Are there any particular telephone companies or cable companies that stand out as being more aggressive in challenging these types of build-outs?
In the telephone industry, it's easy. There are only four (Verizon Communications, SBC Communications, BellSouth and Qwest), and all of them are actively opposed to municipal involvement. While they focus on different regions, there are examples of all of them involved in strong efforts to resist municipal projects. Most of the cable companies have been quite active. Comcast, Charter Communications and Mediacom Communications are ones that come to mind. But I would not exclude others.
Critics claim that municipally owned networks have not been successful and that many are struggling financially. What's your reaction?
It's just not true. The studies that the critics rely upon to support their claims are full of errors and are simply inaccurate. To understand the argument to begin with, you have to accept the framework that the industry imposes on the question of what a successful system is. A successful system to a private sector company means that you have to cover your cost and show a profit within a relatively short period of time because you have shareholders and other investors who are looking for a return on their capital and a profit, dividends et cetera.
A local government has different goals. They look more at the long-term benefits of the project. They can finance the project so that it's not designed to produce a profit, but... designed to recover its cost and develop an asset that encourages businesses to come into the community and create jobs and tax revenue. So if you judge a project under the criteria of a public works project, many of these projects are extremely successful. It's a matter of holding the wrong ruler up to this standard.
Are there any communities that stick out as success stories?
There are several. The fibre-to-the-home network in Bristol, Virginia, is more than a year ahead of projections only after a few months of being operational. Kutztown (in Pennsylvania) is right on its projections. After four months in operation, Dalton, Georgia, had take-rates exceeding 27 percent. Even Cedar Falls, Iowa, which was criticised in its early days by one of the reports that many of the critics rely on, is a marvellous success story. During the peak of the economic decline when other communities around it were suffering, Cedar Falls' economy boomed. The bottom line is that the charge that the systems are not successful, is just not true. Of course, there may be a network here or there that is not as successful as some of the others are, but there are no real failures to speak of.
Is there an opportunity for telephone companies or cable companies to work with the municipalities? Maybe run the networks for them once they're built?
There are some examples of cooperation. But by and large, the cable industry rejected cooperation out of hand and the phone industry did pretty much the same. I know that in many cases, local governments, particularly those that operate their own utilities, would love to have projects that are products of cooperation where it is a win-win game for everybody.
Do you see large cities like New York City or Los Angeles building their own fibre networks?
In the major cities, the economics are different. If you are in a large city where there are many providers offering services to different segments of customers, the take-rates that you would need to be able to build out a fibre-to-the-home system would be very difficult to achieve. We have something of a reverse digital divide. Communities that are outside the major population centres, where there is less competition, are more likely to be able to build out a fibre-to-the-home system. This isn't to say that cities, such as Los Angeles or New York, may not play an important role supporting fibre development in certain underdeveloped areas. But the likelihood of a fibre-to-the-home overbuild by a municipal provider is a long shot.
