Tuesday, November 24, 2009

Taking Ownership of the Rural Network

I read two stories today that affirm my commitment that local governments should build their own network infrastructure and sell access to private service providers.  The first article from TelecomTV discusses how the two largest LEC in the U.S., AT&T (T) and Verizon (VZ), are reducing investment and even neglecting their rural networks.  Verizon’s sale of their land-line assets in rural areas to Fairpoint and Frontier are witness to their strategy.

So what are we to do?  Should the FCC reinitiate Universal Service and force the LEC to serve these smaller, less profitable markets?  Do we institute unbundling to all LEC like the second article suggests?  These heavy-handed government solutions are just taxes that produce minimal results in a marketplace that is trying to be competitive.  The best solution is to let municipalities or other local government entities build and take ownership of their infrastructure.  It is commonly done with roads, sewer, water, and electric utilities.  Why can’t we do it with telecommunications?  It is the next infrastructure.

Allowing local governments to build their own infrastructure means that they can take advantage of their long-term financing capabilities where a private corporation’s shareholders would expect a quicker payback.  The municipality in turn sells access to this network on a non-discriminatory basis to any service provider that would like to sell services.  This open access network enjoys a >65% utilization bringing down the time to a positive ROI to 5-7 years.  At that time the governmental entity starts making money.  Cash flow becomes positive in just a couple of years enabling them to build out the entire area over time.  This objective can be completed while being taxpayer neutral.

The city enjoys the increased economic benefits provided from the network and true competition from service providers.  Traditional service providers such as Verizon, AT&T, Comcast, Time Warner Cable can still provide services to the community just as they would with their single-purpose network.  Additionally new service providers can now offer services to compete with the traditional service providers.  Imagine Verizon offering FiOS in Boulder.

This approach reverses the trend from looking at a solution from the national level to the local level.  Localities are free to choose an architecture, technology, and implementation plan that suits their needs; not have one dictated to them by the FCC or some other federal agency.  Yes there are challenges to funding, planning, constructing, and operating these networks.  Subsequent articles will address those issues.

It is time for the U.S. to take a new approach to its broadband strategy and enable communities to take their destiny into their own hands.  There are already several instances where such a business model is already working in the U.S.  The problem is that many cities face legal challenges from incumbent providers trying to protect their outdated business models.  It is time for them to realize that the service is not the network.  Take a lesson from Google where their services are utilized over 3rd party networks exclusively.

If the FCC has to exert a heavy hand, let it be to abolish any restrictions preventing localities from building and operating open-access broadband infrastructure.  Private enterprise will step in and assist these communities to build these networks just as it did in the early 20th century when electrifying America.

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