Submitted by acohill on Tue, 03/29/2005 - 09:42
Central California is the location of yet another pointless fight over broadband. Forward-thinking public officials are trying to do something good for their businesses and citizens, and a predictable set of knee-jerk reactions to it pop up.
Fresno County wants to look at increasing the number of broadband access and service providers by building infrastructure and letting private sector companies use it to deliver those services. But the predictable hysteria about how government should not be in the service business has ensued. Last time I checked, the *only* thing governments do is provide services, so I'm not sure that's a very strong argument.
As Lawrence Lessig noted recently, public street lights did not put electric companies out of business. And I will further note that building public roads did not put construction companies and delivery services out of business.
Fresno wants to build broadband roads so that private sector companies can use those roads to deliver access and services. Now there are two ways to pursue that model. Fresno is going to buy access and services from the private sector and resell them to broadband customers. Customers like this because you get a single bill with everything on it, and you have a single point of contact for service and support.
The other way to do it is to let companies sell direct to customers. In this model, you may have several bills (e.g. one for access, one for VoIP, one for email services, etc.). And you have several different companies to deal with in terms of service and support.
Both approaches have some advantages and disadvantages--the former model looks better from a customer perspective for billing and support. The nonprofit network operator makes more money to cover expenses and to build out the network. But it's a more complex way of doing business, since the nonprofit operator has to be the middleman for everything.
The latter model--businesses use the nonprofit digital transport system to provide services direct to customers--is simpler to implement in some respects because you have cut out the middleman function for most things. But customers have more bills and more different companies to deal with.
Is there a clear winner? Not as far as I can tell. Some community broadband advocates are arguing strenuously for the "retail" model, where the nonprofit resells the services. There are two arguments for this. The first is that the successful community broadband projects, by and large, are using this model, and it seems to work. The second is that more money stays with the nonprofit network manager, making the sustainability of the system a better bet.
I don't disagree with either of those propositions, but I do think it is way too early to say that's the only approach that ought to be pursued. The absence of something (muni wholesale projects) does not prove it does not exist or is not viable. It just means we have not seen any good examples yet.
Why do I favor a muni wholesale model? Over the long run, letting businesses go direct to customers, even with a bit more paperwork on the billing side, is likely to foster more innovation, more rapid dissemination of new services, and lets good businesses adjust more quickly to changing market demands. The muni nonprofit network manager manages the sustainability side by taking a franchise fee (something modest...perhaps in the range of 3% to 5% of gross revenue) for use of the digital transport system. The catch is that in the early days of service rollout, there is not as much money coming back to the muni nonprofit. But I think you can plan for that.
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