This document provides a case study of the fiber optic network project in Kutztown, Pennsylvania. The key points are: 1) Kutztown embarked on an aggressive Fiber To The Home project to provide internet, cable, and phone services after commercial providers declined to upgrade infrastructure in the small town. 2) The project cost $5 million and now serves 25% of the local market. It has helped lower utility costs and spurred commercial competition. 3) Lessons learned include setting different pricing for residential and business customers and considering alternatives to running only fiber optic lines. 4) While the project has been successful, some states have passed laws prohibiting local governments from competing with

1. City of Glass: A case study of the FTTH project in Kutztown, PA. USA
Ralph M. DeFrangesco
defrangescor@aetna.com
interfered with some Amateur radio frequencies.
Abstract BPL works by deploying radio energy into
power lines and then distributing it into homes.
This paper discusses the problems and benefits A device then plugs into a power outlet in the
of governments competing in the Telephone, home that connects the computer to the BPL
Internet and Cable-TV business. This paper also grid. BPL designers claim 600 mbps or 200
presents a case study of the borough of mbps over each of the three legs is possible.
Kutztown, PA., a community that embarked on
an aggressive Fiber To The Home (FTTH) The Amateur Radio League argues that the
project owned by the local municipality. copper cables that transport electricity are not
designed to carry radio frequencies efficiently
and radiate too much of the energy back into the
air thereby interfering with the spectrum they use
Introduction for transmission (Good, 2004). Many people feel
that BPL is a technology that will never take off
Government owned utilities are not a new the ground and should not be pursued (ARRL,
concept. Municipalities typically own and n.d.).
operate their own sewer and water utilities and
invite commercial vendors to offer services Wireless technology has been around for many
which they have traditionally not offered in the years and comes in a range of technologies.
past such as electricity, telephony, Cable-TV, Many communities have deployed this
high-speed Internet access and garbage technology due to its cost, relative ease of
collection. deployment and compatibility with existing
equipment. Typical commercial installations
This traditional model is changing. The current today are in the 100mbps range. This paper will
literature lists approximately one-hundred and present the most common wireless technologies
twenty-eight communities in twenty-three states but will not discuss each in detail (AirPower,
where the municipality owns its own Cable-TV, 2003):
high-speed Internet and Telephony services
(FTTH Council), 2000 community owned Narrow Band transmits and receives information
electric utilities serving over 143 million people on a specific radio frequency.
or 14% of the nation’s electric utilities (Appanet,
n.d.). Spread Spectrum technology is used in most
wireless deployments. It uses a wideband radio
frequency technique.
Technology
Frequency-Hopping Spread Spectrum
Although the case study presented in this paper technology uses a narrow band carrier that
focuses on fiber, this is not the only broad band modifies a signal on a single logical channel.
technology municipalities are installing in their
communities. Other technologies include: Direct-Sequence Spread Spectrum technology
wireless and BroadBand over Power Lines generates a redundant bit pattern for each bit to
(BPL). be transmitted.
BPL was originally hailed as the technology that Infrared technology cannot be used in large scale
would bring high speed Internet access to every commercial projects. It uses infrared light to
rural community at a cheap rate. After being transmit data and is limited in range to less than
tested, engineers quickly found out that it ten feet.

2. cost up and risk retaliation of commercial
Fiber is perhaps the most reliable of the providers offering increased services or below
technologies that we have discussed. Fiber optics market pricing causing consumers to “flip-flop”
is a technology that uses glass or plastic to between the municipality owned service and the
transmit digital data (ISP Glossary, 2004). FTTH commercial one.
involves running fiber optic cable directly to a
home or business. A FTTH project requires a
large initial investment and the inconvenience of Case Study
laying the cable. The typical speeds at which
services are delivered over fiber are 100mbps. This is a case study of the FTTH project in
System backbones usually run at the 1 or 10gbps Kutztown, PA., called Hometown Utilicom.
speed. As an example, the movie Brave Heart a Information for this case study was collected and
952 MB file, would take the following times to verified on September 2, 2004 from Frank P.
down load from current technologies: Caruso, the borough’s Director of Information
Technology.
