It seems like Gigabit Squared’s comprehensive, integrated buildout will make the community dependent on its infrastructure. The lack of transparency and input towards management/governance easily could lead to characteristics that have been defining the digital divide, particularly fiber deployment to areas that will be most profitable, and unchecked pricing structures.”

The trick for building networks that maximize benefits for the public good seems to be to create a strong governing body for the organization that owns the network, whether a co-op, nonprofit, community foundation, even a public-private partnership. Community stakeholders can’t be so enamored with the technology that they don’t pay close attention to the design of the infrastructure and business practices. How communities respond to options such as Gigabit Squared likely will depend on how they resolve the issue of control.

Craig Settles is a consultant who helps organizations develop broadband strategies, host of radio talk show Gigabit Nation and a broadband industry analyst. Follow him on Twitter (@cjsettles) or via his blog.

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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.”

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You might think that, given the Green Bay Packers’ history of winning seasons and how much revenue the team generated this year even without going to the Super Bowl, $250 in Lambeau field is a sound investment. Until you realize, as one blogger noted, “the stock has almost no benefits. The paperwork to obtain the stock even warns that the stock should not be purchased with the intent to make a profit. The stocks are un-tradeable, pay no dividends, and do not even have securities-law protection.”

Basically, a share has the practical value of a six-pack. But the emotional value seems to be priceless. The Packers sold 280,000 shares in about five weeks. So how does this translate into sound community broadband financing strategy? And is it viable?

Communities put their money where their needs are

In Vermont, 23 town governments created ECFiber, an LLC nonprofit corporation. No tax dollars went into ECFiber. Instead, ECFiber offered tax-exempt 15-year $2,500 promissory notes that effectively earn 6 percent interest. The approximately 50,000 people in these towns raised over $900,000 in 2011 to begin an initial buildout covering 26 miles. To finish the network and bring connections to people’s doorsteps, ECFiber is doing additional fundraising rounds. In a recent effort, the town of Barnard , Vt. with 386 households generated $350,000 to continue building out the network in their town. With funds for covering two-thirds of Barnard accounted for, they expect to raise enough to complete the job.

In rural Lancashire in the north west of England eight parishes united to form Broadband for the Rural North, Ltd (B4RN), a not-for-profit community co-op. Similar to Green Bay, the co-op sells stock in B4RN, though these shares earn immediate tax breaks, and potentially will pay back investors and the communities.

B4RN shares are 1£ each with a 100-share minimum purchase required. Those buying 500 or more get a tax credit of 30 percent of the stock’s purchase price. Investors buying 1,500 shares get a year’s worth of broadband thrown in the deal, or 15 months if they buy before the February 29 Early Bird Special deadline.  Further cementing the community bond with the project, investors buying 3,000 shares can donate 1,500 of those plus the broadband service to a neighbor. B4RN currently is over halfway to reaching its financial goal that enables the buildout to start.

The value in these community-investor models is not just their ability to raise money. When the community literally owns a major technology asset such as communication infrastructure, some of the dynamics of marketing, network operations and management change.

Community investors change the rules

Ownership changes passive network users into true believers and mini marketing teams. A women’s soccer team I coach has a player from Green Bay who’s a true believer. During her trip there for the holidays, the intensity of their support is evident in their Facebook posts, Christmas Eve Lambeau Field drive-bys and, yes, stock purchases. Owning a community asset that improves economic development, healthcare delivery and education produces the depth of support to mirror that driving ECFiber’s and B4RN’s progress.

What’s earned in the community also stays in the community. Green Bay made rules that keep the asset – the team – in the hands of the community and are careful not to lose that control to some corporate interest. Communities creating similar kinds of rules not only keep the network under local control, but also limit the possibility of it becoming a political football. Incumbents can’t muck with local elections to negatively impact the network.

One frequent complaint about broadband customer support is that you can’t reach someone local to resolve your problems, and waiting days or weeks for a support technician is maddening. When the people who manage the network are next-door neighbors with owners of the network, these kinds of issues fade away. Wally Bowen, founder and Executive Director of the community-owned Mountain Area Information Network (MAIN) ISP in North Carolina, refers to this as “social capital,” the ability to literally reach out and touch the people bringing you broadband.

Local involvement in critical management tasks can increase, such as budgeting, fiscal management, legal planning and rules compliance must be addressed. Sometimes communities have to look elsewhere for talent to handle these chores. However, B4RN and ECFiber rely on as much local talent as they can recruit. B4RN has farmers trenching and laying fiber, and has plans to train residents how to do service and upgrades. Those doing the work are paid in stock whenever rules and practicality permit. As the tech industry knows, employees with an ownership stake often do better work.

Community networks can also impact economic development if networks re-invest profits directly into these and digital inclusion activities via community foundations. Sharon Stroh is Director of Business Development of iMAN, an enabling organization for the existing Steuben [IN] County Foundation and the main driver of their community dark fiber network. Stroh described iMAN’s direct contribution to the local economy on Gigabit Nation. After the buildout, 65 percent of subscribers’ connection fees ($225/month) will go to providing funds for economic development projects. B4RN created a charitable group that plans to use network profits to buy broadband services for low-income constituents.

The road to a successful community investment program isn’t easy. But communities are finding the rewards to be sweet indeed.

Craig Settles is a consultant who helps organizations develop broadband strategies, host of radio talk show Gigabit Nation and a broadband industry analyst. Follow him on Twitter (@cjsettles) or via his blog.

Images courtesy of Flickr user Paul Kehrer.

