Incumbents don’t warm to stimulus funding
If you accept the notion that broadband connections are important to economic development and general community well-being — and if you don’t, just stop reading here — then spending billions in federal dollars to bring broadband to places where before it hadn’t been economically feasible just makes sense.
The real debate is over how those stimulus dollars should be spent, and we will begin to see answers this fall when the first round of applications for funding produce the initial rewards.
It’s not surprising to learn that a number of large incumbents — AT&T, Comcast, Qwest Communications and Time Warner Cable — have all said they will not apply for stimulus funding, however, given that there is a great likelihood that any broadband networks built with federal dollars will be open access networks. Incumbents prefer to control the networks they build and to offer their own content — as both AT&T and Verizon have done with their fiber access buildouts.
But it also makes the most sense for federal funding to create the possibility of competition among service providers for customers, rather than simply to subsidize the further extension of incumbent networks. If the broadband stimulus package succeeds in creating open broadband networks over which anyone — including an incumbent — can offer a service to businesses or consumers that can’t get broadband now, it will have achieved its purpose.
Such approaches work elsewhere. In the U.K., where BT was forced to unbundle its copper network, British regulator Ofcom said there are now 6 million unbundled lines and more than 30 broadband competitors. Since 2005, when BT was forced to unbundle, broadband penetration in the U.K. has gone from 37% to 68%. In other parts of Europe, such as Scandinavia and the Netherlands, the open access approach is also bringing new competition and services to consumers.
Of course, open access networks aren’t guaranteed success, and some high profile failures — such as the Utopia and Project Provo networks in Utah — are examples of the “build it and it will fail” mentality that can plague networks deployed in anticipation of competition that doesn’t develop.
What we are seeing now, however, is the potential for a new kind of competition, which federal stimulus dollars also may generate, to offer a whole new generation of services over an open access infrastructure. School districts, hospitals, local community centers and libraries, energy companies and others have the opportunity to partner with applications providers or develop their own applications, well beyond what a telecom service provider or cable company could offer.
Some of these applications — distance learning, remote health monitoring, energy management — will take time to develop, but having the best infrastructure in place to support them when they do only makes sense, especially because these are public tax dollars and not private investment money.
The irony is that many argue incumbents shouldn’t be so afraid of open access networks, though as their response to the stimulus opportunity shows, U.S. incumbents clearly still are.
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