FOR THE TOWN OF PINEVILLE
Google Is Coming to Town:
GigE, GigE, GigE
Would it not be mainly BAD NEWS?
Mid-South Consulting Engineers Inc.
A subsidiary of Mid-State Consultants Inc.
3901 Rose Lake Dr.
Charlotte, NC 28217
Joel O. Williams PE
704-357-0004
5/9/2014
Explanation of how Google’s coming to the Town of Pineville will affect its existing telecommunication
business.
Google Is Coming to Town: GigE, GigE, GigE
I was asked by the Telecommunication Plant Manager to provide a white paper on what the Town of
Pineville can expect from Google’s coming to town and how it may affect the ongoing Town business.
The entire concept of what Google’s coming to town means to everyone depends on how it will affect
each person individually. In my opinion, the Town, which presently owns a telecommunication business,
does not want to see Google come as they have proposed to come to most cities. It may be a surprise,
but the Town’s telecommunication business has had fiber GigE for several years now in some parts of
the Town with most people not realizing it. All the fiber terminal equipment purchased to date and the
lasers to operate the equipment have been operating with fiber GigE internet service, but the customers
on this equipment could not afford to pay for us to provide them a true fiber GigE internet service.
The existing telecommunication business that the Town owns is facing many headwinds as it goes
forward to compete with all the players that are in the business or attempting to get in the business.
The Town of Pineville may want Google to buy its system and get out of the telecommunication
business, which may be one of the options for the Town. Otherwise, Google’s coming to town has
nothing but bad news to provide the Town and its current telecommunication business unless Google
would offer the Town a grant or a low-price connection to the Internet. This would allow the Town to
offer a low-cost option to its customers within the Town, but Google would have to agree not to
compete in the same areas.
What is fiber GigE internet service you may ask? It depends on whom you ask and what they are selling
that day. This may sound like a “cop-out,” but it is not. Most people do not understand what internet
speeds mean and how much they really get from their internet service. Providers offer many different
speed options, but what is marketed and what is actually received at each home never agrees because it
depends on many factors. These factors affect what internet speeds are actually provided versus what
have been marketed by each of the different providers, and the two seldom agree. Most home internet
services are designed to provide a large data pipe in the downstream direction and a much smaller data
pipe in the upstream direction. This specification has been part of the internet-service business model
for many years.
An example of misleading marketing would be when Time Warner advertises a 20Meg internet service
and does not tell the customer that the service will be shared with many other users. When all the
customers try to use it at once when they return home in the evening, no customer is likely getting
20Megs because the service is being shared by everyone. If a customer uses the same service at 2:00
a.m., however, the customer may get the full 20Megs in the downstream direction but never in the
upstream direction. Our Pineville copper VDSL internet service can offer up to 100Megs to most homes
and businesses in Pineville. If all the customers were online at once and trying to download HD movies
or any large files, they all would be reaching our telephone office at the maximum rate of 100Megs;
however, the Town’s 200Megs connection to the internet would block them to a certain extent from
getting the same internet speed from the internet server. Every one of the Town’s internet customers is
using the same connection to Level 3 for all outside internet connections. Any customer within the
Town’s service area can connect with any other customer at the 100Megs or GigE internet speeds if the
customers have computers and equipment capable of accessing this type of service. Many factors can
influence the internet speeds significantly because of the types of computers being used, the types of
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wireless devices, and the types of servers and internet speeds allowed at data-center connections as
well as router-equipment and fiber-transport capabilities.
What does 20Megs versus GigE internet speeds mean practically? All internet data is sent with either
electrical pulses of ones and zeroes on copper or with either light on or light off on fiber. When we talk
about 20Megs of internet speed, therefore, it means the light switches off and on at 20,000 times per
second; and, when we talk about GigE internet speed, it means the light switches off and on at
1,000,000 times per second. As you can see, this means that GigE internet speed is 50 times faster than
the 20Meg internet speed, which is like connecting a garden hose (20 Megs) to a fire hose (GigE).
So what type of GigE internet service is Google offering in Kansas City at this point? The services are
similar to those we now have in Pineville except that all the local loops in Kansas City are able to offer
1Gig of internet speed and an IPTV package similar to the one Pineville offers. Because Google has deep
pockets, it can afford to provide a very large internet pipe at a price that is far below the market cost of
the same service in Pineville. This allows Google to pound its chest for now, but can Google afford to
continue this over the long run in the hope that the price per bit will just continue to fall?
