GOING UNDERGROUND

Like Nocturnal creatures that roam the streets while the world sleeps, CityNet crews are using Albuquerque's subterranean network to deploy fiber. The company's challenge: launching a competitive carrier while the economy is still in the toilet. Vince Vittore went on a reconnaissance mission to get the dirty details.

The first thing I notice is the smell: rotten eggs, with a dash of dirty diapers. This must be what it smells like when New Orleans floods. During Mardi Gras. This isn't what I expected when I first got the call to visit the Albuquerque operations of CityNet Telecommunication, a carriers' carrier that lays claim to the dubious achievement of being first to deploy fiber though city sewers. CityNet officials invited me to various spots in Albuquerque to see their robot, which they call a Sewer Access Module (or just plain SAM), pull metal conduit through the subterranean waste network that snakes its way under the city. I imagined standing in the middle of a traffic-clogged road over a manhole while drivers crept by with middle finger extended. (Finally, I was going to become the jerk holding up traffic instead of the jerk held up in traffic.) But instead of the middle of a busy intersection, the evening's first stop is the back of what local officials promise will someday become Albuquerque's transportation center. Right now it's a dusty stretch of closed road abutting a rail yard, across the street from a Greyhound station. And it doesn't take long before SAM hits a roadblock.

To hear Robert Berger tell it, inspiration quite literally struck him in the shower while he was rinsing shampoo out of his hair. Building an expansive optical fiber network requires securing space in underground channels. Electrical and natural gas lines can be deadly when cut. But there is one sprawling network of urban conduit that's virtually immune to “backhoe fade.” It was just crazy enough to work.

For the past 12 years, Berger — CityNet's president and CEO — led the kind of double life common among suburban lawyers. By day, he spent the better part of a decade representing the companies that form the trunk of the original CLEC family tree — from MFS Communications to WorldCom to WinStar Communications. By night, he was active on the Washington Suburban Sanitary Commission, serving as its chairman for a stretch in the 1990s and overseeing a conglomeration of water and sewer systems outside the nation's capital.

Berger first envisioned putting fiber in the water system. Aside from the advantages of entry into virtually every building and home, it's a lot cleaner than the sewer. But the health concerns that would have to be taken into consideration and public works departments' reluctance to allow anything foreign into the system scotched the idea. “It took me just one phone call to be disabused of using the water side of the water and sewer system,” he said. “But I suppose if I had been really insightful, it wouldn't have taken me 12 years in the water and sewer industry to come up with the idea.”

CityNet's sewer expedition is the company's own way of solving the age-old digital problem of getting multiple local fiber connections to buildings. CityNet can't be dumped into the pariah CLEC category, Berger said, because it won't offer services directly to end users, and it can't be lumped with struggling metro optical carriers because it will actually connect its network to buildings. The company will offer capacity to anyone wanting to access the local market without going through the incumbent. CityNet will own and lease capacity, but it won't operate the network.

The plan sounds suspiciously like the original WinStar charter, especially considering Berger's stint as vice president of regulatory and legal affairs for that competitive carrier. Is this his way of dragging his former employer through the muck — in the most figurative sense?

Berger said CityNet is different and that WinStar got distracted along the way: “Fixed point-to-point [wireless] is a wonderful technology if it's used for what it's good at, which is voice.”

CityNet, by contrast, will do one thing and one thing only: lease capacity. In fact, virtually everything else is handled by outside contractors — construction contractor Carter & Burgess is handling a good portion of the engineering, while engineering firm Henkels & McCoy is managing the actual fiber pulls.

At the train station lot, Carter & Burgess technician Anna Gomez lowers SAM into the manhole with all the care that the heart of a $1 million system would command. The CityNet executive who is on hand to ensure that I don't see anything I'm not supposed to calls Gomez “the bravest woman in America.” She doesn't seem to mind the work, as though hanging out over an open sewer is simply part of the job. Down in the hole, another Carter & Burgess technician, Grady Smith, has the most sought-after job on the crew: positioning the 200-pound robot in the pipe. It seems the yellow blowers pumping fresh air into the hole are not only the best olfactory defense, but also a potential lifesaver against hydrogen sulfide buildups. (HS₂ occurs naturally in the sewer system.) Though the evening's assignment entails a relatively short run of about 60 feet, the pipe hasn't been cleaned in about five weeks. As part of the protocol, CityNet contracts out a power washing of the inside of the sewer pipes with high-pressure water. This particular run connects to a large office building on the other side of the tracks. Translation: It gets “dirty” really fast. Inside the truck, a third Carter & Burgess technician, Jeremy VanRite, pushes SAM forward using a set of levers and buttons vaguely familiar to this fan of 1980s video games. The objective in the first pass through this length of pipe is a simple mapping of the stretch. After a smooth 10 feet, the sewer's contents quickly pile up, preventing the robot from moving forward. I suddenly understand why SAM has miniature windshield wipers on his lens. After several attempts, VanRite pulls the robot back. Time for the washing crew.

