For the past decade, much of the United States has been plagued by telecommunications infrastructure market failure. Many residences and small businesses need fast, reliable landline premise Internet connections but are unable to obtain them because legacy telephone and cable companies have opted not to upgrade and build out their networks to reach them. Alternative business models are thus urgently needed to ensure they don’t remain isolated from the Internet grid and effectively cut off from the many services it provides.
In Utah, two alternatives to construct and operate fiber to the premise (FTTP) infrastructure -- which is also being referred to as “gigabit broadband” in reference to fiber’s substantial carrying capacity that eliminates sluggishness and latency -- are playing out in close proximity.
One model is quasi-public, the other private. The first is
the Utah Telecommunication Open Infrastructure Agency (UTOPIA), of which 6 of 11
member municipalities are moving forward with diligence on a partnership to
bring in private investment capital. (Story here)
UTOPIA’s model treats its fiber infrastructure as a public asset similar to
roads and highways.
By contrast in nearby Provo, Google’s Google Fiber unit is
utilizing the subscription-based business model used by legacy telephone and
cable companies to sign up residential (but not business) customers living in
selected “fiberhoods.” Google Fiber is open only to Google whereas the UTOPIA
model allows Internet Service Providers access to the network on a wholesale basis.
Since Google Fiber sells subscriptions like a magazine, it
has to sell enough subscriptions to be economically viable. Being part of
online advertising giant Google means Google Fiber is also motivated to
get as many subscribers as possible in order to maximize eyeballs on Google-delivered
content and ads. With the bill and keep subscription model, teaser and
special rates are utilized to goose subscriptions such as Google Fiber’s
announcement it is cutting its $300 flat rate, low cost subscription rate to
only $30 for a limited time in Provo fiberhoods – similar to limited time magazine
offers for new subscribers. (See this
item from Google Fiber blog)
Of these two models, the UTOPIA model despite initial resistance
to a modest public utility fee is best able to scale quickly enough to address
America’s significant telecommunications infrastructure gaps short of a massive
federal infrastructure program on the scale of the Federal
Highway Act of 1956. The public-private partnership model being utilized by
UTOPIA relieves network operators of the risk burden and uncertainly associated
with having to sell subscriptions and avoid customer churn. It can also more
easily attract the many billions of dollars necessary to build out fiber to nearly
all Americans regardless of where they make their homes and businesses.
