Wednesday, April 22, 2009

Would you like to own and install fiber to your home?

There are many examples of municipal ownership of access networks, but ownership and control could also be pushed out to home and building owners.

Wu and Slater discuss this alternative in a recent paper and a test is underway in downtown Ottawa, Canada, where fiber has been deployed to serve a 400–home neighborhood, but a service provider has not yet signed on.

The Norwegian telecommunication company Lyse Tele reports that 80% of their 130,000 customers have agreed to dig their own trenches and bury their own fiber in exchange for a discount on installation. This has been good for business -- only .2% of customers who have installed their own fiber switch to another service provider.

While this sounds good, there are questions. Who owns the fiber, Lyse Tele or the home owner? Who controls the fiber -- can their customers reach competing services or are they locked in to Lyse Tele?

I have seen estimates that it costs Verizon about $1,000 to connect a home. I would gladly pay that if it meant I owned and controlled the fiber and could get connectivity from competing ISPs over it. I would consider it an investment -- increasing the value of my house -- not an expense.

I own my own sewer, water and gas lines and call a plumber when there is a problem. I would be happy to own my fiber.

Monday, April 20, 2009

Four excellent videos on municipal fiber networking

We have discussed infrastructure ownership options, and Benoit Felten has posted four excellent videos on municipal fiber networking. Three are interviews of people who gave talks at the recent Freedom to Connect Conference: Terry Huval, Tim Nulty and Bill St Arnaud. The fourth is a presentation given by Felten in New Zealand last month.

1. Terry Huval, Director of the Lafayette, Louisiana Utility Service fiber to the home project.

Huval discusses the motivation and business model that gave rise to the project, their legal battles (3 years of fighting until the State Supreme Court ruled unanimously in their favor), the services they offer, and the applications they will be offering in the future.

2. Tim Nulty, Project Director, East Central Vermont Community Fiber Network (ECFiber).

ECFiber plans to build rural fiber connectivity to 21,866 households in and around 22 Vermont towns. (So far 21% of those households have pre-registered). Nulty presents data on costs and revenue, and concludes that the network is a viable business. They will offer both retail and wholesale Internet service over the network, and he explains why a pure wholesale network like that in Stockholm makes sense in Europe, but would be defeated by the incumbents in the US.

3. Bill St Arnaud, Chief Research Officer at CANARIE, Canada's research network with a mandate to develop next generation networks, applications and services.

St Arnaud describes the "G-commerce" model, which combines connectivity with energy savings and pollution reduction. Installation of fiber to the home will be financed by a 1-2 cent per kilowatt hour increase in electric bills and energy-cap savings from reduced power consumption as high speed communication substitutes for transportation.

4. Benoit Felten, Senior Analyst, Yankee Group.

Felten gives examples from France and the Netherlands showing that network sharing is profitable even for incumbent ISPs. Take-up rate is more important than average revenue per customer, and the fastest way to convert 100% of the population to fiber is sharing it among service providers. He outlines and presents examples of several business models ranging from passive sharing of access and rights of way to offering retail service.

Thursday, April 02, 2009

Why is connectivty in Stockholm so much faster and cheaper than in US cities?

We've been discussing US broadband policy and the stimulus package, and this table shows the cost of fiber-based, residential Internet service in several cities (Brough Turner provided the European and Asian data):

Hong Kong$35100100
Lafayette, LA, Municipal$585050
Lafayette, LA, Cox Cable$140550
US, where available, Verizon$1452050

Can we explain the large speed and cost differences?

The Cox Cable offering in Lafayette, Louisiana seems to be the worst deal. It is the slowest and only five dollars a month less than the Verizon network. The municipal network in the same city is faster and cheaper. The Cox network reaches more neighborhoods than the municipal network, and they are forced to compete with temporary sale prices.

Stockholm is at the other extreme. They have a municipal network that reaches every block in the city. Unlike Lafayette, they do not offer consumer service over their fiber, but lease network access to anyone who would like to offer service. The Internet service providers, including incumbent telephone and cable companies, compete on an equal footing.

As a result, there are many competing service providers in Stockholm, and, as Turner points out, the city owns the expensive, long-life assets like fiber, rights of way, conduit, and tunnels, and the service providers own the electronic equipment that is relatively cheap and is upgraded frequently as technology improves.

Many factors determine the cost of Internet connectivity, but the ownership model is significant, and it seems the Stockholm model is superior to those in the US.

Note that analysts at the OECD also endorse the Stockholm ownership model, writing that:
Municipal networks can play an important role in enhancing competition in fibre networks. If these develop, governments should encourage them to be open networks, that is providing dark fibre to service providers rather than becoming themselves service providers. Nor should the existence of a municipal network providing dark fibre mean that investment in other fibre networks in that municipality should be prevented.
Should some of our broadband stimulus funds be used for Stockholm-style municipal networks?

Click here for a paper with more on this topic.

Click here for a PowerPoint presentation on this topic.

Update 11/10/2014

Stockholm reports 19 years of financial and user success. The Stokab report should be required reading for all local government officials.