Differentiating itself from metro carriers like Yipes Communications, Telseon and XO Communications will be CityNet's most difficult task, in part because the market has heard this story before — owning the network without end-customer contact is nothing new. The extra challenge will be in managing growth on the wholesale level when planning, and spending must be executed months in advance.

Conventional wisdom is definitely in favor of a slow-moving managed growth phase. Case in point: Progress Telecom, a wholesale regional long-distance and metro player, is making the leap out of the Southeast and extending its network north to New York, but that is only because the company could justify an expansion based on immediate traffic needs, said President and CEO Ron Mudry. “What we were finding was that a lot of our customers that had traffic in the southeast needed to terminate in New York either to go on to Europe or to hit the corporate headquarters in New York.”

CityNet now must pull off the same trick, though according to Berger it has one big advantage: Each mini-ring is a self-sustaining economic and engineering project.

Translated from CEO speak: The pressure is on local managers to ensure their own survival.

CityNet's own survival has so far been assured. Founded in 1999, when the money taps were still wide open throughout the industry, the company's first round of funding didn't close until April 2000, but it still brought in $100 million from a roster of private equity firms including The Carlyle Group, Berkshire Partners, Trimaran Capital Partners, Fay Richwhite, a venture arm of CIBC Capital Partners, investment bank Great Hill Partners and venture capital funds Telecom Partners and Crescendo Ventures. This past April, CityNet closed a second funding round of $175 million, plus an additional $100 million in debt financing.

“Up until now, you could paper over your problems with the free cash that was out there,” Berger said. “Once we closed the funding round in April, that left us literally in a fully funded position.”

Within two years the company will be cash flow-positive and will even begin turning an actual profit. Just as important, CityNet's executive ranks include a number of WinStar alums that have gone through the start-up process before: “We know where the bones are buried,” said Cyrus Bamji, senior vice president of marketing and communications, who represented several upstarts with Fleishman-Hillard International Communications.

“We built the company for the bumps in the road,” Berger added. Not to mention the tunnels under it.

Depending on who you believe, the washing crew is either on its way or home for the evening. Time to try a different location, near the corner of 4th and Roma. Based on the street names, I envision a quaint little neighborhood of small cafes and local art galleries. Instead, the area abuts the county jail. Not expecting visitors, the crew is not quite set up to demonstrate the robot but will be in an hour or so after some maintenance to put on the proper-sized wheels. (Each SAM comes with its own retinue of replacement parts, tools, accessories and specially trained maintenance personnel. It's like some kind of touring mechanical diva.) After a slight delay to blow out a high level of HS₂, SAM is positioned to start installing conduit clamps. CityNet technician Ken Mitchell sits at the control panel inside the truck, hard hat spun backward. Because of the condition of the pipe, the process isn't going as fast as normal tonight. Ideally, SAM drags along a second wheeled device that acts as the cargo hauler and feeds the front unit rings off a cartridge. But because of variations in the size of these particular pipes, the rings must be “handed” to the robot one at a time, forcing one of the crew members to spend most of his night in the hole as SAM installs a ring, then returns for another ring while a third technician keeps watch at street level. No one, least of all the robot, seems to mind the extra effort.

Like any incumbent two weeks before an election, Albuquerque Mayor Jim Baca was nervous. Though trailing badly in the polls, he was gracious enough to entertain a few questions from an out-of-town reporter — after all, you never know when a new voter may decide to move to town.

Baca had long tried to attract high-growth companies to Albuquerque, which has a fair number of small high-tech companies sprouting outside the gates of Sandia National Laboratories on Kirtland Air Force Base southeast of downtown. Baca bragged about his latest big catch: Gap recently said it would move its back-office operations to town. But Baca was itching for more.

