Archived from 2001. Describes a potential startup company that facilitates the construction of broadband last mile infrastructure (Fiber/Wireless/Wireline) by local entities such as municipalities, utilities and local entrepreneurs. The local entities capitalize and operate the local infrastructure. Newco helps them plan, construct, deploy and operate the infrastructure, creating an economy of scale for distributed infrastructure construction and deployment. Newco itself does not capitalize, own or operate the local infrastructure but does generate upfront and recurring revenue, thus making it suitable for traditional VC investment that supports a strong return on investment with an appropriate time horizon.

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15550 Wildcat Ridge
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Saratoga, CA 95070
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408-882-4755
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rberger@ibd.com
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Internet Bandwidth Development
Facilitating Distributed
Last Mile Broadband
Access Providers
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A way out of the Telecom Dark Ages

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Facilitating Distributed Last Mile
Broadband Access Providers
A Way Out of the Telecom Dark Ages
Executive Summary
The described Newco is a company that facilitates the construction of broadband last mile
infrastructure (Fiber/Wireless/Wireline) by local entities such as municipalities, utilities and
local entrepreneurs. The local entities capitalize and operate the local infrastructure. Newco
helps them plan, construct, deploy and operate the infrastructure, creating an economy of
scale for distributed infrastructure construction and deployment. Newco itself does not
capitalize, own or operate the local infrastructure but does generate upfront and recurring
revenue, thus making it suitable for traditional VC investment that supports a strong return on
investment with an appropriate time horizon.
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We have entered a vicious downward cycle of a telecom collapse; A Telecom Dark Age.
Most of the broadband last mile access service providers have gone Chapter 11 or shutdown.
The equipment vendors that supply them are severely downsizing with layoffs and write-offs.
The backbone service providers have no way to connect their fat inter-city pipes to end users
since there are no widely deployed cost effective last mile access options. Businesses created
on the assumption that there will be broadband connectivity to homes and businesses are also
collapsing. Investors in the telecom/Internet industries feel burnt and have been fleeing from
the entire segment, seeming to leave no capital to break the cycle or customers to utilize their
portfolio companies’ optical and wireless equipment.
The lack of widely available broadband last mile access is the linchpin of the dilemma. What
is needed is a way to deploy new broadband last mile infrastructure (Fiber and Wireless)
throughout the country without depending on any single entity or small number of large
funding sources.
This is a proposal for a new company (Newco) that will stimulate a renaissance in the
deployment of last mile broadband access by leveraging a broad base of “White Knights”:
municipalities, utilities and local entrepreneurs. Newco acts as the facilitator of a distributed
buildout of local infrastructure. These “White Knights” or Local Entities (LEs) supply the raw
capital, people, rights of way and end user customers.
Newco awakens the latent resources in the Local Entities through evangelism. It then
facilitates the planning, design, construction and operation of the local infrastructure and
services through its customer relationship with the Local Entities who actually own and
operate the local infrastructure.
Newco generates revenue by offering packaged solutions with consulting to bootstrap the
Local Entity’s business. Training and Certification of a whole range of players generates
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revenue and creates a pool of trained personnel for Newco and its customers. Long term,
Newco generates ongoing recurring revenue by supplying products and services (backbone
connectivity, training, network equipment, IT/OSS, 2nd level network/technical/customer
support, etc.) to the Local Entities thus minimizing the Local Entities’ hassles and
dramatically decreasing their time to market and increasing their return on investment.
We Have Entered a Telecom Dark Age
It has become clear that the US is now in a Telecom Dark Age. The data CLECs (Covad,
Northpoint, Rythms) have been forced into chapter 11 or liquidation by monopolistic
practices of the Incumbent Local Exchange Carriers (ILECs). The wireless local
carriers(Winstar, Telegint, ART, Metricom) have all declared bankruptcy. Broadband “3G”
Cellular recedes further into the future and has funneled hundreds of billions of dollars away
from construction into government coffers. The Telecom/Internet equipment vendors have
seen their revenues drop and their stock value drop even faster. Layoffs and write-offs have
been the biggest in history.
