Expensive technology, intense competition and big risks may await Murray city if it decides to build its own fiber-optic network.
But industry analysts said that along with those potential problems, the telecommunications business may provide sizable rewards to municipalities that take the plunge."You're dealing with an industry that is riddled with uncertainty, and a large capital investment that is basically hanging on a hope and a prayer," said Boyd Peterson, telecommunications analyst with Yankee Group in Boston. "But if (cities) are willing to deal with the uncertainty and take on the competition, they could be successful."
Fiber optics are and will continue to be the primary conduits for the telecommunications revolution, Peterson said. An individual strand of the glass fiber, roughly the thickness of a human hair, can use pulses of light to transmit more than a million simultaneous telephone calls or gargantuan amounts of information.
So technology is not the question when it comes to municipal fiber networks, Peterson said. Money is.
Cities have the assets of rights of way and employees who have experience digging up streets, he said, and that could help them put fibers in the ground for less than it would cost a private corporation.
"But it gets hairy at the consumer end of things," Peterson said. "What cities don't typically have is sales forces that can go out and compete against professionals."
Michael Harris, president of Phoenix-based telecommunications research firm Kinetic Strategies Inc., said that is why cities may be wise to avoid doing battle with big telecommunications corporations.
"If they have existing telecom carriers in their area, it may be just as smart to (encourage) them to make the upgrades they want instead of trying to do it themselves," Harris said.
Tele-Communications Inc. provides cable television service to Murray. It recently was purchased by AT&T Corp., which plans to upgrade TCI's cable system with fiber optics.
"So who can do it better, a huge corporation, or town X? It becomes an idea of who can do it for a better price," Harris said.
Peterson said municipalities also have to consider that they are in the business of serving everyone, and not just "high-quality" customers. That raises the question of how the city will fund a fiber project, and whether the benefits of the completed network will go to everyone who helped pay for it.
Harris agreed. "Perhaps there's a major cadre of citizens who could care less about the Internet and would rather have them spend that money on roads or whatever," he said. "If it's city-owned, it will be city-subsidized."
Frank Dzubeck, president of telecommunications research firm Communications Network Architects Inc. in Washington, D.C., said it comes down to where a city's priorities rest.
"I would think maybe police, fire and a few other things may be a better place to put your money," Dzubeck said. "This is one of those very, very questionable business situations that must be well-thought-out by the taxpayer."
A company like TCI can spread its costs across thousands of miles and millions of customers, he said. In Murray, with a population of about 33,000, there are fewer of both.
Dzubeck said city-owned fiber systems also may raise legal issues of whether a government entity should compete with private industry.
"(If Murray runs a system), now TCI has a competitor that doesn't need to make money," he said. "The further you get into it, the stickier it gets."
However, if it does not get stuck, a city fiber network can succeed. Palo Alto, Calif., seems to prove that point.
Van Hiemke, telecommunications manager for City of Palo Alto Utilities, said the city decided in 1996 to spend about $2 million to build a 30-mile fiber ring. The price was kept low because the city installed the ring using the existing infrastructure of its electric utility - something Murray also possesses - eliminating the need for additional boring or trenching.
"We recognized that . . . we could help foster (competition) by putting in a common fiber network that could be used by all players so they didn't each have to put in their own infrastructure," he said.
Most of the network was finished by last December, Hiemke said, but the city offers only "dark fibers." That means it did not install any transmitters or receivers for the light pulses that carry information along the lines.
Individual companies or service providers are responsible for signing licenses with the city to get access to the lines, and they must install their own sending and receiving equipment.
Hiemke said the city should recover its building costs in three to five years based on funds it receives from those leases. And the leases could net the city more than $1 million per year thereafter.
"We make it a whole lot easier for companies to come in and instantly begin serving customers," he said. "They instantly have access to 30 miles' worth of fiber."