last mile, regulatory incentives, etc (was: att fiber, et al)

Ray Soucy rps at
Mon Mar 26 14:46:04 CDT 2012

It varies from state to state ...

In Maine, we've run an E-rate filing consortium for several years that uses
E-rate funds and makes up the difference with a
state telecommunications tax so schools and libraries don't need to pay for

Up until a year or two ago, Verizon was always contracted to provide
transport services exclusively; this was mainly T1 and ATM circuits.
 Unfortunately, we were at a point where requests for more bandwidth than
1.5 Mbps were either being ignored, or being delivered via multiple T1
drops (hundreds of locations with dual T1 connections).

Of course this was a big cash flow for the ILEC, but our K12 schools being
connected at 1.5 or 3 Mbps in 2010 was not acceptable to us (especially
when they were still able to bill 500-800 a month per circuit).

In response to not being able to get movement on newer transport, we opened
up the process to competitive bid and got services from other providers in
the state depending on location; this resulted in Fairpoint delivering
Ethernet over copper services to remain competitive with Time Warner Cable
and others, and ultimately Fairpoint still was awarded the vast majority of
contracts; without the competitive process that wouldn't have happened.
 Most upgrades were modest; 1.5M locations moved up to 10M, and ATM sites
moved to a verity of rates between 20 and 100M depending on the size of the
location, but an upgrade is an upgrade, and 1.5 Mbps today is unusable for
a single person, let alone an entire school.

With the build-out of MaineREN, our facilities based R&E network, we've
picked up a few large schools directly because it's cheaper to do so;
instead of schools receiving 100M service, we can deliver 1G for less
money, and re-direct funds to increase our transit capacity.

Maine Fiber Company and the MaineREN expansion will make that an attractive
option for more schools, but only a handful that are directly along the
route.  To make sure Fairpoint, Time Warner, and others were able to
realize ROI, we signed multi-year contracts with them.

So in our case, E-rate has actually helped the private sector considerably,
and we don't see that really changing.

It's not in the interest of a state to compete with commercial providers if
they want the state to have a healthy market.  It was also the primary
driver for us to push for the creation of a new public utility for dark
fiber rather than having the University own everything, which is the
direction most seem to go.

That said, every market is different.

The biggest problem I've seen is that as soon as "E-rate" is mentioned the
price inflates because providers start to drool over public funding.
 Meanwhile everyone wants to pay lower taxes; seems counter-productive.

Don't get me started on "E-rate consultants", most of them take a % cut of
the awarded funds as compensation for filling out federal forms that can be
completed in 30 min.  Thankfully that's been limited to some extent here by
the filing consortium, but I've heard stories from other states about some
of these guys pulling in close to 7 digits.

On Mon, Mar 26, 2012 at 1:53 PM, david peahi <davidpeahi at> wrote:

