Metronet Builds Telecommunications Infrastructure for New Economy
The economic history of the South Bend area is a story of location and logistics. Rivers for shipping, then railroads, highways and air transportation enabled for more than a century the movement of materials to create a world center of manufacturing.
As manufacturing declined in the latter half of the 20th Century, ideas and services became the dominant drivers of the area’s economy.
Once again, location provides an advantage. South Bend is, quite literally, sitting on the logistics necessary to support this new economy. As raw materials and the products manufactured from them travel on railroads and highways, information travels on fiber optic cables and networks. Just as I-80/90, the “Main Street of the Midwest,” crosses the northern quadrant of St. Joseph County, one of the largest concentrations of national and regional long-haul fiber runs underground through the center of South Bend.
Like a limited access highway without an onramp, proximity alone does little for a community.
Access to high-speed and high capacity broadband services allowing the region to make full use of these logistics was limited. Even when available, the cost was many times higher in South Bend than for the same level of service in nearby Chicago, putting area businesses and institutions at a disadvantage.
And the limitations of the St. Joseph County’s telecommunications infrastructure were becoming increasingly critical. The University of Notre Dame, for example, had adopted a goal of becoming a major global player in research and commercialization of technology. University officials said that an affordable, geometrically scalable means of communicating voice, video and data, was absolutely vital to support this goal.
Existing providers had little incentive to invest in building the reliability, capacity and level of service needed to support the new economy. Economic development such as that offered by Notre Dame's expanding role could be strangled without a 21st Century telecommunications infrastructure.
Finding a way to bridge the gap between available and needed infrastructure became the focus of an effort organized and funded by Project Future, until 2012 the economic development organization serving South Bend, Mishawaka and St. Joseph County. Project Future began a review of the benefits that expanding high-speed data communications would bring to the St. Joseph County region.
The study concluded that almost all areas of economic, civil and cultural endeavor, from private to public sectors, from kindergarten through graduate education programs, from workforce training to technologically advanced manufacturing, would become increasingly dependent upon information technology.
The study confirmed that access to dark fiber broadband technology to support information technology was both greatly needed and largely unavailable. The area’s ability to compete for the data-centric growth of the 21st Century, bringing new jobs, a growing tax base and better quality of life, depended on meeting these communications needs.
As a result, the Project Future committee recommended creating an entity to satisfy that need.
Government agencies, nonprofit institutions and other organizations sharing the vision and commitment that dark fiber technology could enhance the region’s economic opportunities, community development and quality of life collaborated to recommend formation of St. Joe Valley Metronet to implement that vision.
Working from September 2002 through December 2003, Project Future staff, members of its board of trustees, representatives of city and county governments and of the Chamber of Commerce of St. Joseph County, and other community volunteers put together plans to bring St. Joe Valley Metronet into existence.
The planners adopted four operating principles:
- Metronet would build a dark fiber network, providing only physical infrastructure; users would provide the optic equipment to light the fiber.
- The network would be vendor neutral, openly available, at fair subscription rates, to any user or provider of digital telecommunications transport and related services. The real power in a dark fiber network comes from the long-haul carriers’ Points of Presence (POPs) to which the infrastructure is connected. Hence, it will be most advantageous for Metronet to connect to facilities where multiple telecommunications vendors are located. The more telecommunications vendor options available at a facility, the better pricing and service options each user will be able to access.
- As a nonprofit, St. Joe Valley Metronet would pass financial returns back to the community through below-market pricing.
- The network would be built in phases, first working with the local community and telecommunications entities to meet the fiber optic needs of government agencies, nonprofit institutions and private sector corporations critical to the economic vitality of the region. Next, Metronet would develop partnerships to extend the network to the rest of the St. Joseph County region.
A mission and goal were adopted:
Mission: St. Joe Valley Metronet, Inc.'s mission is to encourage the ongoing development of the educational, cultural, research, and healthcare institutions; government-related agencies; and other organizations that contribute to community development, economic development, public health and safety, or workforce development in the St. Joseph County area, by providing high-speed data communications network capabilities at the most cost-effective prices available.
