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A manhole cover in Seattle’s University District marks one of the access points for the city’s existing fiber-optic network, which was to be leveraged by Gigabit Squared to provide high-speed Internet to homes and businesses in the city.

A year ago this week, Gigabit Squared, a “digital economic development” company operating out of Cincinnati, Ohio, announced a deal with Seattle officials to bring ultra high-speed Internet service to homes and businesses here — taking advantage of unused capacity in the city’s 500 miles of fiber-optic cabling.

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Mayor McGinn announces the Gigabit Seattle initiative last year.

Mayor Mike McGinn, gearing up for his re-election campaign at the time, announced the agreement alongside University of Washington and Gigabit Squared officials at a news conference — seeking to fulfill his original 2009 campaign promise of bringing high-speed Internet to people across the city.

This week, preparing to leave office after coming up short in his re-election bid, McGinn said in an interview with GeekWire that the Gigabit Seattle project has been delayed due to financing problems, and acknowledged that he’s concerned it ultimately might not come to fruition.

So what happened? Interviews this week with people familiar with the project make it clear that the financing was left largely up in the air, even as Gigabit Squared’s Mark Ansboury touted Seattle as one of the first cities to take part in the company’s $200 million broadband program.

In reality, that funding was not money in the bank, but rather a plan by the company to raise money for fiber projects across the country.

“When you dug into what Ansboury was saying, there wasn’t any money there, and there wasn’t any clear path to the money other than this general notion that if you got enough people moving in the same direction, money would show up,” said veteran broadband industry consultant Steve Blum, president of Tellus Venture Associates, who has cast a critical eye on the Gigabit Seattle plan in a series of posts on his blog.

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Gigabit Squared’s Mark Ansboury

Blum last year compared the Gigabit Seattle financing vehicle to a concept car.

“That’s not the way you build broadband systems,” he said via phone this week. “That’s not the way you finance broadband systems. … You need something more than good feelings, and they didn’t have that.”

Contacted by GeekWire this week, a Gigabit Squared representative declined to make executives available to comment on the status of the project or McGinn’s concerns about its future. The toll-free number on Gigabit Squared’s website has been “temporarily disabled,” according to an automated message.

Ansboury responded to a voice mail from GeekWire this morning with a text message referring our inquiry to Chris Vogt, whom he identified as the new president of Gigabit Squared. Ansboury said he is now managing director and hasn’t been president for four months. We’ve now left a voice mail with Vogt, as well.

[Update, 11:15 a.m.: Gigabit Squared just issued this statement in response to our inquiries: "Gigabit Squared has completed several rounds of investment financing and is currently executing projects in Illinois and Florida with a combination of public and private funding. Gigabit Squared appreciates Mayor McGinn’s passion for, and support of, the FTTH project in Seattle.  We look forward to a dialogue regarding project possibilities with Mayor-elect Murray and his staff."]

Speaking with KUOW radio over the summer, Ansboury expressed confidence that the initial funding could be raised.  “Our goal right now is $20 million,” he told KUOW. “We’re part way there and we’ll most likely finish that off within two months and wrap that up.”

Gigabit Squared was also planning to “soon” roll out a signup process for customers, involving an unspecified deposit, which has yet to be announced by the company.

At the time, the company had announced the initial pricing structure for its Internet service, offering gigabit speeds for around the same price per month as what Comcast charges for much slower 50 Mbps download/10 Mbps upload. The company was targeting an early 2014 rollout for two of the 14 “demonstration” areas — University District and Capitol Hill —with the rest slated to get access to Gigabit’s network by the end of 2014.

 

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Funding crunch puts brakes on project

McGinn told GeekWire this week that the schedule has since been delayed because of the financing problems. If the project doesn’t go forward with Gigabit Squared, he said he would like to see the city explore the idea of a municipally owned fiber utility.

[SEE RELATED Q&A: Mayor McGinn: Seattle should create a public fiber Internet utility if Gigabit Squared fails]

The outgoing mayor made the Gigabit Seattle project a campaign issue by highlighting campaign contributions from Comcast to state Sen. Ed Murray, now the mayor-elect. In the interview, he defended that strategy, saying it spoke to a larger issue with incumbent broadband providers.

Gigabit Squared said it would  deliver its service to these 14 neighborhoods by the end of 2014. The arrows point to the launch areas — U-District and Capitol Hill — that were supposed to have service by early next year.
Gigabit Squared said it would deliver its service to these 14 neighborhoods by the end of 2014. The arrows point to the launch areas — U-District and Capitol Hill — that were supposed to have service by early next year.

“The incumbent providers of internet service are not upgrading their systems in any meaningful way,” McGinn said. “That means cities like Seattle are falling behind and will fall behind other places in the globe if we don’t upgrade service.”