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Given that other carriers often launch ten or more new smartphones annually at CES, news of the Blaze 4G may sound underwhelming. But in addition to expanding its 42 Mbps service to cover 184 million people, T-Mobile did launch 25 new HSPA+ phones in 2011. I expect that approach of rolling launches to continue in 2012; especially now that its acquisition by AT&T is no longer looming on the mind of T-Mobile.

I haven’t seen the new Android smartphone firsthand yet, but T-Mobile tells me it uses Qualcomm’s Snapdragon S3 processor, which is a dual-core, 1.5 GHz chip. In addition, Samsung’s Super AMOLED screen technology is used in the touchscreen display. Pricing and availability haven’t been announced.

After hearing about the new smartphone, I had the chance to chat briefly with Neville Ray, T-Mobile’s CTO. He confirmed that T-Mobile isn’t stopping at 42 Mbps and intends to double down again to get to 84 Mbps on it’s network. The software in T-Mobile’s cell sites is generally ready, but because 84 Mbps will require a multiple antenna, or MIMO, solution, T-Mobile will have to work with handset makers to prepare new hardware as well as install new antennas on its cell towers. T-Mobile also needs to upgrade the backhaul links to some of its cell sites.

T-Mobile did acquire more spectrum from the failed AT&T deal, which could help T-Mobile accelerate its overall network strategy. And that strategy doesn’t preclude LTE, which Ray said will happen when it makes sense economically.

I couldn’t pin down an LTE timeline from Ray, but with the 84 Mbps plans and additional spectrum from AT&T, I think we’ll hear about some LTE strategies later this year. For now, it’s an HSPA+ world for T-Mobile customers, but that’s not a bad thing. My Galaxy Nexus sees 10 Mbps down in my area — which is a 21 Mbps coverage zone — and for a smartphone, that’s plenty fast enough for the relatively inexpensive price of a T-Mobile data plan.

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This specific situation isn’t new; it was first reported on Reddit back on Nov. 22, not long after the Kindle Fire began shipping. I only just heard about it this weekend via TheVerge and I tested our Kindle Fire to verify the reports. The browser does redirect any Android Market requests to the Kindle app store; even if you turn off the accelerated browsing feature that routes traffic through Amazon’s servers. That means this hijacking isn’t done via the cloud, but instead is hard-coded into every Kindle Fire. TheVerge reports a file called MarketIntentProxy.apk is the culprit.

Who owns “your” mobile device?

I have several concerns. First is the idea of limiting what a consumer can or can’t do on a device he or she has purchased. I’ve seen this situation before with smartphones and tablets sold through carriers. Some examples include the blocking or removal of tethering applications and more recently, Verizon’s insistence not to have Google Wallet installed on its Galaxy Nexus model.

To some, this is a grey area because the operator has an asset to protect — its network — and also because of the hardware subsidy model. If there’s a mobile application pinging servers too much, carriers should have recourse and processes to let the offending app maker know, fix the problem or be pulled from an app store. This exact scenario recently happened with YouMail and T-Mobile, for example. In terms of subsidized hardware, when does a consumer actually “own” their device? Carriers can pay for some of the costs, so do they “own” the device as well over the life of a network contract and does that allow them to have control?

Regardless of where your opinion lies on these two particular angles, these arguments shouldn’t apply to the Kindle Fire. Why? Because even though Amazon is reportedly selling the Fire at a small loss, consumers are paying the full price for the hardware. There’s no subsidy for Amazon to pay in order to get people to buy or use a Kindle Fire. And with no subsidy, there’s no contract for network service.

In fact, the Kindle Fire can’t even use a mobile broadband network because it only has a Wi-Fi radio. So consumers are buying the device outright and supplying or finding their own network connection. I’d say the owner should have full control over their device in this situation, with the understanding that technical support is limited or not provided when using the device outside of its intended use.

Redirecting specific web requests is bad karma

My second concern is: where does it end? By routing a specific web request away from the intended site on the Internet, Amazon has set a dangerous precedent here. We collectively debate open vs closed ecosystems, net neutrality and other related themes, but if I had to pick one app to consider “sacred” in these discussions it would be the browser. That’s not the case for this particular web request on a Kindle Fire and once millions of these are in consumer hands, who or what could stop Amazon from adding other URLs to a list of redirects?

You’d think a Kindle Fire owner could simply install a third-party browser — Dolphin Browser HD on a Fire can access Google’s web-based Market, for example — but guess what? There are no third-party browsers in the Kindle AppStore save for Maxthon. But that the browser is our window to the web and that window should not have smears or streaks obscuring our view because a company says so.

I understand Amazon sells the Fire in order to sell apps, movies, TV shows, magazines, books and physical goods. And the company built its tablet upon Google’s open-source Android platform. I think that was a smart strategy.

But Amazon’s tablet relies heavily on Google’s platform; it’s not like the Fire is a standalone platform of its own because standard Android apps can and do run on the device. You simply have to know how to access them and install them. Most people don’t, so I don’t think Amazon should worry. And blocking one of the easiest ways to get standard Amazon apps on the Fire — via the Android Market website — isn’t a long-term answer because the company could suffer through the tag of “web censorship.”

Perhaps I’m being too hard on Amazon here, since many apps require hardware such as a GPS or microphone, which the Kindle Fire doesn’t have. But when I think about this situation in a different light, it doesn’t sound like I am. For instance, if you decided to purchase a new car and after you bought it, the dealership told you it could only be driven on certain roadways, how would you feel? Maybe that’s too extreme of an example, but all I know is this: I want to ride in whatever lane of the information superhighway with my browser that I see fit.

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