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Private or Public Sector: Who Should Deploy Broadband?

September 5, 2012 - 0 Comments

By Howard Baldwin, Contributing Columnist

Google’s experiment in laying broadband fiber in Kansas City, Missouri revives the old question of who should deploy broadband technology: the public sector, the private sector, or an entity based on a public utility model?

Municipally deployed broadband (like its previous sibling, municipal Wi-Fi) continues to be somewhat problematic. A recent audit for the Utah Telecommunications Open Infrastructure Agency, the optimistically named UTOPIA in the Salt Lake City suburbs, shows that the consortium is still waiting for broadband to catch on in order to pay back its bonds.

Telecommunications carriers AT&T and Verizon, akin to utilities, originally led the way because their fundamental business is communications. More recently, private-sector cable companies started offering services, given that they had already installed infrastructure serving homes. Indeed, Comcast recently began offering 305 megabit-per-second broadband access for $300 per month, clearly more of a small business play than a residential play.

Targeting both types of incumbents, Google’s plan is to offer both data communications and cable television services. Broadband analyst Colin Dixon, of TDG Research, is skeptical of the tech company’s efforts: “It’s not sustainable. Not even a company the size of Google could roll out nationally what they’re doing. It’s incredibly expensive, especially the way they’re charging.” According to eWeek, the rates are $70 per month for 1 gigabit Internet access and $120 per month for 1 gigabit Internet access and television service.

Considering the Investment Alternatives

So who should deploy broadband? Based on economic theories, the more competition there is in broadband, the lower the ultimate costs to consumers. Municipalities could theoretically focus on a specific region, taking advantage of density to provide access. At the same time, the telecommunications carriers seem to be constrained by federal laws that limit their ability to target potentially high-profit areas to the detriment of other less-profitable areas, so they can’t get back their investment as easily.

Of course, as Dixon notes, municipalities have the same problem. “A deeply penetrated broadband network, one that’s neutral that anyone can leverage, is a big advantage. The disadvantage is that people that live there have to foot the bill for the complete installation up front.” That’s the problem UTOPIA is running into.

The situation is muddied, Dixon says, because the cable companies “got really lucky. Coaxial cable is a wonderful fabric because it has characteristics that twisted pair does not. It leverages the last mile and does more than we envisioned it in terms of broadband,” thanks to insulation capabilities that the telco’s currently installed twisted-pair does not. The bandwidth, however, must be shared among multiple endpoints.

The telephone carriers’ ability to upgrade their networks to match the cable companies — by replacing twisted-pair with fiber — is limited by the cost of getting it over the proverbial last mile. Verizon stopped deploying high-speed fiber a couple of years ago because of the cost, with a few exceptions. AT&T has resorted to deploying fiber out to neighborhood nodes and relying on twisted-pair for the remaining distance to the home.

But there are also drawbacks to private-sector investment. It’s possible that economic discrepancies can widen when companies like Google focus on high-profit urban areas rather than rural areas.

Last month, a blogger noted that central California’s Fresno County lost 98 jobs when a company relocated to — interestingly — Provo to take advantage of the UTOPIA system. And of course, no one wants streets torn up multiple times while the telcos, the cable companies, and technology companies lay fiber in the ground.

The most viable option, Dixon says regarding who should deploy broadband, are partnerships between the private sector and the public sector, akin to other big infrastructure projects, like bridges and toll roads. That’s the best way to serve the “strong public interest” in a service being successful and freely available. The fact that the service costs “real money to deploy, manage, and maintain” makes the equation difficult. Ultimately, he says, there is no one answer.

Which means, in America, we’ll likely continue to see today’s isolated efforts continue for a long time to come. Is there a better way? Who among the public sector or private sector should be taking the lead in broadband deployment? And should one of them be getting out of the way?

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