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Allied Fiber said today it’s begun construction of a nationwide wholesale fiber network that will span 11,548 miles. The New York-based company will build out the network in six phases, linking undersea cable landing points, data centers, colocation interconnection facilities, rural networks and wireless towers in order to feed the increasing demand for broadband capacity resulting from everything from the ever-growing number of cellular towers to cloud computing (we’ll talk about the bandwidth needs for cloud computing at our Structure 2010 conference next month).

A New Model to Meet Broadband Demand

But Allied’s effort isn’t just aimed at boosting overall capacity — it’s aimed at changing the underlying business model of providing long-haul telecommunications networks. Hunter Newby, CEO of Allied Fiber, wants to connect the U.S. with an open fiber network comprised of the three disparate systems that essentially make up the backbone of the Internet, and is targeting data centers, high-bandwidth sites, rural ISPs, wireless companies and long-haul networks providers as customers. But it remains to be seen if Allied’s model will compete, not just with offerings from backbone providers such as Level 3 Communications (s lvlt), but also with colocation companies and the tower industry.

Newby, who was the chief strategy officer at colocation provider Telex, is pretty impassioned about his plan to bring wholesale fiber to places where existing backhaul providers may not go. It’s a plan similar to Google’s (s goog) experimental fiber network for consumer broadband, but enacted on a much larger scale, and for businesses. Newby believes that in underserved areas where Allied Fiber will have a presence, the cost of bandwidth will be driven down significantly because Allied will be willing to sell access to the long haul network, at competitive rates, to anyone who wants them — something the incumbents aren’t inclined to do.

Competition Drives Costs Down

The construction of Allied’s network is a big deal for small ISPs, which can find themselves having to pay more than $100 a megabyte for bandwidth, and may mean they don’t have to implement bandwidth caps as a means to keep their own costs down. It’s also a big deal for cellular carriers like Sprint (s S) and T-Mobile, as it will give them access to less expensive backhaul without having to pay the likes of AT&T (s T) or Verizon (s vz).

As Newby explains, rural providers or cellular providers needing rural coverage will be able to buy transport at wholesale rates from a colocation provider in the middle of field somewhere along a railroad right of way (Allied has a deal with some railways companies for access to their ducts). Such an approach could provide access for a single provider near the colocation facility or other regional providers could build off the Allied network. It would also open up the opportunity to locate data centers in rural areas, perhaps near renewable energy projects.

“The incumbents have control and have made it quite clear they’re not willing to make any significant capital investments in rural areas and are selling off rural assets,” Newby told me. “But you need to change the economics, and if these buyers can buy at even $15 per megabyte…the number of gigs and terabytes will eclipse the current rate because right now it’s so expensive.”

Building a High-Fiber Network

The first phase of the Allied network will cost $140 million, will connect New York, Chicago and Ashburn, Va. and will be completed by the end of this year. Newby said the second phase (from Atlanta to Miami) will cost $180 million, and the third phase connecting Chicago to Seattle could cost as much as $350 million. However, he added that potential customers are willing to go in with him on the cost of the connection to Seattle because big bandwidth providers like NTT Corp. need a shorter route to get their traffic to Asia. The final three projects aren’t budgeted yet, nor is there a definitive time frame.

The first phase will provide a combined 648 dark fibers, 19 colocation facilities and 300 tower sites. From the press release:

Allied is deploying a 432-count, long haul cable coupled with the 216-count, short-haul cable that will be a composite of Single-Mode and Non-Zero Dispersion Shifted fibers. Allied Fiber has implemented a new, multi-duct design for intermediate access to the long-haul fiber duct through a parallel short-haul fiber duct all along the route. This enables all points between the major cities, including wireless towers and rural networks, to gain access to the dark fiber. In addition, the Allied Fiber neutral colocation facilities, located approximately every 60 miles along the route, accommodate and encourage a multi-tenant interconnection environment integrated with fiber that does not yet exist in the United States on this scale.

If Allied Fiber can build an open fiber network that spans the country and includes colocation and towers, it could provide a way for municipal fiber networks and rural ISPs to get online and connect to backhaul for less, while bypassing their potential competitors (for example, a muni fiber network might compete against AT&T but may also have to buy access back to the Internet backbone from AT&T because it’s the only provider in the area). We’ve long argued that open networks are the way to go when it comes to big infrastructure, something with which Newby agrees. “I believe in the power of open networks,” he said, “but instead of talking about it or writing, about I want to do it.”

He went on to say that: “I encourage other people to copy our model and philosophy of neutrality. It drives growth and it’s what drives the innovation and bridges the islands of broadband we have in this country.”

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