MAP 3 – A Municipality adding a third network adds to the economic inefficiency. In slide 1, Surewest was a last entrant. Their shareholders lost all the value they contributed even as they captured a fair share of market. Most Municipalities that compete on a retail basis claim victory from the economic development. However a deeper dive into their economics, and actual results, show the investment turning into an additional tax burden. If Google, or another third party is wildly successful, what is the incentive of the other players to upgrade? The economics show it is better to liquidate than to invest from an asset utilization.
MAP 4 – Future State - From the Google Office in Ann Arbor Michigan, If a Municipality was able to influence the Telco and Cable providers to upgrade their network to an all fiber solution, in a collaborative build/labor sharing approach, you have 2 technical solutions. First after agreeing on a common “meet me point”, there can be multiple fibers for each provider and potentially growth, or there could be a single fiber. Each of these solutions may impact the funding and maintenance solution. One area, the single cable solution, another the multiple could be feasible. A potential funding solution is to have the Municipality issue Revenue bonds for this asset, and Local Banking take these bonds. This improves their balance sheets, and provide a revenue stream to the Municipality. Smart Grid solutions can be considered at the same time. Municipalities often own other “last mile” facilities. The goal is for a Municipality to “enable” the infrastructure build out by removing the economic inefficiency, not to compete on a retail basis, and by doing so, all are better off!
MAP 2 – International – Pre 1984, AT&T as a monopoly, lowered the cost of transoceanic cables for all Carriers through labor cost sharing. In the late 1980’s and 1990’s AT&T drove the change to upgrade to fiber in the ocean(s). Market changes had created an economic inefficiency whereby the risk was not worth the reward without their leadership. They worked with US and Foreign Carriers to reach agreement on design, construction, funding, and maintenance of upgrading to fiber. AT&T was driven by the profit motive, but the way the problem was solved was viewed as the optimal economic solution via labor cost sharing. In 2010, the problem shifts to the last mile. Google, being independent, can influence established Mass Market providers to upgrade their last mile to fiber, under a major Municipal Infrastructure project, to lower the overall costs via labor cost sharing.
MAP 1– Current State (for illustrative purposes) – In Overland Park, there are 3 established Mass market providers. They each have fiber up to a point in their network, and then complete it with copper or coaxial cable. The exception are in relatively new developments, when given the option, they put in fiber to the premise, This validating fiber as the optimal solution. How do they ever support to upgrade to an all fiber network, when you pass 2-4 sites, and get 1? Who pays for the lack of use on the asset? the answer is customers, shareholders, and employees. In addition, discriminatory capital spending practices takes place given you go after the locations you can show a profit to your shareholders.