Protectionist policies called greatest regulatory threat to fiber to premise Internet infrastructure expansion

Over the past decade, much of the United States has experienced market failure because incumbent telco and cable companies are unable to serve all premises in their service territories with legacy metal wire infrastructure. They have also been unable to modernize and build out their aging infrastructures with modern fiber to the premise (FTTP) infrastructure able to accommodate expected exponential increases in future bandwidth demand.

At the same time, however, they have sought protectionist policies barring public sector providers from doing so with lower cost business models financed by more patient capital that doesn't require a high, short term return on investment. From their perspective, their service territories whether they fully serve them or not are their proprietary franchises. Hence, the need for protectionism to keep others out.

"The incumbents won't upgrade to fiber, Mr. President, because it's an option they cannot choose."

Writing in the November/December 2013 issue of Broadband Communities magazine, Steven S. Ross terms the incumbent agenda for protectionist policies that institutionalize Internet infrastructure market failure "perhaps the biggest regulatory threat to new FTTH (fiber to the home) deployments."

In fact, looking toward 2014, perhaps the biggest regulatory threat to new FTTH deployments is a push by politicians in many states to restrict municipalities and other public entities or public/private partnerships that want to build their own networks where incumbent providers (typically milking old, obsolete systems) refuse to do so.

Click here for the full article (.pdf)

The New America Foundation issued a critical report on U.S. Internet service on January 15, 2014. It urges the U.S. Federal Communications Commission work with Congress and other stakeholders to implement the 2010 U.S. National Broadband Plan’s recommendation that state-level barriers to municipally-built Internet infrastructure be eliminated.

Colorado legislation would redirect high cost telephone subsidies to Internet infrastructure

Two Colorado legislators are developing legislation to repurpose surcharges on voice landline and cell phone service to subsidize landline telephone service in high cost, less densely populated areas of the state to instead defray the cost of building out Internet infrastructure. "By funding land lines and copper-line phones, we're funding buggy whips,” Senator Gail Schwartz, D-Snowmass Village, told the Denver Post.

Rocky Mountain State lawmakers will however face resistance from incumbent telcos who want to preserve the status quo and continue to provide Internet service over their existing copper cable plants to a subset of wireline customers while deeming the rest unprofitable to serve. Throughout much of the United States, the latter cohort are in innumerable small pockets beyond the short range of DSL signals and/or where the existing copper cable is too old and deteriorated to deliver Internet service. First formed around 2000 and still around more than a decade later, they are like thousands of little holes in a big Swiss cheese, comprised of discrete premises, roads, streets and neighborhoods. Rather than “unserved areas,” they are more accurately described as redlined addresses and neighborhoods, typically avoided by both telcos and cable companies. The unfortunate residents are forced to rely on obsolete dialup offered by telcos or satellite Internet more properly suited to remote areas of the planet while the more fortunate may have access to fixed terrestrial wireless service from a local provider.

Incumbent telcos insist rules for government subsidy programs direct funds only to “unserved areas.” But building new wireline premises infrastructure is a costly, large scale endeavor that can make filling in these numerous voids one at a time impractical even with subsidies. In California, for example, incumbent telcos have largely shunned subsidies for premises Internet infrastructure offered through a six-year-old subsidy fund, the California Advanced Services Fund (CASF), similar to that being contemplated for Colorado. They have also challenged proposed CASF wireline projects by arguing the projects would serve premises adequately served by mobile broadband services.

Only a large scale overbuild of the outmoded copper cable plant with fiber to the premise infrastructure makes sense over the long term from both a technological and economic standpoint. State and federal Internet infrastructure subsidy funds should be structured accordingly.

Internet infrastructure outpolls transportation infrastructure in UK

UK People Want Superfast Broadband More than New Airports and HS2 - ISPreview UK

Watch for this sentiment to spread to other nations including the U.S.

Possible alternative to capitalize U.S. FTTP build out emerges in Utah

Building infrastructure of any kind is a costly undertaking, including fiber optic to the premise (FTTP) telecommunications networks. Those high capital costs have crimped FTTP build out in the United States, challenging existing telephone and cable companies as well as newcomers like Google Fiber.

In Utah, a new strategy is emerging involving a global firm that with patient capital that specializes in big dollar infrastructure projects. The Salt Lake City Tribune reports Macquarie Capital Group, an Australian firm that advises and invests in public projects around the world, will launch an engineering and feasibility study to operate Utah's 11-city UTOPIA FTTP network in a public-private partnership: 

Macquarie’s investors — including pension funds, large insurance firms and private endowments — were seeking to develop stable, long-term investment opportunities and were drawn to technology-based projects, Hann said. 

If the feasibility study proves fruitful and Macquarie agrees to take over the network, it likely will entail a deal in which the firm would assume management of the network for 30 years and invest in building out and upgrading the rest of the lines to neighborhood homes, Hann said. 

The network would remain an open-access network and Macquarie would partner with third-party Internet service providers, he said.

First indication of AT&T withdrawal from residential wireline market

Sensing AT&T's lukewarm commitment to its residential wireline business segment, in 2008 I predicted that AT&T would abandon the segment in the first half of 2010. The telco is still in the residential wireline business as 2013 draws to a close. But a slow withdrawal could now be underway, one state at a time starting with Connecticut.

Bloomberg reports today that AT&T will spin off its Connecticut residential landline unit, including Internet and TV services to Frontier Communications for $2 billion.

AT&T relies on copper cable plant to deliver premises Internet service, scotching plans dating back to the late 1980s developed by regional bell operating companies AT&T absorbed in the 1990s to replace the last mile copper network with fiber optic cable. That reliance has technologically limited the reach of AT&T's Internet-based service offerings since copper was designed to carry analog voice service and not digital Internet signals that can be reliably delivered over only short distances using copper.

AT&T's relationship with Connecticut hasn't been a copacetic one. In 2007, then-Attorney General Richard Blumenthal pressured the telco to make its U-Verse product offering available to all residences in the state. Blumenthal, now a U.S. senator, said this week the deal should be reviewed to ensure it is in the interest of consumers.

Verizon CEO hints at fiber partnerships with local providers

Verizon, which halted build out of its FiOS fiber to the premise (FTTP) infrastructure last year, will stay that course Verizon CEO and Chairman Lowell McAdam said at last week's UBS Global Media and Communications Conference.  McAdam said some "fringe" deployment may occur, but that "deploying fiber in a lot of new markets isn't in the cards."

However, "I think there are more opportunities to partner out of market with companies that are there versus us going in and deploying FiOS," McAdam added.

McAdam's remarks were reported by Fierce Telecom. 

Verizon spokesman Bob Varettoni declined to elaborate on McAdam's comments when asked specifically with whom Verizon might partner to build FTTP infrastructure beyond its current footprint.