Publicly owned FTTP deployment models: prioritizing low rural density versus favoring high suburban density

Among publicly owned fiber to the premise (FTTP) networks financed by public bonds, two opposite deployment strategies are emerging. One prioritizes low density rural areas where private market failure is deeply entrenched, making them unlikely to be fibered in the foreseeable future. The other prioritizes high density suburban areas where there’s presently a fiber gold rush on to gain the all-important first mover advantage.

It’s important because first to connect a premise with fiber creates an asset with long term value unlikely to be overbuilt later by a competing fiber network. That has generated political resistance and dark money PR campaigns likely funded by investor owned providers.

An example of the former is Vermont’s use of local government units known as communication union districts (CUDs) Click here for an excellent documentary on how they’ve been formed and their progress building fiber to residences that conventional wisdom holds FTTP is impossible.

Low density is prioritized in Vermont’s CUDs because nearly all settlement is rural. There’s no mindset among Vermonters in these CUDs that those who live in less settled areas should go to the back of the line (or move away as investor owned providers suggest) while those living in more densely settled areas should get connected first. Instead, a cooperative can do New England Yankee spirit prevails. We’re all rural and we’re all in this together recognizing investor owned providers are not going to meet our need for advanced telecommunications.

The latter example is represented by the Utah Telecommunication Open Infrastructure Agency (dba UTOPIA Fiber), owned by a consortium of 20 cities. UTOPIA is building FTTP in more densely developed suburban areas featuring gridline layouts rather than curvilinear, windy roads found in rural and exurban areas. (See recent UTOPIA “footprint” releases here and here).

The UTOPIA advised Golden State Connect Authority (GSCA) comprised of 40 nominally rural California counties plans to begin construction this year and is similarly prioritizing more densely settled areas of its member counties. It is doing so to accelerate network revenues needed for an aggressive financing schedule allowing servicing of bond debt soon after the fiber is built.

The takeaway here draws from history. Rural areas like those in Vermont’s CUDs formed electric utility cooperatives early in the 20th century when as with advanced telecommunications, it was apparent investor owned providers were not going to show up, favoring more profitable urban areas for their electrical infrastructure. That alters the density calculus and the motivation to connect premises least likely to be connected.

That history is absent in the case of Utah’s UTOPIA and California’s GSCA where residential settlement patterns are decidedly more mixed. While federal and state subsidies such as the Broadband Equity, Access, and Deployment (BEAD) Program target rural areas, areas too dense to be considered rural but too sparsely settled to be deemed suburban may potentially go unfibered as virtual knowledge workers move to these exurban metro fringes.

Will FCC Title II rules provide relief for local officials besieged with chronic complaints over poor Internet access?

Say you're a local elected official. One of the biggest issues your constituents bring to your attention for assistance is poor Internet access. Those who held office before you fielded calls and emails on this subject for years, seeing them spike in 2020-22 during the COVID pandemic.

Flummoxed and frustrated constituents tell you they see homes and small businesses not far way or even just down the road being offered service, but none is available to them despite repeated requests. Often, they may live just outside of town limits in unincorporated county jurisdiction. They try to make do with hard to afford satellite service or smartphone hot spots. Or fixed wireless that offers minimal connectivity at a high price.

Since Internet access was only briefly regulated as a public utility between 2015 and 2018, referring your constituents to the state public utilities commission (PUC) or the FCC won’t be able help them other than recording their complaint and sending them to the same provider that has repeatedly declined their requests for service. 

That could potentially change this year if the FCC adopts regulations next week classifying Internet service as a telecommunications utility under Title II of the federal Communications Act. That would regulate Internet access like landline voice telephone service before it under a federal-state framework between the FCC and state PUCs. That means providers would be required to honor reasonable requests for service and would be prohibited from refusing service to a particular area.

This has significant implications since much of the nation’s existing landline deployment looks like a Swiss cheese with providers cherry picking higher density and income areas likelier to generate more revenues and greater profits for their investors. Homes and small businesses in the holes on the periphery are left without connections.

Assuming the FCC regulation becomes law, local elected officials should keep an eye on how it will be enforced when, for example, a constituent complains they have asked for service and been refused connectivity or told they’d have to come with thousands of dollars for a connection.

One of the main tasks that regulators will face is determining which provider must honor the request for service. While the language of the proposed regulation includes refers to where providers have built infrastructure and offer advanced telecommunications services which they refer to as their “footprint,” federal law (47 U.S.C. 214(e)(5)) affords state PUCs and the FCC authority to develop providers’ geographic parameters for the purpose of Title II’s universal service mandate requiring providers to offer service to all serviceable addresses within their service areas. One possibility is states could utilize state video franchise areas to designate carriers of last resort.

Additionally, the FCC regulation would give regulators authority to sanction discriminatory conduct under 47 U.S.C. 202 barring “unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services for or in connection with like communication service, directly or indirectly, by any means or device, or to make or give any undue or unreasonable preference or advantage to any particular person, class of persons, or locality, or to subject any particular person, class of persons, or locality to any undue or unreasonable prejudice or disadvantage.” The statute allows for fines of $6,000 for each violation and $300 daily penalties for ongoing violations.

FCC reclassification of Internet access as Title II utility likely to have little impact on affordability

When the U.S. Federal Communications Commission votes to reclassify Internet access as a common carrier utility under Title II of the Communications Act of 1934 as expected April 25, it’s unlikely to increase affordable access. The primary reason is the FCC is forbearing rate filing and regulation in the joint federal-state framework with state public utility commissions that regulate rates for as they do for legacy voice telephone service under Title II authority.

While Title II would subject Internet service providers (ISPs) to Title II’s universal service and nondiscrimination provisions requiring reasonable requests for service be honored, without rate regulation ISPs could charge exorbitant rates difficult for households and small businesses to afford.

For example, an ISP could tell a group of households and small businesses that they’ll honor requests for fiber to the premises (FTTP) service. But given the area’s characteristics such as density of fewer than 15 premises per road mile, old utility poles in need of replacement and distance from middle mile backhaul, extending fiber connections would require a connection fee of $1,000 per prem and $250 per month for service.

With the FCC’s forbearance, these end users also would lack the ability to claim the rates constitute discriminatory conduct under 47 U.S.C. 202, titled Discrimination and Preferences. This provision makes it unlawful for common carriers engage in “unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services for or in connection with like communication service, directly or indirectly, by any means or device, or to make or give any undue or unreasonable preference or advantage to any particular person, class of persons, or locality, or to subject any particular person, class of persons, or locality to any undue or unreasonable prejudice or disadvantage.” (Emphasis added)

An ISP could also contend that this pricing would not constitute a discriminatory practice per the FCC’s recently adopted Preventing Digital Discrimination rulemaking because those charges are needed for reasons of economic and technical feasibility in order to extend service. The abovementioned pricing could well become common for new FTTP service reflecting the growth in labor and material costs.