Fiber Wars

Internet companies are racing to provide ever-faster data speeds, but there’s a much larger economic opportunity — hyper quick connectivity is a proven business-attraction tool.
Chuck Irvin, director of network development at 123Net, stands next to a cold-air pressurized data center. He says industry players understand they can often benefit by cooperating with each other.

While everyone would like faster data speeds to send important documents, download large attachments, or simply to watch a blockbuster movie uninterrupted, there’s a big difference between what people want and the actual capacity of the infrastructure and hardware that are in place in metro Detroit.

Although fiber is faster, there’s a lot more copper in the ground, for example, than there is fiber. Lots of people have Wi-Fi routers that can handle the top speeds of two or three years ago, but for people who want 1 gigabit per second of data speed (in other words, lightning-quick), chances are the router they use won’t be able to keep up without paying for an upgrade.

If area Internet service providers can successfully rise to the challenge and provide faster data speeds for their clients — initial installation is already underway — there will be a greater benefit than being able to charge higher rates. It stands as a significant business-attraction tool for the region and state.

That’s the opportunity Dan Irvin — founder, president, and CEO of Southfield-based 123Net — sees. Since 1995, the company has provided voice, data, and colocation infrastructure services to Internet service providers and major users.

Since then, the company has built infrastructure including four power-protected, climate-controlled colocation facilities, and it has the ability to send radio signals throughout the region from its headquarters in Southfield. In turn, 123Net has been aggressively laying fiber lines throughout metro Detroit, in anticipation of the need for end-users and Internet service providers, or ISPs, to meet unprecedented speed expectations.

“The speed wars and the price wars for Internet access, we’ve been engaged in that war for about 20 years,” Irvin says. “That’s why we built our infrastructure and our own facilities (near Northwestern Highway and Evergreen Road). We started acquiring fiber about 10 years ago because we know the bandwidth you can get across a couple strands of fiber is almost unlimited.”

Irvin has a favorite anecdote that illustrates why all this is worth the investment and the effort.

“We observed that inflection point, if you will, five or so years ago,” he says. “There was a company called Weather Underground, started by some guys in Ann Arbor, and they figured out how to get information off the satellites. They were getting (weather) maps from NASA, and they created a website to distribute the data to the public, and then an app.”


Reaching Capacity

At the time, the region lacked the data infrastructure that would allow Weather Underground to thrive here. That bothered Irvin, who approached Weather Underground soon after 123Net had built enough capacity for him to make the case that they should come back home.

“They had moved to San Francisco,” Irvin says. “That’s where their data center was. … After they spoke with us, they realized they could pay just a little bit more for high-speed Internet — not a lot more, maybe 5 percent more — and they decided to move back, and brought Weather Underground back home.”

That’s the sort of development that Irvin believes can happen many times over if the major players in the region step up to provide the necessary capacity. To that end, 123Net decided to take the lead in establishing Detroit’s first Internet Exchange — a setup that allows Internet companies to interconnect with peers and exchange traffic for free.

“Big cities in the country — Chicago, New York, Miami, Los Angeles — have massive Internet exchanges, some of the biggest on the continent, where companies bring fiber in and they interconnect with other Internet service providers and they exchange traffic with one another,” says Chuck Irvin, 123Net’s director of network development and Dan’s son. “The reason they do it is to peer (communicate) with each other, and any traffic that’s on my network that’s traveling to a destination on your network can exchange for free.”

So what did it take to get the Detroit Internet Exchange started? For the most part, it took someone who knew the players and was willing to make the effort to get them on board.

“We had a lot of relationships with regional Internet service providers and we were able to get this exchange started,” Chuck says. “It’s been in operation for about a year now, and we have 15 members — businesses that would normally have to go to Chicago or one of these other exchange points to get their peering — and now they can do all of it in our building.”

The Detroit Internet Exchange peaks out at 11 gigabits per second (fast enough to watch 2,500 Netflix shows at one time).

“We have direct connectivity to Google,” Dan says. “They’re on the exchange, as are several of the major businesses here, so now you can get maybe 60 to 70 percent of your traffic at no charge. And, by the way, it’s better. So instead of having to take the time to get from Chicago or Ashburn, Va. (known as the center of the Internet), it’s right here. Those hops from cities located hundreds or thousands of miles away are eliminated.”

Without those hops, Detroit’s chances of hosting serious action by major players increase a great deal.

“You’ll find the most massive data centers in the country are located next to these NAPs (Network Access Points, or a public network exchange facility like in Ashburn),” Dan says. “If you’re one of the big guys, you have a data center around Ashburn to serve the entire eastern part of the United States. Amazon. The big cloud guys. They’re all there. Our objective is to provide a bigger, faster Internet, but it’s also to provide an incentive to people — ourselves and a lot of our competitors and associates — to invest here.”

