New partnership needed to finance rapid modernization of copper to fiber as public utility

Some observers of advanced telecommunications (AT) expect the modernization of legacy copper telephone outside plant to fiber to the premises (FTTP) will take several decades along a similar timeline as copper. That duration and the relatively slow adoption of voice landline telephone service as shown here synced well. It doesn’t for FTTP. As this chart indicates, there’s a much steeper adoption curve for both landline and mobile Internet protocol-based telecommunications.


Source: Our World in Data

Demand has grown considerably during the public health restrictions of the COVID-19 pandemic that accelerated online retail, entertainment, education and government services, virtual knowledge work and telemedicine.

That raises the question of how FTTP can be built rapidly enough to accommodate burgeoning demand and who should build what is increasingly being seen as an essential utility versus a market commodity of “broadband” bandwidth sold as often pricy packages of video, voice and data services in discrete neighborhood “footprints.”

To shift to a utility model, the U.S. will have to adopt a common carrier framework of FTTP delivered advanced telecommunications infrastructure to replace the current optional market service sold where it produces the fastest return on investment at the lowest risk. That has resulted in a highly fragmented patchwork of access and affordability.

Treating FTTP as common carrier telecommunications utility infrastructure raises the related question what financing mechanism can finance its needed rapid construction. Federal and state grant programs that incrementally dole out funds for discrete, limited builds won’t be sufficient and perpetuate the fragmented “Swiss cheese” patchwork of FTTP deployment. That’s inconsistent with a common carrier utility model in which reasonable customer requests for connectivity must be accepted – universal service -- with service quality and reliability standards and neighborhood discrimination applied the current market-based model prohibited.

Investor owned providers can’t look to their shareholders to bear the cost, particularly legacy telephone and cable companies paying high stock dividends and carrying significant debt on their balance sheets. They would require a massive infusion of outside investment that isn’t likely since private equity investors like their own shareholders will only be inclined to finance limited FTTP builds where the return on investment is greatest -- and not to all serviceable addresses under a common carrier utility model.

The solution points to public sector ownership and finance, partnered with the private sector in a competitive contracting process such as those used for public works projects to design, build, and operate the infrastructure. The public entities should be regional in scope, like that of the regional bell operating companies (RBOCs) created after the breakup of AT&T in the early 1980s.