Jaguar Communications' Rural Fiber Network
— continued

The fiber arrives
The first residential customer was connected to fiber in August of 2006, Smith says. "This customer had no copper lines to their home and the phone company wanted $30,000 to hook up the line in winter, so fiber from us cost less."

Jaguar Communications offers customers in its service area a suite of services that any resident of Manhattan would be pleased to pay $119.99 per month for: local calling, numerous phone features, 3.0 Mbps / 768 Kbps internet, 5 e-mail addresses, anti-spam and anti-virus, and 80 channels of digital TV.

Running fiber from the kerb to the home is not cheap, and the install fee is $599 for a one year contract (dropping to free for a five year contract). Unlimited long distance calling is an extra $25 per month.

The company offers a variety of other options at different prices, but the bottom line is that Jaguar Communications offers everything a residential ISP wants to offer.

Network design
The network backhauls to Qwest COs, and "the big tandem is in Owatonna," Smith says. Owatonna is the core of Jaguar Communucations' network, as well as the company's head office.

The digging is done by outside contractors ranging from local companies to nationwide and multinational firms.

Smith says the network is a G-PON optical network built to telco quality specs. In a cold and rural area, a network that doesn't require repeaters or other equipment left outdoors is ideal. "We have a CO or hut every 18 miles," says Smith. "That gives us a service radius of 9 miles." Huts are concrete, with batteries and generators.

The gear can do 12 miles, but a 9 mile radius between points provides the overlapping coverage the ISP needs to complete its service area. Smith notes that lakes complicate the geography (Minnesota has no mountains, but lots of lakes).

"We do not need any equipment that's not in huts or COs," says Smith. "We install battery backup in each house (and replace the battery every 2 or 3 years). With buried cable, we're not affected by the weather. The customer only goes down if they lose power or if somebody cuts the line with a backhoe."

Smith says that every 32 subscribers are covered by a 2.4 Gbps shared line that that runs to equipment in the huts that have a 1 Gbps backplane (that could rise to 10 Gbps when 10 GigE is available). The backhaul is 10 Gbps. Even video does not overload the network. In theory, 32 homes viewing 32 different channels could consume 32 x 50 Mbps, but in practice, Smith says, "it's all multicast." At any time, most homes are watching the same shows, many of them on network television, and in that case video doesn't take up a significant portion of the bandwidth available on an optical fiber network.

The future
The 10 Gbps backbone (2.5 Gbps in some areas) is more than many networks deploy today, but Smith points out that in the future, even more could be available. In optical networks, different wavelengths, called colors, can travel down the same piece of fiber without interfering with each other. That principle is already used in today's PON networks, but in the future, equipment may be able to handle a larger number of colors than it can handle today.

"We're testing, this month, CPE that can handle 200 Mbps and 300 Mbps," says Smith.

But can he (or anyone) afford to deliver 100 Mbps to each customer? When you give a customer that much bandwidth, they are capable of using enough to actually cost the ISP money. Would you change anything with usage-based pricing?

"If it was usage based," Smith says, "I'd open everybody up to full throttle. But customers want to pay $30 per month and not worry about usage. Calculating prices is like doing an actuarial table. People who buy 256 Kbps and are doing a little browsing and e-mail are [subsidizing] the tech-savvy user who has a 3 Mbps connection and is using it full throttle."

"The people in the bottom tiers are paying too much and those in the top tiers are paying too little. We're charged based on the 95th percentile of usage. I could open bigger a bigger pipe but the customer doesn't want to pay for that."

He's encouraged by telco experiments with charging more for a speed boost. "Our equipment is not able to do that yet, but I want to give the customer the ability to go to our website and pay for a speed increase."

Conclusion
All too often, we write the stories of the failures caused by regulation and the burden it imposes on small businesses. This is not one of those stories, but even the success story of Jaguar Communications illustrates why rural broadband is not happening even though the funds are there. The burden is too heavy.

Jaguar Communications isn't asking for a subsidy like the phone company had during the rate of return regulation years.

The phone company was built on a regime that guaranteed profits no matter how expensive the build. The result is a good telephone network, and an astonishingly expensive real estate portfolio paid for by guaranteed monopoly profits. Case in point: Verizon sold just one of its buildings in Manhattan, 1095 Avenue of the Americas, for about $505 million two years ago. The price is low for some of the city's best real estate because the new owner is converting the bottom floors of the building from windowless switching centers that overlook one of Manhattan's few midtown parks into office space, and all of that costs money and takes time to accomplish.

Smith isn't building office towers or paying lavish dividends. His marketing budget is minimal and mostly he obtains customers through word of mouth and keeps them by providing good service.

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., and why there will be few companies like it.

If you are going through this process, Smith hopes you'll take his example to heart. "I don't think anyone else will do it," he says, "but if they do, I'd like them to succeed."

In that spirit, he's provided a list of other equipment used in the network:

• ECI (network provider) SONET and Layer 2 switching
• Foundry Layer 2 switching
• Calix, "the old OSI platform for OLT and ONT"
• ADC for cross connects and splitters
• Cisco gateway routers
• Amino for set top boxes
• MetaSwitch's soft switch
• CopperCom tandem
• Conklin-Intracom middleware

—End

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