Should users finance fiber-to-the-home?

The city of Ottawa, Canada, even trialed a 400-home network of user-owned fiber to be bundled with electricity from utility resellers, spreading the fiber deployment cost over five years and charging per energy consumed. But that project stalled due to “lack of competition in Canada,” said Bill St. Arnaud, chief research officer at Canadian research organization CANARIE. “We have deployed the fiber but then were surprised to discover that there are no small retail ISPs left in Canada. They have been squeezed out by the big telcos and cablecos who have no use for this innovative approach.”

Larsen said that won’t be a problem for Utopia, which now has 10 service providers on the network, and is poised to gain more, including a local ISP, Brigham.net.

That competition should keep service prices down as well, especially since service providers don’t have to price their offerings to recoup the cost of having deployed the fiber drops. According to Slater and Wu, in fact, that competition among service providers is crucial to the user-financing model. “For ownership to make a major difference, consumers must be able to use their connection to access a multitude of differently priced services from a variety of service providers,” Slater and Wu wrote. That isn’t always easy to conjure up, as folks in Ottawa have learned.

In their paper, the authors pointed out that user-owned fiber needs to interconnect with more communal facilities at some point. The duo imagined a “trunk cable” aggregating several users’ fiber that could be managed by another party the way user-owned condominiums are contained within a shared communal space managed by a condo association. As an ideal example, the authors point to CityNet’s open points of presence in Amsterdam, where multiple service providers can interconnect with customers as they order each service. That structure could even inspire alternative financing approaches.

“A more practical approach [than Brigham’s model] would be to require a certain percentage of commitment per block or per Ethernet switch/OLT in order to justify the build out, but more importantly, guarantee the [return on investment],” said Teresa Mastrangelo, principal analyst with BroadbandTrends.com.

Slater and Wu proposed a variety of approaches, in which the fiber could be deployed and maintained by carriers, specialized construction firms, municipalities or real estate developers. Some of these models have already been adopted in the construction of new homes, if not existing residences.

Utopia is unique in many ways, so replicating aspects of its economic model elsewhere would be tricky. For example, one factor in play for Brigham is that is has already committed financially to Utopia. The city agreed years ago to back the bond funding the multicity project with its own tax revenue. So if it were to just walk away from the project now, with fewer than 50 of its own homes connected to the network, it would still have to pay roughly $17 million to meet its commitments.

Still, the idea of user-financed fiber deployment may seem less strange now that billions of dollars in taxpayer money is being used to roll out fiber as part of federal broadband stimulus projects, as Britain moves forward with a broadband tax and as Europeans and Australians adopt major public open-access initiatives. (In fact, months before the federal broadband stimulus plan was conceived, Slater and Wu suggested a federal tax credit for homeowners buying their own fiber.) In some respects, even private FTTP services are user-financed in their own way. Still, Brigham’s endeavor is likely to continue to be rare, even if it succeeds.