Executive Summary

One of the significant challenges facing network operators today is the high capital cost of deploying next generation broadband network to individual homes or schools. Fiber to the home only makes economic sense for a relatively small percentage of homes or schools. One solution is a novel new approach under development in several jurisdictions around the world is to bundle the cost of next generation broadband Internet with the deployment of solar panels on the owners roof or through the sale of renewable energy to the homeowner. Rather than charging customers directly for the costs of deployment of the high speed broadband network theses costs instead are amortized over several years as a small discount on the customer’s Feed in Tariff (FIT) or renewable energy bill. There are many companies such as Solar City that will fund the entire capital cost of deploying solar panels on the roofs of homes or schools, who in turn make their money from the long term sale of the power from the panels to the electrical grid. In addition there are no Energy Service Companies (ESCOs) and Green Bond Funds that will underwrite the cost of larger installations.

For further information and detailed business analysis please contact Bill St. Arnaud at bill.st.arnaud@gmail.com.

Monday, February 25, 2008

The United States is facing a crisis in broadband connectivity

[Here is an excellent report by Educause on the state of broadband in the USA and a comparison with other countries. It is interesting that the report points to Canada (which has fallen further behind then the US in terms of broadband deployment) as possible model for deploying broadband. Although I agree that broadband is critical economic and social enabler I remain skeptical of government funded solutions, except perhaps for providing basic infrastructure such as conduit and/or dark fiber. Several municipal and government funded broadband initiatives are in already in trouble such as Utopia, Philadelphia WiFi and South Dundas (which is paradoxically is cited as good example in this paper).

The challenge with broadband in North America is lack of facilities based competition. What we need to find out is why the big telcos and cablecos are not deploying infrastructure in their competitor's territory? They seem to have no problem deploying nation wide wireless networks, but nobody wants to make the make investment in nation wide broadband in direct competition with existing incumbents. What are the hurdles? Is broadband a natural monopoly? Do we need to encourage alternate business models, through regulation, tax incentives or other means? More distressing - why aren’t consumers complaining? Why is it that the nation that exemplifies free enterprise and entrepreneurialism, the nation that created Google, Yahoo, Apple Microsoft and host of other world beating companies, cannot find a truly competitive business model that will enable the build out of a national broadband network for the world's richest nation? --BSA]


Executive Summary
The United States is facing a crisis in broadband connectivity. The demand for bandwidth is accelerating well beyond the capacity of our current broadband networks, especially as video traffic and home‐based businesses become more prevalent. In the very near future, a single family will be watching HDTV video at the same that they engage in remote health monitoring, videoconferencing, gaming, distance education class lectures, and social networking. Moore’s Law, as well as several studies of future Internet growth, predicts that homes and businesses will need a minimum of 100 megabits per second (Mbps) of capacity within the next three to five years and will need even greater capacity going forward.

While other nations are preparing for the future, the United States is not. Most developed nations are deploying “big broadband” networks (100 Mbps) that provide faster connections at cheaper prices than those available in the United States. Japan has already announced a national commitment to build fiber networks to every home and business, and countries that have smaller economies and more rural territory than the United States (e.g., Finland, Sweden, and Canada) have better broadband services available.

Why is the United States so far behind? The failure of the United States to keep pace is the direct result of our failure to adopt a national broadband policy. The United States has taken a deregulatory approach under the assumption that the market will build enough capacity to meet the demand. While these steps may have had some positive influence, they are not sufficient. The profit/loss statements of individual firms fail to take into account the positive externalities from a widely deployed broadband network, including economic growth, lower‐cost health care, and higher‐quality education. In contrast, most other nations treat broadband services as necessary infrastructure; their governments adopted explicit broadband stimulus plans at the turn of the century, and their countries are now reaping the benefits.

The United States needs to take aggressive action to significantly expand our broadband connectivity. Now is not the time for incremental improvements; we are behind, and we must adopt a comprehensive strategy this year if we are to address the growing needs of our citizens and our economy. U.S. policy must be forward‐looking—we must “skate where the puck is going to be.” For these reasons, this paper proposes the creation of a new federal Universal Broadband Fund (UBF)that, together with matching funds from the states and the private and/or public sector, should be used to build open, big broadband networks of at least 100 Mbps (scalable upwards to 1 Gbps) to every home and business by 2012. U.S. state governors and foreign heads of state have found the resources to subsidize broadband deployment; the U.S. federal government should as well.

Building a local fiber connection past each home and business will cost approximately $100 billion. The paper recommends the public‐private partnership approach followed in Canada, where one‐third of the funding would be provided by the federal government, one‐third by the states, and the remaining one‐ third by the private and/or public sector. It thus proposes a federal fund of $8 billion per year for four years, to be distributed to the states once they provide their matching amount of funding. Each state would then combine the federal and state funding and award grants to individual entities (public or private) that provide the remaining one‐third of the funding to build open, big broadband capacity on a community‐by‐community basis.

While the initial investment is significant, the returns would be enormous. First, a big broadband network would be less expensive to operate than the existing copper network, resulting in actual cost savings of several billion dollars per year. More important, the availability of broadband capability would generate enormous economic activity (both from building the network and from its use) that would lead to greater tax revenue and economic growth. Furthermore, fiber networks are scalable upwards to an almost unlimited capacity; the investment in building these networks may provide adequate broadband connectivity for several decades. Finally, once the networks are built, the need for additional funding would end, and the private and/or public entity that receives the funding would own and operate the network without the need for ongoing federal subsidies.

A critically important component of this grant program is that the networks built with UBF funding must be open and accessible to all users and content and application providers. The taxpayer is entitled to certain rights in return for providing two‐thirds of the funding to build these networks. Thus, the entity chosen to build the network in each community would maintain both an open network for all lawful uses and affordable pricing, and may be required to make a portion of its capacity available on a wholesale basis to competing retail service providers.

While federal funding and openness are fundamental, other components of a comprehensive broadband plan are equally vital. The plan must include the coordinated effort of our elected leaders and must be implemented by a core of federal, state, and local officials, with guidance from an advisory committee of commercial and nonprofit institutions. The plan should include tax incentives to spur private sector broadband investment and should encourage public sector investment by municipalities and states as well. Efforts should also be undertaken to ensure that the public is made aware of the availability of these broadband services. Funding should also be provided to bolster U.S. investment in long‐term telecommunications research. The U.S. broadband crisis is a unique challenge. Unlike past threats to our future competitiveness, the solution to our broadband connectivity crisis is primarily local. The benefits of broadband connectivity are felt directly by every consumer and business, and final decisions must involve our local leaders under a comprehensive federal program. The United States needs to move beyond the rhetoric and begin to adopt a specific action plan for the future. EDUCAUSE looks forward to comment on this proposal and seeks to join with others in improving our national broadband connectivity.