As the competitive carrier community raises a toast on the fifth anniversary of the Telecom Act this month, it's worth noting that overdependence on a good thing is not necessarily a wise course, especially if, as one CLEC is demonstrating, the presumed imperatives behind that dependence are not as cogent as they might seem.
The dependence in question has to do with the use of unbundled local loop as the preferred means of last-mile access among most competitors to incumbent telcos. If, as Silver Spring, Md.-based CityNet Telecommunications, Inc. (www.citynettelecom.com)appears to be demonstrating, there are cost-effective ways around suffering through the long delays associated with use of unbundled loop, it may be possible to avoid one of the unintended irritants of the Telecom Act.
"Five years after the act [was signed into law], there have been great successes," says Ernest B. Kelly III, president of the Association of Communications Enterprises (ASCENT, www.ascent.org), a lobbyist for competitive carriers. "But there also have been and continue to be great frustrations because competitors still must rely on the incumbents for connectivity to the last mile."
Reliance on incumbent telcos for access to networks and other facilities, interconnection and switching over of customers has caused many needless delays for competitive carriers and has been a source of ire for customers who are not getting the type of service and responsiveness they may have expected. While some new entrants continue to fight the battle with the telcos, others choose to avoid it altogether by building their own facilities and serving their customers exclusively on their own networks, the downside, of course, being that costs of doing so can be astronomical.
But CityNet believes it has found an approach to building out its own fiber optic last miles that will be far friendlier to the bottom line than past methods have been, while allowing the carrier to avoid the clashes and service quality issues that competitors typically blame on the incumbent suppliers of last-mile loop.
As a wholesale carrier's carrier that builds carrier-class, all-optical, high-speed networks that connect directly into commercial and residential multitenant buildings, CityNet uses a unique deployment method to build last-mile networks that bypass the ILECs: it's called SAM.
Domo Arigato, Mr. Roboto
SAM, formally known as Sewer Access Module, is a small computer-driven robot that's equipped with cameras to install stainless steel alloy rings that support the fiber-optic cables inside sewer pipes. By using this installation method, CityNet enables carriers to avoid deployment problems, such as road trenching and subsequent traffic snarls, as well as demolishing walls to get at a commercial office building's inside wiring.
Ken Figueredo, principal consultant with Analysys Consulting (www.analysys.com) in D.C., says that CityNet has identified a very exciting new technology and process for helping companies that are attempting to lay facilities to compete in the last mile.
"Innovation such as this leads to choice in the marketplace and results in the kind of competition that Congress had in mind when it passed the 1996 Telecom Act," Figueredo says. "One of the unintended consequences of the Act, which I experience every day driving through D.C., is the roadwork required to realize it. Companies like CityNet can help prevent this."
"CityNet has a brilliant strategy. It's another way to get at the single biggest problem facing competitors: the last mile, which is controlled by the incumbents," ASCENT's Kelly says. "Competitors have been struggling for years to get around this stranglehold."
Because no one can get unbundled loops fast enough from the incumbents, CityNet president and CEO Robert G. Berger says that the issue facing all competitors becomes riding the ILEC copper as the physical last mile.
Diagram:A Last-Mile Broadband Solution
"And there continues to be great regulatory debates over this challenge," Berger explains. For instance, "how do we address the physical last mile? What's missing? The ability to provision end-to-end, all-fiber-optic connectivity" is the answer, he says.
The fiber-optic cable that SAM lays down in municipal sewers can improve phone, cable and Internet service by replacing legacy copper wiring and coaxial cable that is accessible in older buildings. That's a plus for businesses and property owners, who could end up spending less and reaping more benefits by using a SAM installation.
City officials, meanwhile, gain political clout with their constituents by maintaining streets and historic buildings, while also pulling in new revenue.
For example, in Omaha, where CityNet inked its first deal to install fiber-optic cable in the sewers, the city stands to gain 2.5 percent of the gross revenue generated by the networks. Mayor Hal Daub says that revenue could total about $1 million a year.
"It's critical to the economic health of any city to have widespread access to broadband connections," Daub says. "A city's economic well-being, its ability to attract and retain businesses, depends on it."
As a carrier's carrier, CityNet stands to make big bucks, too. The company is in negotiations with more than 70 potential customers that need last-mile connectivity to complete their broadband networks. Berger says it's more efficient for carriers to lease fiber from CityNet rather than use their own street trencher operation. And he says the company invests money into a city's sewer system, by flushing out, repairing and maintaining any pipes that the company is in.
Privately held CityNet currently remains without a competitor in the United States, having introduced the deployment process here. Other companies are deploying similar networks in five European cities, with the largest taking place in Hamburg, Germany.
CityNet so far has hefty venture capital in its pockets. The money has allowed the firm to pay for some 40 SAMs, which cost $750,000 apiece. CityNet plans to buy a total of 100 robots from Swiss manufacturer Ka-Te Insituform AG (www.ka-te.ch) to handle its planned deployment in at least 36 U.S. and European cities.
Overall, it's a net-net-net win, analysts say.
Jeff Moore, senior analyst of network services for Current Analysis (www.currentanalysis.com), says the demand for fiber access is, for the most part, unmet. CityNet is in a good position to benefit from this demand, he adds.
"The company is building a better mousetrap with its unique fiber-through-sewer-pipes technology," Moore says. "The practical upshot of CityNet's efforts is that American businesses will get faster Internet and data access at a lower cost."
CityNet's ability to deploy fiber through sewer lines also gives CityNet a political advantage since it can offer city officials the benefits of a better technology infrastructure without the headaches associated with digging up streets and causing traffic jams, Moore says.
In fact, sources say that sewer lines represent an untapped right-of-way, which could help alleviate the massive legal and regulatory battles being fought over access to cable networks and multitenant buildings. The demand for such rights-of-way continues to increase yearly as carriers try to meet the bandwidth needs for transmitting voice, video and data.
The Telecom Act has spurred competition and created robust competitors that need and desire their own last-mile fiber connectivity, maintains CityNet's Berger.
The Telecom Act also has spurred an explosion of a full range of services and applications that virtually all companies now want to offer to end users. "To unlock their full potential, everyone now needs last-mile fiber connectivity," Berger says.
Because of such advancements, Moore believes that the Telecom Act has been a glowing success.
"It is one of the most efficacious pieces of business law passed during the 20th century," Moore says. "The Act has unleashed hundreds of energetic competitors. As a result, telecom technology has blossomed, service has improved, and the cost of service has fallen. I would even assert that the Telecom Act has been a significant factor in the current period of unprecedented economic growth."
And such subsequent competition always makes the players stronger. "The RBOCs are a case in point," Moore says. "Since the passage of the Act, they have dramatically transformed and modernized themselves in order to respond to challenges from CLECs."
Figueredo with Analysys also thinks that the Telecom Act has had a very positive impact on the industry as a whole, if not on every individual company. Investment and jobs have increased since the Act was passed, and whole new market sectors have been created, he says.
"Of course, with the increased entry of companies has come increased competition, and incumbents and entrants alike have had to formulate and execute a [winning] strategy that enables them to prosper in this environment," Figueredo says.
Emerging success stories such as CityNet prove that while the Telecom Act might not be working as well as competitors had hoped at this juncture, it sustains hope that there is reason to forge ahead.