Goal: St. Joe Valley Metronet, Inc.’s goal is to provide physical infrastructure enabling access to high-speed data communications network capabilities by entities in the St. Joseph County area, such as:
- Governmental agencies, in order to lessen their burdens by supporting their administrative functions; facilitating the online exchange and organization of information among such agencies in the interests of the safety and welfare of the public at large; and enabling their operation of applications such as e-government and intelligent traffic systems;
- K – 12 educational institutions, post-secondary educational institutions and other institutions that substantially further educational or scientific research purposes, such as libraries, museums, nonprofit hospitals and other healthcare facilities, in order to facilitate the online exchange and organization of educational information among such institutions and their dynamic interaction with advanced facilities worldwide; and
- Other entities that substantially further community development; economic development; public health and safety; or workforce development purposes in order to facilitate the online exchange of information among such entities and their dynamic interaction with advanced facilities worldwide.
The City of South Bend had built a dedicated fiber network to provide communications between city facilities and to improve traffic flow by monitoring and controlling traffic signals. This fiber network, routed mainly through conduit under city streets, extended through much of the city. The City of Mishawaka had installed a similar network of conduit.
While these fiber networks were not originally designed to support other communications uses, the placement of the conduit attracted Metronet planners. Running new fiber through this existing conduit could serve as the base for extending broadband access to more of the area, at the same time producing significant savings in the costs of building out the initial network.
Metronet’s interest had the potential of serving opportunities the City of South Bend also had identified. Robust and economical broadband access would support technology-based economic development in the community and permit city government to use new technology to streamline and improve its operations.
Assessing its network, South Bend officials had come to three conclusions. First, while improved broadband access was needed, the city did not want to be in the telecommunications business. That would have meant creating a city-run utility to provide broadband services. It would cost millions of dollars, it would put the city in competition with existing providers and it would create a new bureaucracy. Although some other communities use this model, South Bend was determined that its aim was not to be in the telecommunications business; instead, it was in the business of supporting economic development.
At the same time, South Bend needed to protect its investment in the existing fiber, the conduit and in the streets under which the conduit was installed.
If access were provided to an outside company, it would have to be structured to limit potential for interruptions and damage to the conduit, the fiber and the streets.
Finally, the goal was to enable this expansion at limited or no cost to the city.
South Bend had solicited existing providers to see if any were interested in establishing vendor-neutral fiber services through the city’s infrastructure. None was.
Metronet, however, was interested, and the dark fiber, vendor-neutral network planned by Metronet, perfectly aligned with the city’s goals.
With organizational planning continuing into early 2004, St. Joe Valley Metronet, Inc. was incorporated as a not-for-profit in March 2004, by Patrick McMahon, executive director of Project Future, Gordon Wishon, of the office of communication technology of the University of Notre Dame, and Karl King, South Bend businessman.
Corporate bylaws called for a board of directors of from three to 30 members, with 11 Standing Members. Those 11 included the executive director of Project Future; two persons appointed by the Project Future board of trustees; two appointed by the mayor of South Bend; two appointed by the mayor of Mishawaka; one named by the St. Joseph County commissioners; the director of the Board of Public Works for the City of South Bend; and the director of Mishawaka City Utilities.
Each of seven founding capital subscribers, which provided initial funding as described below, could name one board member.
The Standing Members also could appoint, by majority vote, chairpersons of authorized constituent committees and other members for the purpose of bringing particular skills or knowledge to the board.
Directors receive no compensation, and they have no ownership rights or interest in the corporation or its assets.
Funding for the millions of dollars needed to install fiber and build the network would come from seven founding capital subscribers: the University of Notre Dame, Memorial Health Systems, St. Joseph Regional Medical Center, South Bend Medical Foundation, Teachers Credit Union, Robert Bosch Corp. and Madison Center. The amount paid by each of the initial capital contributors was prepayment for 10 years of access to the network, with future subscription fees to be negotiated after the end of that term.
More than $2 million was raised from the initial capital subscribers. This funding was used to build the first phase of the Metronet network.
A Second Corporation
St. Joe Valley Metronet, Inc. was incorporated as a nonprofit and it secured tax-exempt status under Section 501(c)(3) of the Internal Revenue Code because its business would be to support purposes of government, including government agencies and tax-supported educational institutions, by extending and maintaining the fiber network.
