Open access fiber: Public ownership offers lower cost operating model. Private ownership less constrained capital access.

Gigapower CEO Bill Hogg – the brand name for AT&T’s joint venture with BlackRock’s Global Infrastructure Fund to build open access fiber delivery advanced telecommunications infrastructure -- boasted other open access networks would be unable to scale up like Gigapower. Gigapower will be “much larger than any other provider in the space,” Hogg declared at a webcast panel presentation last September hosted by Broadband Breakfast. “The scale at which we are going to operate will be a differentiator in the U.S. marketplace.”

Publicly owned open access networks like UTOPIA Fiber, owned and financially backed by a 20 Utah municipalities, operate with a built in cost advantage over investor owned infrastructure like Gigapower. They operate free of the need to generate profits and earnings dividends for investors and income tax liability. Those advantages should provide them the ability to match the scale of Gigapower as regional open access networks.

But that advantage could be offset by freer, ready access to expansion capital from BlackRock’s Global Infrastructure Fund. The fund includes state and local pension funds, sovereign wealth funds, and family endowments, according to Adam Walz, managing director of the fund. According to Walz, the fund is focused on investments in digital infrastructure opportunities across fiber networks, data centers, and wireless infrastructure.

AT&T and BlackRock can independently make decisions on which Gigapower projects to build and finance. By contrast, publicly owned open access networks rely on capital bonds sold on public bond markets to finance construction. Bond underwriters set the terms and conditions of bond offerings and may require additional sources of repayment security beyond network revenues from end users and lease fees paid by internet service providers to access the network. That limits the scale and pace at which they can expand.

Going forward over the long term, this boils down to a competition between private and public capital and which is most responsive to slake the nation’s deep thirst for fiber to replace outdated metallic delivery infrastructure. The competition will likely play out at least initially in densely developed areas since both forms of ownership presently prefer them over less dense areas: privately owned for more rapid ROI and publicly owned to better assure sufficient bond debt servicing.