The United States is facing a crisis when it comes to modernizing its legacy metallic telecommunications infrastructure originally constructed in the previous century for analog telephone and cable TV services. In order to deliver digital advanced telecommunications service based on Internet protocol in the present and with capacity for future services as bandwidth demand grows exponentially, that legacy infrastructure needs replacement with fiber optic connections to customer premises.
However, that’s unlikely to happen for the foreseeable future under current federal policy. Customer premise fiber connections are likely to continue to at a glacial place, putting the nation ever further behind where it should be. Had the correct policy and planning choices been made in the late 1980s and early 1990s when it became apparent video, data and voice telecommunications would go from analog to digital and be transported using Internet technology, fiber connections should have been available to every American home, business and institution by 2010 at the latest. Consequently, the United States is facing telecommunications infrastructure crisis in the 21st century at a time when it’s urgently needed to support a transition from the Industrial Age economy to the information and knowledge economy of the 20th.
Given that telecommunications infrastructure functions as a natural monopoly, market forces cannot provide sufficient incentive to speed deployment of fiber. Legacy telephone and cable companies will only construct fiber where they can earn a relatively rapid return on that high dollar capital investment. New investor owned providers will be reluctant to enter a market already dominated by the incumbent providers given they too face the same high capital investment costs and uncertain investment returns.
The leaves the vast majority of the country with substandard and often obsolete infrastructure with little prospect of meaningful progress. Federal and state subsidy programs are grossly underfunded relative to the estimated $200 billion minimum needed to bring fiber connections to every American doorstep. Leaving telecommunications infrastructure in the hands of the private sector will prolong the dismal situation.
Only the federal government has the economic resources to do the job and the freedom to do so without the need to produce a quick return for investors. That’s not to say spending federal tax dollars on this vital infrastructure isn’t an investment. It most certainly is an investment in the nation’s future that will pay multiplier effect dividends by boosting jobs and economic activity, in turn generating tax revenues to repay the initial investment.
A federal telecommunications infrastructure modernization initiative must not just be sufficiently funded. It must also include a clearly defined role for current and newcomer private sector players to construct and operate – but not own due to its monopolistic nature that disadvantages end users -- the new fiber networks. Like the roads and highways the connect metro areas to states and states to other states, the new federally owned fiber infrastructure should be operated on an open access basis, enabling various telecommunications services to be delivered over them by private sector firms. This avoids the tyranny of the monthly subscription take rate that deters infrastructure investment under legacy business models in which the owners of network assets also provide proprietary services over them.
Owners of existing fiber to the premise networks should be offered the opportunity to continue to operate them as privately held assets or to sell them to the federal government with favorable tax incentives.
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