The current government administration has signaled that they have no intention to support the
newer competitive local carriers and are instead allowing the ILECs to pretty much do as they
please.
The investment community has fled from any investment in new or existing access service
providers, effectively abandoning their investments in network equipment providers by
leaving them without customers. The ILECs and a couple Cable TV companies are the only
last mile access providers left standing and effectively to control the last mile access market.
It was originally thought that the new CLEC and ISP broadband access service providers
would connect our homes and businesses to the big fat pipes of the new backbone carriers
such as Level 3, Williams and Qwest. But these new providers are bankrupt and no new ones
are expected to emerge anytime soon. With no way to get broadband from the big backbone
carriers to the home and office, some of these new backbone carriers are now facing possible
bankruptcy or hostile take-overs.
Now we are left with just the ILECs who have promised broadband over and over and over
since even before the original breakup of AT&T in 1983. First it was ISDN, then it was
Fiber/Coax and now it Project Pronto and Passive Optical Networks. But they have never
delivered, they have only milked their customers as much as they can get away and have
minimized any actual new investment into infrastructure.
We can not expect the ILECs to come to our rescue delivering new broadband services at any
large scale within our life times.
We can not expect the current federal administration’s regulatory environment to encourage
rapid deployment of broadband last mile access.
We can not expect VCs or Wall Street to fund new companies to deploy their own
$100Billion national broadband last mile infrastructure.
With no new broadband last mile access, then there can only be limited new broadband
services. and all Many of tthe companies started in the last few years based on the
assumption there would be broadband access in the home and office will have increased
business failure. There will be limited markets for all of the optical and other network
equipment investments as well, leading to huge failures in the startup and existing network
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equipment vendor market. All of this accelerates the vicious cycle of less and less investment
and innovation in the Internet, Telecom and Broadband.
Are we left then, in a Telecom Dark Ages where there will be no new major construction of
last mile broadband access, the continued destruction of network equipment vendors, and the
continued collapse of internet based businesses?
Latent White Knights: Local Municipalities, Utilities and Entrepreneurs
The CLEC and National ISP model of top down, build and own it all, has not been able to
deploy large scale broadband access to homes and offices. The CLECs and ISPs did not build
new broadband last mile infrastructure, but expected to ride on top of the physical plant of the
ILECs. The ILECs tend not to build new infrastructure unless pressured by competition or
regulation.The
But there are entities at the local level that have vested interest, community support, access to
local capital and rights of way that could build broadband access infrastructure in their local
region.
These Local Entities could include:
• Municipal Governments
• Public Municipal Utilities
• Division of existing Private or Public Power Utilities
• Local Private Companies
• Local Cooperatives
These Local Entities (LEs) think and act locally. They are close to their community and
businesses. Some already have business relationships in place that can be leveraged. There is
a strong possibility that they can raise money suitable for their local fiber/wireless build based
on these relationships. In the case of municipalities, they have the ability to float bonds and
control rights of way. Utilities generally have access to capital, can leverage their existing
rights of way and infrastructure. Local entrepreneurs will know where there is local money
that would be interested in this opportunity.
What they don’t have is the experience, knowledge or skills to plan, build and manage
Telecom / Internet infrastructure. Most probably don’t even know that they are sitting on a
major opportunity and what the options are. Even if they did, they would need help with the
implementation and with the related support issues (Provisioning, backbone bandwidth, NOC,
etc).
Newco can be the change agent to activate this latent distributed local opportunities by
offering near turn-key options to allow a Local Entity to become a fiber/wireless last mile
broadband access service provider.
Bootstrapping a Renaissance: Newco
Newco would operate as a national profit making corporation whose business is to promote,
bootstrap and facilitate independent Local Entities (LEs) as broadband access service
providers in their communities. These LEs would capitalize, build and operate the local
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infrastructure and services with Newco’s help. Newco will not capitalize or own the last mile
infrastructure and would not sell directly to end users. Thus the capitalization of Newco will
fit into traditional VC models, yet it will be able to participate in both upfront and recurring
revenues from the construction and operation of new last mile infrastructure.
