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-... 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/