Current US regulation discourages service providers from making network investments needed to bring high-speed broadband to millions of households. This article presents an overview of the key issues and what should be done to drive investment.
Modernizing the US regulation of access to poles, conduit, and rights of way can help build high-speed broadband to 5.3 million US households
By Tomislav Marcinko
High speed broadband has become an important element of daily life, enabling a range of activities including streaming entertainment, interactive online courses, rich communication, and sharing of various types of content/media. We estimate that 96 percent of US households – or 128 million – have access to broadband connections of at least 10Mbps.[i] That’s a major success driven by a combination of private investment and governmental subsidies such as the Connect America Fund. However, around 5.3 million households still don’t have access to these modest broadband speeds.
In this article, we describe gaps in the current US regulatory landscape related to the access to joint infrastructure that discourage service providers from making the necessary network investments to reach these households.
Improved regulation could significantly reduce capital expenditure for broadband deployment
To provide high speed broadband, service providers must expand or upgrade their networks generally with a combination of aerial plant strung along poles and underground plant in conduit along roads. These projects are expensive because of multiple factors: topography, technology, and labor costs. Also, engineering standards, safety provisions and local regulations play a relevant role.
Therefore, service providers prefer to use existing infrastructure, such as utility-owned poles, telecommunication providers’ conduit or local rights of way, to install fiber cables and reduce upfront capital expenditure. We found that costs related to the setup of poles (pole make-ready) and underground excavation through rights of way represent on average 79% of the fixed upfront capital expenditure per mile to bring modern fiber networks to our homes – we obtained a similar distribution in a previous analysis in the UK market[ii] .
Because the use of joint infrastructure involves different parties, the process to ensure neutral access is regulated by federal law. However, the current regulatory framework still contains inefficiencies that limit the benefits of infrastructure sharing, resulting in delayed access and additional costs that reduce the viability of broadband projects.
Gaps in existing regulation lead to increased time to access infrastructure, increasing project costs and discouraging broadband investment
Despite existing federal regulations, service providers still face impediments to access poles, conduit and rights of way, which in some cases deters them from investing in their networks:
- Not all pole owners are compelled to share infrastructure under existing regulation. The existing FCC regulation[iii] has been amended throughout the years to keep up the changes in the industry. It stipulates timelines, terms and conditions to warrant access to shared poles. But it excludes certain pole owners: municipalities and rural electric cooperatives.
- Standards are inconsistent. Twenty states and the District of Columbia opted-out from federal regulation and decided to regulate pole attachment separately.[iv] Therefore, service providers face varying application processes, and unstandardized fees and timeframes, imposing more uncertainty on the time to market.
- No mechanisms to anticipate make-ready costs and accelerate execution time. Regulation provides a timeline for pole-make ready works but no mechanism to incent a faster performance. Also, regulations do not require pole owners to disclose schedules and rates, or accept alternative contractors that would make rates more competitive. As result, service providers often face expensive make-ready costs, time consuming negotiations, complex multi-party work and long delays before they are able expand/upgrade their networks.
- Lack of infrastructure data results in redundant builds. Given difficulties to locate existing conduit, service providers often decide to complete separate, redundant conduit builds. Also, the absence of coordination among federal, state and local authorities in charge of city planning and permitting duplicates excavation efforts and curbs opportunities to share constructions.
- Unstandardized process to access municipal rights-of-way. Because each authority determines its own regulations to grant rights-of-way access, service providers must go through different procedures in every market they look to enter. Therefore, learned lessons and competencies gained in previous experiences can’t be reused to accelerate broadband deployment.
The current review of the federal regulation should focus on improving incentives and promoting cooperation with state and local authorities
Multiple views on the problems make it difficult to achieve a unified solution. On one hand, service providers support more regulations on infrastructure owners to shorten timelines to access poles, conduit and rights of way. However, utilities argue that further regulation may deter safety and reliability,[v] and do not address the lack of incentives for broadband providers to build new networks.
Last spring, the FCC released a notice of proposed rulemaking on wireline infrastructure that intends to modernize the existing regulatory framework to boost private investment in fixed networks and bridge the digital divide.[vi] Faced with conflicting arguments, the FCC should focus on the creation of the right incentives for all parties collaborate coherently in the use of shared infrastructure and the pursuit of broadband expansion. This exercise should consider reducing operating costs, balancing timeframes and order sizes in the application process, incentivizing more interaction between utilities and service providers through technology, and requiring greater cooperation among federal, state and local authorities. Although complex and challenging, these factors are essential to modernize the current regulations and create market efficiencies that drive broadband expansion.<>
[ii] See “Economics of Shared Infrastructure Access” available at https://www.ofcom.org.uk/__data/assets/pdf_file/0020/25283/csmg.pdf (last visited September 6, 2017)