OSIsoft

Google's not the only one with super-high-speed internet plans

June 18, 2013: 11:34 AM ET

A number of companies and cities are trying to match Google's much-covered Fiber project.

By Verne Kopytoff

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FORTUNE -- Google has repeatedly grabbed headlines with its ambitious plan to wire more than a dozen cities with super-fast Internet service. The attention is well deserved. People at home will be able to download entire movies in just a few seconds. Businesses will be able to shave time from online chores, build new innovative products, and lift productivity.

But Google (GOOG) isn't the only game in town when it comes to superfast Internet connections. A growing number of cities are creating their own so-called fiber networks or enlisting companies to install them. These initiatives generate far less buzz than Google's. Nevertheless, they are slowly increasing the reach of lightening-fast Internet service amid concerns about the United States lagging countries like South Korea in broadband connection speeds.

"Google has moved the interest level a multitude of times higher than there would otherwise be," said Craig Settles, a consultant who helps cities with their fiber projects. "You wouldn't have had anywhere near the national impact without them."

The question remains whether there is enough interest in the United States to make the cost of installing fiber networks worthwhile. Furthermore, it is still unclear whether the faster Internet connections will spur economic development and innovation, as many government officials have promised.

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Among the cities that have introduced one gigabit fiber Internet connections -- 100 times faster than traditional household broadband -- is Cedar Falls, Iowa, which did so last month. San Leandro, Calif. unveiled a network targeted at businesses customers last year. Meanwhile, a number of cities like Lawrence, Kansas, home to the University of Kansas, and Stockbridge, Ga. plan to premiere fiber service in the near future. Others like Longmont, Colo. are considering projects.

The federal government has thrown support behind the spread of fiber. Before leaving office recently, Julius Genachowski, the chairman of the Federal Communications Commission, set a goal that every state would have at least one city with a one-gigabit fiber network by 2015.

Municipal fiber is nothing new. A small number of cities have built networks over the years. The pace has quickened, however, in the wake of Google's announcement in 2010 that it intended to build "experimental" fiber networks. The project is widely seen as an attempt to pressure traditional telecommunications companies to upgrade their networks, something they've resisted because of the expense.

Google started its push with Kansas City, Kansas, which it later expanded to a number of nearby communities. Service is already available to subscribers in a couple of neighborhoods. Later, Google agreed to take over a network in Provo, Utah. and to build another in Austin, Texas. Whether Google plans to move into other cities is unclear.

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In contrast, San Leandro's fiber network is a local effort. OSIsoft, one of the city's few technology companies, spent $3 million of its own money to lay the 11-mile fiber optic loop. Patrick Kennedy, OSIsoft's chief executive, said his company, which sifts through huge amounts of data for industrial clients and their factories, needed the high-speed connection to do its work. Moving his 1,000 employees to another city that had fiber would have been costly and a disruption for employees. "I'm in the software business," Kennedy said. "I can't operate in an all copper city," referring to the copper wires used for traditional telecommunications and invariably slower Internet service.

After consulting city officials, Kennedy set up a separate company to install the fiber in existing underground telephone conduits and market the service to other companies. Last year, the network, which also benefited from a $2.1 million federal grant, went live. Ten buildings have since signed up for the service, which can cost anywhere from a $100 a month to a few thousand dollars depending on the connection speed. Subscribers must also pay a one-time fee of $10,000 to $50,000 to run a line from the main fiber loop into their buildings.

San Leandro officials hope that the city's fiber network will help recruit and retain technology companies in what was once largely an industrial area. Business vacancies have been tough to fill following an exodus of manufacturing firms. Working in San Leandro's favor is that rents are far cheaper than across the bay in San Francisco and Silicon Valley. High-speed Internet, officials hope, will serve as extra enticement for technology companies to move in.

Deborah Acosta, San Leandro's chief innovation officer, said that the availability of fiber opens the door to entirely new uses for buildings that have had trouble attracting tenants. She pointed to a former Chrysler plant that closed in the 1950's and was later converted into a shopping center. Another building in need of tenants is a shopping mall that she described as a "big box." The top floor in both the former Chrysler plant and shopping mall is moribund, she said, and -- with the fiber Internet connections -- can now be reimagined as office and industrial space.

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"You can take traditional and make something completely new out of it," Acosta said.

So far, the results are modest. Fiber has helped to keep some businesses in the city like OSIsoft, Acosta said. But it's difficult to point to new companies that relocated specifically because of the speedy Internet connections. Acosta cautioned that it's still too early to pass judgment.

What isn't available in San Leandro is fiber to homes. Google, in contrast, plans to make its fiber service available, including Internet television as a replacement for cable, in residential neighborhoods for up to $120 per month. Kennedy was skeptical that consumers want or want or need such speedy connections. The cost of wiring individual homes is particularly expensive, he pointed out. "I admire what Google's doing but I don't think you'll have a significant fraction of homes on fiber," he said.

In the past, a number of fiber projects stumbled because of the cost of building networks and limited customer interest. Alameda, Calif., for example, sold its partially built network at big loss in 2008 as did Provo in selling its network earlier this year to Google for $1.

Settles, the consultant, said that making a successful fiber network depends in large part on training local businesses in digital literacy. Many companies are set in their ways and don't see the need for speedy Internet connections. Even then, they will likely only need a slower tier of service. One gigabit is far more than most small and medium-sized businesses need.

"You have to address education before you can expect your maximum success," Settles said. "Cities and towns are just figuring it out."

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