Newco would evangelize the concept to potential LEs as part of Newco’s marketing and sales
effort. As entities “sign up”, Newco would help them plan, design, implement and operate the
local service. This would include contract services for the planning and design phase as well
as ongoing backbone, NOC, OSS services for the operation phase.
Evangelize the startup of local public or private service providers
The initial phase will be to evangelize and educate the potential LEs. A single region would
be the starting point, but would then expand as a successful track record is built. In the early
stages of Newco’s existence, evangelism will be a major activity until a critical mass of LEs
are up and running. Then evangelism will be more institutionalize and part of overall
marketing for Newco.
Template based startup plans and organization
Newco would offer a small number of different services and packages for the planning,
promotion, organization and operation of the LEs. This would include:
• Business models
• Legal issues
• Community education
• Marketing campaigns
• Construction options
• Equipment selection
• Network designs
• Provisioning and OSS
A small set of templates can be used as the basis of a near turn-key process so that there is
leverage as more and more LEs take advantage of Newco’s consulting services.
Training & People Certification at all levels
In previous waves of networking technology change, Novell, Cisco, Sun and Microsoft
Certified Engineering and Training programs acted both as a major profit center and helped
grow the overall businesses for these companies and the industry in general. There is currently
a lack of people that would be capable of running the Newco and LE operations. The Newco
Training and Certification program would be set up to insure that there is a solid pool of
skilled personnel for this new industry.
Training and certification will be a major component of Newco’s revenue and one way that
Newco can profitably scale its overall business without having and explosion of direct hires
for the consulting side of the operation. This process can be amplified through a “Training of
Trainers” program and certified partnerships with established consulting firms that have gone
through Newco training.
The Training for Trainers infrastructure would be in-house and be used for developing
Newco internal personnel, consulting partners and top tier outside trainers. Outside certified
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trainers would then be able to train specific positions that would be suitable for employment
in or contracting with the LE companies.
Some of the certified positions may include:
• Initial Organizers of the LEs
• Business and Network Planners
• Network Operators
• Customer Service
• Plant Deployment
• Customer Deployment
• Evangelists, Sales and Marketing
• New Trainers
Infrastructure Construction
Newco will partner with select construction firms experienced in building the types of last
mile broadband access infrastructure appropriate for these markets. Newco would then offer
turnkey build solutions to the LEs for their particular situations.
You can think of Newco as the “Prime Contractor” for the LEs and the various construction
firms as the sub-contractors, not requiring the LEs to become expert in the construction phase.
Supported infrastructure would include Fiber to the Neighborhood (FTTN), Fiber to the Home
(FTTH), as well as various Fiber/Coax, Fiber/UTP-Ethernet, Fiber/Wireless hybrids.
Backbone Procurement and Management
Since the LEs are locally focused, they will still need ways to connect to the larger Internet
and broadband backbones. Newco will offer backbone services by running some core services
and partnering with existing broadband backbone service providers. Newco will be able to
offer these services to the LEs at rates lower than they could get individually.
These backbone services will be groomed to be “plug compatible” with the local
infrastructure configurations that come with the Newco LE Business Templates. This
minimizes the hassle and potential problems that a LE may have if they tried to do it
themselves.
Newco can support LEs that want to be the complete service provider (all the way up the
stack to Internet services) or open access models where the LE builds and runs wholesale
Layer 1 (Dark Fiber) and/or Layer 2 (Ethernet) infrastructure and allows 3rd party ISPs to
have the end user customer relationship.
Regional NOCs
Newco would operate regional Network Operation Centers (NOCs) that would coordinate and
manage Newco’s backbone built with wholesale carrier networks and the handoffs to the LEs
that are utilizing Newco’s backbone services.
It will also act as backup NOC and trouble ticket escalation operations for the LEs.
