Jaguar Communications' Rural Fiber Network

This is the sort of company that should be in every rural area in America; the obstacles it has overcome show why there is still a digital divide between city and country in the U.S.

by Alex Goldman ISP-Planet Managing Editor [December 21, 2007]

All too often, ISP-Planet covers the stories of ISPs destroyed by bureaucracy or regulation. This is a rare success story, but it's not about good government sweetness and fiber light.

The government may claim to be eager to deliver broadband to rural areas, but in practice, bureaucracy is a huge burden to anyone running a company smaller than a national phone company. That's the experience of Donny Smith, CEO of Owatonna, Minn.-based Jaguar Commuications, who has just connected the first customers in a rural network that will deliver the same triple play services (voice, TV, and data) that customers can already get in the major cities.

Financed in part by loans from the US Department of Agriculture's rural broadband program, Smith says he also needed approval from the following entities (listed in no particular order):

Minnesota State Historical Preservation Office, US Army Corps of Engineers, Minnesota Pollution Control Agency, USDA Natural Resources Conservation Service, the U.S. Fish and Wildlife Service, Minnesota Department of Natural Resources (DNR) Trails and Waterways Division, Minnesota Department of Natural Resources (DNR) Division of Lands and Minerals, each county's soil and water conservation district, and, last and perhaps most enormous, every township and city in the coverage area (Smith says there were 103).

In addition, he needed permits for many parts of the buildout, including digging to lay fiber, crossing railroads, and crossing state or federal highways.

It took years.

Here is where I am
Why did he persevere? "It sounds too corny, but I did this because I think we need it here, and if I don't do it I don't think anybody will. When I was a kid in a little country school in Iowa, we got to be part of a project on DARPAnet, when 10 baud or 100 baud was state of the art, but just a few of us got to work on it and that advantage has followed us through our lives. Our kids today are getting that way with computers. Nobody thinks about cars; they just use them. Everyone, not just people in metropolitan areas, deserves [the same opportunity]."

It's not easy to get internet service in Southeastern Minnesota (largest town, Rochester, population 94,950). It's not easy to get phone service either. "All of my neighbors are long distance to me and to each other," says Smith. "I make a call to pick up tractor parts and it's long distance."

The years of bureaucracy
Smith founded a dialup provider, Local Link, in 1995, and sold it in 1999. He founded Jaguar Communications that same year. Initially, the company sold services over phone company copper on the UNE-P and UNE-L platforms. When UNE-P was scrapped by the FCC, many such companies disappeared or went out of the business of selling internet connectivity, focusing on business services.

"It's difficult to use UNE-L," says Smith. The problem is that retail prices are lower than wholesale. Customers can get a local line from one ILEC for $13.60, but Jaguar pays $16. In another town, with another ILEC, the retail price is $21 and the wholesale price is $28.

Jaguar developed unusual skills, Smith claims, running multiple phone lines down a single copper pair, for example, or encapsulating the entire TDM signal into IP voice in order to ensure quality (but at the cost of higher bandwidth usage). He credits equipment from Integral Access (a manufacturer now owned by Telco Systems) and an IP-based rather than telco-based mindset. If you're paying above market prices for network elements, you need the skill and the equipment to get more out of those lines than the phone company does.

"We have about one year of telco experience combined outside our company," says Smith. "We did what we did because we didn't know you couldn't do it."

Instead, the company hired and retained IP network experience and is now adding IP video experience.

The company started laying fiber in the first half of 2001. It attempted to build more fiber but was denied access to a key manhole by Qwest. The details are complex but the state PUC summed up the situation in a later statement by noting, "Qwest failed to provide the service in a timely manner and cannot blame the CLEC. The incident is a case of Qwest discriminating against a wholesale customer in favor of its retail arm."

Smith says that many providers have fiber routes that come through the city and that fiber is relatively plentiful for a town of its size. Nevertheless, Qwest is the local ILEC and Jaguar's second fiber ring was not complete until 2003 or 2004.

In 2003, Smith began the process of applying from a loan from the USDA. The first application was rejected in 2005 and Jaguar applied again in 2006, hiring an outside engineering team to validate the company's network design. Many ISP owners would resent hiring someone to validate what already works, but Smith said that hiring Fail Engineering helped a lot. "They're called 'fail' but they didn't fail."

In September of 2005, the USDA informed Jaguar Communications that the loan had been approved pending clarification (APC) and on April 21, 2006, the money was approved to great fanfare. The $4,461,000 loan is at interbank rates at the time of the loan, over a period of 20 years, arriving in tranches. Smith says Jaguar took out a loan to cover the time between the APC announcement and the arrival of the cash. The first tranche arrived in December of 2006.

Go to page two: The fiber arrives >