Of the estimated 22 million homes in America (out of 128 million total) with fiber optics connections, more than half have been wired by an incumbent carrier—Verizon, AT&T, CenturyLink, or Frontier—all in large urban areas. On the other end of the scale, some 150 of the 1250 electric or telephone cooperatives in America have installed fiber optics networks with funds supplied by the federal government, with another 100 likely to be funded per year over the next decade. A number of midsized municipalities with existing electric utilities have constructed universal fiber optic networks, led by the poster child, Chattanooga, all subsidized in one way or another through the utility. Some number of rural towns, less then 200 in total, have cobbled together networks with state or federal subsidizes, using contractors for construction and O&M; several towns in western Massachusetts number among the fold. Finally, there are the odd municipalities like Santa Cruz, CA, the towns involved with Utah’s UTOPIA network, Westminster, MD and Montgomery, AL, who have ventured into fiber optics with a private partner without subsides, hoping that network revenues will pay for the community portion of capital costs. School is out on the prospects.
As we have noted elsewhere, several different fiber-optic-to-the-home network models have been adopted by other communities, with about half the actual connections made with subsidies of one form or another, the other half constructed by private carriers—incumbent and new—with the total now around 22 million homes, or 17% of the U.S. home total. That puts us way behind many other countries in Europe and east Asia (particularly China, Japan, South Korea, and Singapore). However, none of these countries have HFC networks capable of 1 gbps downstream passing 90% of the country, so the comparison is less about today—we are still probably better served than almost any other country—than tomorrow, when our cable networks will be visibly creeking around some rest home for the network disabled.
Four models for networks in America have been adopted. The most widespread is the historical one, of private carriers constructing new networks over old ones (for incumbent carriers) or fashioned anew (for new entrants such as Google). Verizon has wired New York City, Boston, Phiadelphia, a few towns in Connecticut, and most of New Jersey, but stopped there. ATT claims fiber in San Francisco among other towns, but will not actually connect people in most areas of the city. Google’s highlight reel starts in Kansas City, but the experience soured and they now cherry pick with partners. Frontier has a new corporate charter to convert their network to fiber It is now absolutely clear that these networks are not making enough money to justify their independent existence, the reason no carrier has continued after starting. The second model, following Chattanooga, is a municipal network fashioned through a municipal electric utility (Chattanooga’s electric utility manages TVA). It is far from clear even in Chattanoogs—who received $110 million in federal stimulus grants—that the networks are earning enough to pay down their associated debt; Chattanoogo apparently does not separate the maintenance costs for their two networks, so cannot easily specify the exact allocations to the fiber network.
The third model involves creating a municipal utility devoted exclusively to data networking. To protect carrier interests (and ignore broadband as a necessary utility), twenty states, mostly in the south, have outlawed such networks. But in states like Massachusetts some twenty towns have done just that, created municipal netwoks owned by the municipality with private contractors for ISP and management services. All received state subsidies and all were limping along without cable television in any form, hence essentially cut off from broadband except excrutiating DSL and satellite access; they have take rates above 80%. We cannot ignore in this model, however, the UTOPIA system in Utah that began in 2002, staggered around with many missteps, looked near death in 2016 when it could not agree to a buy-out, but has rebounded and now looks alive and well, meaning paying down some levels of debt, adding towns and adding customers. It faces hurdles—eternal life is not secured yet—but one marvels at their capacity to suruvive.
Finally, there is Westminster, MD, and Montgomery, AL, each owning the wire but working with a private partner (Ting and Google, respectively) for everything else. Both cities expect to pay down debt from network revenues.
We cannot leave this subject without mentioning the failures, in Burlington, VT, in Provo, UT, in Vernon, CA, and others. A study done on municipal networks through 2014 by the University of Pennsylvania showed municipal networks at the time generally running negative cash flows, with failures far more likely than successes as logical outcomes. The towns mentioned here are in that report. It was done too long ago to reflect upon municipal networks that had public funding, hence working with a much smaller debt level, which are transparently successful.