Should Rural Fiber be a Utility?

I’ve heard or read half a dozen people in the last month say that the way we get rural fiber everywhere is to make fiber a regulated utility. This idea certainly has appeal for the many rural places that don’t have fiber today. On the surface this sounds like a way to possibly get fiber everywhere, and it’s hard to see a downside to that.

However, I can think of a number of hurdles and roadblocks to this concept that might be hard to overcome. This blog is too short to properly explore most of these ideas and it would require a 40-page whitepaper to give this topic justice. With that caveat, here are some of the big issues to be solved if we wanted to create rural fiber utilities.

What About Existing Fiber? What would we do about all of those who have already built rural fiber? There are small telcos, cooperatives, and rural communities that have already acted and found a way to fund a rural fiber network. Would we force someone who has already taken the commercial risk to somehow convert those existing fiber properties into a utility? Most small companies that have built rural fiber took on a huge debt burden to do so. Rural communities that have built fiber likely put tax revenues on the line to do so. It seems unfair to somehow force those with vision to already tackle this to somehow transform into a regulated utility.

What About Choice? One of the most important goals of almost every community I have worked with is to have broadband choice. One of the key aspects of a fiber utility is that it will almost certainly be a monopoly. Are we going to kick out WISPs in favor of a fiber utility? Would a fiber monopoly be able to block satellite broadband? .

The Definition of Rural. What areas are eligible to be part of a regulated fiber utility? If the definition is defined by customer density, then we could end up with farms with fiber and county seats without fiber. There’s also the more global consideration that most urban areas don’t have fiber today. Do we ask cities that don’t have fiber to help subsidize rural broadband? It’s impractical to think that you could force city networks to become a utility because that would financially confiscate networks from the big cable companies.

Who Pays for It? Building fiber in rural America would probably require low-interest loans from the government for the initial construction – we did this before when we built rural electric grids, so this can be made to work. But what about keeping fiber utilities solvent for the long run? The rural telephone network functioned so well because revenues from urban customers were used to subsidize service in rural places. When the big telcos were deregulated the first thing they did was to stop the internal subsidies. Who would pay to keep fiber networks running in rural America? Would urban ISPs have to help pay for rural broadband? Alternatively, might this require a tax on urban broadband customers to subsidize rural broadband customers?

Who Operates It?  This might be the stickiest question of all. Do we hand utility authority to local government, even those who are reluctant to take on the responsibility? Would people favor a fiber utility if the government handed over the operations to AT&T, Verizon, CenturyLink or Frontier? What do we do about cooperatives where the customers want to own their fiber network? Do we force existing fiber owners to somehow sell or give their networks to a new utility?

What About Carrier of Last Resort? One of the premises of being a utility is the idea that everybody in the monopoly service area can get service. Would we force fiber utilities to serve everybody? What about a customer who is so remote that it takes hundreds of thousands of dollars of construction to reach them? Who gets to decide who gets service? Does a fiber utility have to build to reach every new home?

What About Innovation? Technology never sits still. How do force fiber utilities to upgrade over time to stay current and relevant? Upgrading infrastructure is an expensive problem for existing utilities – as I found out recently when a water problem uncovered the fact that my local water utility still has some of the original main feeder pipes built out of wood. The common wisdom is that fiber will last a long time – but who pays to replace it eventually like we are now doing with the wooden water pipes? And what about electronics upgrades that happen far more often?

Government’s Role. None of this can be done without strong rules set by and enforced by the government. For example, the long-term funding mechanisms can only be created by the government. This almost certainly would require a new telecom act from Congress. Considering how lobbyists can sideline almost any legislative effort, is it even possible to create fiber utility that would work? Fiber utilities would also require a strong FCC that agrees to take back and strongly regulate and enforce broadband regulations.

Summary. I’ve only described a partial list of the hurdles faced in creating rural fiber utilities. There is no issue on this list that can’t be solved – but collectively they create huge hurdles. My biggest fear is that politics and lobbying would intervene, and we’d do it poorly. I suspect that similar hurdles faced those who created the rural electric and telephone companies – and they found a way to get it done. But done poorly, fiber utilities could be a disaster.

4 thoughts on “Should Rural Fiber be a Utility?

  1. Hey Doug, wouldn’t you already consider it a utility in Washington state?

    Our Public Utility Districts provide fiber services, on a wholesale basis.

    Mitch

    Sent from my iPhone

    >

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    • Only a few of the PUDs have built extensive fiber and none of them have built fiber to everybody. Most of the PUDs have done little or no fiber. The PUD structure has some of the aspects of being a utility, but there is still a lot about it that is not the same as a universal rural fiber utility – that would find the money to get fiber built to everybody. I would describe the PUDs that have built a lot of fiber as half-way toward that ultimate fiber utility. They are probably about as close to such a model as exists.

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  2. All big issues! How is this different than the state of the phone system in the early days (a real question — i don’t remember the history).

    Given that it’s unprofitable to support rural, if “utility” isn’t the answer, what is? Wait for a tech breakthrough like leo satellite?

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    • The difference with the early phone system was that Ma Bell had 90% of the nationwide market and it was easy to make them the entity that had to create internal subsidies to support their own rural properties and external subsidies to support other rural places. Having a nationwide monopoly made this all easy. AT&T basically charged everybody 50 cents extra per month to cover the cost of providing a rural network.

      I’m not saying a utility model isn’t possible. However, there are hurdles to overcome and there would also need to a national consensus that the utility is the way to go. I honestly don’t trust our politicians and regulators to get this right.

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