Open access fiber telecom infrastructure funded in West Virginia over telco's objections

Competition in telecommunications infrastructure isn't really among major telcos and cable companies. They operate in market that due to the high cost barriers to entry functions as a natural monopoly or at best, a duopoly where service is available from just two landline providers: the phone company or the cable company. In much of the United States, the choice is only one of the two or sadly, neither because they have redlined parts of their service territories.

The real competition is between the business models for premise Internet connectivity: open access Internet infrastructure such as employed by the Utah Telecommunication Open Infrastructure Agency that regards it as a public asset like roads and highways or the proprietary, closed access infrastructure model of investor-owned telephone and cable companies.

This week in West Virginia, the debate tipped in favor of open access after the West Virginia Broadband Deployment Council voted 3-2 to provide $690,000 in funding to the West Virginia Network, a state agency that provides Internet service to schools, universities and other public facilities. The deciding factor was the state wanting more control over the infrastructure and not being subject to the whims of a monopoly provider.

“Frontier is the only provider in the region, and there is no open access to that infrastructure,” one of the council members noted. “You can’t really connect any of the dots [communities] together . . . . We can hopefully connect those rings and enable broadband expansion in the area.”

This is a notable development because it signals that public policy is shifting towards viewing Internet infrastructure as essential as public thoroughfares and thus not best controlled and operated as a hodge podge of private toll roads with high tolls and serving only some areas while leaving others disconnected from the Internet.

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West Virginia Broadband Deployment Council voted 3-2 to award the money to West Virginia Network, or WVNET, a state agency that provides Internet service to schools, universities and other public facilities. WVNET would own the three-segment fiber network that would connect Snowshoe to Cass, Valley Head to Mill Creek, and Durbin to Green Bank. - See more at: http://www.wvgazette.com/article/20140723/GZ01/140729675/1419#sthash.ldOg1t7a.dpuf

West Virginia Broadband Deployment Council voted 3-2 to award the money to West Virginia Network, or WVNET, a state agency that provides Internet service to schools, universities and other public facilities. WVNET would own the three-segment fiber network that would connect Snowshoe to Cass, Valley Head to Mill Creek, and Durbin to Green Bank. - See more at: http://www.wvgazette.com/article/20140723/GZ01/140729675/1419#sthash.ldOg1t7a.dpuf

West Virginia Broadband Deployment Council voted 3-2 to award the money to West Virginia Network, or WVNET, a state agency that provides Internet service to schools, universities and other public facilities. WVNET would own the three-segment fiber network that would connect Snowshoe to Cass, Valley Head to Mill Creek, and Durbin to Green Bank. - See more at: http://www.wvgazette.com/article/20140723/GZ01/140729675/1419#sthash.ldOg1t7a.dpuf

West Virginia Broadband Deployment Council voted 3-2 to award the money to West Virginia Network, or WVNET, a state agency that provides Internet service to schools, universities and other public facilities. WVNET would own the three-segment fiber network that would connect Snowshoe to Cass, Valley Head to Mill Creek, and Durbin to Green Bank. - See more at: http://www.wvgazette.com/article/20140723/GZ01/140729675/1419#sthash.ldOg1t7a.dpuf

The FCC wants to let cities build their own broadband. House Republicans disagree. - Vox

The FCC wants to let cities build their own broadband. House Republicans disagree. - Vox

House Republicans would be well advised to consult with or hire new, better economic advisors. They demonstrate a fundamental misapprehension of telecommunications infrastructure in viewing it as a competitive market when in fact it's a natural monopoly as Susan Crawford notes (see the embedded video interview).

Competitive markets (like retail grocery and furniture, for example) have many sellers and many buyers. Due to high cost barriers to entry, telecommunications infrastructure is not characterized by a multitude of sellers and will likely never be a competitive market. It's a utility like telephone service as Crawford correctly observes, and should be regulated accordingly.

Another public regional telecom infrastructure project may be ripe for PPP investment

In Utah, several cities are moving ahead with due diligence on a public-private partnership (PPP) to construct fiber to the premise (FTTP) telecom infrastructure.

Another public FTTP infrastructure project in the eastern United States might also be an attractive partner for private investment companies like Australia-based Macquarie Capital Group, which is looking at investing in Utah's UTOPIA regional network.

This one's in western Massachusetts and is a utility cooperative of 42 municipalities. According to a June 2014 update by the Wired West cooperative, it is hoping to obtain state funding to move forward with construction as people in western Massachusetts continue to be vexed by the lack of adequate internet service.

Given the scope of the Wired West project, it will likely need significantly greater funding from the private sector as part of a PPP like that under consideration in Utah.