But that’s not an accurate portrayal, said John van Oppen, the co-founder of Spectrum Networks. The company this year was acquired by WaveDivision Holdings along with its subsidiary CondoInternet, and it’s building out its own gigabit service in the region by focusing on multi-family residential projects, most recently in Seattle’s Ballard neighborhood.

“To say nobody is investing anything is just silly,” said van Oppen. “We all, collectively as an industry, want to keep customers and we invest large amounts of money to offer additional services and to accommodate additional usage over time.”

Van Oppen explained, “We fight two battles. One, people want faster speeds. Two, which is kind of hidden, is the usage of what people have goes up every month. We have to upgrade to keep the speeds up and match the higher usage. The service would stay the same if we didn’t put capital in. We have to keep upgrading to offer faster and faster services.”

At the same time, he said Gigabit Squared faces major challenges financing the project. “This is something that is very hard to raise money for, especially if you haven’t done it before. It’s not a trivial amount of money that you would need, and it’s especially difficult not having a proven business model.”

Inside the city, there have been increasing concerns about Gigabit Squared’s ability to pull off a project on this scale.

Although the city announced last year that it had reached an initial agreement with Gigabit Squared, many of the details were left to be worked out. They hinted at this in the news release at the time: “The City, the University and Gigabit Squared have signed a Memorandum of Understanding and a Letter of Intent that allows Gigabit Squared to begin raising the capital needed to conduct engineering work and to build out the demonstration fiber network.”

For some people in the city, one red flag came when the company declined an offer of help from Stan Wu, a longtime Seattle city engineer who played a key role in building out the city’s existing fiber network.

Gigabit Squared’s broadband pedigree

Gigabit Squared’s leaders do have notable resumes, with experience building community broadband projects in places including Cleveland, Ohio; Chattanooga, Tenn.; and Jackson, Miss.; among other cities.  Gigabit Squared’s $200 million “Gigabit Neighborhood Gateway Program” was created in partnership with Gig.U, a group of research universities led by Blair Levin, a former top broadband official with the Federal Communications.

And to help get the Seattle project off the ground, the company also brought in respected computing industry veteran Armando Stettner, famous in computer science circles for creating the original UNIX “Live Free or Die” license plate. Stettner couldn’t be reached for comment before press time.

Ed Lazowska, the University of Washington computer science professor who spoke at the Gigabit Seattle announcement, said this week that Stettner has been doing good work to bring the project to fruition. But Lazowska, who is not directly involved in the project, said it still faces major hurdles.

“Armando is strongly committed to trying to see this project through,” Lazowska said via email this week. “But in addition to raising the money for the rollout, there’s a question of whether it can be financially viable.  For political reasons, the City’s specification for the initial stages did not focus entirely on areas of the City where there were clearly customers willing to pay.”

Another challenge is that any investors in the project will need to take a long-term view — with financial returns possibly not coming for many years, given the scale of the build-out, and the likelihood that the incumbent providers would compete aggressively on price.

Whether or not Gigabit Squared can pull off the project, the fundamental concept of leveraging the city’s existing fiber network is a good one, Lazowska said. He said “the idea of the city making its fiber available to others as an alternative to Comcast and CenturyLink is *excellent*. There shouldn’t be any debate about that.  We have *terrible* Internet service in Seattle  — high price, low bandwidth, limited choices.”

One way or another, this will be a major issue for incoming mayor Murray to address.

McGinn cited Google Fiber as an example of what’s at stake. “The kids are moving to Kansas City right now because they want to get that fiber,” he said. “I don’t want to say anything bad about Kansas City, but we want the kids to come here. We want the entrepreneurs who want that high speed to come here.”

Editor’s note: Wave Broadband is a GeekWire annual sponsor.

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Comments

  • marccanter

    I can tell you that Mark Ansboury’s efforts here in Cleveland created lots of backhaul – fiber infrastructure – but barely touched the community – per se.

    Hospitals and schools were wired up, lots of promises were made, but not much else. The org Ansboury was involved in – called “OneCommunity” is now under new leadership and has made promises to bring gigabit networking to areas near Shaker Heights, OH.

    No one challenged Ansboury when he announced those deals – about his supposed $200m. perhaps someone should call Blair Levin?

  • GPhinney

    I’m very distressed by this news. My non-profit organization is located between the ID and CD at Jackson and Rainier, and have dismal options for internet access. We had high hopes that a quasi-public service like Gigabit Squared could improve our bandwidth and address many of the accountability/transparency issues that our community has with the traditional selection of cable and network providers.

    With all due respect to John Van Oppen, the private sector has not adequately fulfilled Seattle’s need for quality bandwidth at a reasonable pricepoint. CondoInternet is a nice option for residents of upscale high-density multi-family complexes in places like Ballard and Belltown; but the vast majority of residents of this city are forced to pay whatever Comcast/Wave or CenturyLink/Verizon decide to charge.

