What If No Business Case for Gigabit Metro Networks Exists?

One has to wonder why a concentrated 20-mile downtown fiber network apparently was not financially interesting to a single U.S. fiber specialist, Internet service provider or competitive local exchange carrier, causing San Leandro in 2011 to create and build its own fiber backbone serving the downtown area.

The likely answer is that commercial suppliers could not create a business case. And that might be the story for such networks: they might wind up being built because no single commercial service supplier actually can earn a financial return.

A federal grant of about $2 million, for example, was used to build 7.5 miles of the initial 18-mile core network, which was itself financed by OSIsoft CEO Patrick Kennedy, as the anchor tenant.

San Leandro Dark Fiber LLC, the firm created by Kennedy to build the network, invested $3 million to pull fiber strands through existing conduit.

San Leandro is sandwiched between Oakland on the north and Hayward to the south. The suburb of perhaps 85,000 people features any number of industrial (food processing) operations, several corporate anchor firms (JanSport, The North Face, Ghirardelli, OSIsoft, Otis Spunkmeyer), a Coca-Cola plant. Maxwell House coffee roasting plant and five shopping centers.

But the story here might just be that no commercial provider could create a viable business plan for the whole network. In San Leandro, an anchor tenant was motivated to create gigabit connectivity because such connectivity is essential for its own business.

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