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Legal, Governmental and Regulatory
Another area where Newco can have an economy of scale compared to individual Local
Entities is in having the legal expertise and resources to deal with the FCC, PUCs, ILECs and
other regulatory or competitive legal issues. This can be made available as part of service
bundles, specific retainers or on-call time/material basis.
It can be expected that this will be a key enabler and differentiator as the legal and regulatory
environment is a major influence on the success or failure of telecom activities.
Equipment and Services Purchasing Aggregation
Newco bundled services would come with equipment. Newco can also act as an aggregator to
offer its customers better price points and support than they could get on their own.
Facilitate order processes from 3rd parties
Newco will have an IT infrastructure including Order Entry, Provisioning, OSS, Billing, etc.
that can be private labeled for its LE customers. It can be offered as an outsource “ASP” or
licensed for in-house use by the LE. IT is a major stumbling block for most new service
providers so this would greatly accelerate their time to market and quality of their customer
experience.
Newco Labs
This would be the in-house R&D, engineering group for Newco. Would integrate, test, and
certify equipment, software and services that would be used by Newco and its LE customers.
• Equipment Specification & Selection
• OSS and NOC refinement
• Best Practices Development
Local Entities (LEs)
The LE’s would be the entity that would own and pay for the building and operation of their
local last mile broadband access infrastructure. They will generally outsource the construction
and some aspects of operation to Newco. Newco will partner with the appropriate
construction firms, wholesale carriers, and other suppliers to deliver an integrated solution to
the LEs.
Generate their own funding
It will be up to the LEs to come up with their own funding for the construction and operation
until profitability. It is expected that the LEs will have a variety of ways to put together the
initial capital:
• Private Local Funding from local interests
• VCs / “Wall Street” investors that want to fund specific local projects
• Municipal Bonds
• Other local, regional and national public or governmental funding
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Open Access
Generally expected that the Local Entities would be a form of utility and so would support
open access to various higher layer operators and 3rd party service providers. It is not required,
but would probably have the most synergy. In some cases, the LE may be only operating
wholesale services at the layer 1 (conduit / dark fiber). Others may offer layer 2 (Ethernet
most likely) or even layer 3 (IP).
• Focus on the best, most cost effective Layer 1 & 2 connectivity
• Procedures for integrating alternative layer 3 & above service providers
• Only support service providers with inter-OSS / Flow through order
entry
• Could have its own ISP division
Build the Local Infrastructure
The ultimate responsibility for building the local infrastructure lies with the LE since they will
have to pay for it and will end up owning it. But they will be able to contract with Newco or
other construction contractors to do the actual construction. In some cases (such as power
utilities) they may have their own ability to do the build.
Some of the possible local infrastructure components or connectivity options include:
Metro Fiber Backbone
This is the local backbone for the LE. It is a metro area fiber infrastructure that is used to act
as the backhaul interconnect for all of the neighborhood Points of Presence (PoPs) as well as
the larger connections to high rises or ultra-high bandwidth customers. It may be built as a
ring or star configuration depending on the eventual technology selection and local
conditions. This may or may not be owned by the LE. In some cases it may make more sense
to lease this from another service provider.
Fiber to the Neighborhood (FTTN)
If FTTN is to be used, there would be spokes going out to all the neighborhoods to be served
from the Metro Backbone. This would most probably be Gigabit Ethernet.
Wireless to the Neighborhood (WTTN)
In some cases, particularly smaller LEs, fixed wireless point to point or point to multipoint
would be used to connect the Metro Backbone to the Neighborhood.
Options to the Home
It may be a few hundred to several thousand feet from the FTTN or the WTTN Point of
Presence to the home. A variety of options could be selected to cover that last distance:
• Wireless
• Ethernet over Fiber
• Ethernet over Twisted Pair
• Coax
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Options to the Business
Depending on the size of the business or the facilities its in, the LE would connect to them
ether directly from their Metro Backbone or via neighborhood PoPs. The options include:
• Fiber to the Building
• Ethernet over Fiber
• Ethernet over Twisted Pair
• Wireless
Manage the Local Infrastructure
The LE would have the responsibility for the 1st level network management (including the
local NOC), tech support and customer service. It is expected that the LEs will outsource their
2nd level network management, tech support to Newco. There may be the option to outsource
the 1st level as well for those LEs that just want to capitalize and own the service but not
operate it.