He was more than happy to welcome CityNet into a town that hasn't previously attracted much CLEC attention: “[The companies we're trying to attract] need the last mile links before they get here, not after.”

CityNet's original plan called for concentrating only on high-growth technology areas. That changed when carriers started approaching with requests for capacity in larger communities. Now CityNet is moving into NFL cities such as Pittsburgh, Dallas and Indianapolis.

The challenge now: convincing cities to take a chance on a company with no name recognition in an industry segment that has more often than not dug up streets and fled town. Berger said: “Within the city organization you have to overcome a trust barrier.”

Despite the minor glitches, the evening is moving along well. Mitchell installs the conduit holders, which resemble giant hose clamps. (After the first few are in place it becomes apparent why any crew would look for diversions. Like many physical tasks involved in installing a network, the exceptional becomes rote in short order.) The clamps soon will hold three conduits, which to an amateur home remodeler looks and feels like ordinary electrical BX, only slightly stiffer. Once in place, fiber is pulled through to form a typical physical ring. Getting fiber into the buildings requires some short trenching to hand holes, small 4-foot-deep wells that are placed by CityNet in parking lots or on sidewalks and contain the splice between the ring and conduit leading into the building. It's one of the few times during the process that CityNet's crews get to work at street level and out of the sewer system. I'm told that that the crew was forced to evacuate this very run a few weeks prior because of a jailbreak. When they came back to do more mapping, the story goes, they discovered two-by-fours and a bed sheet in the sewers.

The hose clamps CityNet uses in its network are not just a clever way of attaching conduit to sewer pipes but also a physical reinforcement. The extra support makes people like Larry Blair very happy.

Blair, Albuquerque's director of public works, spent most of this particular morning assuring local media that the town's water supply is safe from potential biological attacks. Questions about CityNet's plans are a welcome distraction. Not that he necessarily welcomed the idea with open arms when CityNet came to town. He was intrigued, but cautious.

“We've seen a lot of snake oil salesmen come and go,” Blair said. “Public works people are very conservative with what we'll allow in our system. There's a huge amount of suspicion when anyone comes to town. It had never occurred to us to use the sewer system for anything other than transporting sewage.”

Surprisingly, CityNet wasn't the only company to approach Blair, who as a public official must at least consider almost every idea put before him. One company wanted to bolt conduit to the top of the sewer, an idea quickly rejected because it would weaken the pipes. Another company came up with the idea of running a smaller concentric pipe into every sewer line, a plan that would have required reinstalling most of the system.

“It became clear that [CityNet] was the only technology that met the criteria,” Blair said, and the cream on top was the initial phase of the operation, during which the company would videotape and map every section of sewer it planned to use. The end result isn't a Blockbuster manager's choice, but it provided a free visual inspection for most of the downtown section sewer. To people like Blair, the video process even provided a unique drama when one of the SAMs fell through a hole in the bottom of one pipe. The crew on hand was able to rescue the robot, saving the company from writing off a $200,000 paperweight.

But before the first fiber gets into the sewer — even before the first SAM is lowered into the sewer system — CityNet must sell not only the director of public works but also elected officials on the value of yet another competitive carrier coming into town.

CityNet's sales pitch to city leaders rests on the economic advantages of having multiple local carriers. It's an offer they've heard before, often from CLECs that came into town on a blaze of promise, only to hightail it out at the first sign of trouble.

Figuring out whom to approach first is a tricky proposition. Mayors and city councilmen don't like hearing about economic development from public works directors, who don't like being told by a bunch of politicians what to put in the systems they work with every day.

CityNet tries to mollify both sides with a little legal payola. For the elected suits, it's a 2.5% cut of the company's gross revenue plus four fiber strands and free connections to city offices along the route. For the sewer guys, it's a promise to clean the section of sewer CityNet is using for the next 24 years. Everyone's a winner.

Back at the prison hole, SAM is moving along swimmingly. Despite all the earlier problems, it looks like this stretch of sewer will be ready for conduit installation tomorrow night. Fiber pulls have just started on a portion of the mini-ring across town and should be complete in a few weeks. As much as Mitchell would love a pesky reporter hovering over his shoulder asking inane questions, it's time to trust that the operation will go on without my guidance.

Everything went according to plan. On Oct. 2, CityNet officially launched service in Albuquerque. On the same day, Mayor Baca was voted out of office.