Open access: The opponents have a few points to make

In yesterday’s online commentary, I talked about why I think open access is the right approach for the broadband networks being built with $7.2 billion in federal funds. I received a number of very articulate comments from people who strongly disagreed with me, and I think they are worth sharing.

From someone who has been very engaged in the stimulus process and FCC hearings:
“Our country believes in private property and free enterprise. How could/would the gov’t ever compensate owners for the anticipated price extraction of owning and controlling access to their network? I think we can dream all day about open access, because although it’s the most technically efficient, it doesn’t reflect this country’s values and economic engine.

Plain and simple, if the FCC enforces open access, there’s less interest by the incumbents, or anyone, to do those builds, because the opportunity to extract monopoly rent is diminished (whether real or perceived), further reducing their incentive to invest their own monies. Despite the federal monies, those who build their own networks still have to put their own money to work, and in these areas of the country where there’s no good return, requiring open access jeopardizes an opportunity to make a decent margin on their own monies. And that appears to be the case, because even with the carrot, the big players aren’t biting. It’s not like they’re only holding out for more money, but also need the opportunity better structured so that there’s a better chance in making a return on their capital.”

From an independent telco:
“I have no problem with open networks especially if they are built with public funds. What I have a problem with is the idea of a company like mine that has built out almost 30% of their network with fiber at our own expense being expected to open that portion to other users without compensation if we use federal stimulus. I would love to allow others to use what I have built if they pay for that use. If we are going to open the network then we should also open the access to content and applications that so many of the cable companies are so protective of. It does cut both ways.

Realistically, if the incumbents do not embrace their competition and look at ways to open their networks we are doomed. We are lousy at building applications but we are great at building and maintaining network infrastructure. The applications are worthless without a network to deliver them. The networks are worthless without applications which create demand.

The dawning of user negotiated content and high bandwidth applications like cloud computing are not far off. Unfortunately they are far enough off to make the financial commitment for fiber overbuild very difficult. Until that happens and the telcos and cablecos are forced by market forces I do not see much collaboration taking place. The stimulus is great, but it is a long way from covering the cost of building these networks.”

Another independent telco manager explains why his company won’t apply:
“Issue number one for me is simply that [my company] has already deployed at least 1.5M service to 100% of its customers. We have also expanded outside of our territory with fixed wireless in some rural areas. This is typical of most rural ILECs. In Iowa the rural incumbents have deployed to approximately 94% of their customer base. We took the risk and did it!

Second, in my estimation filing for the proposed funding would cost us approximately $30,000-$40,000. This is for just a chance at funding regardless if we are successful or not.

Third, we are an RUS borrower. Part of the point evaluation would be the loan than grant ratio, with a more favorable outcome for those with more on the loan side. Considering we can already borrow funds for such projects it seems rather pointless to throw $30,000-$40,000 at the issue to get a slight reduction in the loan.

Fourth, yes, we in general have an aversion to someone else using the network we have built. This probably goes back to inter-carrier compensation, phantom traffic, etc…. While there may be some areas where that would increase penetration what benefit would it be to a company like ours that has provided access to 100% of its customers? And currently the schools we serve have a 10Mb pipe from us that they are free to put any services on. They have one contact to deal with for broadband service that is two minutes away from them, which is important in a rural area.

While we would all like some ‘free’ money it has a lot of hoops to jump through. I imagine that some companies just simply do not want the headaches, are not yet prepared for the onslaught of paperwork this takes and/or the positive/negative ratio is not appealing enough.

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