Dial-up 2 days
ISDN 20 hrs Kutztown is located 50 miles north-west of
DSL 2.5 hrs Philadelphia, PA., and is approximately 1.6
Cable 1 hr square miles in area. At first glance, you might
FTTH .4 min wonder why such a small municipality would
want to incur the cost and management
*Source: FTTH Council
responsibilities of owning their own Cable-TV,
High-speed Internet and Telephone services. In
the case of Kutztown, it’s a matter of pride,
Government Involvement tradition and taking control of their destiny. The
borough has a long history of municipality
In this section we will explore the advantages owned utilities. The borough has managed a
and disadvantages of local governments being public electric utility since 1907, a public water
involved in owning Cable-TV, Internet and system since 1917 and a sewer system since
Telephony services. Municipalities are taking on 1940. When the commercial providers had no
this initiative because of the unwillingness of plans to upgrade their infrastructure, the FTTH
commercial service providers to upgrade their home project seemed like a natural fit (Citizens
infrastructure in remote or rural communities due of Batavia, 2004).
to lack of financial profitability.
The borough, with a population of approximately
Advantages 5,000 residents, was split among its constituents.
A large part of the population was retired or
There are many advantages to local governments reaching retirement age and struggled to see the
owning utilities. These benefits include; being benefits in owning such costly utilities. The
able to raise the large financial investments project leaders saw an opportunity to generate
required of such projects, clearing the way for revenue and provide its residents with state of
permits, providing the up to date services in the art services. A small college located in the
cases where commercial providers do not want to borough with 1800 off campus residents was an
and spurring commercial providers to be more untapped market. By allowing the college
competitive on their pricing. students to ride a dedicated backbone to the
campus, the municipality could charge each
Disadvantages student a competitive flat rate while offering the
students the ability to connect at familiar LAN
Arguing the other side of the equation, there are speeds and accessibility to university
negative impacts with governments owning applications.
utilities. Municipalities that engage in self owned
utilities are taking a risk because services like Debate about the project started in 1996. Finally
high-speed Internet access are not attractive to after three years of planning, the borough offered
the main stream public yet and might never turn taxable bonds and borrowed money from the
a profit. Municipalities frequently have to hire electric utility surplus to fund the roughly 5
their own technology experts thereby driving million dollar project.

3. and wireless are now being investigated as an
The initial objectives were to provide connection alternative.
for a Supervisory Control and Data Acquisition Finally, the borough had the option to run fiber
(SCADA) system monitoring the municipality with copper but opted to run just fiber instead.
wells, pumps and transformers. The objectives Running just fiber meant that power for the
were expanded to provide basic Cable-TV, phone systems had to be generated at the
including local stations and high-speed Internet household rather than at the pole. The lesson
access that was competitive with a standard dial- learned was that by running copper with fiber
up offering, to its residents and businesses. would have reduced costs and complexity by
using fewer strategically located power modules.
The system designers chose to use just fiber
Today, Hometown Utilicom has 420 Cable-TV because of regulations on locations and setbacks
users, 450 Internet users and 300 Telephony of the power modules.
users. This translates to approximately twenty-
five percent of the utility market in Kutztown
taking advantage of a significant reduction in the Benefits
cost of their utility bills (Parker, 2004).
The benefits of this project to the community
In 2003 the borough won the prestigious are: cheaper utilities, control of the technology,
Governor’s award for local government customization of the services and control over
excellence. An award administered by the costs. Hometown Utilicom was not expected
Pennsylvania’s Department of Community and to turn a profit until 2007. The borough Manager
Economic Development. It recognizes the has already announced a profit as of August,
creativity and exceptional accomplishments of 2004. Future profits could be used to upgrade
local governments and officials that continuously infrastructure of even pay down the borough’s
work to improve their communities (Optical debt.
