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| Objective criteria for "middle mile" spending |
| Monday, 03 May 2010 22:30 |
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Several of the "middle mile" fiber builds should not have been funded. At least one, based on the publicly available data, is being funded at several times what the job should cost.
If there there isn't any fiber or capacity is inadequate and not inexpensively upgraded, the test should be whether enough people will be served to justify the expense. That's a judgment call without an easy answer. At $200 per unserved home passed, it makes sense. At $20,000 per home passed, it doesn't. At $4,000/home, it's a tough call. Satellite is about to increase speeds to 5 and 10 megabits, but has latency and other disadvantages. Microwave is getting better and cheaper, and often can deliver 100 megabits for $15K-$50K. Populated areas without fiber backhaul are surprisingly rare. There are very, very few places in the developed world that don't already have enough fiber. Close to 100% of local telco exchanges are fiber fed and can be inexpensively upgraded when more capacity is needed. The actual fiber is cheap but construction expensive, so typically there there are extras run but not used (dark fiber.) In general, relatively inexpensive gear can "light" this fiber. You can also expand the capacity of existing fiber through "wave division multiplexing." That's not as cheap but usually not close to the cost of running new fiber. If there's plenty of fiber in place, it's only right to overbuild if the new fiber will be sufficiently cheaper than what's in place. If the local market price is $40/megabit in moderate quantity and the proposed fee of the new provider is $20/megabit, then one can measure the likely saving by taking an estimate of demand and multiplying it by the price difference. The market prices need to be surveyed and compared with the prices proposed by the new carrier. The answer won't be exact, but I believe some of the funded projects are an order of magnitude more expensive than the likely savings. That's wasting taxpayer money when the budget deficit is at historic levels. In some parts of the U.S., the telco has the only fiber and uses that market power to charge extortionate prices. Bandwidth costs $5-$15/megabit in hundreds of cities/ Many examples came up at the broadband workshops of prices of $100 and even $200/megabit despite minimal cost to provide the service. I believe the right answer to monopoly-like pricing is to bring the price to something fair and am told that can be done via "special access." But if "special access" is impractical, the existing market price is the measure. A related issue is when the fiber owner is impractical to work with. I'm told that Fairpoint in Maine makes things impossible for rivals, in which case the Maine "3 Ring Binder" project makes sense.
To judge an overbuild, the first thing you need to know is the price the new company intends to charge. If they won't reveal that, it will generally be impractical to judge an overbuild application and it should not be approved.
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