‘Dark fiber’ lights paths for two very different communities

One city has around 800,000 inhabitants, the other has just over 17,000. One city’s per-capita income in 2007 was around $20,000, while workers in the other city boasted earnings of close to $56,000. 51 percent of the population in one city has received university level education, meanwhile, a nearly identical percentage of the other city’s population just had their high school diploma.

Stockholm, Sweden and Bristol, Virginia are worlds apart in just about every demographic possible. But, the two cities have both leveraged the power of broadband to buttress their economies and improve their citizens’ lives. In this year’s Intelligent Community Forum’s Building the Broadband Economy Summit, the two cities are competing for the top honor.

During the early-to-mid 1990’s, Sweden’s economy was under siege from national inflation, brought on by a real estate bubble burst, forcing Central Bank interest rates to climb as high as 500 percent. Employment fell 10 percent, and in 1994, their budget deficit exceeded 15 percent of Gross Domestic Product. The result of this economic crunch was to slash historically plentiful social benefits and to base future economic growth on knowledge-based workers instead of construction.

In the ICF’s Top Seven Intelligent Communities white paper, the “Stokab Model” is explained:

During the early Nineties crisis, the City of Stockholm decided to pursue an unusual model in telecommunications. The city-owned company Stokab started in 1994 to build a fiber-optic network throughout the municipality as a level playing field for all operators. Stokab dug up the streets once to install conduit and run fiber, closed them up, and began offering dark fiber capacity to carriers for less than it would cost them to install it themselves. Today, the 1.2 million kilometer (720,000-mile) network has more than 90 operators and 450 enterprises as primary customers and is now in the final year of a three-year project to bring fiber to 100% of public housing, which is expected to add 95,000 households to the network. Stockholm’s Mayor has set a goal of connecting 90% of all households to fiber by 2012.

The Stokab open-access, or “dark fiber”, network provided capacity to competing carriers for much less than it would cost them to build their own network. The result has been a robust climate of quality service and rich competition, bringing a Web-based government to the people of Stockholm and a chance to be a world leader in innovation and technological development. Although Bristol, Virginia might not be able to become the epicenter of technology in the 21st century, what it has accomplished in under a decade is nothing short of remarkable.

In 1998, officials from the Bristol Virginia Utilities sought grant money to lay fiber optic cable between their eight electric stations in the Appalachian region around southwestern Virginia and Northern Tennessee. In 2001, BVU began offering fiber-to-the-user (FTTU) services under the name OptiNet. Incumbent regional telecom companies Embarq and Verizon protested the move, claiming that BVU would provide cheaper-than-market prices by using cross-subsidies from other services. After three years of legal battles, including $2.5 million in legal fees, BVU won the right to deliver retail communications.

Again, from ICF’s white paper:

As it turned out, the private sector was right to fear competition from BVU. Market research conducted by the company in 2001 suggested that 70% of respondents might switch telephone and television service from the incumbent operator, while half might switch Internet service. By August 2008, BVU’s OptiNet FTTU service had captured more than 62% of the available residential and business market in its service area, thanks to effective marketing to electric customers with whom BVU already had a relationship. Despite millions of dollars of investment, OtpiNet had reached financial self-sufficiency on $16 million in net revenues in the 2009 fiscal year. A 2008 study conducted for the BVU Board determined that OptiNet customers, while enjoying the bandwidth bonanza of FTTU, had saved nearly $10 million over incumbent competitors’ rates or special offers since the start of service.

In addition to the savings, OptiNet has brought in two major information technology government contractors, Northrop Grumman and CGI, to the region with the help of a dark fiber network built by the Cumberland Plateau PDC, which serves Buchanan, Dickenson, Tazewell and Russell counties. In turn, this allowed the region to achieve 60+ percent broadband penetration.  The city has also become involved with state university and job development programs to ensure economic stability for future generations to come.

To read the Intelligent Community Forum’s Top Seven white paper and learn more about Bristol, Virginia and Stockholm, Sweden, click here.

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