Municipal broadband internet: The next public utility? | Smart Cities Dive: Despite many cities and counties looking to put together a municipal broadband initiative of their own, there remains strong opposition from telecom companies, as well as concerns over cost. While the CTC report found that municipal internet in Seattle is feasible, it also raised concerns about the price tag of the project, which is complicated by the fact that SCL cannot assume additional financial risk and so would need guaranteed payments to cover operations and maintenance.
The legacy incumbent investor owned telephone and cable companies have been conservative in modernizing their infrastructures to fiber and building out to reach every customer premise in their nominal service territories. It goes back two decades to the late 1990s when telephone companies offered digital subscriber line (DSL) as a luxury upgrade over standard sluggish dialup service. Soon thereafter, cable companies offered IP telecom services as an extra cost add on to create more lucrative service bundles beyond their traditional TV programming.
Naturally, these companies wanted to offer a high end upgrade product only where there were a sufficient number of densely developed neighborhoods with incomes high enough they would be a good bet to sign up. Those neighborhoods deemed too risky are redlined -- where too many of them remain today with some 19 million Americans lacking access to landline connections according to current U.S. Federal Communications Commission data.
Now a tipping point may be at hand. Instead of being regarded as a luxury service as in the past, IP telecom service delivering voice, video and data is widely becoming viewed as a basic utility like voice telephone service was before it, with nearly every home, school, business and institutional building expected to have a landline connection. That shifting expectation alters the risk picture for investing in building universal fiber to the premise #FTTP. If most everyone will take the service, the risk of not generating sufficient revenues to cover capital and operational costs of the infrastructure decreases considerably. Particularly if it's offered at single price point affordable by most rather than costly, confusing and misleading offers that plague today's IP services. Yes, potentially lower ARPU, but a lot more end users to spread out the costs. And there should be subsidies for low income households; it's better they pay something rather than nothing because they can't afford it.
The public sector is beginning to see things as this story suggests. It has a major advantage over investor-owned ISPs in having access to far more patient capital that does not demand a rapid return on investment. Public sector owners of advanced telecom infrastructure also have an advantage in having more broad-based incentives to get it built in the form of what Paul de Sa, former head of the U.S. Federal Communications Commission's Office of Strategic Planning and Policy Analysis, termed "positive externalities" in a white paper since retracted by the current FCC. That's an economic term referring to the beneficial, knock on impacts on economic activity, healthcare, property values and local tax bases, education, and transportation demand reduction when most every premise can get connected to modern, advanced telecom infrastructure.
That's not to say there's no role for investor owned players. They know how to build and operate advanced telecommunications networks and should partner with public sector owners to bring the United States to where it should be amid explosive demand that shows no signs of slowing down.
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