broadband: Austin, Texas- a case study

Why Would CT Want Gig Service?

Case Studies

Austin, Texas

Austin, Texas, has long been considered to be a center for technology and innovation. There are multiple initiatives that have contributed to the success of Austin’s technology sector. These include the: Telecommunications Infrastructure Fund (TIF), Austin Free-Net (AFN), and Austin Technology Incubator (ATI). Austin’s technology sector is reported to employ approximately 100,000 individuals. A few of its employers include: Dell, Inc., IBM Corp., Advanced Micro Devices and Apple Computer, Inc.

The Telecommunications Infrastructure Fund (TIF) is considered to be the most significant of Texas’s information technology initiatives. Established in 1995, its goals are to: develop a broadband communications capability for businesses, residences, and institutions; deploy broadband technologies within city government to improve efficiency; and promote access to information technologies to the low-income population. These goals have been met through a proposed franchise agreement with Central and South West Communications, and the development of the Greater Austin Area Telecommunications Network (GAATN) and the Austin Free Net (AFN). A franchise fee as compensation for use of Austin’s public-rights-of-way and a fiber-optic network that links all participating public institutions has been enacted due to the TIF.

The Austin Free Net was initiated in 1995, and has a goal of providing universal public Internet access and training to help its citizens acquire the skills necessary to succeed in the digital age. AFN had discovered that the main technology barriers in Austin were not related to cost per month for connectivity, but rather to equipment costs and training. Therefore, AFN has continued to focus on training exercises in order for its citizens to become less intimidated of information technology. AFN’s training activities occur in community centers, job training sites, churches, and schools. This allows for Austin citizens to work collectively on their information technology training.

The Austin Technology Incubator (ATI) operates through the University of Texas at Austin. ATI has a 25-year track record of advising companies on how to raise capital. It offers two to four hour strategy sessions to identify key issues facing one’s company. ATI has helped more than 250 companies raise over $1 billion in financing to date and has seen an 85% success rate. In 2012, fifteen of its startups raised at least $1 million, and five raised at least $5 million. According Austin Chamber of Commerce, Austin is one of the top areas for venture capital investment in the country, garnering $621 million in 2012, with software and semiconductor firms receiving about 43 percent of the funding.

The aforementioned technology initiatives have helped construct Austin’s technology sector; however, technology sectors can be extremely volatile with their employment numbers tending to fluctuate. This volatility was seen during the Dot-com bubble, which was one contributor to the 2001 recession, and the recession that began in December of 2007. Austin was subject to decade-long reverberations that reshaped its technology sector’s capital investment outlook. Instead of free-flowing venture capital, Austin’s venture capital scene underwent a contraction, and startup companies were forced to consider more creative financing. But five years later,   local analysts and economists are optimistic about the future of Austin’s technology sector. With local tech jobs potentially reach 101,000 this year, Austin’s technology sector will have 12 percent of the metro area’s roughly 855,000 jobs.

Austin’s current technology sector and its technology initiatives are improving the flow of information technology to all of its citizens. Austin government officials understood that in order for a more prosperous technology sector and to compete against other domestic cities, the city required private company offerings of state-of-the-art broadband Internet services. In February 2010, Google announced that it had plans to develop an ultra-high-speed broadband Internet service. One would expect Silicon Valley or Austin, both major technology hubs that applied for the announced gigabit, to be the first cities to implement Google’s new technology. However, on March 30, 2011, Google announced it had chosen Kansas City, Kansas, to be the first city to implement Google Fiber.

Google’s Fiber City Checklist had cities submit data on their existing infrastructure and speed and predictability of construction. Google believed that Kansas City, Kansas, had the required infrastructure and public-private partnerships for Fiber implementation. Though other cities were disappointed, Google did state that it would eventually offer its Fiber service to other cities pending its rollout in Kansas City, Kansas. Kansas City, Missouri, was the next city to implement Google Fiber, and on April 9, 2013, Google announced its next stop would be Austin, Texas. According to Google Fiber’s blog, the Austin rollout was attributed to “its creativity and entrepreneurialism, with thriving artistic and tech communities, as well as the University of Texas and its new medical research hospital.”