Fulfilling the larger mission of fostering economic development by bringing expanded and lower cost telecommunications access to the entire community, however, requires providing fiber access to institutions and entities not supported by tax dollars, such as banks, manufacturers and other businesses. Therefore, a second entity, SJVM, Inc., was set up as a taxable, for-profit, corporation, owned and controlled by the tax-exempt corporation, so that private sector users could be served.
This model of a nonprofit, tax-exempt corporation owning a for-profit, taxable corporation is quite common and allows the for-profit to generate income that can be used to support activities that couldn’t be funded by the nonprofit. One local example is the University of Notre Dame, which once owned the taxable WNDU television and radio stations. The broadcast stations, taxable, for-profit businesses, earned profits that were used to support programs of the non-profit university.
The fact that the for-profit corporation pays income and property taxes places it on an even competitive field with other for-profits that may be providing similar services.
Governance and Financial Structure
Metronet, the tax-exempt corporation, owns the taxable SJVM, Inc. The same board of directors governs both corporations. Board members receive no compensation and have no ownership interest in or rights to the assets of either corporation. In the event of financial difficulties or failure, the founding capital subscribers may invest to preserve the corporations. In case of bankruptcy, the City of South Bend would assume ownership of the network and other assets would be distributed by the courts as outlined in the corporate bylaws.
Metronet, the tax-exempt corporation, derives income from its contracts with government and educational entities. That income is not sufficient to meet all demands for expansion or maintenance of the network. Income from the taxable SJVM, Inc. is used to build the network and support operations and, in the form of dividends, is paid to the tax-exempt Metronet to subsidize its operations and expansion.
Pricing models and limitations of use
Metronet has a three-tiered pricing structure, with different rates for businesses, providers and for government and educational entities. Fees depend on the type of connection, degree of redundancy and other factors. Further information is available from the Metronet executive director.
Subscribers pay to install the fiber that connects their facilities to the main network and are responsible for maintaining these lateral fiber connections to their equipment.
Since Metronet’s mission is to encourage the ongoing development of local organizations that contribute to community and economic development, Metronet also offers discounted pricing to qualifying charitable organizations. Non-profit organizations that deliver critical services to those in need often receive a majority of their funding from public and personal donations and government grants. These organizations are typically resource-constrained, limiting their abilities to take advantage of the latest technologies; most of the energy is – and should be – focused on the organization’s mission.
Metronet offers an in-kind contribution to qualifying charitable organizations that substantially reduces the annual subscription fee, making it very affordable to take advantage of high-speed, reliable bandwidth – a necessity of all organizations.
Metronet installs, maintains and monitors the main fiber networks. Costs are split between St. Joe Valley Metronet, Inc. and SJVM, Inc. on a percentage basis as established in the bylaws and determined by the types of subscribers leasing the fiber. A similar formula is used to determine SJVM, Inc. payment of property tax on the fiber and other assets. Income earned by the for-profit, after taxes are paid, is returned to the nonprofit corporation, where it is used to invest in expansion of the network.
Benefits for the City of South Bend
The public-private partnership that helped launch Metronet has produced numerous benefits for the City of South Bend, meeting original goals of lessening the burden of government and justifying the agreement granting Metronet exclusive use of the city’s conduit.
One of the first improvements was to the structure of the network itself. Metronet is configured like a series of rings, creating redundancy. In the event of a break in the fiber, data can be rerouted around the intact side of the ring. Prior to Metronet, South Bend’s network was built in a star configuration with many dead-ends. Metronet provided redundancy to South Bend’s operations.
Metronet allows improved use of remote sensors, controllers and servers.
Because Metronet accommodates virtually unlimited data, the city’s dedicated fiber has allowed transfer of very large files used to support its GIS needs.
Metronet’s speed, capacity and reliability support South Bend’s innovative approach to Combined Sewer Overflow mandates, saving the city tens of millions of dollars to meet federal requirements to prevent storm water from overwhelming waste treatment systems.
Metronet supports use of a new VOIP (Voice over Internet Protocol) telephone and internet system. Because of phone cost savings, South Bend is breaking even on lease-purchase payments for the required equipment and expects to save $250,000 annually once the lease is paid off over approximately five years.
Two new applications controlling building energy and security systems will be added to the VOIP system and the city expects to save 10 percent of its $8 million annual energy bill.
