IIJA provides opportunity for structural separation with state, regional wholesale open access fiber networks

With the enactment of the Infrastructure Investment and Jobs Act (IIJA), the federal government and the states have an opportunity to structurally separate advanced telecommunications infrastructure and Internet Protocol (IP) services delivered over it by funding state and regional government owned wholesale open access fiber networks. That would boost access and affordability, and by extension, support virtual knowledge work, learning and telemedicine -- all of which jumped amid public health measures put in place during the COVID-19 pandemic. These large scale entities would also enjoy vital purchasing power as demand for labor and materials to build fiber networks is taxing their availability.

The Telecommunications Act of 1996 contained a structural separation component, requiring telephone companies to offer wholesale access their network infrastructure to retail Internet Service Providers (ISPs) -- referred to as unbundled network elements (UNE). But this provision lacks regulatory incentive for telephone companies to modernize their legacy copper networks to fiber. They leased access to their central office switches and legacy twisted pair copper plant to ISPs via dialup and later, digital subscriber line (DSL) that due to technological limitations could not serve all customers. Moreover, the telephone companies lacked market incentive to upgrade to fiber since they could derive passive revenues by placing the copper in runoff mode without sacrificing profits and shareholder dividends to capital expenditures. Consequently, only about a third of U.S. homes are passed by fiber.

With the IIJA, the National Telecommunications and Information Administration and the states can utilize $43.45 billion in grants earmarked for advanced telecommunications infrastructure in the legislation to attain a superior form of structural separation that can yield far greater public benefit than the 1996 legislation. Unlike shareholder owned telephone and cable companies, government owned networks have incentive to pursue the positive externalities that come with increased access and affordability that don’t accrue to the balance sheets of investor-owned infrastructure. These broad-based benefits clearly outweigh more narrow interests of their shareholders. 

Policymakers should implement and if necessary, amend the IIJA to ensure the widest and most rapid deployment of state and regional government owned open access fiber networks.