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

[Ray Soucy <rps () maine edu>]

Here in Maine, after seeing no strong proposals were being put forward by
others, we went after American Recovery and Reinvestment Act funds to
address a major lack of middle-mile infrastructure in the state.

Verizon had stopped making new investments in Maine for nearly 10 years
before pulling out and dumping a very old, very high maintenance copper
plant on Fairpoint.  It was nearly criminal.  Even worse, the Fairpoint
business plan was to continue to make large investments in copper ignoring
the realities that fiber is the only way to reach areas in a cost effective
way with such low population density.

So the University of Maine System and Great Works Internet prepared a
proposal for a public-private partnership to build out high capacity,
diverse, middle-mile infrastructure in Maine; and instead of the University
of Maine System or Great Works Internet managing it, we set it up so that a
new independent private company would be created to manage the
infrastructure and would be regulated as a public utility by the state;
very similar to the power company model.  The result is that Maine now has
a new public utility classification of "dark fiber provider", and a company
building out that fiber.

It's called Maine Fiber Company:
http://www.mainefiberco.com/

The way Maine Fiber Company was setup was key.  They're forbidden to offer
lit services; so they're a dark fiber only provider.  They're require to
provide open access to the fiber at a fair and published rate to anyone
interested.  Since the build was subsidized in part by Recovery Act funds,
the rates are low enough to encourage new services in the state.

One of the big problems in a state like Maine, and probably the majority of
the US, is that companies like Fairpoint and Time Warner Cable (the two
providers in Maine) end up building out redundant infrastructure at great
cost.  Not redundant as in diverse, mind you, but literally running fiber
on the same utility polls, taking the same path, and both going down when
hit by a truck.  Because areas of the state are very low population, they
often can't justify building a diverse path, so historically, one accident
could, and often has, taken out services for entire counties.

For the last few years MFC has been working to build out the high capacity
fiber rings described, and this summer we're finally at a point where
people can begin making use of MFC infrastructure.

For us, it means expanding our R&E network, MaineREN, to interconnect the
public universities in Maine.  But for other service providers like Great
Works Internet, it means being able to survive as Fairpoint tries to push
out their competitors:

See the following link for that story "Fairpoint Bankruptcy Exacerbates
Circuit War":
http://www.pressherald.com/archive/fairpoint-bankruptcy-exacerbates-circuit-war_2009-11-12.html

I think the model setup in Maine is something really powerful.  It will
drive down the price of delivering broadband significantly; it will open up
and promote competition so that consumers aren't stuck paying premium rates
for 20th century services, and it will provide much needed redundancy of
services.  It also helps the bigger companies like Fairpoint and Time
Warner Cable if they're willing to make use of it (to
my recollection Fairpoint decided to not even bid for the build out; that's
how opposed they were to it)

Personally, I think this is a model that might be useful to replicate at a
municipal level as well: Dark fiber to the home as a public utility;
service provider of your choice to light it up.  I think we're a few years
away from seeing that kind of effort, though, but after a few years of
seeing the effect that Maine Fiber Company will have on the state, there
might be people open to the idea.

For now, I'm thankful to have the middle-mile taken care of.

I know a few other states decided to go after recovery act money for
broadband; does anyone know if something like the Maine model is being
replicated anywhere else in the US?




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



-- 
Ray Soucy

Epic Communications Specialist

Phone: +1 (207) 561-3526

Networkmaine, a Unit of the University of Maine System
http://www.networkmaine.net/