There are a few glaring holes in all federal broadband grants that have to do with how a grant recipient uses the network that was constructed with grant dollars. I wrote a recent blog that talks about the fact that most grants surprisingly don’t have any mandate that the grant recipient serve any customers in the grant area. For example, Starlink could take a grant for western North Carolina but never sign a customer in the grant areas.
Even more amazingly, there is not any proof required that the grant money was all spent for the intended purposes in the grant areas. Consider the CAF II grants where the telcos self-report that they have completed the upgrades in each grant area – the telcos were not required to show any proof of the capital spending. A lot of people, including me, think that the big telcos didn’t make many of the required CAF II upgrades. The FCC has no idea if grant upgrades were really done. It would have been easy for the FCC to demand proof of capital expenditures showing the labor and specific equipment that was used in each of the grant areas. Such a requirement would have forced the telcos to do the needed work because it would be extremely easy for an FCC auditor to show up and ask to see some of the specific equipment that was claimed as installed.
Today’s blog talks about the third missing element of federal; grants – grant recipients don’t have to make any promise to maintain the networks after they are constructed. There is nothing to stop a grant recipient from taking the grant money, building the network, and then milking revenues for years without spending any future capital.
All of the industry experts will tell you that a new fiber network will likely be relatively problem-free after you shake out any initial problems. Unless fiber is cut, or unless customer electronics go bad, there is not a lot of maintenance capital required for the first decade after building a new fiber network. There will still be fiber cuts and storm damage and the inevitable things that happen in the real world, but fiber technology is so tried and true right now that it largely works well out of the box.
I wrote a blog recently that conjectured that a fiber network can be a hundred-year investment. But the key to longevity is maintenance. If a grant recipient treats a fiber network the way that the big telcos have treated copper networks, then new fiber networks will start deteriorating in ten years and will be dead in thirty years. Good maintenance means properly fixing fiber cuts with quality splices. It may mean replacing stretches of fiber that demonstrate ongoing problems that might have come from the factory or from improper handling during installation. But most importantly, maintenance means upgrading and replacing electronics.
Fiber electronics don’t last forever. Manufacturers talk about a 7-year life on electronics, but they are in the business of selling the replacements. There is no physical reason to replace customer electronics (ONT) as long as it keeps working, and we’ve already seen some customer electronics (fiber ONTs) last for as long as fifteen years. But my guess is that, on average, that electronics are going to require upgrades every ten or twelve years.
Luckily, it looks like many of the FTTP upgrades already on the market involve what we call an overlay. This means introducing a new core that can provide new customer electronics while still being able to support the old equipment, as long as it’s working well. This is the sane way to do upgrades because a company can phase customers from old electronics to new over many years rather than going through the chaotic process of trying to change technology for a lot of customers at the same time.
But back to the grants. Federal grants are going to turn out to be a total disaster if the companies receiving the grants don’t build what they are supposed to build and maintain the network to keep it running for a hundred years. This won’t become apparent for fifteen or twenty years, but then we’ll start hearing about big problems in rural areas where customers on poorly maintained fiber networks go out of service and can’t get repairs.
It really bothers me to know that there are bad ISPs in the industry who are likely to take the grant money with the intention of milking the revenues and not reinvesting in the networks. We know that cooperatives, small telco, and municipal network owners will be happily operating grant-funded fiber networks a century from now. But amazingly, sustainability isn’t part of the discussion or criteria in deciding which ISPs deserve grant funding. We continue to pretend that all ISPs are good corporate citizens even after some have proved repeatedly that they are not.