Competition works in the fiber market

Submitted by acohill on Tue, 11/16/2010 - 13:58

Fiberevolution has a short article with a damning slide, showing what Verizon charges for a fiber connection in downtown Boston and what a start up firm is charging for a fiber connection. The start up is offering ten times the bandwidth (100 meg vs Verizon's 10 meg) for a measly 97% reduction in cost on a per megabit basis. Put another way, you can buy ten times the bandwidth for almost 75% less cost ($2700 vs $700). What's wrong with this picture? Well, two things. First, why is Verizon charging so much in the first place, with what has to be a nearly fully depreciated infrastructure? And second, rural parts of the U.S. can't get this kind of rate reduction unless the community itself gets involved. A start up in Boston can go head to head with Verizon because there is enough business in the city to justify the high cost of building new infrastructure. But rural communities don't have the kind of density that justifies overbuilding new completely private networks. The solution for rural communities and smaller cities is to build a single, high performance open access network and let any service provider use it--a shared business model.

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