Incumbent strategy post 1996: Buy time, protect service territories.

As policymakers dithered since the enactment of the 1996 Telecom Act, large incumbent telcos bought time to slow their copper to fiber transition match their business models that would permit only slow, incremental construction and to protect their nominal service areas from public and utility coop owned fiber. They limited their fiber builds to select high potential areas offering sufficient density of relatively affluent households most likely to meet their internal rate of return standards and generate strong ARPU.

This was accomplished by sleight of hand, keeping the U.S. Federal Communications Commission’s policy focus on boosting “broadband speed,” while keeping policymakers’ and the media's eyes off the larger challenge of modernizing the legacy copper telephone network to fiber. They also did so by apparently influencing policymakers to dole out piecemeal, highly restricted grants nominally aimed at expanding access since their own fiber builds were very limited, leaving Americans hungry for connectivity. The hunger became acute during the public health restrictions of the COVID-19 pandemic with the need for advanced telecommunications to work, school and obtain medical care at home. The goal is to keep the issue framed as "broadband" -- a discretionary information service -- versus an essential utility.

The biggest disruptive threat came with the Biden administration’s draft language of the Infrastructure Investment and Jobs Act (IIJA) of 2021. It was initially geared toward building fiber to every American doorstep as was achieved with copper to provide voice telephone service in the 20th century. Priority was to be afforded fiber to the premises (FTTP) infrastructure owned, operated by, or affiliated with local governments, non-profits, and co-operatives. It was a wise decision since telecom like other infrastructure is a high cost undertaking that favors size and economies of scale -- something AT&T put into practice in proposing to form regional operating companies as part of its 1983 settlement of the federal government’s anti-trust action leading to its divesture. As is noted, these providers operate without the need to generate profits for investors (as well as pay income taxes) and thus can be committed toward a goal of universal service.

However, instead of standing its ground and favoring this lower cost model that would have allowed taxpayer dollars to go farther, the Biden administration went along with new IIJA language creating the Broadband Equity, Access and Deployment (BEAD) subsidy program with generous subsidies for fiber construction and geared toward investor owned incumbents looking to incrementally edge out their existing “footprints.” Decisions on how BEAD subsidies are awarded will likely result in controversy and produce more delay. Disputes over proposed subsidized projects in California offer a preview. The incumbents are likely singing Time Is on My Side.