Private providers just aren’t building fiber at a fast-enough pace today in the USA. Local leaders in an increasing number of communities are looking into options for how to save their residents from being left in the dark when our way of life and economy is moving online. This is especially true in rural areas where the private providers show no interest in investing since the return on investment isn’t good enough with low subscriber density and numbers. In other parts of the world publicly built fiber infrastructure is often operated with an Open Access Model and it is winning ground in the USA as well. But there is quite a lot of confusion about what the term means, so here is a walkthrough of the most common models with pros and cons of each. A hint to you who is reading this – read to the end, we save the best to last.

Introduction to Open Access

In short the Open Access model builds on the concept of layers.

  • The first layer is the Infrastructure layer, which is the conduit and physical cables that make up the network. It is also called the Passive
  • The second layer is the Operations layer, which is lighting up the physical network with electronics and making it all work. It is also called the Active
  • The third layer is the Services layer, which simply consists of all the services delivered over the network. People tend to think of the traditional Internet, Phone (VOIP) and TV (IPTV) services, but we see an increase in other services like telehealth, home security, IoT and other Smart services.

The idea is to separate these layers, so that one entity can own and maintain the Infrastructure layer and then lease it out for others to deliver services. Much like an airport works. One entity builds the airport and all the airlines pay when they use it. Imagine how ridiculous and expensive flying would be if every airline had to build their own airports! That is how telecommunications generally work today.

What people have questions about is generally the operations layer. What does it really mean? Well, let’s compare all the data flowing into and out of the network to water. If it was important to get the right stream of water to a specific house all the way from the water tower, the only practical way would be to build a separate pipe all the way to that house. That is basically what happens in the operations layer. Using controller software, you create a tunnel through the network to every single end user, in which the service is delivered. This is what every service provider does when they start up a new service, but in the scenario with a single provider they typically make no significant difference between the operations and the services layer. That separation is important when multiple service providers can have their own tunnels and you need to keep track of who has which tunnel set up.

With that introduction given it is time to start listing some of the most common Open Access models used today. Please note that there is no standardized vocabulary, which is the reason why this blog post is written in the first place! You might find other names for these models. Also, this has the outlook of a municipality building a publicly owned fiber infrastructure. The assumption is also that it’s a positive thing to give consumers multiple choices for services and providers. Private service providers are in this business to make money, which can obviously make them have a different opinion on some of this.

Dark fiber Open Access

In networks you talk about backbone, middle mile and last mile. If comparing to a road system the backbone would be the highways, connecting cities to each other. The middle mile would be all the small streets within the city, and the last mile, or the “drop”, are the driveways at peoples’ houses. Without a backbone your city would have no means of effectively reaching the rest of the world’s network and without the middle mile the houses would have nothing to connect to. In the Dark fiber model, the community is only providing the passive infrastructure layer and they allow private providers to lease access to it and use it as they wish.

Dark fiber backbone Open Access

In this model the community would pay for the highway into the city, ensuring there is capacity enough for private service providers to sell high quality services.

Pros

  • The minimum investment needed to likely improve broadband quality
  • No need for knowledge in network operations
  • No need to invest in electronics
  • Might reduce the cost enough for private providers to start investing in the community

Cons

  • There is no guarantee a provider will build out
  • If a provider builds, they will likely only build where the business case is the best and leave some residents without
  • Since the final connection to the end customers will be built by private providers, the community will have to reach agreements for using their infrastructure in order to deliver community services (smart services), which will also not reach all residents (see above).
  • Customers will in reality have no choice. The investment done by the first provider in middle mile and last mile is too much of a barrier for a new provider to come in. Overbuilding is very uncommon in fiber. The common monopolistic problems of high price and sometimes low quality are likely.

Dark fiber middle mile Open Access

The community would also build the fiber in the streets and then allow private providers to bring the electronics to light up services and build the drops to the houses.

