Free beer and fiber

Fiber-to-the-premises (FTTP) was one of the most talked-about subjects at Supercomm last week (surpassing even hula girls and free beer, I think). But one of the more interesting discussions of FTTP came in a panel discussion on Wednesday.

Marvin Sirbu, department of engineering and public policy at Carnegie Mellon University, pointed out seeming contradictions in FCC Chairman Michael Powell's vision of the competitive broadband industry: vertically integrated competitors, each deploying and owning their own infrastructure to the home. Those upfront investments in infrastructure require considerable take rates in market share to pay off, Sirbu said, sometimes as high as 40% to 50%, which doesn't leave room for many competitors.

"It seems clear we're not going to have three, four, five companies running fiber to the home," Sirbu said. "It just isn't going to happen." Particularly difficult, Sirbu said, is the task of fostering competition or choice among video providers. (True, Sirbu didn't directly address wireless broadband, so I don't know how that fits in with his argument.)

In fact, one of the few competitive models that accommodates the economics of FTTP is one in which municipalities or other third parties (e.g., real estate developers) deploy infrastructure on a wholesale basis, allowing service providers to compete for use of those pipes. This model has been met with some resistance by the private telecom industry, though I was never completely sure why, since it holds the potential for technological agnosticism and frees telecom companies from having to sink sizable upfront investments into the dirt. Perhaps the private sector should participate more in these discussions, even at the risk of missing out on some free beer.

E-mail me at egubbins@primediabusiness.com.