Need for sell and buy side subsidies points up advantage of government, coop owned fiber networks

Testifying before Congress back in May, NTIA Administrator Alan Davidson confirmed that a failure to fund the ACP will negatively impact BEAD. "As we build out our broadband networks, we want providers to know that there's some certainty that they'll have customers, particularly in these rural areas, particularly in areas where there's lower-income Americans, they need to know that those Americans are going to be able to afford to get online. The ACP plays a major role there," he said.

How ACP negotiations might shake out

This statement clearly points up market failure and the need for a lower cost alternative model for advanced telecommunications infrastructure. Davidson is in effect saying without both seller subsidies -- delivery infrastructure subsidies such as the NTIA's Broadband Equity, Access and Deployment (BEAD) program and buy side subsidies based on household income (the Affordable Connectivity Program), market failure will result. In short, providers won't be able to to connect American homes and consumers won't be able to afford their monthly bills since providers have to price in a profit margin and allow for income taxes. Even then, it's hard to make it pencil out. Jeff Luong, AT&T’s vice president of network engineering, reportedly said at the recently held Fierce Telecom U.S. Broadband Summit that even with AT&T spending about $20 billion per year on infrastructure, “we cannot build out in all the areas we deem as economical.”

This situation clearly points up the need for lower cost alternative and one more likely to avoid the problem of uneven deployment by investor owned providers that must carefully segment where they build fiber that leaves many homes unconnected: fiber optic networks owned by governmental entities and consumer utility cooperatives. Neither must generate profits or pay income taxes.

Iowa governor sets goal of universal premise Internet service

Iowa Poll: Aid for broadband gets Iowans' OK | The Des Moines Register | desmoinesregister.com: While adoption and satisfaction are relatively high, Gov. Terry Branstad’s Internet expansion initiative aims for 100 percent.

“The governor’s bill is titled the ‘Connect Every Iowan’ bill, not ‘Connect Some Iowans’ or ‘Connect a majority of Iowans,’ ” said Adam Gregg, the governor’s lobbyist. “... We want to encourage ubiquitous access all throughout the state.”

This should be a goal for every state. But setting a goal without a realistic plan to reach it will only produce disappointment. Branstad's plan for getting there is based on providing tax incentives to spur the construction of necessary infrastructure. Problem is tax incentives alone cannot overcome market failure -- when there is insufficient economic incentive to invest in infrastructure reaching every home and business. To reach that goal, Iowa and other similarly situated states would have to form and fund state Internet infrastructure authorities to subsidize municipal networks and telecommunications consumer cooperatives.

Since states adjacent to Iowa tend to also suffer from market failure that leaves many of their residents off the Internet grid, Bradstad might also consider negotiating a compact with these states as he is currently doing for the health insurance exchange marketplace to form a regional Internet infrastructure authority. The very fact the Bradstad is acting on this issue in Iowa points up the deficiencies in U.S. federal government policy that leaves many Americans in Iowa and other states with less than universal premise Internet access.

Who needs a Gig at home? Half of U.S. businesses | Technology Futures

Who needs a Gig at home? Half of U.S. businesses | Technology Futures

Andrew Cohill makes the excellent point that with the emergence of Fiber to the Home (FTTH) telecommunications infrastructure, the past focus on Internet throughput speeds that was relevant to legacy telephone and cable companies is becoming increasingly less so. Since incumbent telephone and cable companies have to compress data to transport it over metal wire cable plant not originally designed to carry Internet protocol-based signals, from their perspective bandwidth is a limited commodity. This also limits their ability to serve all premises in their service areas. Even more so in the case of mobile wireless technology which provides far less capacity and range. Hence, their business and pricing models treat bandwidth like a metered utility such as water or electricity.

With FTTH, that entire paradigm of bandwidth as a finite commodity goes out the window and with it the incumbents' outmoded business models. This also has implications for now outdated government subsidy programs based on rules written nearly a decade ago when DSL deployed by telephone companies was state of the art Internet technology. Those programs now need to be updated to scrap obsolete references to the speed of available Internet technology and treat any area lacking FTTH infrastructure as eligible for subsidies if incumbent or other providers aren't constructing it or opt not to.

My Turn: A critical look at the state's broadband policy | Burlington Free Press | burlingtonfreepress.com

My Turn: A critical look at the state's broadband policy | Burlington Free Press | burlingtonfreepress.com: What is happening now and why is that a problem? Much federal money has been coming into the state in support of broadband and the state has allocated some of its own. Some of the federal money is going into fiber optic networks to be built by Waitsfield/Champlain Valley and by VTel in its home territory.

But most of the money supports two technologies: DSL and fixed wireless. The problem with this is that neither of these technologies can deliver the broadband service that will soon be required.

Vermonter Henry Swayze couldn't be more correct in his criticism that federal telecom subsidies should not be directed toward stopgap technologies that can't offer adequate reach, throughput and future network demand capacity.  It's an inefficient, wasteful use of public money.  It would be like subsidizing a high speed transcontinental railroad system that's a patchwork of metro streetcar systems that end at the edge of towns, forcing people to walk to the next town to continue their journey.