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Tuesday, May 12, 2009

Norwegian ISP: dig your own fiber trench, save $400

Lyse has become the largest fiber-to-the-home provider in Norway thanks to an innovative business model that asks customers to preregister before any fiber is dug, then offers them a $400 savings if they dig their own trench from the street to the home. So far, 80 percent of Lyse's customers have broken out the shovels.

Norwegian ISP: dig your own fiber trench, save $400
Don't dig up his flowers

How did a Norwegian electricity company become the biggest fiber-to-the-home provider in the country? By adopting an innovative business model, offering faster speeds at identical prices, and—most unusual of all—letting customers save a few hundred bucks by digging their own fiber trenches through their backyards. We spoke to the company about the willingness that Norwegians have shown to get involved in laying their own infrastructure.

From power to broadband

Lyse didn't start out as a broadband company; before 2002, it was an electrical company that provided power to about 120,000 Norwegian homes. But it was good at infrastructure building, and in 2002 it decided to jump into the Internet game by deploying fiber to the home. That first year, it had only 500 customers; now, it has more than 130,000, making fiber even more important than electricity.

And that fiber doesn't just supply Internet access. Lyse offers the usual triple play bundle of voice, TV, and Internet, but it is also experimenting with tying home alarm systems and WiFi-equipped mobile phones into the fiber connection (every install comes with a wireless router to make this simple to set up). Users can pay for all these services—plus electrical service—on a single bill.


Lyse's business model is different from companies like Verizon, which is currently rolling out fiber across its service area and then trying to sign up customers. Lyse instead sends people into unserved areas, knocks on all the doors, and passes out information on the new fiber service. Only when 60 percent of the people in an area sign up in advance for the service does Lyse start the actual fiber install.

Sixty percent sounds like a tough threshold, but the company says that it has been "very successful" so far by offering people far greater Internet speeds for the same price they are currently paying. Lyse's Altibox service offers 10Mbps, 30Mbps, or 50Mbps connections—all of them fully symmetrical (upload and download speeds are identical). In many areas, the uptake rate tops 80 percent, though competitors have boosted speeds and started deploying fiber of their own in an effort to retain customers.

Digging the trenches

In addition to entering an area with tremendous support already lined up, Lyse also does something innovative: it allows prospective customers to dig their own fiber trenches from the street to their homes. In return, customers can save about $400. "They can arrange things just the way they want," says Herbjørn Tjeltveit of Lyse, which makes for happier customers; apparently, nothing angers a Norwegian more than having some faceless corporation tunnel through his flower garden.

The scheme also appeals to a Norwegian sense of thrift and do-it-yourselfness, says Tjeltveit, and he speculates that it has an additional benefit: customers who put some sweat equity into bringing their Internet connection from the street to the basement are more likely to be invested in the product and the company. (The obvious downside is that passionate customers are more likely to complain whenever they see shortcomings in the product.)

So far, 80 percent of all customers have elected to do their own trenching, following the instructions and timeframe provided by the company. A technical team still has to come out to pull the fiber from the street through the ducting to the house and then make the proper termination, but much of the tough manual labor is avoided.

A new fiber deployment can certainly be expensive, but Lyse has insulated itself from much of the risk. The model works, too; the company is now the main fiber-to-the-home provider in Norway, where it covers half the municipalities, and its customer churn rate has stayed quite low. As for the future, Lyse can ramp up the speed dramatically once all that precious fiber is in the ground; its partners are already testing both 100Mbps and 1,000Mbps connections.