National Business Incubation Association; Your source for knowledge and networks in business incubation

Getting wired

by Bridget McCrea

December 2000

Clients need it while phone and cable companies push it, but what does it really take to get an incubator wired to handle high-speed telecommunication?

Not too long ago, having an ample supply of phone jacks was the only aspect of telecommunication that a business incubator had to worry about. Today, the options are seemingly limitless, as clients demand higher speeds, better bandwidths and "always-on" Internet connections. If they're not asking, you have reason to worry about their competitiveness. The telecom menu includes cable modems, DSL, ISDN, T lines, fiber optics, satellites – a mind-boggling array of options that even the most tech-savvy incubator staff may not have time or desire to sift through. And what's it all going to cost? Who will pay?

Faster, faster …

Why all this need for speed? Simple: Although traditional dial-up modems are easy to use and come standard with most computers, their performance is limited, especially in a business setting. Plus, having to place a telephone call before establishing a connection to the Internet service provider (ISP) makes that type of access to the Internet discontinuous and inconvenient.

The root of the high-speed issue, in a word, is bandwidth – the amount of data that can be transmitted in a fixed amount of time. The rush is on to build the infrastructure needed to bring high bandwidth, or "broadband," communications to businesses – including those housed in your incubator.

Besides, there's more to high-speed access than just sending e-mail messages and browsing the World Wide Web. For example, companies use Internet protocols to integrate functions like telephony (the combining of telephones with computers) into their operations. They're also establishing lightning-fast company intranets (an internal "Internet" that is accessible only to the company and not to the outside world) and viewing large-bandwidth files (such as complex PowerPoint presentations) that can download in a flash with a high-speed connection.

The industry is moving toward Asynchronous Transfer Mode (ATM – but not the banking kind), a transfer protocol that promises to handle all types of media. Depending on the company, it may be important to utilize technology applications such as real-time high-fidelity music, telephone, videoconferencing, television and radio programs – all of which can be provided by a single service company over a single high-speed access line. Here are a few of the more popular options currently available:

Cable modem

This is one of the more affordable options, and relatively simple to set up and use. This type of access uses an ordinary cable setup to tap into the cable company's high-speed access. No additional ISP is needed, and start-up costs for the equipment and installation average about $100 per connection, with monthly fees ranging from $40 to $50 per connection.

Cable modems provide a very fast connection (a potential of up to 3 million bits per second [bps], versus a standard 56,000 bps modem, which often never reaches even that speed due to phone line quality), and free standard phone lines for other uses. The downside is that cable shares bandwidth with multiple users, which can lead to potential slowdowns. Also, it's not available in all areas.

DSL

DSL – Digital Subscriber Line – access runs through an ordinary phone line and is another popular way of getting wired. "These come in seven or eight flavors – ADSL, SDSL, HDSL and so forth – but they all work essentially the same way," says Jim Graham, director of the Information Technology Resource Center (iTRC) at the University of Louisville in Kentucky. The line, which carries digital data as well as voice, belongs solely to the user, who doesn't share access with other users who can sap the bandwidth on, say, a cable modem. However, if your incubator is more than a few miles away from a phone company's central office (usually 18,000 feet), then getting DSL may be difficult.

DSL offers speeds from 384,000 bps to more than 1.5 million bps, much faster than a regular analog phone line. There are three costs associated with Internet service using DSL: installation charges of about $100 to $200 per line (which covers the necessary equipment); a monthly charge payable to the telephone company for the DSL line of about $40 to $100, and the monthly charge payable to the ISP (usually $15 to $20) for providing Internet service on top of the DSL line. The setup also requires a DSL modem, which is frequently provided at no charge, but sells separately for about $250. You can use your existing phone lines and have both voice and data delivered over a standard four-conduit phone wire.

Asymmetric Digital Subscriber Line (ADSL), the most prevalent type of DSL, has higher "downstream" speed. This means information (such as Web pages or files) come into a computer faster than things you send out. In other words, downloading files is a very fast process with ADSL. It makes sense for many businesses because Web pages or files coming into a computer are usually much larger than those sent upstream when the user clicks on a link, for example. For this reason, however, they are not the best choice for organizations that will be hosting their own Web sites. To see if DSL lines are available at your address, go to www.dslreports.com.

ISDN

The original "high-speed" alternative, ISDN (Integrated Services Digital Network) is a digital telephone service that works over existing phone lines. There are various types of ISDN, with connection speeds averaging about 128,000 bps. Start-up costs range from $325 to $400, with monthly fees running from $50 to $80 to the phone company, plus your ISP subscription. Costs vary by location, so check with your local telephone company to find out exact rates.

ISDN lines are available almost everywhere, and equipment and protocols are standard throughout the United States. And while ISDN lines are widely used, some feel that their performance is not on par with other emerging digital technologies like DSL and T-1. Phone companies have been downplaying their availability.