Revenue Streams for Newco
There will be a rich set of streams of revenue for Newco. These include consulting,
outsourcing, construction management, backbone services, network operations, IT, etc. These
can be roughly broken up into two classes; Bootstrapping and Ongoing.
Bootstrap Phase
This is the initial phase for a LE where they have to figure out what they are going to do, how
they are going to do it and all the related support issues for getting their business up and
running. For Newco this will mainly be a consulting service, but would have an economy of
scale based on having a set of templates for a relatively small set of possible organizations
from doing it all before.
Planning and Design consulting will be the bulk of the work during the bootstrap phase.
Training and Certification revenues for training the LE’s team as well as for any of the
outside consultants that Newco may bring in.
Legal and regulatory work will also be a significant need by the LEs during the initial
phases.
Cash and / or Equity in Local Entity
Newco will have the option to negotiate cash and/or equity in the LE.
Ongoing Full Service Contracts
It is possible that the LE will work with Newco only for the Bootstrap phase and that should
be a profitable situation for Newco. But it is expected that there will be an ongoing
relationship between Newco and the LEs as Newco can offer many services that will make
life easier for the LEs as they sign up and retain customers.
Closely coupled with Newco for Operation Phase
This would be the preferred way. The Local Entity would focus on the local issues and Newco
can continue to assist with Backbone, Regional NOC, legal, backup support, etc.
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Ongoing relationship
• Backbone Services
• Regional NOC
• Equipment and Services discounts / aggregate purchases
• Legal / Regulatory
• Training and Certification
• Access to Newco Labs
• Backup Tech/Customer support
• Inter ISP / Local Entity OSS and Flow thru provisioning
• Advertising and PR
Bundled or unbundled payment
• Branding would require bundled packages.
• Pricing based on services + branding.
• Could still include equity participation.
Training and Certification
Training and Certification could be unbundled as well and should be its own profit center.
Potential Partners / Initial Funding Sources for Newco
Newco will require traditional initial and subsequent rounds of financing before it can reach
profitability. The amount of funding and the time to profitability would vary depending on
how fast it was decided that the business should grow. It is expected that the levels of funding
necessary will be in line with traditional VC investments and not the huge investment before
return style of the Internet Bubble.
It is critical that first tier funding of an adequate amount be raised in order to gain the interest
and attention of the first several Local Entity customers as well as to attract the top tier
management team and strategic partners.
Besides the traditional VC investor, there are many possible strategic investors that would like
to bootstrap new network construction and deployment since the general market has
stagnated.
Energy / Carrier / Construction
• Williams
• Enron
• Level 3
• Other Power Utilities
• Bechtel
• Mastec
• Other construction firms
Equipment Companies
It will be in the interest of some of the larger network equipment companies to ether invest or
(if they are still able) do vendor financing.
VCs and Investment Bankers
The investment levels are on the order that would be a natural fit for VCs in the beginning and
Investment Bankers in later rounds. Newco has the opportunity to be a very solid investment
on its own and will also help to insure that there is a solid market for earlier investments in
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optical and other networking equipment, businesses that depend on broadband services and so
on.
Conclusion
The Telecom Dark Ages is indeed upon us. All the current trends are reinforcing the
downward spiral that is sucking out the investment capital and the will to innovate across
entire industry segments beyond just Telecom.
This Newco proposal shows a way out. It is a call to action and not yet a business plan, but
identifies many of the issues and opportunities that a business plan can be built upon. It would
not only help end the Telecom Dark Ages and reinvigorate the network equipment market, but
can be an extremely successful and profitable business in itself.
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