Google announced that pricing would be similar to that in Kansas City. In Kansas City, Google Fiber has Internet speeds up to 1,000 Mbps. Its rates start at $70 a month for Internet service or $120 a month for Internet and television service. In addition, free Internet service is available at 5 Mbps for a $300 construction fee. The problem for local competition was that they did not offer any gigabit service nor have as affordable of prices as Google. Therefore, LiveAir Networks, Grande Communications, and AT&T developed their own Fiber technology in order to compete against the technology giant. Google, however, continues to delay its Fiber launch because it must apply for public rights-of-way. It is still not clear when Google Fiber will be available to Austin citizens. Competitors that are currently offering gigabit services are benefiting from Google’s continued delays because of their market penetration capabilities.

LiveAir Networks is a Texas-based Internet service provider that started as a wireless-only Internet service provider, and today operates a fiber network stretching across thousands of square miles of Texas. After Google’s announcement, LiveAir developed a network that would support one gigabit services via the FTTH infrastructure. It now offers a $75 a month gigabit plan to select areas, and expansion plans will be contingent on the number of signups received online. The gigabit competition in Austin is fierce and has led to regional equitability concerns. LiveAir Network’s CEO stated, “Fiber-based Internet has traditionally been limited to urban areas, such as Verizon’s FIOS, AT&T U-Verse, and Google Fiber. Our rural communities are getting bypassed.” LiveAir Network has plans of differentiating itself from the competition by starting its own FTTH project in Eastern Central Texas, which will kick-start a new chapter in the areas’ economic development.

Grande Communications is a small, San Marcos-based telecommunications firm that uses fiber optic networks. Its Power 1000 plan now offers gigabit service to approximately one-quarter of the 75,000 homes and businesses already wired in the Austin area. Grande Communications’ decision to begin offering gigabit service was in part due to Google’s announcement of Google Fiber and the desire and readiness of Austin citizens to have a gigabit. President Matt Murphy stated, “Once competition in the Austin area heated up, we knew we had to be nimble and do things faster and made a conscious effort to beat Google.” Grande Communications is currently assessing expansion plans for other cities in Texas, although no official timeline has been released. Its Power 1000 plan is $65 per month with a one-time $20 installation fee.

AT&T is an American multinational telecommunications corporation that is headquartered in Dallas, Texas. Its new U-verse GigaPower plan will eventually offer gigabit service to Austin citizens. However, U-verse GigaPower will only have speeds up to 300 megabits per second.  AT&T has committed to upgrading its network to a full gigabit-per-second connection in order to compete against Google and local Internet service providers. AT&T wants to then expand U-verse GigaPower to San Antonio, San Jose and Atlanta; all of which are cities named by Google as potential homes for Google Fiber. This proposed expansion will allow AT&T to compete with Google in 14 markets where Google plans to bring its rival service, Google Fiber. AT&T’s pricing will be similar to that of Google, with gigabit service plans at $70 per month. It is clear AT&T’s strategy is to offer a similar gigabit service plan in the same locations as Google. This will allow AT&T to acquire some of the existing consumer base that demands gigabit services in locations in areas in which Google will offer its services.

The potential benefits of having gigabit service include: higher tax valuations from rising home values; more tax revenue for the city; and more jobs stimulated by entrepreneurs and technology start-ups relocating or starting a company in the city. Google already cited studies in Kansas City where there is anecdotal evidence indicating a direct correlation between Fiber connectivity and increased home values by $2,000 to $5,000. The increase in home values will lead to higher tax valuations and more tax revenue for Kansas City. In addition, thousands of contract jobs are now available for Fiber installation. While many contractors do not work for local companies, contractors are spending money in Kansas City while they work there. Although there seem to be some promising results in Kansas City, it is still too early to make any sweeping conclusions in Austin. Since there are more companies offering gigabit service in Austin than there are in Kanas City, the benefits may be even more prominent in Austin due to the increased availability of a gigabit.

Content Last Modified on 11/30/2014 5:40:45 PM