T-1

The speedy choice for incubators, at least today, is the T-1 line. This widely available wiring is dedicated phone connections supporting data rates of 1.544 million bps and suitable for incubators with 10 to 75-plus companies. Cost is the major hang-up for these lines, which are frequently used in business. A T-1 line actually consists of 24 individual channels, each of which supports 64 kilobits per second (Kbps). Channels can individually be configured to carry voice or data traffic. They also can be bundled into threes and fours (known as T-3 and T-4 lines) to serve as Internet backbones. They have data rates of more than 274 million bps.

Most telephone companies allow users to buy just some of these individual channels, known as fractional T-1 access. This type of access will run an incubator between $500 and $1,500 per month, depending on number of channels. Setup fees vary and tend to be complex, so you'll need to confer with your local providers for exact numbers. As a starting point, various price comparison charts are available on the Internet, most of which are segmented by geographical location.

Graham recommends that incubators check to see if they can get institutional discounts on T-1 lines. "Tennessee, for instance, makes T-1 lines cheaper for educational institutions," he says.

Other options

If your incubator is serving companies that command scads of bandwidth, such as Web production companies, software developers or other high-tech companies that are on-line 24-7, you may decide to jump up to fiber optics. The price for this type of connectivity can be quite steep – perhaps $10,000 per month – but the capacity is some 30 times that of a T-1 line.

For areas located more on the Internet dirt road than superhighway, the emerging satellite Internet connectivity may be an option worth watching. "The technology is not quite ready for prime time yet," says Graham. This option is fast evolving, though most of the market-ready applications are residential through satellite television companies, and can receive data but not transmit it (output back to the Internet must go though hard wires). DIRECTV, for instance, has an arrangement with AOL to debut the option soon. Although this service is not really a commercial solution, stay tuned because more data satellites are deployed every day, federal regulations are coming into place to free up more bandwidth and companies are scrambling to be ready with products and services.

Wireless Internet access utilizing transmitting towers is available in some urban areas too, but range and bandwidth are limited. Again, says Graham, we'll be seeing more on this front in the next few years.

What does your incubator need?

Now that you know what your options are, it's time to figure out what your incubator and clients actually need in terms of high-speed access before you invest in equipment, sign any long-term contracts, tear up carpet or drill holes in your incubator's walls.

Bill Simon, of the Center for Emerging Technologies in St. Louis, says that if you need only basic communications – with no big data files to transfer and only e-mail and Internet access – then your incubator's needs will be relatively simple to meet. However, if clients are transferring bandwidth-hogging files, a bigger pipeline will be necessary. Types of files that require more speed include digital pictures in groups (for example, a chest x-ray is about 8 MB, but a CAT scan can be 20 to 30 MB) and streaming video.

The next step is to find out exactly what's available in your area. Simon recommends that "all incubators go for the T-1 line" whenever possible because the lines are readily available, the cost can be passed through to the tenants, and the connection fees are usually favorable. "In cases where big files must go out, T-1 or multiple T-1s are a must," he says. DSL is a good second choice if cost is a strong consideration. Check with your phone company to see if it's offered and affordable for your address.

When choosing either T-1 or DSL, Graham recommends that you go to your phone company first. Though independent companies offer the technology and sometimes at a slightly better rate, they don't own the wiring so can't offer you service. If problems arise, they won't assume responsibility.

When wiring up, consider establishing a local area network, or LAN, says Tracy Kitts, NBIA's director of Web services. This connects all of the offices in the incubator together onto one uniform network. Kitts says proper installation will ensure that all tenants have connections to the Internet, one another, or both. "If you're offering services via the computer to your tenants, then you may want to develop an intranet where you can maintain applications, data, and browser pages that your clients or tenants can access," Kitts says.

"Establishing a LAN requires physical equipment like routers, switches, hubs, repeaters and various cabling topographies that will probably be handled by whoever is handling the physical installation process," Kitts says. This may be the phone company but more likely a firm specializing in LAN installation.

"Depending on the age of the incubator, you may be able to use existing phone and data wiring for your LAN," Kitts says. "But an update of the building's wiring during the LAN installation may be warranted. As bandwidth keeps increasing and clients demand more speed, antiquated wiring could hold back the progress."

Offsetting the costs

If price is stopping your program from wiring up, now is a good time to rethink, because funding sources for technology have never been more available. Depending on the stage of your incubator – new, old or under construction, for example – various state, regional and federal grants are available to help with the installation and equipment costs. The New Century Venture Center in Roanoke, Va., for example, recently received a grant from Virginia's Center for Innovative Technology for the installation of a T-1 line. Other states have similar programs available for financial assistance.