Pros

  • With almost all of the investment done , it’s very likely private providers will start investing in the community
  • If all streets have fiber, even the weaker areas of town could be connected
  • No need for knowledge in network operations
  • No need to invest in electronics

Cons

  • The provider will likely only build to residents with stronger economy since they have profit targets to reach and don’t want customers who might be bad payers.
  • Since the final connection to the end customers will be built by private providers, the community will have to reach agreements for using their infrastructure in order to deliver community services (smart services), which will also not reach all residents (see above).
  • Customers will in reality have no choice. The investment done by the first provider in last mile is too much of a barrier for a new provider to come in. Overbuilding is very uncommon in fiber. The common monopolistic problems of high price and sometimes low quality are likely.

Dark fiber last mile Open Access

In this model the community builds all of the fiber, but they lease it to a private provider/s who would install the electronics, operate the network and sell services.

Pros

  • With all of the investment in fiber done , private providers will definitely start lighting up customers
  • If all properties have a fiber connection, even the weaker areas of town could be connected
  • No need for knowledge in network operations
  • No need to invest in electronics

Cons

  • The provider will likely only invest in and install equipment to residents with stronger economy since they have profit targets to reach and don’t want customers who might be bad payers.
  • Even though the final connection to the end customers is owned by the city, the community will still have to reach agreements for using that infrastructure in order to deliver community services (smart services), as private providers own the electronics and thereby control the network.
  • Customers will in reality have reduced choice. The investment done by the first provider in electronics to serve a specific area and investment in electronics at the customers home, will be prohibitive for a new provider to come in. The common monopolistic problems of high price and sometimes low quality are likely to still exist.
  • In order to enable multiple providers to coexist, you need multiple fibers and also enough space in huts, handholes, and such to house multiple providers electronics.
  • The total cost will be higher since electronics will not be utilized to a maximum (two providers in the same area might have their own switches, which are both not used to a maximum.

Lit Open Access – Single provider

In this model the community would build the entire fiber network and also invest in the electronics all the way to the ONT in the customers’ homes and also build up operations capacity (an alternative is to lease the network or hire a neutral operations company to light and operate the network). Service providers are invited to resell services that are offered to them by the operator on wholesale terms which are equal to all providers. The service providers would still own and bill their customers. In this model the customer can freely choose between providers, but only have one provider at a time.

Pros

  • With all of the investment in fiber and electronics done, there is a very small hurdle for providers to start selling services on the network. Selling services goes from CAPEX intensive to an OPEX game.  
  • If the ONT is installed by the community network, the investment for providers is almost none and even the weaker areas of town could be serviced by private providers.
  • The common monopolistic problems of high prices and low quality of service will be reduced since customers can change providers if unhappy.
  • The assortment of services with multiple providers will probably be larger.
  • Lower prices, higher quality and bigger assortment will improve take-rates and both revenue and other benefits of a higher utilization will increase
  • The city now owns the entire network and can freely roll-out smart city services and decide which providers of other IoT and smart city services are welcome to deliver services on the network.
  • Investments in electronics is kept to a minimum, since new hardware will only be installed when needed. (never two half full switches from two different providers in the same rack.)

Cons

  • This is the largest investment a community could do (an option would be to invite a neutral operations partner who could bring the electronics and/or operate the network).
  • If doing their own operations, the city would have to build an operations organization.
  • Customers will have choice of providers, but not full freedom to choose what they like from multiple providers at the same time, which reduces the value of the network greatly since not all providers will be fit to deliver the services of the future.

True Open Access (Lit Open Access – Multiple providers)

The difference between the previous model and the True Open Access model is that the customer can freely choose between not only providers, but even on a service by service level. They have the freedom to build exactly the bundle of services from any number of providers that suits them best. This means maximum power to the consumer, an open and level playfield for any kind of provider and no restrictions for introduction of future services.

Pros

  • With all of the investment in fiber and electronics done, there is a very small hurdle for providers to start selling services on the network.
  • With the ONT being installed by the community network, the investment for providers is almost none and even the weaker areas of town could be services by private providers.
  • The common monopolistic problems of high prices and low quality of service will be reduced since customers have full choice of providers and services.
  • The assortment of services with multiple providers will be larger and providers who aren’t selling the traditional internet service can also come on the network since customers can buy services from multiple providers at the same time.
  • Lower prices, higher quality and bigger assortment will improve take-rates, and both revenue and other benefits of a higher utilization will increase
  • The city now owns the entire network and can freely roll-out smart city services and decide which providers of other IoT and smart city services are welcome to deliver services on the network.
  • Investments in electronics is kept to a minimum, since new hardware will only be installed when needed. (never two half full switches from two different providers in the same rack.)