Pineville has offered and is still offering internet packages within the Town at very competitive rates
when compared to the rates of AT&T and Time-Warner for all internet speeds on the market today. The
$75 per month that Google is offering in Kansas City for GigE internet service does not work here unless
we want to lose money on each customer.
So, yes, Pineville has some GigE; but what good is it? Well, for starters, it can be a good marketing tool
to attract new small businesses and techies that are looking for very fast internet services. This may be
desirable or not to the Town, depending on each person’s vision of what the Town should become.
The pertinent point about the marketing of internet speeds has more to do with perceptions of what the
customers think they are receiving than with what is being provided in practice. The actual speed
depends upon so many factors that most companies can advertise one thing and do another by using
the pattern of customer usage and the data pipe to the internet to shape the traffic so that most people
do not experience any issues. Pineville continuously monitors its data pipe to the internet and has
continued to increase the size of the pipe to prevent data blockage to and from the internet except for
short periods during the busiest peak-usage times. Having a large number of business customers who
mainly use the service in the day and do not use it much in the evening allows for good internet service
for residential and business customers.
Until about two years ago, Pineville was in the process of upgrading the entire Town to fiber in a
program that was to take three to five years to complete. When the cost of the IPTV project became
viewed as too costly, the Town chose not to pursue any additional upgrades; so the fiber program was
suspended. At this point, we have a few ILEC areas of the older parts of the Town with fiber; but we still
have about 60% left to complete in those areas with Time Warner as our only primary competitor. All
new subdivisions in the CLEC area are being built with fiber as they are developed, but we have the
entire portion on the east side of the Interstate that has never been built with fiber or copper. All areas
of the Town served by the CLEC operation have AT&T and Time Warner as competitors that can offer
the same services.
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We have not conducted an in-depth study of the cost to complete the entire Town with fiber but
present below for your consideration a broad-gauge cost estimate to complete all areas of the Town
with fiber. We are assuming we will have competitors and, at best, will get only 50% of the customer
base.
Type Cost
ILEC Fiber Cost
CLEC Fiber Cost
ILEC Office Equip. Cost
CLEC Office Equip. Cost
ILEC Premise Cost
CLEC Premise Cost
Engineering
Cost per item
$75,000/mile
$80,000/mile
$300/Service
$300/Service
$500/Service
$500/Service
$200,000
QTY
6
10
350
600
350
600
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Total
Ext. Totals
$450,000
$800,000
$105,000
$180,000
$175,000
$300,000
$200,000
$2,210,000
This estimated budget shows that each new customer will cost approximately $2400 to move or to add
the fiber with very little new revenues to help offset this cost. We strongly recommend that the Town
move in the direction of all fiber as soon as economically possible so that it will not be behind in what its
citizens have access to in the future.
The Town has been able to provide a very economical telephone and data business over many years
because of the environment in which it was operating and its ability to provide excellent personal
customer service. The Town has been able to do this successfully for many, many years and to provide
some funds back to the Town to meet other needs, but this day has now passed.
The Town is at a major crossroads with its telecommunication business. To date, the Town has been
able to provide any telecommunication service that anyone within the Town has required. As internet
speeds increase, the Town now faces the need to purchase internet pipe access from other providers at
much higher rates than the “big boys” are able to pay when purchasing high volumes.
The Pineville Telephone business has had some great things going for it that have allowed us to survive
in a very tough business. For instance, we have had the ability to offer power service in a bundle, the
ability to be very responsive to the customers--large or small, and the ability to provide a certain amount
of fiber to some of the homes and businesses. We also have retained fairly low rates that have kept us
from eroding more access lines than what we otherwise would have lost. At one time, we were pushing
2400 access lines without all the new developments; but now we are down to 1700 access lines and are
losing part of our subsidized settlements because of the FCC changes taking place. Pineville does not
have the large scales necessary to bargain with the vendors and internet-connection providers to get
lower prices. Also, the regulatory environment in which Pineville operates ties our hands in some ways
by not allowing us to use all the pricing and strategies that other private companies could under the
same conditions. We understand, however, that this situation may be improved shortly if we implement
the recommendation from the regulatory attorney.
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My main recommendation for Pineville at this point would be to move to all fiber as stated above or to
attempt to sell its operation to another provider that can afford to make the investment necessary to
provide the fiber that will be required for the Town to succeed in the future.
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