Saturday, October 11, 2008

Green movement could spur public sector investment in fiber to the home

When the 1996 Telecommunications Reform Act was enacted, it was anticipated it would drive competition giving most Americans fiber optic service by 2006. Didn't happen. Plenty of mid-mile fiber got laid but much of it was never lit up following the dot com bust of 2000. Then in the years following the dot com downturn, telcos opted to avoid the CAPEX of fiber over the last mile and instead retain and depreciate their aging legacy copper cable plants and deploy underpowered DSL service over them that left millions without broadband access.

Now the Fiber to the Home Council (FTTH) expects increased interest in reducing carbon emissions will drive fiber over the last mile. Updating the last mile to fiber will deliver substantial environmental benefits in the short term outweighing the environmental costs of deployment in as little as six years, the FTTH says, citing a study by the consulting firm PricewaterhouseCoopers (PwC).

The study found that by 2010 and later, an estimated 10 percent of the working population with FTTH service would telecommute an average of three days a week because bandwidth improvements will make working from home more feasible. That's a lot less driving and reduced gasoline consumption and savings on road maintenance and construction.

Since government is in business of building and maintaining roads, it indirectly benefits by investing in last mile fiber such as selling bonds to finance its build out as Monticello, Minnesota and other local governments have done. At this point, it appears to be far easier to make the business case for fiber to the home in the public sector -- which can raise more patient capital -- than the private sector where telcos and other providers require rapid returns on their capital investments that has discouraged them from deploying fiber to the home.

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