Seattle and the University of Washington have agreed to work with Gigabit Squared on building out the network. The city already owns its own fiber network, which it is leasing to Gigabit Squared. Ansboury estimates that the company will invest $25 million in the project to get it started with more capital required later. Unlike in Chicago, where Gigabit Squared has grant money to work with, it will have to come up with its own capital for the Seattle project. However, the ability to lease the existing Seattle fiber lowers the cost to a point where building out service becomes viable, because Gigabit Squared doesn’t have to dig trenches or string fiber along utility poles.

Thus, Ansboury estimates that he should have permits by mid-summer for the network, and can begin construction. If that schedule works, the city gets gigabit service in late fall. The network here is different from the fiber-to-the-home network Google offers in Kansas City or even from what Gigabit Squared hopes to offer in Chicago. It will have three parts: a fiber-to-the-home component serving roughly 50,000 houses, a point-to-point gigabit wireless service and a Wi-Fi based mobile broadband service in areas where there is existing fiber.

The fiber tech is pretty self-explanatory and the wireless broadband is basically superfast Wi-Fi access points that will attach to that fiber. Subscribers to Gigabit’s home service will have access to that network as part of their home service package but other Seattle residents can also buy access to that Wi-Fi network. That’s an interesting model — will people pay for superfast Wi-Fi in a specific neighborhood where they may not live? Will people who live there buy the Wi-Fi service instead of fiber?

Ansboury says he thinks the Wi-Fi will help drive customer acquisition because people can see how fast a gigabit really is — although he estimates the Wi-Fi network might only offer speeds between 600 and 900 Mbps. He’s also hopeful that he might wholesale that service to other companies, especially during events. In fact as the ISP for the planned network Ansboury is willing to open up access to all of the network, selling wholesale access to others, even to providers that may want to offer competing services he said. Of course, Seattle is also willing to lease its excess capacity to other providers so someone else could come in and do the same thing as Gigabit Squared if they saw economic benefits to doing so.

The other component of the planned network that needs explaining is the point-to-point gigabit wireless rooftop deployment. Ansboury says the company will use a combination of licensed and unlicensed spectrum between 11 and 60 Gigahertz to deliver a gigabit or more between the rooftops of about 39 buildings that make up Seattle’s’ public housing. Such services are not unheard of in major cities, with San Francisco’s WebPass being a good example of such an ISP.

Of course, Gigabit Squared has yet to build a network anywhere, so it remains to be seen how realistic these estimates are. However, it’s clear that cities and service providers are not waiting for the larger, incumbent ISPs to upgrade their infrastructure. As these networks spread and cities can see models to get their own gigabit networks, I’ll be curious how the larger providers respond. Dane Jasper, the CEO of Sonic.Net, which is proposing a fiber-to-the-home network in San Francisco, once told me that for the larger providers to care about these networks they need to take about a fifth of the market.

“Competitors need to take substantial market share before we begin to see large changes in the policies and business practices [of large ISPs],” Jasper said. “If they have 5 percent of the market then there’s not much shift in pricing and things like capping but if competitors take 20 percent with all-you-can-eat plans, the rest of the market changes and consumers will see policy and product and practice changes that are beneficial as a result of the competition threat.”

Hopefully places like Seattle, San Francisco, Chicago, Chattanooga, Tenn. and Kansas City will help get the U.S. to that 20 percent.

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Gigabit Squared has set aside $5 million for the Chicago project as part of its Gigabit Neighborhood Gateway Program in collaboration with partner Gig.U. The State of Illinois is kicking in $2 million, while the University of Chicago is committing $1 million now and plans to raise another $1 million in the surrounding communities.

The first phase of the project will bring gigabit fiber connections to 4,825 homes, businesses, schools, libraries and healthcare institutions in the Hyde Park neighborhood U of C calls home, as well as surrounding communities. For those of you unfamiliar with Chicago, the south side contains many of the poorest neighborhoods in the city, but right in the middle of them all, Hyde Park sticks out like a beacon of affluence.

By bringing in the surrounding neighborhoods of Woodlawn, Washington Park and Kenwood, the project isn’t just targeting college students, professors and administrators. It’s covering a lot a lot of territory beyond the University’s direct sphere of influence. What’s more the project will expand outwards over the next four years taking in more neighborhoods. Eventually the project hopes to connect 210,000 residents living in 79,000 households with a combination of fiber and Wi-Fi technologies, as well as link 10,000 individual small businesses. That’s a healthy chunk of Chicago’s south side.

To get that level of broadband penetration it’s going to take additional funds from Gigabit Squared as well as the university and local government. Gigabit Squared, however, looks like it’s just getting started. It’s raised $200 million and so far is only targeting six cities. Gigabit Squared president Mark Ansboury recently told GigaOM that the company is using these university collaborations as testbeds for making gigabit broadband profitable.

Though the city of Chicago isn’t investing directly in this project, it has a lot of vested interest in seeing it succeed. Last month, Chicago Mayor Rahm Emanuel announced his intention to create new connected tech zones in the city limits through both public and private investment. Those goals line up with Gigabit Squared’s project perfectly. It will not only create a fiber broadband zone around one of the city’s premier educational institutions, it will bring broadband and Wi-Fi connectivity to underserved areas.

Photo courtesy of Shutterstock user Henryk Sadura

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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.

Handshake image courtesy of Shutterstock and skyshak roman.

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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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