The rainbow rabbit leaps over incumbents: Google Fiber in diligence for expansion in 9 metro areas of U.S.

Google Fiber's announcement today that it is in diligence with local governments in nine metro areas of the United States for possible expansion of its proprietary fiber to the premise (FTTP) telecommunications infrastructure illustrates how a company that has been in the Internet business from the beginning can nimbly hop over legacy incumbent telephone and cable companies. The incumbents are weighed down by large investments in metal wire-based infrastructure and outmoded pricing structures that rely on creating artificial bandwidth scarcity and unit-based consumption. They must also satisfy shareholders who favor big dividends over capital investment in FTTP networks -- which explains why Verizon halted its FiOS FTTP product expansion in 2012. Finally, incumbents have sowed sour relationships with local governments that have asked for better service for their residents for years, making them likely to heartily welcome the Googlers.

What's also evident from today's announcement is Google Fiber's colorful hare won't likely be running to areas of the U.S. where it's needed most -- locales where homes and businesses lack wireline premises Internet service due to redlining by the incumbent providers.

Those areas will likely have to rely on municipal and cooperative fiber builds, although some investor-owned players could potentially offer them FTTP as in this rather counterintuitive circumstance in Mississippi. They can, however, benefit from Google Fiber's experience, adopting principles and techniques that lower costs and improve the economics of FTTP. These include prioritizing construction based on interest from potential subscribers and differential pricing models that include an option for basic, flat rate service at low cost for a limited period of time.

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.

Demand aggregation won't attract investor-owned providers

Broadband Internet service for rural communities eyed - The Daily News Online: News:

A consultant asked Genesee County lawmakers Wednesday if they wanted to join a regional coalition to try to get broadband Internet service to rural communities and homes.
Evhen Tupis of Clarendon said he’s been working on getting high-speed broadband for unserved areas of Orleans County and Niagara County. The sparsely populated parts of the two counties don’t have a provider because it isn’t financially feasible for companies such as Time Warner and Verizon.

The coalition would issue a request for proposals to broadband service providers “with 100 percent coverage,” he said.
Tupis’ proposed Inclusive Internet Initiative would pool together the region’s counties to make it more attractive to communications companies. He estimated the cost to provide broadband to most or all of Genesee County at $150,000, the same as it would in Niagara.

Yet another misguided notion that investor-owned telecommunications infrastructure providers can be convinced to serve an area that is insufficiently profitable for them by aggregating demand.  Demand aggregation does not solve the underlying economics that make deployment impractical for these providers.  If businesses and residents want modern Internet access, they will have to provide it themselves with municipal fiber or a consumer cooperative.

Municipalities, telco coops essential players in fiber to premises deployment

Verizon issued a news release Monday pointing to a study commissioned by the Fiber to the Home Council suggesting that once the U.S. housing market begins to thaw, homebuyers will be hot for fiber. Or as another study issued last November by Google described them, "Homes with Tails."

As the only telco committed to a full fiber to the premises strategy for both brownfields and greenfields with its FiOS product, Verizon clearly has an interest in promoting the concept. The problem is Verizon like other big telcos as well as cable companies have segmented their markets such that locales where fiber would be most the desirable real estate amenity -- such as those that are home to exurban and semi-rural telecommuters and small businesses -- are least likely to see it. The only way these places can expect to get fiber to the premises in the foreseeable future is to start municipal fiber projects and fiber telecommunications cooperatives.

Both types of entities are also good candidates for some of the $7.2 billion in broadband infrastructure subsidies contained in the American Recovery and Reinvestment Act signed into law in February as well as likely follow on funding promised by the Obama administration.

The underlying conflict driving muni, coop fiber

The saga of the planned City of Monticello, Minnesota municipal fiber network clearly points up the fundamental conflict between privately run advanced telecommunications providers and municipal fiber projects such as Monticello, which as this story reports successfully withstood a lawsuit by TDS Telecommunications aimed at blocking the project.

Privately held providers are primarily accountable to their investors and shareholders. In the case of costly telecommunications infrastructure requiring extensive capital expenditures that can crimp investor returns over the short term, their interests are directly at odds with those of consumers and businesses desiring more and better value services necessitating those capital expenditures.

Given these starkly conflicting agendas, it's no wonder we're seeing alternative models of constructing advanced telecom infrastructure emerge such as muni and cooperative fiber projects that are accountable to their constituents and members. These alternative models will be particularly viable in areas where existing providers have built incomplete local access networks that leave numerous broadband coverage gaps -- which describes much of the United States.

