Monday, August 08, 2016

Public-private parterships for telecom infrastructure modernization hamstrung by subscription-based business model of incumbents

Citywide broadband service could cost over $200 million, study says | Local News | In the report, CTC recommended that the city pursue an approach in which the city would build and own the fiber network. Private businesses would then provide internet service and build lines connecting individual users to the network.

This of course assumes those "private businesses" are willing. This is a major downside of applying a end user subscription-based model employed by legacy incumbent telephone and cable companies that has produced widespread cherry picking, redlining and market failure in the United States. Using the same business model isn't going to result in a rapid project that builds out to serve all Madison, Wisconsin homes, businesses and institutions. The private partners will run the numbers and likely conclude that simply doesn't pencil.

Soglin said covering the cost for the project would be a challenge, but said the move would foster competition among internet service providers and force them to improve their services.

Perhaps among the service providers. But certainly not among infrastructure builders since telecom infrastructure tends toward a natural monopoly due to high costs to play in the market.

"It will be a fight, politically and economically, with the companies that would rather have monopoly kind of control," Orton said.

That would be Barry Orton, chairman of the Citywide Broadband Subcommittee and a professor emeritus at UW-Madison. And he's right. The subscription-based, sell and own the customer business model favored by legacy telcos and cablecos promotes a winner take all mentality that along with the aforementioned microeconomic realities foster a monopoly market.

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