A few times each year I get the question of where a new ISP should go to get insurance for a fiber network. The question comes from new ISPs that are hoping that they can buy insurance that will compensate them for catastrophic damage to a new fiber network.
Everybody in the industry knows about many examples of catastrophic fiber damage. Fiber networks along the coasts can be devastated by hurricanes. The second biggest cause of network damage is probably ice storms, which can knock down wires across huge geographic areas. We’ve seen networks damaged by heavy floods. Networks are sometimes hit by tornadoes. In this last year we have huge examples of poles and fiber networks destroyed in the huge forest fires in the west, and occasionally in Appalachia.
The damage can be monumental. We saw hurricanes a few years ago that broke every utility pole in the Virgin Islands. We’ve seen a few towns along the Gulf coast be leveled by hurricanes. The fires last year burnt large swaths of forests and utility poles and burnt and melted all of the wires.
Asking for insurance against such damages sounds like a sensible question since we seem to be able to buy insurance for almost anything. But the bad news for those looking for insurance for a fiber (or electric) network is that such insurance doesn’t exist – at least not in any affordable form.
This mystifies people who wonder why they can buy insurance to protect a $50 million building but not a $50 million fiber network. The answer is that a building owner can take multiple steps to protect a building. For example, an insurer might insist on a sprinkler system throughout a building to protect against fire damage. But there is nothing that a fiber network owner can do to brace against the ravages of mother nature. A large network can be badly damaged at any time and can be hit multiple times. In just the last few years, the City of Ruston, Louisiana was hit by a devastating tornado and then two subsequent hurricanes.
So how do owners get compensated after major network damage? The answer is FEMA. When there has been bad damage from the natural disasters listed earlier, a Governor and President can declare an emergency, and this unleashes state and federal funds to help pay to fix the damages. People often wonder about the size of federal funding after a disaster – the government isn’t only helping to fix destroyed roofs after a hurricane, but also the telco, cable, and power networks.
If you press an insurance company hard enough you can get damage insurance for fiber. I had a client who won an RFP to build fiber for a rural school, and the school insisted that the network be insured. Even after providing evidence that this is not a normal insurance policy, the school system insisted. My client bought a 2-year insurance damage policy for the newly built fiber that was priced at almost 20% of the cost of the fiber.
I remember when Fire Island in New York went without broadband and cellular coverage for well over a year after Hurricane Sandy while Verizon, the New York Public Service Commission, and FEMA argued about how the network was to be rebuilt. It’s far better to protect against catastrophic damage whenever possible. I have clients in storm-prone areas that have paid the extra cost to bury fiber networks. I have clients in flood zones that place electronics huts on stilts. A lot of ISPs work hard to make sure that trees stay trimmed to reduce ice damage. These ISPs know that not taking these extra precautions means the network is likely to get damaged and go out of service. There is nothing more satisfactory than having a fiber network that keeps humming along during and after a big storm. Unfortunately, mother nature often has different plans.