Thanks to Ron Britvich for the link to the story.

Forget about broadband mapping; it's time for consumers to take control

I concur with Art Brodsky of Public Knowledge that "broadband mapping" is an exercise in distraction and a waste of time and money better directed to getting broadband infrastructure in place. Infrastructure that was needed yesterday, last year and five years ago in much of the U.S. No map can provide that.

In fact, as Brodsky suggests, mapping is nothing but a feel good PR ploy favored by the telco/cable duopoly to create an impression they're doing something to fill in the holes while at the same time playing hide the pea. It's about going through the motions while doing nothing.

Homeowners and small business owners don't need a map to know they're in a broadband black hole when they're forced to resort to early 1990s era dial up or substandard satellite for Internet connectivity. They should get together with their neighbors and take control of their telecommunications destiny by forming fiber optic telecom consumer cooperatives as quickly as possible and applying for federal and state grants and loans to help finance the cost of deploying the fiber. Bringing the U.S. last mile telecommunications infrastructure up to date is a bottom up-- not top down -- endeavor that does not require maps.

Telcos, cablecos have future role as middle mile and long haul IP connectivity providers

Bob Frankston has penned a thoughtful piece that encourages out of the box thinking when it comes to broadband Internet connectivity. He's dead on. We're at a transition point between yesterday's legacy single purpose, proprietary telco and cableco owned systems designed to dispense discrete services as billable events and the open architecture possibilities of the Internet that allow for customization according to need.

The two models are not compatible -- which Frankston says explains the artificial market scarcity of bandwidth delivered via the telcos (slow and costly 1970s-era T-1 lines that telcos are still selling, for example) and cablecos at a time where fiber to the end user is capable of delivering hundreds of megabits and even gigabits per second.

Instead of expecting telcos and cablecos to meet our Internet protocol-based telecommunications needs, Frankston suggests we view these entities as middle mile and long haul carriers. They would still have a critical role to play, serving locally owned and operated telecommunications entities such as municipal fiber systems and fiber cooperatives. Frankston has seen the future and I share his vision.

Fiber cooperatives pick up the slack where telcos won't go

Here's an item from the nation's least populated state, Wyoming, that counters the myth that fiber optic telecommunications infrastructure is feasible only in densely populated areas. This is where things are headed: while the major telcos shun less densely populated areas and deploy fiber in limited portions of their service territories, cooperatives are stepping into the gap just as they did several decades ago when the other large private utility companies wouldn't serve these areas. Most importantly, those forming fiber cooperatives hold a long term view of their future telecommunications needs in contrast to the big publicly traded telcos that operate with limited quarterly and annual time horizons.

Tri County Telephone, the cooperative that serves the Ten Sleep area, upgraded from decades-old copper phone wiring to fiber in 2006 — a step that has still yet to happen in many urban areas.

Chris Davidson, Tri County's general manager, said the company wanted "to build a network for the future.

Obama administration should offer incentives for homeowner-owned fiber over the last mile

The incoming administration of U.S. President-Elect Barack Obama has tagged rebuilding America's aging infrastructure as a key policy objective. That includes its badly outdated last mile telecommunications infrastructure in order to make broadband accessible to more Americans.

Since the primary inadequacy of the telecommunications infrastructure when it comes to supporting broadband-enabled IP services isn't with the long haul and mid-mile portion of the network but rather the so-called "last mile" local access network, the administration should concentrate its efforts on developing incentives to hasten the change out of copper cable to fiber optic cable over this segment.

The administration should pay particular note of a recently issued working paper by the New America Foundation authored by Derek Slater and Tim Wu. The paper, Homes with Tails What If You Could Own Your Internet Connection, recommends state and federal tax credits to create incentives for homeowners to spend a $2,500 to $4,000 to connect their homes to last mile fiber built by existing carriers, neighborhood cooperatives, developers, local governments and private fiber optic vendors.

The authors seem to acknowledge that while there's near universal agreement that fiber over the last mile is essential to the future of America's telecommunications system and the critical role it plays in the nation's economy, there also is a substantial amount of inertia on both the supply and demand sides of the equation that keeps the U.S. stuck behind a technologically obsolete "copper wall" built decades before the Internet was created. The limitations of telcos' circa 1970s and earlier copper cable plants have become painfully obvious to all too many Americans who have vainly attempted for years to subscribe to their telco's DSL (or VDSL)-based services, only to be told it can't reach their homes or the copper cable is too old and degraded to support it or find it can't reliably deliver the throughput they'd like.

