Dark fiber rates come to light

Commissioners may vote on rate schedule June 5

EPHRATA — The Grant County Public Utility District held a rate hearing on Monday to discuss a proposed "dark fiber" rate schedule and gather public input on the issue before a vote by the board of commissioners.

Earlier this year, Northwest Open Access Network, a statewide telecommunications company known as NoaNet, submitted a request to lease some of the district's dark fiber, which refers to unused fiber optic strands contained in the utility's high-speed "backbone" transport network.

Grant County PUD is a member and founder of NoaNet, which provides a conduit to other member PUDs around the state and to other telecommunications carriers.

NoaNet was formed by the PUDs in Washington to bring high-speed telecommunications services to rural communities for purposes of economic development.

After the request by NoaNet for dark fiber, a number of similar inquiries followed from several other potential resellers.

In response, the district's staff members and an outside telecommunications consultant focused on drafting a dark fiber rate schedule that would generate revenue for the utility as customers began utilizing the existing backbone fiber system.

But in the process, the utility district didn't want to design a dark fiber rate schedule that was too expensive and would encourage potential customers to build their own fiber optic system around the utility district's fiber system.

Microsoft Network, a provider of Internet service for Microsoft Corp., which appears headed to Quincy to build a giant data center, has hinted to district officials that it may build its own fiber optic system if existing dark fiber is too expensive.

"Microsoft is the one that we've heard from that would (build around)," said district spokeswoman Sarah Morford. "But there's a potential that anyone of that size could come in and do that themselves."

Morford said it's important dark fiber rates be neither too high nor too low.

A commission vote on the dark fiber rate schedule has been tentatively set for June 5.

One dark fiber rate option being considered by the district is subject to rate changes, at any time, by commission action. The second option allows the commission to change the rate only after an initial five-year term has ended.

Under the proposed rate schedule, the one-time connection charge would be a minimum of $35,000, or $750 per strand mile. The monthly charge would be $55 per strand mile for the first two strands, and $20 per strand mile for the second pair, per customer.

NoaNet is currently the only customer with a request for dark fiber. Yahoo! and Microsoft Network are both NoaNet customers.

The dark fiber requested by NoaNet would help to connect new facilities built by Microsoft Network and Yahoo! to the NoaNet network for transport to Seattle and the rest of the world, said Tom Villani, NoaNet's strategic alliance manager.

Yahoo! and Microsoft Network want to expand their services to customers, said Villani, and they need more data center space to do it.

The two Internet giants contacted Grant County PUD because of favorable power rates, Villani said.

"Both companies knew they would need high-capacity fiber capability to connect their new potential facilities to the rest of their networks and to deliver the services to their customers," he said.

So, Villani said, Microsoft Network and Yahoo! also contacted NoaNet.

"NoaNet wants to find a dark fiber arrangement that enables economic development in our rural communities and prior to building a multi-million dollar facility, each of these customers want some assurance of predictable cost over time," he said.

At first, he said the companies wanted 10-year terms with fixed rates. That doesn't appear likely.

"The draft proposals are for five-year terms and that may work," he said. But for NoaNet it's essential the rates remain fixed for five years.

"That is likely to be a requirement of our customers," he said. "There's no point in a long-term contact where the rates can fluctuate monthly."

Some local Internet service providers have expressed concern about the dark fiber rates and NoaNet.

"Giving away our fiber for $37.50 a mile when it will cost upwards of $30,000 per mile to replace, it seems to me to be a bad idea," said Craig Jungers, of Moses Lake-based ISP Network Essentials.

"If the PUD staff is finally concerned with making some money from the fiber system maybe they should consider billing NoaNet for what it's worth instead of giving them everything cheap," Jungers said. "Even the district's own consultant has stated that dark fiber is difficult to get because there is more money in selling the services than the infrastructure, so why sell the infrastructure?"

Marlon Schafer, president of Odessa Office Equipment, a provider of wireless DSL services, agrees.

"I think the rates are way too low," Schafer said. "If they're going to do it they need to make it worth everyone's while."

Schafer questioned why NoaNet was selling to Microsoft Network and Yahoo! when the district would generate more revenue selling directly to the two companies.

"NoaNet is, in essence, a wholly owned subsidiary of the PUDs. Why is the district selling through a subsidiary instead of going direct?" he asked. "This is a Grant County customer, why isn't Grant County taking care of them?"