My Industry Perspectives presentation at VON and the article I subsequently wrote have prompted a few questions. To quote from one articulate email received this morning:
The problem I see is that we have (as in many other areas) regressed to where we were about a century ago. Fiber to the building or home is a natural monopoly: it costs a lot to deliver one, but once you have it you have everything. If people are willing to lay single-mode fiber they have (looking forward) delivered around a terabit/s to each customer.
I'm questioning the idea that fiber is a natural monopoly.
If you only consider service providers competing to deliver a specific service like Internet access, then you are correct -- the first service provider to get a fiber to your building has an incomparable advantage over anyone else -- it's a natural monopoly.
However, in the real world there are at least two other considerations:
1. Service bundles.
So far, few providers are peddling straight Internet access by itself. In the consumer space, we have various dual-, triple- and quadruple-play offers and they are further differentiated by content bundles. In the commercial space, we have Cogent pushing pure low-cost IP transit, but all the other service providers push their other services capabilities which might include private line, frame relay, managed services, international footprint, and so on. There's also the issue of "brand" - who do you trust with your data service needs?
In my neighborhood (Newton, MA), I have three fixed access service providers. Verizon is pushing Fios (a dual-play over a fiber PON) while Comcast and RCN are pushing triple-play over HFC. At the moment, Comcast and RCN have similar offers and have pushed fiber to about the same depth into Newton neighborhoods. Comcast has the benefit of being first and RCN is struggling, but I don't think this means triple play is a natural monopoly!
In the commercial world, there are many competing rights-of-way between major cities so we see many, many parallel fibers between those cities. The first fiber from New York to San Francisco has no "natural monopoly." Again, when you buy services between New York and San Francisco, there are typically other factors at work besides just the New York to San Francisco connection.
2. User-owned fiber.
If you add in the opportunity for user-owned fiber (most likely via condominium fiber), then there will be plenty of individuals or organizations who will chose to own their own fiber -- making their investment decision for a wide variety of reasons, most of which are very different from those of the service provider.
I can't point to a lot of consumer's who own their own fiber, although there are some, like these folks in northern Sweden. But, if you could own a pair of fibers from your house to some aggregation point where there were competing suppliers of upstream access and your recurring cost for 100 Mbps Internet access was $10/month, would you be willing to spend $5K one time? (OBTW: you could fund by this by adding to your mortgage). The folks in Sweden are spending about $8/month per household after a one time capital expense of less than $2K per household, but they made use of a community center that holds some active electronics.
On the commercial side, we already see universities and large corporations buying their own fiber on specific routes, i.e. they are buying 20 year IRUs on a few fibers in a larger cable. Bill St. Arnaud at the CANARIE project in Canada has described several ways this model plays out.
So no, I don't think fiber by itself is a natural monopoly. The right-of-way in front of my house is the limited resource (that's already government owned). That's the natural monopoly.
I take it as a given that if something can be open up to (or regulated into supporting) real competition, the consumer benefit will exceed anything that government owenership or government regulation of a monopoly or duopoly would achieve. There are plenty of grounds for this assertion in telecom -- just look at the comparative rates of subscriber growth in the over 200 countries that now have mobile phone service compared with the number of effective competitors in a country. The results are striking -- competition really works to benefit consumers.
So regarding broadband access, I'd love to see regulatory efforts focused on facilitating competitive access to the limited space on the poles and under the streets. Obviously Verizon, Comcast and RCN would freak out at a community fiber or municipal fiber effort in Newton, but I see this as a political issue, not something that is impossible due to economics.
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