  • CMM

    How can Mark Ansboury state that he is no longer the President of Gigabit Squared when 30 days ago he is stating in the following article that he is in fact.

    http://www.chicagogrid.com/reviews/tech/south-sides-million-dollar-wi-fi-network-overcomes-hard-business-environment-break-ground/

    And when is it OK to lose 180 million dollar investment that he pulled the wool over everyone’s eyes. Shame on Blair Levin Gig-U, they should be embarrassed. The courage to TXT back the statement alone is outrageous.

  • CMM

    Oh it just keeps getting better and better. It’s all going to tumble and I shall be sitting back smiling as the luck runs out. He always been nothing more than a smooth talking used car salesman in a suit. Each and every deal has had no true livelyhood or experience in this industry, none nada nothing. Karma is catching up. And oh it’s deeply linked to all the projects and multiple company names and inner circles of the government broadband funding in many states. Nice job guys how’s those kickbacks under the table deals working out for you now? Sleeping well? I bet not. Go ahead keep trying to swindle out..so busted. Since it seems the city’s/states engaging in these contacts or mou’s with Gigabit either don’t care to require proper documentation to win a bid honestly. Let me spell a simple tool Google! Try it it’s an amazing. The things you discover will shock you. Would be interesting to look up.. again let me help you out Google the broadband deals thru the stimulus projects that require reporting and cross reference what was filed and what was done…or shall I say not done. Gigabit I now give the name GigaDust !!

  • CMM

    Lets make sure we all clearly understand what was said in the text. Vogt is President and Ansboury is managing director 4 months now they say. Interesting cause lets see where that is misrepresented:
    http://gigabitsquared.com/about/executive-team-founding-partners/mark-ansboury/
    http://gigabitsquared.com/about/executive-team-founding-partners/chris-vogt/
    Or what happen to this 50 million stated from 6/2013 article:
    http://gigabitseattle.com/geekwire/

  • Joshua Harris

    They should have merely just spoken to MFN, Global Crossing, and AT&T. AT&T Ma Bell largest fiber network on the globe…. enough said….

    MFN is one of the largest fiber network, core fiber, and fiber backbone owners in the world – next to the leader ATT. They have a very solid (greater than 70 Gigs of capacity) infrastructure in Seattle that extends throughout Downtown into Belltown and then down into SoDO and Tukwilla.

    Their backbones provide the fastest links between their metro networks in – Tokyo, Soule, Honolulu, Hong Kong, Dubai, Mexico City, Vancouver, Toronto, NYC, Chicago, London, Miami, etc.

    They are the most redundant of the three Trans Pacific fiber cable owners.

    They are the most redundant of the five Trans Atlantic fiber cable owners.

    MFN AKA AboveNet has the expertise, the existing backbones, and capital – having run Premier bandwidth fiber (and Dark Fiber) throughout the Americas, Europe, and Asia for decades.

    Global Crossing another one of the top 10 fiber owners and providers also owning – well metro networks, fiber backbones and Trans Oceanic fiber cable.
    Global Crossing has a far more redundant and reliable network than more well known providers such as Level Three and Time Warner Communications.

    Finally, a local player to help leverage existing infrastructure – Century Link.

    If the city were to have financed creating a data center facility. The city could have easily used existing city owned property, near redundant power grids and such – of course accounting for proximity to provider fiber. Then built a peer point paid for the networking equipment and hardware and built it’s own “Internet Public Works” co-op for what they expected a company with no fiber in the ground outside of Cincinnati – to build an entire metro network and convince providers to allow them upstream access to backbones.

    Lastly, be the first city to kill a telco monopoly and allow AT&T to lease and utilize Century Link lines (and vice versa of course). This levels the playing field because now Century Link has an ability to tap into a 100 Gig backbone at subsidized costs.

    Forcing Comcast to A – drop prices, B – physically upgrade their network, C – possibly join the Collective.

    How would this have brought gigabit fiber to the consumer?

    It would have given both AT&T and Century Link subsidized peering to alternate backbones and commercial metro fiber networks ,that already exist in many neighborhoods.

    So rather than having to create brand new entire fiber networks – they boost global and local businesses giving them all a way to share bandwidth and deliver it to the customer.
    If you could choose between Century Link, AT&T, and then MFN or Global Crossing – you build free market. Each one of those companies can continue to grow existing networks as they had planned. Yet adding new customers is only 1 fiber drop to your peering partners backbone or metro network.

    The difference between an installation cost of a few hundred vs a few million dollars….

    McGin, there is still time! Be the first city to link the worlds best internet providers and be able to offer its citizens personal gigabit at subsidized rates…

    If ever there was a way to compete with RTP, and Silicon Valley this would be it ….
    Just an old school enterprise architects thoughts…..

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