Sunday, January 05, 2014

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.

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