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With Bandwidth Demand Booming, a New Kind of Optical Network Is Born

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Allied Fiber said today it’s begun construction of a nationwide wholesale fiber network that will span 11,548 miles. The New York-based company will build out the network in six phases, linking undersea cable landing points, data centers, colocation interconnection facilities, rural networks and wireless towers in order to feed the increasing demand for broadband capacity resulting from everything from the ever-growing number of cellular towers to cloud computing (we’ll talk about the bandwidth needs for cloud computing at our Structure 2010 conference next month).

A New Model to Meet Broadband Demand

But Allied’s effort isn’t just aimed at boosting overall capacity — it’s aimed at changing the underlying business model of providing long-haul telecommunications networks. Hunter Newby, CEO of Allied Fiber, wants to connect the U.S. with an open fiber network comprised of the three disparate systems that essentially make up the backbone of the Internet, and is targeting data centers, high-bandwidth sites, rural ISPs, wireless companies and long-haul networks providers as customers. But it remains to be seen if Allied’s model will compete, not just with offerings from backbone providers such as Level 3 Communications (s lvlt), but also with colocation companies and the tower industry.

Newby, who was the chief strategy officer at colocation provider Telex, is pretty impassioned about his plan to bring wholesale fiber to places where existing backhaul providers may not go. It’s a plan similar to Google’s (s goog) experimental fiber network for consumer broadband, but enacted on a much larger scale, and for businesses. Newby believes that in underserved areas where Allied Fiber will have a presence, the cost of bandwidth will be driven down significantly because Allied will be willing to sell access to the long haul network, at competitive rates, to anyone who wants them — something the incumbents aren’t inclined to do.

Competition Drives Costs Down

The construction of Allied’s network is a big deal for small ISPs, which can find themselves having to pay more than $100 a megabyte for bandwidth, and may mean they don’t have to implement bandwidth caps as a means to keep their own costs down. It’s also a big deal for cellular carriers like Sprint (s S) and T-Mobile, as it will give them access to less expensive backhaul without having to pay the likes of AT&T (s T) or Verizon (s vz).

As Newby explains, rural providers or cellular providers needing rural coverage will be able to buy transport at wholesale rates from a colocation provider in the middle of field somewhere along a railroad right of way (Allied has a deal with some railways companies for access to their ducts). Such an approach could provide access for a single provider near the colocation facility or other regional providers could build off the Allied network. It would also open up the opportunity to locate data centers in rural areas, perhaps near renewable energy projects.

“The incumbents have control and have made it quite clear they’re not willing to make any significant capital investments in rural areas and are selling off rural assets,” Newby told me. “But you need to change the economics, and if these buyers can buy at even $15 per megabyte…the number of gigs and terabytes will eclipse the current rate because right now it’s so expensive.”

Building a High-Fiber Network

The first phase of the Allied network will cost $140 million, will connect New York, Chicago and Ashburn, Va. and will be completed by the end of this year. Newby said the second phase (from Atlanta to Miami) will cost $180 million, and the third phase connecting Chicago to Seattle could cost as much as $350 million. However, he added that potential customers are willing to go in with him on the cost of the connection to Seattle because big bandwidth providers like NTT Corp. need a shorter route to get their traffic to Asia. The final three projects aren’t budgeted yet, nor is there a definitive time frame.

The first phase will provide a combined 648 dark fibers, 19 colocation facilities and 300 tower sites. From the press release:

Allied is deploying a 432-count, long haul cable coupled with the 216-count, short-haul cable that will be a composite of Single-Mode and Non-Zero Dispersion Shifted fibers. Allied Fiber has implemented a new, multi-duct design for intermediate access to the long-haul fiber duct through a parallel short-haul fiber duct all along the route. This enables all points between the major cities, including wireless towers and rural networks, to gain access to the dark fiber. In addition, the Allied Fiber neutral colocation facilities, located approximately every 60 miles along the route, accommodate and encourage a multi-tenant interconnection environment integrated with fiber that does not yet exist in the United States on this scale.