Bluetooth type devices are being installed to monitor traffic flow on main arteries. Integrating these with the original traffic control network supported by Metronet fiber optimizes traffic flow, saving drivers an estimated $3 million in fuel and uncounted hours of time.
In general, Metronet facilitates the city’s ability to do more technology-based innovations. Some would not even have been imagined but for the large, affordable data pipes Metronet provides. These savings would have been much harder or not feasible without Metronet connectivity.
It’s impossible to state the value that an environment that supports entrepreneurial and innovative thinking from government workers, engineers and scientists, returns to local government.
Benefits for the Community
Metronet access, with its ultra high speed, virtually unlimited bandwidth, has fostered new opportunities for new and existing businesses and encourages creation of new businesses to support them, such as companies providing offsite data storage and other cloud computing functions. Case studies and videos explaining the benefits to businesses as diverse as Mossberg and Co., North American Signs and Teachers Credit Union are available on our web site: MetronetZing.org.
Creative benefits such as one shared by the City of South Bend and the University of Notre Dame, which located computers in the city’s greenhouse conservatory, show how low-cost access to high-speed and high-capacity communications support innovative ideas for economic development. The computers’ heat was captured for the greenhouse and the university saved energy that would have been used to cool the equipment at another site.
It is not only large and institutional users that benefit.
Metronet supports an initiative to offer managed services to nonprofits.
The Socially Responsible Computing Initiative provides Internet and VOIP at reduced rates. This is possible because companies providing the services charge reduced, nonprofit rates and costs are spread over several organizations. Whenever possible, these organizations use Metronet’s fiber to access those services. The result is a high-speed, reliable fiber connection to a host of managed services available at a very low cost. Money saved can be invested directly into client services.
In addition to the initiative to serve nonprofits, there are service providers who offer Metronet connectivity via a shared circuit model. This allows small- and medium-sized businesses to leverage the reliability of the network by leasing a connection on a service provider’s circuit. The service provider lights the connection and sells the organization the amount of required bandwidth and other services. The circuit is managed by the service provider. The organization is able to take advantage of the benefits offered by Metronet without having to lease its own dedicated circuit.
Agreements and expansion
Reciprocal agreements with the City of South Bend, the City of Mishawaka and St. Joseph County give Metronet access to government-owned infrastructure in exchange for access to fiber and other considerations.
Recently, Metronet entered into a new agreement with Mishawaka to take over management, monitoring and maintenance of the fiber network that city installed to connect its city facilities. That new agreement will allow Metronet to more rapidly expand its network to unserved commercial and industrial areas, many on the east and south sides of the city, while freeing the city from maintenance and monitoring.
With a proven record of bringing benefit to the governmental entities with which it works, of fairly fostering competition and innovation, and of increasing opportunities for economic development, Metronet is working to develop similar public-private agreements to bring dark fiber advantages to surrounding counties.
Because the cost of fiber and conduit can be prohibitive, as much as $100,000 per mile, Metronet also is exploring means to support the development of wireless networks to extend the value of the dark fiber competitive model to areas where installing fiber would not be economically feasible, at least initially. Installing underground conduit and fiber can be a time-consuming process. A hybrid wireless/fiber approach could provide improved connectivity more quickly.
Metronet’s mission is to encourage technology-based economic development by providing readily available, high-speed telecommunications infrastructure at cost-effective prices. Initially, the infrastructure has been fiber but it could also be a wireless solution or a combination of the two. By connecting through a wireless link that joins to the fiber optic backbone, users can take advantage of the carrier neutral network to connect to their other locations, the carrier hotel and data centers. And, these organizations can use any service provider, including other wireless providers, to purchase bandwidth, Internet and other technology services. Wireless providers would be in a position to use the fiber backbone to extend wireless services to currently underserved organizations or areas. In either option, Metronet provides the low-cost, competitive and vendor-neutral infrastructure to bring connectivity to organizations and for service providers to offer their services.
The wireless concept as an extension to the fiber network is just one of the initiatives Metronet considers for future strategy. Metronet will continue to pursue ideas that will:
- Work to bridge the digital divide;
- Assist schools with technology strategies;
- Pursue stimulus funds to improve broadband connectivity and improve the economic vitality of the community; and
- Operate the fiber-optic network for the benefit of schools, hospitals, libraries, governments and nonprofits.