U.S. FTTP infrastructure projects falling into 2 categories

The construction of fiber to the premise (FTTP) Internet infrastructure in the United States is falling into two main categories:

1. Projects in large and midsize metro centers such as those started or planned by Google Fiber, AT&T and Century Link as well as some cable companies. An article in the July 2014 issue of Broadband Communities magazine lists these deployments.
2. Community or regional projects by local governments, utility cooperatives and public-private partnerships serving less densely populated areas not containing large cities such as those tracked by the Institute for Local Self Reliance.

The bifurcation of these infrastructure projects is distinguished by the economic health of their respective markets. Those in the first category undertaken by investor-owned providers that need a rapid return on investment are targeted to markets undergoing rapid economic growth, Broadband Communities editor Masha Zager writes in her article on large metro projects, citing the FTTP deployment strategy of Cox Communications:

Cox explicitly named rapid growth as one of its criteria for selecting cities for gigabit deployments. In contrast to municipalities, which often deploy fiber in an effort to jump-start lagging economies, large players favor localities that are healthier to begin with.

For the second category of projects, FTTP is clearly an economic development strategy to a far greater extent than the first. Unlike those in the first category financed by the impatient capital of telcos and cablecos burdened with high debt loads and large shareholder dividend obligations, community or regional projects will rely on patient capital. Sources include long term public bonds and creative public-private partnerships that blend public and private funding such as the Utah Telecommunications Open Infrastructure Agency (UTOPIA).

The second category is also distinguished from the first by the ownership and business models of the network infrastructure. In the first category of investor-owned projects, the network is a proprietary, closed access property. The telcos and cablecos that own the networks charge a retail monthly subscription fee to connecting premises.

By contrast, the second category is more likely to utilize an open access business model (such as UTOPIA) where fiber infrastructure is like a public works project such as a road or highway. Instead of selling individual subscriptions to customer premises, an open access model operates as a wholesaler selling network access to Internet service providers who provide services to customer premises. This model is a better option for the second category of projects because it removes the business risk of getting sufficient numbers of premises to sign up for service in order for the network deployment to be economically viable.

AT&T falls short on California landline infrastructure upgrades

AT&T California has not met requirements for the build out of infrastructure to make Internet-based video services available to at least 50 percent of its California telephone service area as of year-end 2012. 

That’s according to the California Public Utilities Commission’s Sixth Annual DIVCA Report for the year ending December 31, 2012 (issued July 31, 2014). DIVCA – the Digital Infrastructure and Video Competition Act of 2006 – specifies a five-year build out period of 2008 through 2012. (The relevant reference is at page 9 of the report.)

AT&T California qualified for relief from the five-year infrastructure build out requirement under a DIVCA exception in cases where a provider has been unable to sell Internet video services to at least 30 percent of households in its telephone service area.

This in turn has resulted in a significant customer quality issue. Many households in AT&T California’s telephone service territory are unable to order landline-delivered Internet services since AT&T video services (branded as U-Verse and which includes bundled Internet access and voice service) are delivered over decades-old copper cable plant. Instead, these customers are offered only substandard, obsolete dialup Internet service that cannot support the delivery of video services.

Advocates of municipal broadband face resistance over high-speed access | GazetteNet.com

Advocates of municipal broadband face resistance over high-speed access | GazetteNet.com: Foes, including private Internet service providers such as Comcast, AT&T and Time Warner Cable, have a different view. They say they are spending hundreds of millions of dollars upgrading infrastructure to give high-speed access to every American, and that government shouldn’t compete against private companies, which must pay taxes and make a profit.

The assertion regarding "upgrading infrastructure to give high-speed access to every American" is a false statement. These providers segment their markets and redline neighborhoods deemed less profitable and have no plans to serve them, all the while making promises they cannot stand behind. The reason they cannot is they are constrained by inpatient shareholder investment capital and short term business models inappropriate for high cost capital infrastructure that can require decades to produce a return on investment.

The claim that government is unfairly competing with private sector telecommunications providers is also false in a strict economic sense. Competitive markets are characterized by many buyers and sellers. In telecommunications infrastructure, there are many buyers and users but few sellers, making the market a natural monopoly or duopoly. When the public sector steps in to build and/or finance telecommunications infrastructure, it does so because this market environment combined with the previously mentioned business model limitations of investor-owned telephone and cable companies produces market failure on the sell side. That failure has left millions of Americans unable to order modern Internet landline-delivered services at their homes and small businesses.

Latta ascribes wrong cause to constrained investment in last mile infrastructure

Rep. Bob Latta Weighs in on STELA, Title II & E-Rate | USTelecom: On the topic of Title II, net neutrality and broadband legislation, Latta said, “First of all, I believe in an open Internet — a free Internet without government intervention. When you look at where the Internet has come and where it’s going in the future, this has all been done on the private sector. It’s not been done because of what the Federal government has done.” According to Latta, by putting broadband under Title II to make it more like telecommunications using a law from 1935, “What we will see happen then is that the innovation out there that’s spurred about a trillion dollars in private investment is all of a sudden going to be tied up like it would be with a telephone company. We don’t want that. Because once you start that up, then all of a sudden innovation is going to slow up — not only innovation — the dollars put in it and the tens of thousands of jobs being created. So we don’t want that to happen. We want to make sure that it remains free, it stays open and it stays away from government control.”

The problem with this position is regulation isn't the cause of what the Federal Communications Commission estimates as nearly 20 million Americans who are not offered landline Internet connections to their homes. In addition, much of the nation remains served by outdated twisted pair copper plant built many decades ago for analog telephone service and not fiber to the premise needed today and in the future as bandwidth demand grows dramatically.

If legacy telephone and cable companies had innovative solutions to build that necessary infrastructure, they would have pursued them over the past two decades. They haven't been able to do so not because of regulatory burdens but rather market failure on the sell side. It's because their business models are oriented to gaining a return on infrastructure capital investment over time frames far shorter than what's needed given the high costs -- mostly labor -- of deploying that infrastructure. It is this economic consideration that stifles investment in last mile Internet infrastructure in the United States, not regulation.

Roanoke Valley Broadband Authority, Internet providers disagree on state of broadband - Roanoke Times: Roanoke News

Roanoke Valley Broadband Authority, Internet providers disagree on state of broadband - Roanoke Times: Roanoke News

This story illustrates that local government officials are growing less inclined to rely on what incumbent legacy telephone and cable companies claim they have in place or will build when it comes to last mile Internet infrastructure.

Good for them. Other local governments should follow this example and create and fund special districts and authorities to build the infrastructure they need. Collectively, their doing so will help the United States bridge a persistent Internet infrastructure gap that leaves millions of Americans without adequate connectivity -- many of them still forced to use dialup connections that were state of the art 20 years ago.

Study finds Missoula city, county should spend $10M on broadband

Study finds Missoula city, county should spend $10M on broadband: As proposed, the city and county together would invest $10 million toward a $17 million system, with the local government funds leveraging other money, Copple said. The local money would be paid through user fees, not taxes, and it would build roughly 60 miles of an “open access” fiber-optic network.

“Everybody has the same chance to use it,” Copple said.