Valparaiso, Indiana, is investing in dark fiber to stimulate economic development; it is deploying ValpoNet, a dark fiber network to serve local businesses and institutions.
The city of approximately 32,000 people is a little over an hour southeast of Chicago and home to Valparaiso University, Purdue University North Central, Indiana Vocational Technical College, and several other colleges. The community also has a large manufacturing base and a number of hospitals and medical clinics, so there is an ample supply of entities with IT departments with the requisite knowledge to use a dark fiber network.
If At First You Don't Find Fiber...
In 2010, a regional economic development organization developed a report that identified the lack of fiber in "Valpo" and Porter County but no project developed. The city moved on to other things until 2014. A situation with a large financial information company in town breathed new life into the idea of municipally owned fiber. The company wanted to expand its facility and wanted to be sure it could access better connectivity. Several years earlier, there had been an ice storm at one of the company's home offices and, while they thought they had redundancy from the incumbents, such was not the case. They lost connectivity for days and from that point on, whenever they opened new offices, expanded, or relocated, redundancy was always a top priority.
Valpo's Redevelopment Commission decided to hire a consultant to draft a feasibility study. He determined that a dark fiber network was not only possible, but needed. The study revealed that other companies suffered from poor reliability and considered affordability another pressing issue.
The Commission, working with Economic Development Director Patrick Lyp, reached out to entities in Valpo and found that the university and healthcare facilities were also interested in the promise of better reliability via fiber-optic connections. Valparaiso University and two large regional hospitals, including St. Mary's, expressed their desire to participate. Local officials approached large companies directly and, while several indicated that contracts with incumbents must be fulfilled before making a switch, every local business they approached confirmed that they want ValpoNet.
Location, Location, Location
As it turns out, the geography of Lake Michigan's southern tip pushes a number of transcontinental fiber lines south near Valparaiso; there are also splice points nearby which contribute to the plan. The city will deploy a dark fiber loop down into Valpo that will then circle back up to the big pipe about 10 miles north of the city. There will also be a redundant loop to ensure uninterrupted connectivity. With the exception of a few areas where the fiber requires aerial placement, the network will be entirely underground, which will help protect it from the elements.
Valpo has no plans to offer FTTH service for residents or businesses or to offer any other lit services. Their plan is to entice both large and small ISPs to provide service over the new infrastructure and are actively seeking providers even before construction begins. Like a number of other ex-urban communities near major metro regions, Valpo has one cable provider (Comcast) and one DSL provider (Frontier). There is also a local provider called Nitco that provides DSL, wireless, and some limited fiber services.
Prices in Valparaiso are higher than in the Chicago area and, according to Lyp, tend to drop as one approaches the metro. Community leaders hope this project will encourage competition and lower rates in the area.
City Savings Ahead
The municipal facilities have always been served by the incumbents because the city owns no telecommunications infrastructure. Serving municipal facilities is not part of the dark fiber network phase 1 plan, but Lyp anticipates it will likely be part of a future phase. As they develop the network, planners are considering ways to include fiber accessibility for city buildings and local schools. The network design integrates strategic placement where laterals can easily extend to schools, desirable business development areas, and locations within Valpo ripe for economic development.
Financing With Future Dollars
The cost of the backbone fiber network will be approximately $2.39 million; Valparaiso is funding the network with tax increment financing, or TIF. Other fiber projects have been financed with TIF in recent years, particularly in Indiana. TIF allows public financing based on future gains in property or sales tax that are limited to a certain geographic area that will obtain the redevelopment or infrastructure project. Local government can borrow the funds, build the project, then use the funds generated from the project to pay off the debt.
The method is gaining popularity for fiber-optic projects in Indiana, but it has been used for some time on other public infrastructure projects, such as toll roads, bridges, and transit systems. In some states, it has been used for decades while other states are slow to adopt TIF.
The Cost Of Going Dark
In April, the Redevelopment Commission reached out to local businesses with an informational meeting to answer questions and share anticipated connectivity costs. Each customer will pay a one-time installation fee of $500 for all circuits and drops. Monthly fees will be $1,000 for one pair of dark fiber strands to a business customer unless that customer is an Internet Service Provider (ISP) or some other entity that plans to resell use of the fiber. ISPs or similar entities will pay $1,200 per month for one pair of dark fiber. There will also be a monthly charge of $200 for each drop.
Because the network is dark fiber, businesses will still have to pay monthly fees to an ISP for Internet access. The Commission's executive director, Jim Mooney, encouraged attendees to sign a nonbonding letter of interest to help them prioritize 2016-17 construction.
Mooney told business leaders at the meeting that the Commission had signed a contract with a company in March and that construction will begin in July. The network is scheduled to be completed by the end of 2016.
Out Of The Gate Strong
In addition to strong support from local businesses that want to use the dark fiber network, other members of the community understand the benefits a dark fiber network will bring. In August 2015, the Northwest Indiana Times expressed their support for the municipal project:
Anyone who says government should leave this solely to the private sector is missing a key point — that the private sector hasn't met this need.
Digital infrastructure is as much a part of economic and civic development as a strong, well-designed transportation network. We shouldn't punish this sort of progressive thinking by hanging on to outdated notions of what the government's role might be.
This is the answer to bridging the tech divide that is separating who will be successful from who will not be.
Managing The Network
Valpo offers municipal sewer and water utility service and while the community feels that their staff can eventually maintain the network, they realize that there is a learning curve. They want to be able to offer businesses connectivity managed by experienced professionals on launch so have issued an RFP to find a firm to manage and operate the network.
After working with an outside firm for the first couple of years, Valpo will determine whether or not to continue with a similar model or develop city talent to take over. Valparaiso has no electric utility like many other communities that invest in fiber networks.
Come To The Dark Side
A growing number of communities are now considering dark fiber investment to stimulate economic development and improve local connectivity. Recently, Huntsville, Alabama, announced it will be deploying a citywide dark fiber network on which Google Fiber will deliver retail services. Other communities have been using their dark fiber resources quietly for years with little fanfare; Burbank, California's dark fiber network is saving money and generating revenue.
Dark fiber networks require lower risk while still inspiring better connectivity in the community. Cities like Valparaiso need fast, affordable, reliable connectivity to be able to compete, especially with Chicago nearby. With ValpoNet in place, the city may be able to lure commerce from the Windy City with reliable connectivity, affordable rents, and a high quality of life.
As Valpo Mayor Jon Costas said in February:
"We're looking forward to being the first city in our region to offer municipal dark fiber, which will make us more competitive in attracting new businesses and jobs."
Be sure to check out Community Broadband Bits podcast #199, in which Chris interviews Patrick Lyp about the new ValpoNet.