If Allied Fiber can build an open fiber network that spans the country and includes colocation and towers, it could provide a way for municipal fiber networks and rural ISPs to get online and connect to backhaul for less, while bypassing their potential competitors (for example, a muni fiber network might compete against AT&T but may also have to buy access back to the Internet backbone from AT&T because it’s the only provider in the area). We’ve long argued that open networks are the way to go when it comes to big infrastructure, something with which Newby agrees. “I believe in the power of open networks,” he said, “but instead of talking about it or writing, about I want to do it.”

He went on to say that: “I encourage other people to copy our model and philosophy of neutrality. It drives growth and it’s what drives the innovation and bridges the islands of broadband we have in this country.”

Related GigaOM Pro Content (sub req’d): Who Will Profit From Broadband Innovation?

24 Responses to “With Bandwidth Demand Booming, a New Kind of Optical Network Is Born”

  1. We are a minority construction firm located in Washington DC and are very interested in the construction of the plant. Information on how we may participate on the project would be appreciated

  2. NoNameJoe

    So, This is already being done by several companies.
    and, I work for one that does this. we even run fiber backhaul to cell towers.

  3. Tariq Biziou

    I suffer severe agonizing attacks every time the wrong units of measurement are used. Megabyte is to megabit per second, as mile is to miles per hour. “My car does 65 miles” … wow, that thing must burn gas like mad.

  4. mrfixit123

    this is stupid. more investors suckered into another useless telecom idea so executives can stay rich. i dont see telx doing so great. if companies like level3 or ATT see a demand for bandwidth in an area, then they will build out there if they feel its worth it.

  5. Phil Read

    Speaking of the money…. the fed’s rural broadband stimulus supposed to make it more economical for rural ISPs to provide bandwidth to surrounding areas …unless they’re a recipient (?) i wonder what kind of dent that development puts in their economics.

  6. Lots of new, cheap fiber all over the place sounds like fun, until the bill comes due. Who’s putting up the money, and when do they expect to get paid back? I don’t see Wall St. salivating over this plan, open or otherwise.

    Best of luck.

  7. Brett Glass

    What’s ironic about this company’s proposed fiber builds is that fiber exists along every one of the rights of way where it is building. However, the owners won’t sell the dark fiber; they either insist upon selling services only (which drives up the price of bandwidth) or they’re intentionally keeping it off the market to try to make it more valuable.

    The greatest danger to this new venture would be anticompetitive tactics by the companies that already own fiber along the same routes (e.g. Level3). If they release just a bit of their existing capacity (which is a sunk cost), they can put any newcomer out of business by preventing it from realizing a return on its investment. They can then buy the newcomer’s fiber up for pennies on the dollar, take IT off the market, and drive prices back up. Lather, rinse, repeat.

  8. This seems to have more promise to me than Harbinger/Skyterra’s wholesale LTE network. Providing backhaul is the missing link for new last mile providers. Hopefully Allied Fiber’s economics work and they can provide more competition and lower access charges.

  9. Brett Glass

    There is, unfortunately, one problem here. Allied Fiber’s proposed routes miss many areas where bandwidth is needed — including mine — by hundreds or even thousands of miles. Unless they change or add to their proposed routes, their project will not help me — or others similarly situated.

    • Michael Chaney

      So start up a company to build an interconnecting network in your area, or convince Allied Fiber to expand to your area. Nothing on this scale can be rolled out to all places at once, but the openness of the architecture allows for others to play too. Something AT&T and Verizon don’t.

      • Brett Glass

        Not so, Michael. When I go to the store to buy oranges, I don’t care whether or not the trucks that brought the oranges to the supermarket carry freight for other companies. I just want reasonably priced, quality product. The same is true of bandwidth. The owner of the backbone can have as “closed” or as “open” an architecture as it wishes, so long as it sells us the product we need at a competitive price.

  10. Daniel Golding

    I’m very skeptical about any new long haul fiber. On the other hand, fiber-to-the-tower is an amazingly great idea, so long as you can get the laterals to work. Of course, if Hunter can get close enough, the folks on the towers will build to him – its a balancing act.

    The least talked about problem in telecom today is the last mile – to the cell tower. Phones are getting smarter and using more bandwidth, but the carriers can’t get the backhaul element to work. If Hunter (or someone else) doesn’t pull this off, it will be a real problem for development of mobility technologies.