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Will Poor People Get Google Fiber?

FiOS installed in Montclair, New Jersey
FiOS installed in Montclair, New Jersey (Photo credit: Wikipedia)

This was a great question that was posed by a recent article in Forbes Magazine. In this country we have a long history of having telecom provided by monopoly telephone companies and more recently by cable companies. Both incumbent providers have been mandated to serve almost everybody in their footprint. In the case of telephone companies this has been done by regulatory fiat by the various state Commissions that regulate telephone service in each state. Every state has rules for incumbent telephone companies that include a requirement for universal service using a concept known as carrier-of-last-resort. When a telephone company got the right to serve an area they were expected to provide service to everybody in that area, within reason, and then the costs of the more expensive-to-reach customers was averaged with everybody else. I say within reason, because even the telephone companies were allowed an out for really expensive-to-reach customers. For instance, if a farmer lived back a seven-mile long lane, the phone company might only provide a mile or two of the service line and expect the customer to pay for the rest.

And cable companies had similar requirement that came through the franchise agreements that they signed with local governments. If a cable company wanted to serve a town, then they were required to serve everybody in town in order to get the franchise.

Today fiber is being built by both regulated monopoly carriers like Verizon, but also by competitive providers like Google. But none of the fiber builders has the same carrier-of-last-resort or cable-like franchises requirements that the incumbents faced when they built their copper networks.

So to answer the opening question, will everybody get Google fiber?  The answer is no, for the following reasons:

  • Copper is still in place.  As long as the copper is still in place for the telephone and cable company, they can satisfy their service obligations by connecting customers on copper. They are thus relieved of building fiber everywhere as long as copper still exists.
  • Exclusive contracts with MDUs.  Anybody that builds with fiber needs to get the approval of the owner of multi-tenant buildings, be that apartments or multi-tenant business buildings. And some of those building owners are not going to give permission. Some building owners will have signed exclusive access contracts with the incumbent cable company. The FCC invalidated some types of exclusivity a few years ago, but there are still contractual ways for the cable company to keep out competition. Further, some building owners just don’t want to let a provider into their complex.
  • Places too expensive to serve.  Fiber overbuilders can pick and choose where to serve. It is often very expensive to bring fiber into apartment buildings, particularly older apartments, and many fiber builders choose to not build or selectively build to apartments. Verizon is famous for avoiding high-cost places. If you look at a suburban map of Verizon FiOS you would find a real patchwork of served areas. They will build to one pocket of houses but then skip over ones right next door, certainly due to cost. For the most part Verizon has elected to not dig up streets to build fiber, and so FiOS is more commonly placed in neighborhoods with existing Verizon aerial wires, or in neighborhoods where there is existing conduit in the ground. Verizon also often skips past apartment complexes. But I don’t want to single out Verizon since this is true of just about every fiber overbuilder.
  • Redlining, or the nearest thing to it.  As the article suggests, the build-out patterns of Verizon, Google and just about any other fiber overbuilder have a significant taste of redlining about them. It is easy for the fiber builders to say they are building where the cost is the lowest and the returns are expected to be the highest, but this means that they generally end up avoiding large apartment complexes and poorer neighborhoods. If they had set out to deliberately redline they would end up with basically the same networks that actually get built.

And so we are entering a future where there will be definite fiber haves and have-nots. There has been a lot of this for the last few decades since the introduction of DSL and cable modems. Rural areas for the large part have received very little broadband compared to urban and suburban areas. But the future digital divide is going to be starker, with the divide being everywhere, including the cities and suburbs, with some homes having fiber and others not.

For the last decade there has been conventional wisdom that having fiber connected to your home will add to the value of your house. I guess we are going to get to see this tested on a very large-scale.

2 replies on “Will Poor People Get Google Fiber?”

The underlying question here, in reality, has been the underlying question behind the roll-out of telecommunications since the 1870s. Boston’s American Bell Telephone (later NY’s AT&T Bell System) rolled out its copper lines in areas where it felt it would get the biggest bang for the buck. It started in Boston, and NYC, and only branched out to the suburban areas when their customers demanded it. This business plan has been followed for every roll-out of successive technologies.

Some prospective customers — especially those in smaller cities and non-urban areas — were unwilling to wait for the AT&T roll-out to eventually reach them, and they formed, built out and interconnected their own versions of independent local telephone companies, telephone cooperatives, and other ILEC companies to provide the service not offered by that reigning monopolist. This pattern was copied in numerous locations around the country and around the world.

A few years ago, Verizon ostensibly sold off parts of its local landline telephone footprints in northern New England (New Hampshire, Maine and Vermont) so it could concentrate on serving its more urbanized footprint in southern New England. This has also occurred in other areas as well.

Does redlining occur? Always — and for the most part, it is done for economic reasons — some neighborhoods are just more economically advantageous than other neighborhoods. (PBX companies were at one point trying to sell their equipment to every house in Potomac, Maryland. Funny, they never knocked on my door in Germantown!!)

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Maybe what is needed in underserved areas are a new generation of CLECs to compete with Verizon and the new AT&T (nee SBC). The new generation will be willing to build fiber into those areas where Verizon, et al., is not upgrading service? In many areas, telecom providers with fiber capabilities already exist… in the form of electric coops, municipal utility companies, native American telecom cos., and other providers.

So long as there is a business/economic case for a provider to choose a high-end neighborhood verses a neighborhood of lesser means, there will always be the opportunity for another, competitive provider to come in and try and steal the incumbent’s customers in those underserved markets… especially if the customers perceive themselves as “stuck” with inferior equipment or service.

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