> I have discovered that the Federal School Lunch E-Rate program has built
> out an entirely parallel fiber optic infrastructure in the USA, bypassing
> telco fiber in many urban areas such as Los Angeles/Southern California.
> There are now companies that exist solely to construct E-Rate fiber.
> Sunesys is one such company.
> E-Rate builds out fiber to schools and libraries, and the telcos apparently
> have lobbied to ensure that a lateral to a library, for example, does not
> become a local fiber hub, but the backbone fiber can be used by anyone,
> with laterals built to order.
> I do not work for any of these E-Rate companies, but have discovered their
> potential use for connecting my network locations together.
> On Thu, Mar 22, 2012 at 9:26 AM, Jared Mauch <jared at>
> wrote:
> >
> > On Mar 22, 2012, at 11:05 AM, chris wrote:
> >
> > > I'm all for VZ being able to reclaim it as long as they open their
> fiber
> > > which I don't see happening unless its by force via government. At the
> > end
> > > of the day there needs to be the ability to allow competitors in so of
> > > course they shouldnt be allowed to rip out the regulated part and
> replace
> > > it with a unregulated one.
> >
> > I think this partly captures the incentive case here, but there is also a
> > larger one at play.  Over the years the copper infrastructure was
> installed
> > and extended through various incentive programs.  You can see the
> > modern-day reflection of that in the RUS (used to manage rural
> > electrification act, part of USDA) and NTIA (Department of Commerce).
> >
> > The barriers to entry are significant for a new player in the
> marketplace.
> >  The cost is putting the cabling in the ground vs the cost of the cable
> > itself.  One can easily pick up hardware for $250 to light a single
> strand
> > of 9/125 SM fiber @ 10km for a 1Gb/s ethernet link.  That's low enough
> you
> > could likely get a consumer to buy the hardware.  The real cost is the
> > installation per strand foot/mile.
> >
> > In the past this has been subsidized for copper plant.  There is no
> reason
> > in my mind that the fiber plant should be treated differently from this
> > standpoint.  I can find fiber optic cabling for $0.25/ft.  The problem
> here
> > is a multi-dimensional one that I've seen play out in a few markets:
> >
> > Verizon selling assets to Fairpoint (NH, ME, VT).  These are high cost
> > areas due to low-density population.  For the sale to go through,
> Fairpoint
> > had to agree to build into these higher cost areas.  The result was
> > bankruptcy for Fairpoint.
> >
> > Verizon sold assets in Michigan (and other states) to Frontier.  I've not
> > tracked this one as closely, but I suspect the economics of this are
> fairly
> > complex.
> >
> > I've also spoken to some small ISPs and their general cost of building
> > fiber to the home tends to be $2500/subscriber in upfront capital.  This
> > covers just the installation cost.  Due to years of subsidy and
> regulation,
> > people are unwilling to pay this amount to install a telecommunications
> > service whereas a new home requiring a connection to the water, sewers,
> > natural gas or electric grid may pay $10k or more to connect.  Many
> people
> > wouldn't think of buying a home without electric service, but without
> > modern telecommunication service?  I've seen this play out after the fact
> > with friends asking how to get service.  Satellite, Fixed wireless or
> just
> > cellular data quickly become their fallbacks.  The demand is there, the
> > challenge becomes recovering the build cost.
> >
> > It is my firm belief that without a regulatory regime it will not be
> > feasible to connect many communities robustly to modern communications
> > infrastructure.  This could clearly change if the carriers involved see
> fit
> > to replace this infrastructure, but with their current debt loads, I
> think
> > it will be challenging to say the least.
> >
> > Taking a look at Verizon - Their most recent quarterly balance sheet
> shows:
> >
> >
> >
> > Assets: 230.461 Billion USD
> > Liabilities: 194.491 Billion USD.
> >
> > This is not a lot of money, considering they have growing liabilities on
> a
> > quarterly basis as part of their debt load (Long-term debt of $50
> Billion).
> >
> > A large fiber build would easily cost a few billion dollars and have lots
> > of regulatory barriers.  In my county it costs $200 to go over or under
> any
> > public road (just for the permit).  This starts to add up quickly.
> >
> > I do think we need a new last-mile regime in many areas, be it more
> "fair"
> > access similar to pole attach fees or the removal of local barriers to
> > build this infrastructure.
> >
> > Some school and other governments here in Michigan would love to
> > sell/lease their excess fiber capacity to the private sector, but are
> > worried about turning a profit when it was built with taxpayer funds and
> > problems associated with that.  I'd like to see these barriers removed.
>  If
> > it's there, lets make it of value.  If the school system turns a profit
> on
> > their enterprise, that's fine, it can lower the tax burden elsewhere.
> >
> > Me?  I'd be willing to pay $2500 to have Fiber built to my home.  I might
> > even pay more.  At this point, my research continues on building the
> fiber
> > and arranging my own easements for where to place it.  I suspect you just
> > need a few geeks that are willing to part with some extra $ for fiber
> > bragging rights and one can build it.
> >
> > - Jared
> >

Ray Soucy

Epic Communications Specialist

Phone: +1 (207) 561-3526

Networkmaine, a Unit of the University of Maine System

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