Cons

  • This is the largest investment a community could do (an option would be to invite a neutral operations partner who could bring the electronics and/or operate the network).
  • If doing their own operations, the city would have to build an operations organization.

The True Open Access model is obviously the most complex to operate, but also the one that has no built-in restrictions. With this model you as a community are in full control of your digital future. What you need is a software platform that was built ground-up to support this business model.

COS Business Engine is the platform we launched in 2008 to automate the operations of True Open Access Networks. It is today used to Operate around 150 True Open Access Networks Worldwide, big and small.

For additional information contact:

Isak Finér
CMO & VP North America
COS Systems
+1 (540) 988-3224
isak.finer@cossystems.com
www.cossystems.com

Late 2013 we released the first version of our demand aggregation platform COS Service Zones. Our primary focus was to help those building out fiber in the US get enough customers signed up so that they could move forward with their projects with lower risk of failure. Since then our platform has been used in over 100 projects in the US alone. What have we learned so far? Well, a lot, and some of it we will share with you in this article.

COS System’s founders started building software for the fiber network operators in Sweden 20 years ago. At this time the saying “build it and they will come” was still the most common strategy (if you can call that a strategy?) behind fiber buildouts. The thinking was that a new technology, literally lightyears better than what was in place before (in Sweden primarily ADSL and traditional dial-up modems), would make customers switch over without hesitation. It soon proved though that it wasn’t that easy. Studies have shown that over time the fiber take-rates tend to reach over 70 percent, but this often took 10 years or more. Since large parts of Sweden, like the US, is rural, a more cautious method of building fiber was starting to be used. When approaching a new area you tried to get engaged with the residents through meetings, information and even door-to-door campaigns. You defined their neighborhood boundaries and explained that they needed to come together and show that enough of them were willing to sign up before the fiber build-out could start. It was generally done with pen and paper and with the help of grassroots in the neighborhoods who volunteered in rallying their neighbors. Often these grassroots were those running a home business and those with kids who made the phone line busy every night and the phone bill break the family budget. This method was very effective in avoiding the worst potholes where low take-rates would make the network builder loose money for years, but it was a demanding administrative task.  

In 2012, when COS Systems first started to look at what the fiber industry looked like in the US, we decided to build a platform to make this method digital and to the largest extent automated. We already had a BSS/OSS (Business and Operations Support System), but it was too early to sell that platform, because the networks had to be built first! The good thing was that we could use a lot of the experience we had from building that platform and a large portion of the core code.

We built the product around a couple of major concepts. First we needed a way to manage people’s expectations and the level of commitment asked for. The result was the two first phases a neighborhood zone could be in; Survey and Signup (Zones are now often referred to as “fiberhoods” – more on that later). In the Survey phase people are asked to take a non-committing survey asking questions about the performance of their current Internet connection and of course how likely they are to sign up to the new network potentially being built. If the take-rate target is reached in Survey phase, the zone can be moved to the next phase which is the Signup phase. This phase is suitable to use if you know you will be able to start building the network in the near future if the take-rate targets are met. The customers would agree to the terms of the connection to the network and later we also added functionality to gather deposits.

From our customers building fiber we’ve gotten to know that the most hectic phase is still the construction phase since the subscribers typically have a lot of questions at this stage. They want to know when the installation will happen, how it will affect their house, their lawn, etc. The zone phase Construction is therefore important in order to be proactive in spreading information to the subscribers in those zones. The last phase is Connected and in this phase you will direct the subscribers already connected to your Marketplace to sign up for services or sign up laggards who didn’t sign up before.

Still, the most important feature is probably the Champion functionality. This is a way to automate the identification, signup and management of the local grassroots. On the COS Service Zones platform there is an entire program relating to the Champions. They apply to become your champions on the website, you approve them manually after checking their willingness to really help out. All champions will get a referral code and can thereafter go out and recruit their neighbors to the network.