While the Internet business is highly competitive, it’s also an industry in which rivals understand that they can often benefit by cooperating. It’s not that different from three or four rival banks that can’t satisfy the withdrawal needs of their customers individually, but they can accomplish the task if they move money amongst themselves.

“There are probably four or five different fiber companies that we’re involved with, getting that connectivity from here to there,” Chuck says. “When you have 144 fibers you’ve put into the ground someplace, chances are one of my competitors might be able to use that to get to my end customer, so there are several people on a daily basis we’ll trade with.”

While 123Net is aggressively laying fiber, it also sees a very healthy market in wireless service — particularly in downtown Detroit, where many users are intrigued by speeds like 10 gigabits per second that are only available through fiber, but in fact rarely get anywhere near the usage that requires such capacity.

“The city of Detroit is where we’ve gotten a lot of traction with wireless, and we have some really cool accounts down there — some major consumers of the Internet that we’re able to service via wireless,” Dan says. “And 95 percent of our customers don’t need fiber, so we service their needs via wireless.”

A new player in the market, Detroit-based Rocket Fiber, co-founded by Marc Hudson, Edi Demaj, and Randy Foster, and financially supported by Dan Gilbert, founder and chairman of Quicken Loans Inc. in Detroit, is challenging the idea that businesses don’t necessarily need the top available speeds. “Pretty much all our competitors like to say they don’t need that speed,” says Hudson, CEO of Rocket Fiber. “They try to tell people what they do and don’t need, and to us they say, ‘Who are they to tell us what we need? I want that speed.’ ”


Burstable Speeds

Rocket Fiber is now laying fiber in downtown Detroit and Midtown to facilitate the delivery of speeds up to 10 gigabits per second for residential customers and 100 gigabits for businesses. The service went live late last year, and is now in use by approximately 20 residential and commercial properties downtown (and growing).

The key, according to Rocket Fiber CTO Randy Foster, is to have the ability to be “burstable” with Internet speeds.

“Aggregately, the average U.S. consumer consumes about 10 megabytes of Internet consistently,” Foster says. “We’re providing you with a gig, so what’s the point of a gig if you only use 10 megs? On the business side, you may not use the gig all the time. But if you need a large file transferred, the burstable nature is the key part of it. And the 10-meg increment has been increasing year-over-year, so in five years, I guarantee you that the sustaining bandwidth on the residential side — and I’m sure on the business side — is going to go up.”

To illustrate the finer points of megs and gigs, a major challenge for Rocket Fiber came from Henry Ford Health System, which needed to share very large MRI files between its different hospital and clinic locations. Unfortunately, the health care provider found that the size of the files took as long as 24 hours to upload and send. That’s the sort of thing that makes 100-gigabit-per-second speeds crucial, although it depends on the capacity of the user’s internal equipment.

“There’s Internet, and there’s Intranet,”  Foster says. “Being able to share large files with research universities is a major plus. We have the capability of allowing a medical corridor to connect all their hospitals together and be able to share files among each other if they’re not on a research institution network. So you can create point-to-point if you have two offices. You can create a super-fast connection if you have to transfer large data files.”

The same is true in the residential market, where longtime major players Comcast and AT&T are getting ready to roll out 1-gigabit-per-second speeds as a standard offering.

“We talk so much about network speeds,” says Tim Collins, Comcast’s senior vice president of the Heartland region, which includes Michigan. “The really critical question is whether the Wi-Fi and equipment in the home are being upgraded to handle the same speeds. If you’re a candidate for 1-gig, I’d be stunned if what you have (in your home) will handle 1 gig. If it does, then you probably spent thousands of dollars two years ago.”

Comcast is going full speed ahead with up to 1 gig of service for residential customers. The cable company says its major advantage is that it doesn’t have to build any new infrastructure to make it happen — at least on the residential side. Still, customers will need to have their equipment and wiring upgraded

“What’s on the horizon that we’ll be ready to talk about fairly quickly is going to be 1-gigabit data speeds over our existing network,” Collins says. “And that’s the critical point, because there are some providers starting to build an all-fiber network. We can do 1-gigabit data over our existing network. We don’t have to tear up the streets and build a new network. Our changes are in (our) back office.”

What kinds of changes? A big one is compressing video signals, which Collins says frees up a lot of bandwidth. But a more difficult challenge is making sure equipment vendors are up to speed on what will be needed.

“There are starting to be some 1-gig routers out there, but it’s very early in the development,” Collins says. “We’re working with our equipment vendors, and that’s a big part of our trial (now underway). We know what it takes to run 1 gig over our network.”

