Tuesday, April 30, 2013

FTTN: An alternative Google fiber model to build out Internet infrastructure

Google has been getting a lot of attention lately over its current and planned fiber to the premise (FTTP) builds in Kansas City, Austin, Texas and potentially Provo, Utah.  But Google is unlikely to expand that model to the outer suburban, exurban and rural areas of the United States anytime soon for the same reason the incumbent telephone and cable companies have declined to do so: too few potential subscribers to justify the business case for the sizeable investment.

However, Google may be able to make the numbers pencil better with a fiber to the node (FTTN) network in these unserved and underserved areas, mixing in aerial fiber cable plant where the cost of burying fiber conduit is overly expensive.  Using the FTTN model described in this November 2008 white paper, Google would bring Internet “trunk” connections to neighborhood nodes.  Property owners could join together in a telecom cooperative – compared to a condominium in the paper -- to build the final fiber segment to bridge the gap from their premises to the neighborhood nodes.  The cost of the construction for those projects in rural areas can be financed by low cost, long term loan funding offered by the federal Rural Utilities Service.

The paper notes the property owners would economically benefit given research showing adding a fiber “tail” to a residential property increases its marketability, thereby allowing property owners to recoup and potentially profit from any upfront investment they would have to make to fund the cooperative and get wired up.

It’s worth noting that although disclaiming official representation of Google, the white paper titled Homes with Tails: What if you could own your Internet connection? is co-authored by Derek Slater, a Google policy analyst.  Back when Slater wrote the paper, Google wasn’t in the fiber infrastructure business.  Now that it is, Google management would be well advised to dust off Slater’s paper and give it another look.

1 comment:

InfoStack said...

" But Google is unlikely to expand that model to the outer suburban, exurban and rural areas of the United States anytime soon for the same reason the incumbent telephone and cable companies have declined to do so: too few potential subscribers to justify the business case for the sizeable investment."

It's amazing that people still don't understand network theory and the network effect 100 years after the ill-fated, farcical and fraudulent Kingsbury commitment.

Very simply put, over the past 30 years we have seen numerous instances of core subsidization of or demand for access from the edge. 800, VPN, prepaid, the internet, etc...

Even the smartphone, which is a market-driven form of equal access, witnessed the device and network pull-through of the core application ecosystem.

But this only happens when pricing and transaction costs reflect marginal cost, which in turn only happens with horizontally scaled intranets. This is how Google gets its scale to take on the vertically integrated carriers and do a pricing end-run about them.

So if we look at wireless, mobility, HD video collaboration by institutions and enterprises, then we can build the case whereby the core pays for or subsidizes edge access.

Don't you believe Google and competitive market providers will arrive at the same conclusion? We haven't even finished chapter one of this story.

 
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