Late 2013, the first version of the software was ready for launch. Imagine our surprise when during developing the platform, Google Fiber had launched in it’s first city, Kansas City, using a methodology similar to ours but without the first Survey phase. What we called zones, they called Fiberhoods and we got a much easier way of communicating what our platform did! The methodology even got its own term; Demand Aggregation.

So, that was the background, now what about the learnings from over 100 demand aggregation projects so far in the US?

First, a big misconception has to be made clear. The methodology was not, unlike many beliefs, designed to help private providers cherry pick the richest and most profitable neighborhoods, to leave the rest of the city unserved. Where we come from the networks we work with are generally community owned Open Access Networks (You can read more about open access here). In this model the fiber infrastructure is treated as a city owned utility that is open for any provider to deliver services on. The goal is to build fiber to everyone, just as with electricity and water. But I believe I speak for any taxpayer in the world when I say that you would expect your politicians to use the taxes you pay in a responsible and effective way. By building the network first to where high take-rates ensures a positive return on the investment, the cash flow from good neighborhoods can eventually be used to cover cost for further expansion. This means that the neighborhood that potentially could benefit the most might not get it first, but at least they will get it. If just building in random order or only to unserved areas the money might not last long and large parts of the area remain unserved. Use the method to connect all and remember – the biggest benefit is not the revenue generated, but all the benefits access to high-speed internet will bring to the community.

It was hard to choose when it comes to concrete advise we want to share in this post when running a demand aggregation campaign. Please feel free to reach out if you want to discuss more.

  • Don’t make the zones too large. We have found that an ideal size is 50-100 homes. If the number of neighbors you need to convince into signing up is for example 200, it will feel like your effort won’t make a difference. If it says you need 20 more it will feel like it’s within reach and you will be more eager to go out and spread the word.
  • Kick the campaign off with a blast. Even though the platform builds upon word-of-mouth and neighbors talking to each other, you need to make people aware of the project and the COS Service Zones site as a start. If you already send bills to your community (ideal for utilities), include information about the fiber project. Talk to local news, both papers and radio and make them write about the project. Invite people to an information meeting. Those who show up will be the ones most eager to get fiber. Have them sign up at that meeting and convince them to be your champions. They will be your best sales people.
  • Use the community to spread information. In underserved and unserved areas it’s not sure people understand why they would need better internet and some education might be needed. By uploading both marketing and educational information on the COS Service Zones site, you make it available for download and print-out to anyone who wants to share it. This way it will reach more people and you will be able to control the messaging.
  • Use your first buildouts as marketing. We’ve found that in areas where there have not been many options for high speed Internet before, the experience of the first customers is a very good thing to market. Interview your first customers in their homes and let them share their story about how their new service works.
  • Communicate like a pro (or use a pro). Even if building fiber is an incredibly positive thing, there still might be those questioning the project. It might be your competitors who are threatened or just people who think money should be spent on something else than new technology (especially if it’s a municipally funded buildout). You must quickly respond in a professional way to any misconceptions being spread. If you don’t have this competency inhouse you could hire a communications firm to help you with this as well as with marketing.

What we have found over the years is that with the COS Service Zones platform, some smart marketing tactics and good communications, you can really use your entire community as your sales organization and quickly reach remarkable take-rates. In fact, if successful you will be doing much more than just demand aggregation – Perhaps it is time to update the industry term to Demand Generation?

For additional information contact:

Isak Finér
CMO & VP North America
COS Systems
+1 (540) 988-3224
isak.finer@cossystems.com
www.cossystems.com

Last week the Local Swedish Fiber Alliance celebrated their 20th anniversary in my home town Umea. They are a non-profit organizing many of the community networks in Sweden. My strongest take-away from the conference was how important the communities perceived their control of this infrastructure to be, especially now when smart city applications are being introduced across the networks.