AT&T also announced plans to bring 1-gigabit-per-second speeds to Detroit — along with 56 other metropolitan areas — by expanding the AT&T GigaPower service that is already active in 20 regions.

“As far as Detroit is concerned, one of the reasons we chose this market is because our customers have been asking for faster speeds,” says Teresa Mask, public relations representative for AT&T in the Detroit market. “We have been preparing for customer demands for services, (and only) fiber will do it.”

As for business users, Collins believes online storage and mobility will drive ever-faster speeds. “The most important thing for business customers is really cloud storage and data access anywhere,” he says. “Businesses are more mobile, and things need to be shared more, and nobody wants to maintain a server farm in their office, let alone pipes (data lines) in and out.”

While Comcast is prepared to provide up to 10 or even 100-gig speed, that’s not as simple as compressing a few video signals on the existing network, nor is it likely to be appealing to smaller businesses in the short term.

“We’ll build fiber out to (businesses),” Collins says. “We’ll do 10 gigabits or 100 gigabits. The startup (companies) don’t want to pay those prices, and maybe they don’t need 100 gigabits. So they’ll be able to get the 1-gig speeds, as well.”

Dan Irwin from 123Net agrees. “If I had to target the business in Michigan, I would say (I would target) the 10,000 largest customers in Michigan,” he says. “So it’s people who are moving their data to the cloud, or there’s some application or something that they want to start utilizing. Maybe they’re a consumer of that, or maybe they’re a provider of that. We do both ways, so we have hundreds of cloud applications in our data center — and then we have thousands of people who’d be using Amazon or a Google service.”

Of all the major players, there is no bigger user of Internet capacity than Netflix, which is in 123Net’s data center along with other major users like Twitter. But it’s Netflix that might, on a given day, account for around 37 percent of all Internet bandwidth in the region (or country). And can you imagine what would happen if Netflix lost its connectivity?

“These are people who can’t have their Internet go down,” Chuck Irwin says. “These are customers who are willing to pay to have separate connections.”


Ready to Expand

That’s why 123Net’s elaborate and multifaceted colocation facilities, which are expensive to operate and maintain, have been worth every penny.

“Whether it’s a single provider like ourselves, or a combination of a couple of people to provide that redundancy, it’s getting so it’s cheap enough that if I spend an extra thousand dollars so that I’m not going to lose service, it’s worth it,” Dan Irvin says.

The mobility question is particularly important in a market like Detroit, which he thinks is ripe for an explosion of new Internet-related businesses if the major players are prepared.

“If you just focus on automotive, one of the major companies that provides connectivity to their vehicles is right here in this building,” Dan says. “So the whole thing is just going to explode. My car just got an update last night at 3 a.m. It completely updated its software. And as the cars get more and more connected, as they learn to drive themselves, they’ve got to know about that new stoplight that someone put at 10 Mile, for example.”

To position itself for such opportunities, 123Net has taken what it says is the unusual step of making dark fiber available for lease. Dark fiber is excess fiber that’s been included in fiber infrastructure but isn’t being used. The Irvins say very few companies will currently let users lease dark fiber, but they expect that to change. “The future is a dark fiber play,” Chuck says. “It’s a step up in the speed war.”

It might be the sort of arrangement that allows a competitor to expand its reach, and that prospect doesn’t seem to bother the Irvins in the slightest.

“The beauty of the Internet is that it’s a big collaborative network with almost no government regulations, and people make it work and continue to make it work because they want to,” Chuck says. “We horse-trade a lot. For instance, if you think about Rocket Fiber, they have a nice ring around Detroit. Maybe they want to get to Grand Rapids. So that’s the kind of opportunity that comes up with us all the time.”

It’s the same idea that fueled the creation of the Detroit Internet Exchange — the more efficient use of existing capacity, such that the overall experience of using the Internet for business in Detroit is more robust in a variety of ways.

“(It’s) tens of thousands of dollars that these ISPs are saving,” Chuck says. “The hope is they pass those savings on to Michigan businesses by creating an Internet that’s closer and cheaper. We’re talking about creating an entirely different economy — an Internet economy here in Detroit that didn’t exist before.”

It didn’t exist because Detroit still needs to put the capacity in place, and bring the players together to establish the necessary balance between competition and collaboration. If that is now changing, then the homecoming of a user like Weather Underground could merely be the first of many.

While the Internet needs of everyone from automotive to health care will only become more challenging in the years ahead, if local companies can provide a high-speed data solution, it will become another important building block to draw and retain corporations, businesses, entrepreneurs, and residents.