Tuesday, August 26, 2014

U.S. FTTP infrastructure projects falling into 2 categories

The construction of fiber to the premise (FTTP) Internet infrastructure in the United States is falling into two main categories:
  1. Projects in large and midsize metro centers such as those started or planned by Google Fiber, AT&T and Century Link as well as some cable companies. An article in the July 2014 issue of Broadband Communities magazine lists these deployments.
  2. Community or regional projects by local governments, utility cooperatives and public-private partnerships serving less densely populated areas not containing large cities such as those tracked by the Institute for Local Self Reliance.

The bifurcation of these infrastructure projects is distinguished by the economic health of their respective markets. Those in the first category undertaken by investor-owned providers that need a rapid return on investment are targeted to markets undergoing rapid economic growth, Broadband Communities editor Masha Zager writes in her article on large metro projects, citing the FTTP deployment strategy of Cox Communications:

Cox explicitly named rapid growth as one of its criteria for selecting cities for gigabit deployments. In contrast to municipalities, which often deploy fiber in an effort to jump-start lagging economies, large players favor localities that are healthier to begin with.

For the second category of projects, FTTP is clearly an economic development strategy to a far greater extent than the first. Unlike those in the first category financed by the impatient capital of telcos and cablecos burdened with high debt loads and large shareholder dividend obligations, community or regional projects will rely on patient capital. Sources include long term public bonds and creative public-private partnerships that blend public and private funding such as the Utah Telecommunications Open Infrastructure Agency (UTOPIA).

The second category is also distinguished from the first by the ownership and business models of the network infrastructure. In the first category of investor-owned projects, the network is a proprietary, closed access property. The telcos and cablecos that own the networks charge a retail monthly subscription fee to connecting premises.

By contrast, the second category is more likely to utilize an open access business model (such as UTOPIA) where fiber infrastructure is like a public works project such as a road or highway. Instead of selling individual subscriptions to customer premises, an open access model operates as a wholesaler selling network access to Internet service providers who provide services to customer premises. This model is a better option for the second category of projects because it removes the business risk of getting sufficient numbers of premises to sign up for service in order for the network deployment to be economically viable.

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