Re: last mile, regulatory incentives, etc (was: att fiber, et al)

[chris <tknchris () gmail com>]

On Thu, Mar 22, 2012 at 12:26 PM, Jared Mauch <jared () puck nether net> wrote:

> On Mar 22, 2012, at 11:05 AM, chris wrote:
>
> > I'm all for VZ being able to reclaim it as long as they open their fiber
> > which I don't see happening unless its by force via government. At the
> end
> > of the day there needs to be the ability to allow competitors in so of
> > course they shouldnt be allowed to rip out the regulated part and replace
> > it with a unregulated one.
>
> I think this partly captures the incentive case here, but there is also a
> larger one at play.  Over the years the copper infrastructure was installed
> and extended through various incentive programs.  You can see the
> modern-day reflection of that in the RUS (used to manage rural
> electrification act, part of USDA) and NTIA (Department of Commerce).
>
> The barriers to entry are significant for a new player in the marketplace.
>  The cost is putting the cabling in the ground vs the cost of the cable
> itself.  One can easily pick up hardware for $250 to light a single strand
> of 9/125 SM fiber @ 10km for a 1Gb/s ethernet link.  That's low enough you
> could likely get a consumer to buy the hardware.  The real cost is the
> installation per strand foot/mile.
>
> In the past this has been subsidized for copper plant.  There is no reason
> in my mind that the fiber plant should be treated differently from this
> standpoint.  I can find fiber optic cabling for $0.25/ft.  The problem here
> is a multi-dimensional one that I've seen play out in a few markets:
>
> Verizon selling assets to Fairpoint (NH, ME, VT).  These are high cost
> areas due to low-density population.  For the sale to go through, Fairpoint
> had to agree to build into these higher cost areas.  The result was
> bankruptcy for Fairpoint.
>
> Verizon sold assets in Michigan (and other states) to Frontier.  I've not
> tracked this one as closely, but I suspect the economics of this are fairly
> complex.
>
> I've also spoken to some small ISPs and their general cost of building
> fiber to the home tends to be $2500/subscriber in upfront capital.  This
> covers just the installation cost.  Due to years of subsidy and regulation,
> people are unwilling to pay this amount to install a telecommunications
> service whereas a new home requiring a connection to the water, sewers,
> natural gas or electric grid may pay $10k or more to connect.  Many people
> wouldn't think of buying a home without electric service, but without
> modern telecommunication service?  I've seen this play out after the fact
> with friends asking how to get service.  Satellite, Fixed wireless or just
> cellular data quickly become their fallbacks.  The demand is there, the
> challenge becomes recovering the build cost.
>
> It is my firm belief that without a regulatory regime it will not be
> feasible to connect many communities robustly to modern communications
> infrastructure.  This could clearly change if the carriers involved see fit
> to replace this infrastructure, but with their current debt loads, I think
> it will be challenging to say the least.
>
> Taking a look at Verizon - Their most recent quarterly balance sheet shows:
>
> http://finance.yahoo.com/q/bs?s=VZ
>
> Assets: 230.461 Billion USD
> Liabilities: 194.491 Billion USD.
>
> This is not a lot of money, considering they have growing liabilities on a
> quarterly basis as part of their debt load (Long-term debt of $50 Billion).
>
> A large fiber build would easily cost a few billion dollars and have lots
> of regulatory barriers.  In my county it costs $200 to go over or under any
> public road (just for the permit).  This starts to add up quickly.
>
> I do think we need a new last-mile regime in many areas, be it more "fair"
> access similar to pole attach fees or the removal of local barriers to
> build this infrastructure.
>
> Some school and other governments here in Michigan would love to
> sell/lease their excess fiber capacity to the private sector, but are
> worried about turning a profit when it was built with taxpayer funds and
> problems associated with that.  I'd like to see these barriers removed.  If
> it's there, lets make it of value.  If the school system turns a profit on
> their enterprise, that's fine, it can lower the tax burden elsewhere.
>
> Me?  I'd be willing to pay $2500 to have Fiber built to my home.  I might
> even pay more.  At this point, my research continues on building the fiber
> and arranging my own easements for where to place it.  I suspect you just
> need a few geeks that are willing to part with some extra $ for fiber
> bragging rights and one can build it.
>
> - Jared


I agree that barrier of entry is what is stifling competition. Hardware,
cabling, even software is relatively inexpensive. Opening things up to
competition is what drives innovation in the field. I think a good example
of this is in the datacenter space. You  usually have the same group of
suspects who provide internet access for the home/business delivering
service there at a fraction of what their retail price is. I know some
people will say its a different scenario and less complexity, but the
competition helps significantly. Do you think Verizon can sell ATM circuits
with ridiculously long contracts like they're used to? Hell no. If I call
up the carriers who service my local datacenter and they know they have
competitors who can deliver the same service they will price accordingly.

There's a unique sequence of events in each market but its all similar, and
all in all Verizon isnt the only one at fault. We need new regulation that
puts things back into perspective. Why is it that the big companies are
controlling what happens?