MCNC aims to spread broadband around state

In the telecom business, the big fear is that Internet servers choke to a standstill on high-definition movies, video conferences and streaming audio.

The expectation of broadband congestion is forcing commercial Internet service providers to consider options like tiered pricing or other unpopular approaches that charge heavy users higher rates.

The Evolution of MCNC

The General Assembly initially funded MCNC in 1980. Back then it was called the Microelectronics Center of North Carolina, and its purpose was to be a catalyst for technology-based economic development throughout the state.

Five years later it received a state mandate to provide and operate an advanced communications network, CONCERT (now called NCREN). Its initial system linked N.C. State University, Duke University, N.C. A&T State University, UNC-Chapel Hill and Research Triangle Institute.

In 2000, Cronos, a company spun off from MCNC, was sold to JDS Uniphase for 2,495,460 shares of JDS Uniphase stock - at the time of the sale about $750 million, though later in the year it lost much of its value. Legislators at the time were upset that the state did not benefit from the sale. MCNC pledged $30 million to what was then the Rural Internet Authority to help spread high-speed Internet access across the state.

In 2003, MCNC was restructured into two companies. Research and venture funding became the focus of MCNC Research and Development Institute. Two years later, the research operations were sold to RTI International and its name changed to NC IDEA with a mission to provide early-stage companies with venture funding, grants and loans.

In 2009, it teamed up with state government, education systems and businesses to connect all 115 K-12 public school districts to NCREN.

The nonprofit organization no longer receives appropriations from the General Assembly.

For its part, the U.S. Federal Communications Commission is considering diverting some of the $8.7 billion annual Universal Service Fund from subsidizing rural phone service to subsidizing rural broadband in mostly poor, isolated areas where residents still don't have the option of subscribing to even basic high-speed Internet.

One local approach to dealing with the problem of broadband capacity shortages is unfolding in Raleigh, where a nonprofit Internet service provider is more than doubling the size of its network to prevent system overloads.

MCNC, created by the General Assembly three decades ago, will soon operate one of the state's largest high-speed data networks. Once the organization completes a planned addition of 1,700 miles of fiber-optic cable over the next three years, it will operate nearly 3,000 miles of cable linking most of the state's schools, colleges and universities on its N.C. Research and Education Network.

But getting there over the next three years will take more than $100 million in federal stimulus subsidies for broadband expansion.

Just a few years ago, MCNC was facing a major capacity crunch as students, researchers and professors put increasing demands on the system. Any laptop or iPad that downloads music or uploads videos from 2,500 schools and campuses in the state does so over MCNC's network. That's on top of the heavy-duty university computing systems, research laboratories and administrative services that depend on the data network.

Today MCNC is building out enough capacity for at least 25 years, said MCNC chief executive Joe Freddoso. The total cost of the project will come to $146 million. In addition to the $100 million from the federal stimulus, MCNC will pay for the project with $24 million from the Golden LEAF Foundation in Rocky Mount and its own funds.

Much of MCNC's buildout will ring the state, linking the mountains, coastal areas and other remote areas into a wobbly oval.

"In many of these areas where we're building, there is no fiber," Freddoso said.

MCNC received North Carolina's biggest chunk of a $7.2 billion national stimulus subsidy program designed to improve the nation's broadband reach. In all, last year North Carolina got more than $250 million in broadband subsidies, some going to small rural telecoms and rural electric cooperatives.

As a result of its expansion, MCNC is moving from a model where it primarily leases broadband capacity from commercial telecommunications providers to building its own parallel network. In essence, MCNC will go from being a net importer to a net exporter of broadband capacity.

MCNC's rapid growth has raised questions about whether the organization is overbuilding its networks and doing so at public expense.

Private providers irked

Commercial Internet service providers had co-existed peacefully with MCNC as long as the Raleigh organization stuck to its knitting and served its limited base of universities and their specialized research needs.

But in the past several years, MCNC has expanded prolifically. It has added 115 school districts and 58 community colleges to its network, and is now adding nonprofit hospitals and public libraries.

MCNC's growth has not gone unnoticed by rural telecoms such as Windstream, TDS Telecom, Suddenlink Communications and Charter Communications. These companies notified the National Telecommunications and Information Administration, which administered the broadband subsidy grants, that the areas proposed for expansion by MCNC in 2009 and 2010, were already well-served and didn't require subsidization. The areas include Cumberland, Edgecombe, Gaston, Carteret and Harnett counties.

Pete Able, spokesman for St. Louis-based Suddenlink, said the federal law authorizing broadband subsidies requires that "no such funds ... be used to construct new broadband facilities in areas that are already served by multiple companies."

Suddenlink told the NTIA that "Suddenlink and its competitors already offer robust broadband service within the mapped area" proposed for expansion by MCNC.

Piggybacking required

Freddoso said MCNC is investing for future needs and in recent years has already come perilously close to exceeding its network capacity during times of peak Internet demand.

"If we had maxed out on capacity, we would have to restrict access to users," he said.

As a condition of receiving stimulus funds, MCNC is required to make its rural network accessible to commercial providers at reasonable prices, a policy designed to expand public Internet access by piggybacking on MCNC's system.

Freddoso said it costs about $12 million a year to run MCNC's network, a cost that is expected to remain stable after the expansion. If not for the stimulus money, he said, MCNC would have had to lease more capacity and its annual operating costs would have gone up to about $19 million.

Fans of MCNC

MCNC's state government clients consider the Internet service provider a bargain. It charges fees that can be as little as half of those charged by commercial Internet providers for comparable service, said Darryl McGraw, chief information officer at Wake Tech Community College.

MCNC is also the Internet service provider for Wake County government and for the state government.

According to N.C. Virtual Public School, a program within the N.C. Board of Education, the number of high schoolers in the state taking distance learning has jumped from 5,200 to 22,400 in the past four years. These courses require high-speed video connections linking labs and classrooms across the state.

"I don't think the school districts would have ever been able to afford that level of service from a commercial provider," said Ray Reitz, chief technology officer at Chapel Hill-Carrboro City Schools. "The main aspect is the exponential growth in online learning we've seen in our schools."

By JOHN MURAWSKI - Staff Writer, News & Observer

Source: News & Observer -