Sunday, August 08, 2010

FTTH Council prematurely buries open access networks

In a recent filing with the U.S. Federal Communications Commission, the FTTH (Fiber to the Home) Council is urging the FCC avoid placing Internet protocol-based telecommunications services under common carrier requirements of the Title II of the Communications Act of 1934.

In its 87-page filing, the FTTH Council contends doing so would inject a large degree of business uncertainty into what's arguably an already tenuous for profit business model and discourage private investment in the build out of fiber networks.

The FTTH Council also worries that the FCC's placement of IP-based telecom services under Title II would lead to the FCC declaring such services a monopoly -- not a hard stretch considering that high CAPEX costs make fiber networks natural monopolies. Once it has done so, the FCC would then require private companies to share its fiber facilities as phone companies were required to do with DSL under unbundling rules until the FCC reversed that policy in 2005 by deeming DSL an information service rather than Title II telecom service. Also once the FCC formally finds wireline telecom a natural monopoly, the FTTH Council warns, price controls will be put in place, further clouding the business case for for-profit providers.

Another more disturbing part of the filing beginning at page 19 effectively asserts that if the FTTH business case can't work in the context of a regulated monopoly for investor owned FTTH providers, then it can't pencil out for open access nonprofit municipal or other community-owned fiber networks either. The FTTH Council's filing quotes Tim Nulty, former manager of the Burlington, Vermont muni fiber network, as dismissing the open access wholesale model in which network owners sell access to service providers as "a recipe for financial failure."

But in a footnote on p. 19, the FTTH Council lauds closed proprietary (non open access) muni fiber networks as playing an important role where legacy incumbent providers aren't meeting community needs. Moreover, the organization notes, open access community networks require subsidization. Well of course they do. So do investor owned networks in areas where it's difficult to make a business case for deploying fiber given the slow return on investment.

My impression is the FTTH Council is jumping the gun. It's far too early to pronounce open access fiber networks unworkable as the U.S. searches for a sustainable business model alternative to address market failure among legacy telcos and cablecos that has spawned innumerable broadband black holes across the nation.

Open access can work if people truly regard fiber infrastructure as a community asset like roads and other public infrastructure, recognize its importance to a community's economy by making it far easier for information-based businesses to operate and workers to telework at distant jobs. And most importantly, having a willingness to pay for that infrastructure in recognition of its inherent value.

1 comment:

Craig Settles said...

While I believe that "open access" can mean different things to different people, I totally disagree with any assertion that these cannot make money. I recently interviewed Tim Nulty for an article I wrote for GigaOm (http://bit.ly/9supJb ), and I believe his comments as reported by FTTH Council are either incorrect or taken out of context.

I do believe that a lot of homework must be done to determine how an open access network can be profitable given a myriad of factors that are unique to each community. It seems the only people how categorically deny the value of this option are the entities (i.e. incumbents) who stand to lose the most from true competition.

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