Solutions, 2003).
Perhaps the greatest benefit of this project was
that the community leaders had the insight to
Lessons Learned offer these services to its residents when the
current providers were not able to offer them.
In the two years the FTTH project has been
operational, the borough of Kutztown has
learned three important lessons: they did not Conclusions
create separate pricing policies for business
versus residential usage. Business that were Municipalities thinking of investing into Cable-
paying several hundred dollars a month, were TV, High-speed Internet and Telephony services
now paying a fraction of that for the same access need to think long and hard before embarking on
speed. This was cost effective for business that such a protracted and costly project (Parker,
took advantage of the service, but in the long 2004). The road is difficult but they do not have
run, residents will shoulder the maintenance and to do it alone. The FTTH Council and the Muni
upgrade costs. The borough should have created Consortium are two resources available to help.
a separate price scale for businesses versus The FTTH Council (n.d.) is a non-profit
residential users. This would have apportioned dedicated to educating members on the benefits
the price to the usage. of FTTH solutions. The Muni Consortium (n.d.)
is a group of commercial companies that are
Second, several apartment complexes wanted the capable of supplying an end-to-end solution to
borough to pay them a flat fee or kick-back municipalities.
money based on usage for allowing the borough
to offer the service to their residents. The Finally, although the FTTH project in Kutztown
landlords felt that they offered a large lucrative could be considered a win for municipalities
market and the borough should pay a fee to tap wanting to improve services to its residents, it is
into that market. Knowing this puts the borough indeed a shallow victory. In the mid-1990’s the
in a better position to look into alternative US Congress passed the Telecommunications
solutions. Broadband over Power Line (BPL) Act of 1996. “The goal of this new law is to let
anyone enter any communications business -- to

4. let any communication’s business compete in Cornell Legal Information Institute,
any market against any other” (FCC, 1996). In Telecommunications Services. (2004). Retrieved
March of 2004, the Supreme Court reversed its December 6, 2004 from
decision ruling that states can bar cities and local http://supct.law.cornell.edu/supct/04highlts.html
governments from offering their own
communications services (Cornell, 2004; Cox, W. The business of government? (2003).
Davidson, 2004). Texas Public Policy Foundation. Retrieved on
December 7, 2004 from
Under pressure from Telecommunication lobby http://www.texaspolicy.com/pdf/2003-09-24-
groups, today some states have taken it upon govt-competition.pdf
themselves to pass legislation again prohibiting
municipalities from competing in this arena. Davidson, P. (March 24, 2004)
Texas passed the Public Utilities Code that Supreme Court ruling may limit rural phone
prohibits municipalities from providing options. USA TODAY.
telephone service (Cox, 2003). Pennsylvania
passed House Bill HB 298 and Senate Bill SB FCC. Telecommunications Act of 1996.
321, also know as The Government Competition Retrieved October 15, 2004 from
Against Private Enterprise Act, which prohibits http://www.fcc.gov/telecom.html
municipalities from competing against private
industry (PASEN, 2004). FTTH Council. (n.d.). Retrieved October 2, 2004
from http://www.ftthcouncil.org
Future Work Good. A. (2004). Frequently asked questions
about BPL. Retrieved October 4, 2004 from
Future work in this field might include http://www.qrpis.org/~k3ng/bpl.html
conducting a large scale comparison of the
advantages and disadvantages as well as the true ISP Glossary. Fiber optics definition. (2004).
costs and savings to consumers, of all of the Retrieved on December 7, 2004 from
municipalities providing these services. http://isp.webopedia.com/TERM/F/fiber_optics.
html
One could then break out each service
separately, Cable-TV, high-speed internet and Muni Consortium. (n.d.). Retrieved on October
Telephony, and determine which are profitable to 12, 2004 from http://www.municonsortium.com
own and which are not.
Optical Solutions. (2003). Borough of Kutztown
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