Middle mile projects may be creating new monopolies

Submitted by acohill on Mon, 12/21/2009 - 16:08

As stimulus dollars start to roll, there is much excitement in the industry about an expected boom in "middle mile" projects. Many of these are being promoted as public/private partnerships, but some of the deals being done may result in the creation of substantial new long term monopolies.

Middle mile fiber is necessary, but these projects do not automatically create competition or solve business and economic development last mile connection needs. In fact, many middle mile projects have the potential to further fragment the broadband market space in communities and will have the paradoxical effect of raising prices for businesses and residents while slightly lowering prices for local government and public safety use.

It is all about demand aggregation and unbundling infrastructure from services. The two concepts, executed properly with the right level of local government participation, have the potential to dramatically lower the cost of telecom services: witness the 40% to 70% prices drops for Internet access on The Wired Road, (a Design Nine project) in just one year because local government "middle mile" needs and business/residential needs have been aggregated in a single unified market space.

Middle mile projects that award all the local government connectivity to a single provider that also controls or owns the middle mile fiber dis-aggregates the market space, creates stovepipe networks that are unable to benefit from infrastructure cost sharing, and discourages competition.

The result can be catastrophic to jobs creation and economic development, as it becomes much more difficult for businesses to negotiate favorable prices for telecom services and Internet access. Middle mile, done right, with true sharing of middle mile infrastructure, can be a powerful engine for economic development. But the demand aggregation and infrastructure sharing have to be built into the contracts for these projects.

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