In the fourth decade since telecommunications began to shift to Internet protocol-based technologies, about half the connections to U.S. homes have not yet been modernized to fiber optic lines. That’s according to a recently published white paper commissioned by the Fiber Broadband Association and Frontier Communications.
The paper points to a clear reason: excessive reliance on investor owed deployers who lack incentive to fully build out fiber. According to the paper, this is because they naturally look to benefit their own economic interests and are not directly seeking the broader socioeconomic benefits that come with fiber connections reaching most every doorstep. Those are identified in economic terms in the paper as positive externalities: unintended, incidental (i.e. external) benefits beyond the narrow economic incentive of investors to earn the highest level of profit in the shortest time. That leads to micro market segmentation as seen on so-called “broadband maps” that an East Texas local government official compared to the spotted coat of a Dalmatian. (Related story from The Texas Tribune)
Lonnie Hunt, with his spotted map to visualize broadband availability in East Texas, at the McKenzie-Merket Alumni Center at Texas Tech University in Lubbock on Nov. 18, 2022. Credit: Mark Rogers for The Texas Tribune
The paper’s authors estimate deploying fiber to 56 million households that are in tracts unserved by fiber has the potential to generate at least $3.24 trillion in terms of net present value (NPV) in incremental economic impact.
“Society as a whole benefits from the positive externalities of fiber deployment,” the paper notes. “However, no group of private investors can fully capture these benefits. As a result, a private market equilibrium that balances the marginal revenue and marginal cost of fiber deployment will lead to an under-provision of fiber resources, resulting in market failure.”
The 1996 Telecom Act and the Telecommunications Infrastructure Act of 1993 before it recognized the broader socioeconomic knock on effects of ubiquitous access to advanced telecommunications infrastructure. But the flaw in both is their exclusive reliance on investor-owned providers and market forces to bring them to fruition. They overlooked the economic misalignment identified in the white paper between the more limited, short-term interests of private players and the longer-term public interest. Both failed to establish clear, well thought out public policy to balance them.
For analog voice telecommunications, public policy is to regulate them as common carrier utilities under Title II of the Communications Act of 1934 to ensure widespread, affordable access. However, even though Internet access is now seen as a de facto utility, it is still not legally recognized as such four decades after the Internet digitized and transformed telecommunications.
While the FBA/Frontier paper doesn’t do so explicitly, it makes a strong argument for public and consumer utility cooperative ownership of advanced telecommunications infrastructure. By definition, these ownership structures are affirmatively intended to realize the positive socioeconomic benefits of access and affordability. For them, these are not merely incidental externalities but an organizing principle.