They say that imitation is the sincerest form of flattery. If that's true, Google should be very flattered by the efforts of a regional wireless provider to bring a 1Gbps fiber network to Mississippi.
C Spire is using the Google Fiber business plan that the search giant has employed in building 1 Gpbs fiber networks in Kansas City; Provo, Utah; and Austin, Texas. C Spire is using the plan as a blueprint for building its own fiber-to-the-home network that the company hopes will eventually blanket Mississippi.
For a state such as Mississippi, an ultra high-speed fiber optic network, could be transformative. Mississippi ranks last nationally in many categories, such as education and health care. And it also has the lowest median household income, making it the poorest state in the nation.
What's more, Mississippi's economy is still struggling to recover from the last decade's recession, which has hurt the state's credit rating, making it even more difficult for the state to fund projects and programs that could help improve education, health care, and the economy.
Last November, credit ratings agency Fitch Ratings Service downgraded Mississippi's bond rating from stable to negative. The agency noted Mississippi's reliance on manufacturing as well as its poor record in education and high rate of poverty for the downgrade.
C Spire executives are hopeful that a high-speed fiber broadband network could help improve Mississippi's credit rating and help turn things around for the Magnolia state.
Google's chief financial officer, Patrick Pichette, has already been singing the praises of what a Google Fiber network can do for communities. Speaking at the Goldman Sachs Technology and Internet Conference last month, he said that Kansas City has received a higher bond rating as a result of Google's investment in an ultra-high-speed network in the city, according to the website Telecompetitor.com.
But Ben Moncrief, director of government relations for C Spire, said that Mississippi can't afford to wait for Google to come to town.
"Chances are that Google wasn't going to come to Mississippi anytime soon," Moncrief admitted. So he said that C Spire, a homegrown Mississippi company, needed to take matters into its own hands.
"We are a Mississippi company. And we wanted to make a difference in our own community."
Google Fiber as inspiration
Currently, Google is only committed to building its network in three cities. And even though the company said last month that it's considering building its fiber gigabit network in 34 other cities in nine separate regions across the nation, the truth is that Google Fiber will never be in every city or community in the US. It may not even offer its super fast fiber network in every state. And yet, President Obama and the Federal Communications Commission have emphasized the importance of building such high speed networks in more communities.
Despite the fact that Google can't build fiber everywhere, it has changed the conversation about these networks. And if the company is able to make money from its high-speed networks, Google could provide a roadmap for success that other companies can use to build their own networks, which might result in a Gigabit fiber renaissance.
"Google has been a change agent in the discussion about ultra high-speed broadband and fiber networks," said Heather Burnett Gold, president of the Fiber to the Home Council of North America. "Even if Google doesn't build its network in 34 cities, the fact that they are building a roadmap that other cities or companies can follow is just as valuable as the networks themselves."
C Spire's move to build a fiber network using the business plan outlined by Google is an example of how Google's broadband ambitions are having a much wider effect on the broadband market than the few cities it's chosen to deploy its network.
Indeed, last year at a Fiber to the Home Council event in Kansas City, where Google deployed its first fiber network, Milo Medin, vice president of access services for Google who is heading up Google's fiber projects, encouraged other cities and other companies to take a look at Google's business and replicate it elsewhere.
"We expect to make money from Google Fiber," he said in May. "This is a great business to be in."
Moncrief attended this meeting and walked away inspired. He said he already knew that C Spire had the assets to build such a network. But what the company lacked at that point was a strong business plan.
C Spire is a regional wireless operator that owns its own infrastructure. Since 2003, the company has invested more than $1 billion in network infrastructure improvements, including upgrading its cellular backhaul network with fiber to support 4G wireless services. As a result, C Spire has access to more than 4,000 route miles of fiber deployed to some 1,800 cell sites around the state, most of which are located in large population centers.
"We already had most of the fiber in the ground," Moncrief said. "What we needed was a business model that took enough of the risk out of building that last mile portion of the network. And that's what I came away with from my time in Kansas City talking to Google and others. The crowd-sourcing model can work."
