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Citynet Leaders Cite VA Example

By George Hohmann, The Charleston Daily Mail (1/7/2011)

The leaders of Citynet, who believe West Virginia is deploying broadband the wrong way, say a Virginia nonprofit is doing it right.

Citynet president and chief executive officer Jim Martin has brought Tad Deriso to Charleston for several days of meetings with members of the administration of acting Gov. Earl Ray Tomblin and political and business leaders.

Deriso is president and chief executive officer of the Mid-Atlantic Broadband Cooperative. The non-profit cooperative was established in 2003 to promote economic development in rural southern Virginia by deploying a world-class fiber-optic backbone network.

Before the cooperative was formed, the shift of the textile and furniture industries to other countries and the downsizing of the tobacco industry had hit southern Virginia's economy hard.

"We talked to economic development professionals and they said, 'When we talk to anybody who needs technology they say they want to locate in the area, they like the taxes, work force and location, but they would have to pay way too much for broadband in rural Virginia, compared to northern Virginia,'" Deriso said. "Pricing was 80 times more than what you would pay in a major metropolitan area."

The state formed the Virginia Tobacco Commission and funded it with a portion of the money it received from the master tobacco settlement. It directed the commission to promote economic development in southern Virginia.

Leaders of the region decided that the way to control their own destiny was by improving the region's infrastructure, Deriso said. "But how to do it? The state was barred by law from getting into the telecommunications business. They decided to form a cooperative. The Tobacco Commission decided to fund the concept."

The cooperative got going after it won a $6 million federal Commerce Department grant, which was matched by the Tobacco Commission. To date, the cooperative has received several additional grants and has invested about $50 million. It has built an 800-mile fiber optic network that connects southern Virginia to the Internet backbone in northern Virginia and Atlanta.

The cooperative doesn't provide any retail services. The member-owners do that. Member-owners include big companies like Verizon, Comcast and Level 3 Communications and small, local companies like farmer Dennis Hunt's Guaranteed Network Services.

"Our initial goal was to build our network to every industrial park in the region," Deriso said. Each of the region's 60 business and industrial parks has since been re-branded as a "GigaPark." As the network was extended to each park, "we built access points when we passed a school, a tower, or other telecommunications providers."

Southern Virginia has scored several recent major economic development victories because of the availability of low-cost, world-class broadband, Deriso said. One example: In August, Gov. Bob McDonnell announced that Microsoft would build its Next Generation Data Center at the Boydton GigaPark in Mecklenburg County.

Deriso said the Mid-Atlantic Broadband Cooperative has been cash flow positive since December 2007 and can sustain itself over the long term.

Mike Friloux, Citynet's executive vice president of business development, said he is convinced the non-profit, cooperative model "is the solution rural markets are going to require," because for-profit companies cannot justify making big investments in sparsely populated rural areas.

"What Tad has done in southern Virginia is an incredible example of how this can work," Friloux said. "He's built a middle-mile system, brought the cost down, and shown how to overcome the investment cost barrier. This is the exact approach we've been pushing for in West Virginia.

"Look across the country and you will see others adopting this middle-mile solution," he said. "I think this is the future of rural middle-market broadband."

Citynet's Martin is an outspoken critic of the way the state plans to spend a $126 million federal stimulus grant to deploy broadband. The state's project will connect 1,064 community anchors like libraries and government offices. It will use Frontier Communications Corp., the state's telecommunications provider, to build the connections.

Martin contends the project will only benefit Frontier Communications because, once connected, state agencies and anyone else who wants to connect to Frontier's network will have to pay Frontier's going rates.

Frontier has repeatedly said it will abide by all of the federal requirements and the state's contract to fulfill the goals established by the federal government.

Martin said that following the Dec. 15 meeting of the West Virginia Broadband Council, "I realized we had a little bit of a hurdle in educating people about what middle mile is. We're just trying to do the right thing for the state. It's a new year. Some people are starting to listen. Maybe the controversy will go away and we'll work toward some real solutions."

Contact writer George Hohmann at or 304-348-4836

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