Fiber 2.0: The coming Balkanization of American telecom

Submitted by acohill on Wed, 10/27/2010 - 07:57

A few months ago, a competitive telecom provider ran fiber down the main road near my home. Yesterday I figured out why; a crew was running a fiber drop to the bank branch on the corner. All over America, it is the dawn of Fiber 2.0. Fiber 1.0 took place in the late nineties, when an enormous amount of capital was spent on fiber too far in advance of the marketplace for demand. Along with the rest of the dot-com ventures, Fiber 1.0 was a bust. But today, the market for bandwidth continues to grow along a nice smooth curve, with the demand doubling every two years, and we have fifteen years of data to back this up. While the incumbents are busy trying to convince us they can meet this demand with 1950s copper cable plant, smaller telecom firms are busy spreading bits of fiber through communities to cherry pick the more profitable business customers. These companies tend to have no interest in full fiber build outs, and instead just want to lock up a portion of the local business market. Fiber is still costly enough (mostly for the labor to put it in) that once a customer like a local bank is captured by one of these smaller fiber firms, no other provider will gamble on the expense of building a second fiber cable to the same location: the first fiber provider in essentially creates a small monopoly. Nice work if you can finance it.

The tragedy is that as communities are chopped up among two or three small telecom firms, a Balkanization occurs. In effect, the incumbent duopoly (the phone company and the cable company) is replaced with a cartel--a handful of providers who have a vested interest in limited competition. Prices come down a little, but then freeze at the new cartel price point. The end result is that it becomes more challenging financially to build a single community-owned shared, high performance network; not impossible, but more difficult because key anchor tenants like schools and large businesses have already been cherry-picked with long term contracts.

Best regards,

Andrew Cohill
President, Design Nine

A Broadband Properties top 100 company for 2013
A Broadband Properties top 100 company for 2012
A Broadband Properties top 100 company for 2011

Design Nine has been selected as a Broadband Properties / Broadband Communities top 100 company from 2008 to 2013.


Smart 21

Designed by Design Nine, the nDanville fiber network has won the Intelligent Community Forum's Smart 21 award for 2010.

Design Nine provides visionary broadband architecture and engineering services to our clients. We have over seventy years of staff experience with telecom and community broadband-more than any other company in the United States.

We have a full range of broadband and telecom planning, design, and project management services.