Gigabit over fiber altering telecom landscape

One word is exerting substantial influence over U.S. telecommunications infrastructure: gigabit. It is literally exponentially redefining what constitutes modern premises Internet connectivity from megabits per second (Mbs) range to gigabits per second (Gbs).

Gigabit is also aiding in a shift of market power to the demand side and away from legacy telephone and cable companies that supply megabit class service – often in the single digit Mbs range in the case of telcos -- over “last mile” metal wire or cable to customer premises. The limitations of this infrastructure versus fiber optic lines easily capable of delivering gigabit class service have led telephone and cable companies to ration bandwidth, selling it in various “bandwidth by the bucket” consumption tiers like electricity or natural gas. Gigabit over fiber to the premise will obsolete that business model at the same time premise bandwidth demand continues to rapidly accelerate. Drivers include more and higher definition video streams, multiple devices in the home and emerging Internet-enabled home services. Also, more knowledge workers working at home at least part of the work week.

Gigabit over premises fiber service will also obsolete the legacy telcos and cablecos themselves, burdened with decades-old twisted pair and coax cable infrastructure as well as high debt and shareholder dividend obligations. That will give advantage to agile and financially creative overbuilders connecting premises with fiber service.

Since telecommunications infrastructure is a natural monopoly, once fiber first movers have established a substantial market presence, the economics of challenging them with parallel infrastructure become very difficult. This same dynamic has historically deterred those who would overbuild the incumbent telcos and cablecos. But the shift toward gigabit class service delivered over fiber could reverse the advantage of incumbency the legacy telephone and cable companies have enjoyed for more than a decade.

The first mover advantage would be particularly high in parts of incumbent telephone and cable company service territories where the incumbents don’t offer landline Internet connections or very slow ones such as first generation DSL.

Telcos’ copper cable plants deteriorate with no clear plans to replace them with fiber

A crisis affecting Americans who obtain premises telecommunications services (Internet, voice, and video) from legacy telephone companies has been slowly unfolding over the past 10 years. 

These companies’ copper cable plants are growing very aged and nearing the end of their useful lives with no clear plan to replace them with fiber optic cables.

The problem has worsened in the past decade as telcos have concentrated their infrastructure investments on mobile wireless services while all but ignoring their deteriorating landline cable plants. Much of it is in such poor condition that it can’t deliver any Internet connectivity or only marginally at sluggish speeds.

One strategy going forward is to sell as AT&T is doing with its Connecticut residential landline unit. However, in parts of telcos’ service territories where the copper cable plant is ancient and a fully depreciated asset, it’s questionable as to what value any potential buyer would see in such a deal.

A possible path to resolution of this crisis could come later this year if the U.S. Federal Communications Commission opts to subject Internet protocol-based services to common carrier and universal service requirements under Title II of the Telecommunications Act of 1934.

“Broadband” infrastructure subsidy programs falling behind in the gigabit world

As telecommunications becomes an Internet-based, fiber delivered service, programs aimed at subsidizing the cost of infrastructure construction are rapidly going out of date. For example, the U.S. federal government’s Connect America Fund helps underwrite the cost of building infrastructure in areas with service providing Internet connections of less than 3 Mbs down and 1 Mbs up. The California Advanced Services Fund targets areas with less than 6 Mbs down and 1.5 Mbs up. Both definitions are now technologically obsolete in that they are purposed for “broadband" service and define "broadband" based on a moving and quickly obsoleted throughput target that only measures speed but not latency or jitter --  key components of throughput quality.

It's no longer a broadband environment where the term broadband was used to distinguish advanced services from 1990s "narrowband" dialup. It's now a "gigabit" world of fiber to the premise (FTTP) that can provide exponentially superior throughput with no near term threat of obsolescence.

In addition to using an outdated and incomplete measure of throughput, these programs are deeply flawed insofar as they aim to preserve the hegemony of the legacy metal wire-based legacy telephone and cable companies with eligibility standards based on the companies’ need to constrain bandwidth on their bandwidth-limited metal wire plants. Program subsidies are only available in areas deemed “underserved” and “unserved” relative to services provided – and not provided -- by the incumbents. 

This isn't a practical definition since the footprint of wireline-based services of the incumbents is highly granular at the network edge due to market segmentation and arbitrary redlining of discrete neighborhoods deemed undesirable and therefore unserviceable.

For the most part, the large first tier incumbent telcos and cablecos have spurned the subsidies, probably because they are far too limited to allow them to significantly upgrade their plants to FTTP. They also likely realize accepting subsidy funding would potentially increase pressure on them to provide service to all premises in their service territories as some advocate, urging the U.S. Federal Communications Commission to regulate the Internet under a common carrier scheme like that in place for decades for voice telephone service.