The Google Playbook
The heart of Google's strategy is simple: Find communities that really see the value in an ultra high-speed broadband network. While this may sound rather elementary, in the past companies deploying capital intensive infrastructure such as these fiber networks, almost had to guess where demand for their services would be.
But Google has changed the way new entrants address markets. The company doesn't just research consumer demand, it actually asks city governments and citizens themselves to commit to the network as a condition of its construction.
The second major piece of Google's strategy is to forgo offering several different tiers of service. Instead it offers a single tier of service: 1Gbps downloads. And the company offers this service at the affordable price of $70 a month with increased pricing for adding TV service.
This is the exact same strategy that C Spire is employing as it builds its fiber network in communities throughout Mississippi. Like Google, the C Spire service has a single broadband speed: 1Gbps for $80 a month or $70 a month if you're also a C Spire wireless customer. With a basic TV package the price goes up to $140 or $130 with a C Spire wireless contract. And since C Spire's roots are in the wireline phone business, the company also offers an IP telephony service over the fiber connection. All three services cost $160 a month or $150 if you subscribe to the company's wireless service.
"We took some of the things we like about the Google model, such as the crowd-sourcing information, and we applied it to our business," Moncrief said.
In many instances, the pricing for the broadband service is more than the average American pays for high-speed data service and a TV package. But the fact that people are getting 1Gpbs, which is often 100 times faster than service they'd get for a slightly lower price from a competitor, as well as the same, if not improved selection of TV channels, is the key to the offer, said Jared Baumann, who is heading up the C Spire fiber project.
"We've gone to town meetings where residents say, 'I pay more than that for the crappy service I get today,'" he said. "We've seen no resistance at all to the pricing."
How does Google do it?
The cornerstone of Google's business model is ensuring that the communities that are selected for Google Fiber are true partners in the deployment of the network. Specifically, Google looks to the city leadership for guarantees that access to public rights-of-way and permits needed for construction will be a quick and easy process.
C Spire has done the same thing in the communities where it's deploying its fiber network.
"We wanted to know that the city and town leadership would partner with us," Baumann said.
He said the top priority was ensuring that the cities would provide a streamlined permitting process. Baumann explained that in the past when it has laid fiber for its wireless network, C Spire has experienced permitting delays of more than a year.
Those kind of delays would kill the economics of this type of project, he said. To ensure a smooth process for its fiber-to-the-home build, C Spire negotiated a five-day permitting process with each city that was chosen to get the fiber network. In the case of disputes, C Spire's contracts with the cities require the issues to be resolved within a total of 15 days.
In another move adopted from the Google Fiber playbook, C Spire went directly to residents and asked them to commit to the service before construction even began. Each neighborhood or so-called "fiberhood" is required to sign up between 35 percent and 45 percent of households for the service in order to "greenlight" the project. Residents can sign up at "rallies" in person or online. And a $10 fee is required as part of a non-refundable deposit.
While a commitment of 35 percent of residents may not sound too hard to reach, let's put this in perspective. In New York City, which is considered Verizon Fios's biggest growth market, the company has 30 percent to 35 percent penetration in areas where it offers the service. And Verizon negotiated its Fios deal with the city back in 2008.
Having 35 percent or 45 percent of a market committed to a service, even before the company starts building it, is an impressive feat. And it should help ensure the success of the service.
Fiber networks are expensive to build, even when a company already has fiber in the ground, as C Spire had.
"You have to get creative about how you determine where the demand is for your service," Baumann said.
Nine cities in Mississippi will be getting C Spire Fiber as part of its initial roll-out. And C Spire has already qualified several "fiberhoods." The company expects to begin building the network in those cities this summer.
C Spire is not the only company that is exploring the Google Fiber business model. Baumann said he has received several calls from community leaders and businesses in other states that are also considering replicating the Google Fiber business model. He said he's confident that C Spire will make money from the service eventually. But he said it takes more than a business model to get such an ambitious project off the ground. And he credits the leadership at C Spire for taking the plunge.
"This is a long term investment in the community," he said. "It could take 10 years before we start to see a return on our investment. But our leadership is local, and we think it is important enough to Mississippi and our community to make this happen."