Communications Insights: Trends and Cool Stuff

A while back, I was asked by a client how to stimulate the deployment of a fiber to the home infrastructure given the enormous risk of stranded investment and given a potentially capital-constrained incumbent. I suggested FFTH – fiber from the home. I was not being facetious, at least not totally.

When I gave my answer, I was thinking about the Netherlands. One of the major investors in fiber to the home projects in the Netherlands is a real estate developer. The reasoning is simple. Houses with access to broadband Internet services sell for a premium over comparable house without. (Lehr, Osorio, Gillett and Sirbu did an excellent TPRC paper measuring the magnitude of that premium, which I cannot find). In addition to making money as a fiber access provider, the real estate developer could capture the benefit of increased property values created by the availability of broadband Internet access.

I mentioned my FFTH idea to David Isenberg at the recent CITI 25th Anniversary Gala, and to his credit, David mentioned me in his blog posting (thanks, David). In addition, Sascha Meinrath and Michael Calabrese at the New America Foundation have organized an event for this Friday to examine the idea of FFTH. Calling it “Home with Tails”, Tim Wu and Derek Slater examine in a forthcoming paper whether this is a “customer centric” means for driving broadband adoption. Further, FFTH might possess other benefits. Eli Noam has suggested that private ownership of the access potion of the broadband network would help to solve the network neutrality problem.

Insight: When I suggested FFTH, I was not thinking about Network Neutrality and other consumer issues. I was merely thinking about distributing the risk of potentially stranded investment. However, since the idea of FFTH seems to have some merit I wanted to put a finer point on it, examine some of the potential downsides, and the policies which might be necessary to make FFTH possible.

Think about this. Instead of getting a cable modem or FiOS from Comcast or Verizon, Joe the Fiber Layer knocks on your door and offers to build you a fiber loop to the nearest Internet access node. And for less than it would cost to have Joe the Plumber remodel a bathroom (somewhere between $2,000 and $7,000), you would have your own fiber connection which greatly increase the value of the whole house at resale time.

The first thing necessary for the policies which to enable a FFTH business model is full and open interconnection to the nearest feasible Internet access point. This might be a remote terminal, street cabinet, or cable node. Creating effective access at this level is not necessarily an easy task. This may be small engineering spaces with powering and other serious engineering concerns. Thus, it might be able to accommodate every Joe or Jane the Fiber Layer who wants to put their customers’ equipment in those access points. Further, it would be simply impossible for each homeowner to have someone dig up the streets or hang fiber everywhere.

Here in Germany, we have some experience with policies for privately owned access networks. Back about 20 years ago, or so, a political decision was made to separate cable delivery from in-building plant. An artificial classification of access Level 3 and Level 4 was created. Level 4 network providers owned the cable wires inside individual buildings and there are some 700 of these companies still in existence. Level 3 providers were restricted for offering in-building wiring. This arrangement has lead to certain economic inefficiencies and may have some effect in hampering cable deployment in Germany. Thus, any policy designed to enable FFTH should not create artificial classifications and unreasonably prohibit network from providing services further up or down in the network. And who knows, you might someday find a major incumbent seeking unbundled access to your private fiber loop.