At the Northeast Alabama Entrepreneurial System in Anniston, Giles McDaniel says his incubator chased down $10,000 in local grant money to pay for its T-1 installation. The funding came from an economic development consortium – composed of Jacksonville (Alabama) State University and two technical colleges – which receives state funding for workforce training and development. McDaniel at first considered the Department of Commerce's Technology Opportunities Program (TOP) for funding. "But since we had a local source, we went for that instead to pay for all of our equipment," he says.

TOP awards matching grants in an annual competition to projects demonstrating innovative uses of network technology in the public and nonprofit sectors. The Enterprise Center in Philadelphia received a $600,000 TOP grant in 1999 to create the Philadelphia Interactive Business Network (PIBN) under the incubator's auspices. Still under development, the virtual incubator will use its high-speed connections – both T-1 and ADSL – to provide on-line business assistance and training programs to affiliate clients, and to help them incorporate technology into their daily operations.

A TOP application involves planning that can take months to complete, including meeting with potential partners, raising matching funds and identifying likely end users. PIBN Director Kim Miller recommends paying close attention to the application's detailed guidelines, an approach that paid off for her. Of the 870 applications submitted in the 1999 competition, only 43 received funding. Miller says two factors worked in her favor: The project was innovative and she made an effort to get the community involved, including nonprofit and for-profit organizations. "I really took to heart the idea of partnering," she says.

Past the equipment and setup stage, most incubators recoup the monthly high-speed access fees by charging clients for the service. Usually, it's either built into the rent charge or set apart as a separate monthly fee.

Lisa Ison of The New Century Venture Center says that when her incubator's high-speed access is up and running, she'll charge by the month based on the amount of bandwidth subscribed to, with a minimum of 32 Kbps. Tenants are fine with the arrangement, she explains, "since they can't afford to have high-speed Internet access in our area on their own – that would run about $1,000 a month plus their own equipment and other charges."

Simon believes charging back to clients is a must. "When you are 60 to 70 percent occupied, all the costs should be covered – how else will the company get both the benefit of the high speed access for their enterprise and learn to live on a budget?" he queries. His incubator charges $8 per month for 10 MB connections and $20 per month for 100 MB. He says that covers everything – most of the time – and is cheaper than any alternative. His incubator has three T-1 lines: a data line, a voice line and a spare line in case one fails.

It's not necessarily easy to determine what to charge clients. Ison says that conversations with other incubator managers taught her that pricing is "all over the board," ranging from a one-time set-up fee, to a monthly fee, to free, depending on the area's telecommunications infrastructure.

The Madison Enterprise Center in Wisconsin has a T-1 line for which its service provider charges based on average daily bandwidth use, says manager Sarah Hole. Her incubator charges back clients on a per-computer basis, with the charge per computer decreasing as the number of computers increases. "Our highest category is 10 computers and we don't charge for additional computers after that," she says. "The theory is that bandwidth use will be reflected in the number of computers a company has." The incubator charges only those clients who choose to take advantage of the T-1 connection. "Since this is our first year with the T-1, it remains to be seen if this is the best method for billing," Hole says.

"Realize that clients will want more later," Kitts says. "Plan for change and expansion up front, and think about what the incubator and its clients can reasonably afford. And, remember that once the equipment is in place, you'll need the staff to handle and maintain it." Kitts urges incubator developers to be forward thinking up front by trying to project where you'll want your information capabilities to be three to five years down the line. "It's easier to get money in the development phase than later, and it's easier to install wiring when the walls are opened up in the construction phase."

Regardless of which type of high-speed access you decide on – and how you choose to offset the installation and monthly costs – remember that the key is first to determine your clients' wants and needs tempered by how long you expect your system to last. Even if you put in state of the art, you'll be reworking it in three to five years.

"In the next five years, you'll see more wireless options with much higher speeds and with prices coming down," says Graham. "Or who knows? Someone might invent something new tomorrow and bypass everything we have today."

Before betting wired, get answers

Wiring your incubator for high-speed access takes planning. Ask yourself the following questions before signing on any dotted lines, advises Larry Wilson, a marketing manager at Nortel Networks in Santa Clara, Calif. Use your answers to compare and contrast various options before making a decision. Then go over your options with your service provider(s).

  • How many staff members – both in the incubator itself and in the client companies – will actually use the high-speed access?
  • What types of client companies are in the incubator? High-tech? Low-tech? Some of each?
  • Are the telephony and Internet access requirements of those clients high, medium or low?
  • What are the different types of business applications that clients are using internally?
  • What is the growth potential for the client companies and the incubator itself?
  • What is the return on investment and break-even analysis of the technology itself?
  • How will client companies handle Web site development and hosting with high-speed access?

Keywords: new technology, shared administrative/office resources, technology/productivity resources

Contact NBIA

Phone: (740) 593-4331
Fax: (740) 593-1996
340 West State Street, Unit 25
Athens, OH 45701-1565
info@nbia.org