Policy debate -- not market competition -- predominates in U.S. premises Internet infrastructure

In the United States, the major competition in last mile wired premise Internet infrastructure is playing out in the public policy arena more than in the marketplace. In order to have market competition, there has to be a market. In many areas, there isn’t one. Those looking to purchase wired premise Internet service cannot do so because no providers want to sell it to them. The basic definition of a functional market is willing buyers and willing sellers. Others want better value service and more options. Here again, the market fails. No providers are willing to make the necessary investment in order to sell better value services to them – the impetus behind many municipal Internet infrastructure projects.

Second, telecommunications infrastructure due to its high construction and operating costs excludes many potential providers. It’s what known as a natural monopoly or at best, a duopoly. Roads and highways are tremendously expensive and thus tend to be operated by one provider that can bear the large cost burden: the government. In a limited number of cases, a duopoly exists where motorists have the option of taking the public highway or a private toll road. By definition, there cannot be a competitive market, which is one made up of many sellers and many buyers.

Which brings us to the major ideological battleground over last mile wired premise Internet service: Whether it should be operated like a closed, private toll road or an open access public thoroughfare. Big money has joined the fight to bolster the latter position. Macquarie Capital Group, an Australian firm that invests in multi-billion dollar infrastructure projects around the world, is considering investing in UTOPIA, an open access fiber to the premise (FTTP) network serving 11 Utah municipalities. (See item here).

On the other side of the debate are the legacy incumbent telephone and cable companies that want to preserve their closed network models. As Community Broadband Networks reports, they are sponsoring bills in both chambers of the Utah legislature opponents say are intended to scotch a potential Macquarie investment in UTOPIA. In Kansas, the cable company lobby is seeking legislation that would add Kansas to the roster of 20 states that bar local governments from building Internet infrastructure projects to serve their citizenry.

Kan. bill would outlaw public broadband service - Washington Times

Kan. bill would outlaw public broadband service - Washington Times: Officials in the southeast Kansas city of Chanute, population 9,100, say they’re the primary target of the proposed legislation. As part of its public utility system, the city runs an ultra-high-speed broadband network that now serves schools, city buildings, the town hospital, banks and other key businesses.

On Nov. 23, the City Commission voted to work toward “fiber to home,” which would extend access to all residents and businesses within about a three-mile radius around the city, said Larry Gates, Chanute utilities director.

“This bill is an attack on competition, an attack on municipal government,” Gates said. “It takes away our local control and local decision making. It will hurt our efforts in economic development,” he said. (Emphasis added)

I respectfully disagree with Mr. Gates' characterization of the bill as an "attack on competition." Utility infrastructure by nature isn't a competitive market. It's really an attack on progress that threatens the incumbent telephone and cable providers backing the measure.

Upgrading the nation's telecommunications infrastructure to fiber to the premise to support new Internet protocol-based networks represents progress in the digital age just as interstate highways did in the 1950s. No one would describe paved roads as "competition" to dirt roads. By bullying local governments to get their way, the incumbents are on the wrong side of this issue. Americans like progress and they hate bullies. If they keep it up, local governments should respond by exercising their redevelopment and inverse condemnation powers to take over incumbent assets and upgrade them to fiber to the premise.