Thursday, July 03, 2014

Davis, California exploring FTTP options to address private market failure

Sacramento News & Review - Sacramento Internet is actually really slow - News - Local Stories - July 3, 2014: “It really comes down to market conditions,” said Rob White, chief innovation officer at the city of Davis (yes, that’s a real title). “Putting fiber in the ground or in poles costs money. Most don’t want to do it where there won’t be subscribers or users.”

White said that Davis is exploring a lot of options, one of which involves an international fiber-optics company that offered to install the cables so that it could charge ISPs (the main ones in Davis are Comcast and AT&T) to use its network.

Sacramento might be going the route of cities that have allowed Google or AT&T to build broadband infrastructure for them.
Other options allow cities to choose from either central or decentralized systems. What we have now is more decentralized, in that various companies claim the right to install their own cables in different parts of town and charge customers accordingly. In a centralized system, however, the city would build and control just one fiber-optic network itself and let ISPs use it.
One proposed state law, Assembly Bill 2292, would facilitate this by letting local governments issue bonds to construct broadband infrastructure.

The face of ISPs are companies like Verizon and CenturyLink, so Internet service is seen as a commercial product. But it differs from other commercial products like shoes and microwaves because there is a very tight limit on the space (roads and telephone poles) that makes it physically possible to offer Internet. That has sparked a national debate on whether to treat the Internet as a public utility.

White likened Internet service to firefighting, which used to be a private enterprise. But that meant that a city could have five different companies fighting fires, which made coordination difficult—until fire districts were municipalized as a public utility. Today, with different companies building disparate systems of copper (and now fiber-optic) cables, Internet infrastructure lacks uniformity.

As White put it, “I think we’re exhibiting a market failure in this world of broadband.”

Market failure indeed. It's most painfully evident in large portions of the four county Sacramento region where homes and small businesses have wanted to purchase modern, fast Internet service for the past 10 years but cannot because incumbent telephone and cable companies have redlined their neighborhoods and decline to sell it to them.

White's comparison of multiple commercial telecommunications providers competing to capture subscribers with their own proprietary infrastructure to private fire departments (the first type of fire insurance) is apt. However, the high costs White notes that come with deploying fiber to the premise (FTTP) telecommunications serve to keep out competitors and make the market a natural monopoly unlike private fire protection companies.

Davis has the right idea in regarding telecommunications infrastructure as public infrastructure like roads and highways -- another costly endeavor that doesn't lend itself to market competition -- that benefit everyone whether they drive on them or not. Under this model, access is provided to ISPs on a wholesale basis. The real competition is among the ISPs looking to sell communications and information services over that public infrastructure -- as it should be.

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