“We’ve built an eight file super highway, but up until now we’ve only been riding one of the files – by bike.” This was said by someone from a muni owned network on the conference I attended last week. It was a 700 attendee conference and the 20th anniversary of the Local Swedish Fiber Alliance, a non-profit organization with 155 community networks and 130 vendors as members. It was held in my home town Umea, which is not the largest Swedish city, but one of the first in the world to get high speed broadband. Already in 1994 the local utility started to lay fiber, long before Facebook, Instagram and the dotcom bubble and burst. I remember how most people hardly knew what the Internet was back then! This visionary bet on fiber made the city of Umea and our mainly rural county rank among the highest in the world in terms of average broadband speed and fiber coverage for decades. Since then many cities, towns and counties have followed in their steps and today there are close to 200 muni networks in the country. Already in 2016 80% of Sweden had access to fiber according to PTS (The FCC of Sweden). There is a race now to fiber up the rest of the country and the latest I’ve heard, that number is getting closer to 90%.

The community owned networks are definitely still a driving force in the build-outs that are now taking fiber to small villages deep in the Swedish pine forests and remote coastal areas with summer houses. According to a recent press release by the Local Swedish Fiber Alliance the community networks connected 100 000 homes to fiber during 2017 and the planned construction for 2018 is the same number of households and investments of $500 M USD (Swedish only https://www.ssnf.org/press–opinion/pressmeddelanden/arkiv/2017/kommunala-stadsnat-planerar-att-investera-miljarder-i-bredbandsutbyggnad-under-2018/)

What strikes me is that what the cities envisioned and wanted to achieve by building this infrastructure has been realized. That said, the real revolution is still to happen – likely in only the next few years. The muni networks were mainly built because the city leaders realized that without high speed broadband, both resident and business would move elsewhere. Leaving their digital future in the hands of the incumbent telecom providers would mean too much of a risk the city leaders weren’t willing to take. Critical infrastructure is not something you happily gamble with. On the conference it was very interesting to hear the stories from the smaller communities, often with as few as a couple of thousand households or less. They all agreed their communities would have looked very different if they hadn’t built their networks, with much fewer jobs and many employers that would never have stayed or established their business in their community.

Back to my quote in the beginning of this post. It’s obvious that it’s now the full potential of these networks are beginning to be realized. The consensus seemed to be that “smart city” and “IoT” that has been talked about so much for years, is now starting to happen. With billions of new devices coming online, these fiber super highways will for the first time really be used to their full potential, something that simply would not be possible with legacy technology. It was also made obvious with new vendors on the show, displaying alarms, sensors, smart hubs, etc. There was also a strong consensus among the community networks that their ownership of the networks had never been as important as now. How would it be possible as a community to roll-out smart city services without being in control of the network and where it is deployed. Many smart city services build on ubiquitous access in order to fully deliver the potential benefits, which could never have been guaranteed if profit driven private telecom providers had been setting the agenda for the buildout or what services makes it onto the network and at what price. And the smallest communities would have been the biggest losers.

Another strong take-away was the importance of the business model. The vast majority of the networks in Sweden are operated on a True Open Access model, where a neutral operations company is responsible for deployment and maintenance of the active layer and provisioning of services, while multiple service providers sell services to the subscribers over one single infrastructure, owned by the community. In the early years the communities did their own operations, but over time many have outsourced this to one of the nationwide operations companies that can be found in Sweden. Still, by owning the network and deciding how and where the network is built out, the communities can be in charge of where service is available. With an open access model the retail service providers pay a wholesale fee to the network operator for delivering service over the network. This way the community can influence the price to the subscriber. First, the direct competition between the providers (generally on an Appstore like online marketplace where all providers and services are listed) will drive the prices down. Secondly, the city can choose to lower the wholesale price which due to competition will affect the retail price and thereby increase utilization.

My conclusion is that the decision made by many communities in Sweden to build their own fiber infrastructure has proven to be right. They have made sure their communities have been relevant throughout the digitalization that has taken place over the last decades. But the full value is now to be realized as cities in control of a high-speed broadband infrastructure have the necessary tools to embrace and be leaders in the smart city revolution.

Written by:

Isak Finér
Chief Marketing Officer
COS Systems
+46 737 51 99 38
isak.finer@cossystems.com
www.cossystems.com