A 6/29 post by PBS tech columnist Robert Cringely is entitled “If we build it they will come: It’s time to own our own last mile.” It’s apparently based on conversations he’s had with Bob Frankston, who years ago wrote the VisiCalc program (which Cringely describes as “the first killer app”) and who last year authored an essay entitled “Connectivity is a Utility.” Cringely describes Frankston as “one of the smartest people I speak to.”
To Bob Frankston’s way of thinking [it] all comes down to who owns the infrastructure. The phone and cable companies own the wire outside our homes but we own the wire inside…Frankston [says] “We should pay for our wires in our communities just like we pay for the wires in our homes.”
…The Internet has been a huge success to date specifically because nobody much controls the electrons. This is as opposed to services like broadcasting where some perceived scarcity of spectrum allowed governments to determine who could give or sell us entertainment and information. The ISPs (by which I mean telcos and cable companies) would very much like to go back to that sort of system, where they, not you, are the provider and determinant of what bits are good bits and what bits are bad. No thanks.
…”We have an alternative model in the road system: The roads themselves are funded as infrastructure because the value is from having the road system as a whole, not the roads in isolation. You don’t put a meter on each driveway…”
Roads are mainly financed by taxes, but there’s also another approach that could be used, instead of, or in tandem with a tax-financed system. You might call it a “last mile cooperative,” or a “fiber condominium.”
The obvious answer is for regular folks like you and me to own our own last mile Internet connection. This idea, which Frankston supports, is well presented by Bill St. Arnaud in a presentation…(Bill is senior director of advanced networks with CANARIE, which is responsible for the coordination and implementation of Canada’s next generation optical Internet initiative.) The idea is simple: run Fiber To The Home (FTTH) and pay for it as a community of customers — a cooperative. The cost per fiber drop, according to Bill’s estimate, is $1,000-$1,500 if 40 percent of homes participate. Using the higher $1,500 figure, the cost to finance the system over 10 years at today’s prime rate would be $17.42 per month.
What we’d get for our $17.42 per month is a gigabit-capable circuit with no bits inside - just a really fast connection to some local point of presence where you could connect to ANY ISP wanting to operate in your city.
In his presentation, St. Arnaud explains how implementation of this model could begin by deploying customer-owned fiber in the “middle-mile,” to municipal buildings, hospitals, businesses and public schools, the latter typically serving areas with 250-500 homes. He says this “middle-mile fiber-condo” model has already shown it can generate a ROI of “typically 2-3 years versus purchasing managed services.”
The next step would be to extend fiber into residential areas. According to St. Arnaud, “last mile” customer-owned fiber could be cross-connected to “middle-mile” fiber at a neighborhood co-location facility, preferably located near schools, where “middle-mile” condo fiber would terminate.
St. Arnaud has suggested that a pilot phase of last-mile deployments might initially be funded by a consortium of large companies that provide services over the Internet (e.g., Google, Yahoo, MSN, AOL, Earthlink, Dell, HP, film studios), and perhaps also backbone providers like Level 3. All of the above would arguably have a strategic interest in any model that expedites the deployment of high capacity fiber networks not controlled by vertically-integrated local access gatekeepers.
Such a consortium, he says, could finance “demonstration projects” in local communities. To reduce financial risk, he says, these projects would only be undertaken in areas where at least 25% of households (or some other appropriate penetration threshold) had committed to pay for fiber connections. Assuming these pilot projects go well, the model could then be expanded into other areas without any funding from the consortium.
St. Arnaud says some portion—maybe $500—of capital costs could be paid upfront by homeowners purchasing their own fiber. The balance, plus some profit and a small maintenance fee, could, as Cringely explains, be recovered over time.
Cringely suggests this approach could yield the ideal model sought by most “neutral end-to-end network” advocates—an extremely high-capacity, cost-effective network where end-users are in full control.
The effect of this move would be beyond amazing. It would be astounding. No more arguments about Net Neutrality, for one thing, because we’d effectively be extending our ownership and control of the wires all the way to the ISP interconnect. Of course you’d still have to buy Internet service, but at NerdTV rates the amount of bandwidth used by a median U.S. broadband customer would be less than $2.00 per month. Though with that GREAT BIG PIPE most of us would be tempted to use a lot more bandwidth, which is exactly the point.
Either as individuals, or with the increased clout of a buying group, end-users could negotiate with service providers for Internet connectivity and also for installation of optical network terminals. And, as St. Arnaud has suggested, the cost of the latter might even be subsidized by service providers or equipment vendors, depending on the nature and size of the deal (i.e., the number of users and how much bandwidth they were purchasing), and how much competition there was among service provider and vendors to win market share in this new “user-owned” access market.
St. Arnaud’s presentation underscores the relatively low risk profile of such an approach, since “last mile” deployment in a local area would typically be undertaken only when enough households in an area had made a financial commitment to the project. And, since most of the project’s costs would be fixed, and financed by an initial group of committed customers, St. Arnaud says that, as penetration grows beyond this initial threshold level, a user-owned fiber strategy has “significant potential to be a major source of revenue.” He also notes that churn, a key cost factor in network economics, should be relatively low with this model, since homeowners would have a direct financial stake in their access connection.
This “user-financed” model does raise the “digital divide” question, however. What about low-income areas and households that can’t afford the upfront cost and/or the monthly financing and Internet access charges?
This could presumably be handled by some form of government subsidy of these costs, based on the desire of local citizens, as represented by their elected officials, to share the financial burden of bridging the digital divide within their community. The case for such public funding (which could be financed through surcharges on everyone else’s monthly access fees, or from any number of other mechanisms) would be strengthened to the extent it could be justified by cost-savings and efficiencies in the delivery of public services to low-income households, and in tax-related or other benefits (e.g., better education, health and jobs) enabled by the provision of low-cost, high-capacity Internet access to low-income households.
Cringely sees the likely result being a healthy IP access and service market:
A model in which the infrastructure is paid for as infrastructure — privately, locally, nationally, and internationally can create a true marketplace in which the incentives are aligned. Instead of having the strange phenomenon of carriers spending billions and then arguing that they deserve to be paid, we’d have them bidding on contracts to install and/or maintain connectivity to a marketplace that is buying capacity and making it available so value can be created without having to be captured within the network…
This would be a real marketplace not a fake one. Today’s system is a fake because it depends on capturing the value of the application — communications — in the transport and that would no longer be possible because with the Internet the value is created OUTSIDE the network.
Mitch Shapiro at 1:42 PM|Comments(0)
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