Fiber for Everyone?

Fiber CableJust a few days ago I wrote about the two cities that are considering having citizens pay for their fiber networks through utility fees and pledges to support the fiber financing. After writing about Ammon, Idaho I heard back from several people in the industry pointing out that the proposed Ammon utility fee was a pledge intended to support bonds. The fees, which are supposed to be about $16.50 per month for about twenty years, would total nearly $4,000 over that twenty-year period and would be used to secure, and then pay for, the bonds needed to build the system.

That raises an issue that I have raised before: how important is it that everybody in a community get access to broadband? Every community that thinks about finding a fiber solution faces this issue. They can look for an approach that will get fiber to every household or they can settle for something less. This choice is sometimes a philosophical decision, but it often comes down to the difference in cost between the two choices.

Ammon has clearly chosen a solution that will benefit homeowners who are able and willing to pledge a lien on their homes. To be able to make the pledge a resident must own a home that can be pledged, so this eliminates renters. Interestingly it might also make it a challenge for anybody who doesn’t think they’ll be in their home for long. According to the US Census, the average time that families stay in an owned home is 13 years. And fewer than 40% of homeowners stay even 10 years. So anybody that thinks they are going to move out of their home in Ammon in the next few years probably ought not to pledge since they are likely to have to cover the remaining amount of the lien when they sell their home.

I don’t want to sound like I’m coming down negative on Ammon, because they have come up with a creative solution to get fast broadband to at least part of their city. And that is exactly what a whole lot of other cities have done. Ammon is unique because of their creative financing solution, but a whole lot of other cities have settled for broadband to less than everybody.

For instance, almost every city getting Google fiber is going to end up with fiber built to only parts of their city. Only cities willing to step up with a lot of city dollars like Huntsville, Alabama are going to get fiber everywhere. And the vast majority of cities that got Verizon FiOS years ago now thinks they made a mistake since they now have fiber in some neighborhoods and not others. They are now seeing a big difference between neighborhoods with fiber and those without. This difference is likely to grow since both Verizon and AT&T have made noises about tearing down copper in older city neighborhoods. We might end up with more urban households without affordable landline broadband than we have today in rural areas.

Fifteen years ago I worked for several cities that wanted to get Verizon’s attention to get onto the FiOS list. At that time these cities were so ecstatic to get some fiber that they didn’t insist that Verizon eventually build their whole city. But it probably would not have mattered if they had – because there are cities that got that agreement from Verizon but which still don’t have fiber everywhere.

I don’t want to make Google and Verizon sound like bad actors because almost every large fiber overbuilder is doing the same thing in only building to the most profitable parts of cities. The returns from only building to the best neighborhoods are dramatically better than from building everywhere – I’ve created dozens of business plans that quantify the difference. This is also the approach being taken by CenturyLink, Aspire, and half a dozen other fiber overbuilders – they are simply making the best financial decision for their company.

This is a tough philosophical issue for a city. Do they take the high ground and hold out for a solution that gets fiber everywhere or do they take the practical approach and get some fiber built? The risk of holding out for a whole-city solution might mean that nobody gets fiber. But the flip side of this is that building to only parts of a city probably means there will be neighborhoods that will be cut off from fiber for decades to come – talk to any city that has FiOS if you don’t believe that.

It’s almost impossible to build a reasonable business plan today to somehow fill in fiber where Verizon didn’t build – because they built where the construction costs were the lowest.  So Ammon is not at all unique, and in fact they are joining the majority of the cities in the US that have elected a solution that will result in something less than 100% fiber coverage. My primary reaction to this issue is a personal one – I know how I’d feel if I was in one of the neighborhoods that didn’t get fiber. I think that any city that elects to build less than 100% fiber ought to expect to hear an outcry from the rest of the city for many years to come.

4 thoughts on “Fiber for Everyone?

  1. Let the overbuilder cherry pick to get to break even fast. Then over time they can extend their network to get more complete coverage.

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    • Sounds nice in theory, but far too often the rest of the construction never happens. But the smaller the city the more likely this is to occur. I have seen cities partner with commercial partners like telcos that have agreed to build a city in phases that has worked. But I’ve also seen the smallest of ISPs cherry pick – so it’s hard to know who to trust to build a whole city.

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    • There was a time when this was the mantra for building fiber – build it and attract jobs. But there are enough places with fiber today that I think we might have crossed that thresshold where now places are building just to stay even with their peers, and if that happens to bring jobs great. But the other benefits from building fiber are more immediate.

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