Telcos that have to produce quarterly profits are inherently conservative and won't make a long term capital investment in deploying fiber over their entire networks. They argue there's not enough evidence that homeowners will subscribe to fiber-based services at a sufficient "take rate" to justify such a major expenditure unless homes are densely packed cheek to jowl, thus reducing their investment risk. The problem is a lot of Americans don't live in such neighborhoods nor have any desire to do so. And since telcos operate in a duopolistic and often monopolistic market environment, telcos eschew meaningful market research and don't get hard data that might indicate that if they built fiber, customers will sign up for advanced services.

Hence, Slater and Wu posit -- correctly in this blogger's opinion-- that it falls to consumers themselves to break down the copper wall in favor of fiber over the last mile since risk averse telcos will continue to default to the safe status quo whenever possible.

The authors aptly acknowledge that many homeowners might balk at dropping a few thousand bucks to connect their homes to locally owned fiber and that there needs to be a compelling financial argument in addition to bringing their dwellings into the modern telecommunications age. In this regard, they point to a study by RVA & Associates, a market research firm that focuses on fiber networks, estimating that fiber connection increases the value of a home by about $4000. If the Obama administration combined that with a tax break, the proposition becomes even more appealing, particularly along with incentives for mortgage companies and other lenders to extend low interest fiber loans to homeowners. The tax breaks could be partially offset by stimulating economic activity that would bring in additional tax revenues.

Slater and Wu are to be commended for advancing the discussion beyond the true but tired themes of how much the nation is falling behind other developed countries when it comes to broadband and needs a national broadband policy to outlining a strategy to make it happen. It's no longer useful to call for a vague "national broadband policy." Since the U.S. is already years behind where it should be when it comes to broadband telecommunications infrastructure, what's sorely needed an action plan and rapid implementation. The solutions don't have to be perfect when the dreary U.S. broadband status quo is unacceptable and grows increasingly so as time goes on. As business gurus Tom Peters and Robert H. Waterman Jr. advised in their 1982 book In Search of Excellence: Ready, Fire, Aim.

BPL gets another lease on life

The obituary for Broadband Over Power Lines (BPL) had all but been written when IBM announced it would pony up $9.6 million in a venture with a small company to deploy BPL via electric power cooperatives formed decades ago in areas of the U.S. skipped by private power companies. Today, these same areas are being passed over by the private telco/cable duopoly and left without broadband Internet access.

According to Yahoo! Tech, the BPL rollout will take about two years and potentially serve 340,000 homes in Alabama, Indiana, Maryland, Pennsylvania, Texas, Virginia, and Wisconsin where about 86 percent lack cable or DSL access. The project has received $70 million in low-interest loans from the Department of Agriculture.

Making this project work could prove challenging. BPL utilizes similar transmission technology as DSL that rapidly degrades over distance, requiring extensive and costly amplification to get the signal to homes over long distances.

In addition, by the time this BPL project comes on line, residents of these areas could have superior alternatives such as fixed terrestrial wireless broadband based on multiple current and emerging technologies such as WiMAX and white spaces broadband over unused television frequencies that was given the green light by the Federal Communications Commission last week. And given that these areas have a history of forming cooperatively owned utilities, they may similarly opt to form cooperatives to build fiber optic infrastructure to assure their telecommunications needs are met over the longer term.

Location, location, location: Broadband access now a factor in residential real estate

Associated Press writer Peter Svensson reports on what I've predicted will be a growing factor affecting the residential real estate market: whether a home has broadband access. Broadband has become a basic telecommunications utility. Homes that lack it are becoming about as desirable as those without electricity or water hookups. Svensson quotes Edward Redpath, a real estate broker in Hanover, N.H., as saying he's seen deals fall through once the buyer realizes a home can't get broadband.

I disagree with Svensson's theory that over time the lack of universal broadband in the United States along with higher gasoline prices could pull people from the countryside toward cities and suburbs.

Small local Wireless Internet Service Providers (WISPs) are springing up throughout the U.S. to provide wireless broadband where the telco/cable duopoly does not. Residents and businesses will also take matters into their own hands and form and invest in cooperatives to build their own local fiber optic telecommunications infrastructures just as they did several decades ago to bring electricity and telephone service to their communities.

As Svensson's story suggests, they will be motivated by economic considerations to boost the market appeal and value of their homes -- particularly as they work to crawl out of the current real estate market downturn -- and to support their ability to start businesses and telecommute to their jobs.