Intelligent management of broadband subsidies works

by Steve Blum • , , ,

Each taking care of its own.

I had the opportunity to speak at the California Broadband Workshop in Mountain View yesterday, organised by the National Telecommunications and Information Administration. Here are the remarks I prepared, which greatly resemble the remarks I delivered…

Good morning. I’d like to make three points.

First, public subsidies provide the greatest benefit to the greatest number when used to leverage private capital and steer it toward public policy goals. Publicly owned assets are a powerful tool for encouraging competitive builds and keeping public policy goals front and center. Lit San Leandro was built by a local entrepreneur using city-owned conduit, and then it was extended using a combination of private equity and a grant from the Economic Development Administration.

Second, public subsidy programs are siloed and usually work against each other – at the federal, state and local levels. Construction programs, such as the Connect America Fund and California Advanced Services Fund, have incompatible standards, even to the point of funding programs in overlapping areas – the town of Anza in Riverside County is a case in point.

It’s a problem with operating subsidies too – E-rate, the California Teleconnect Fund and Calnet are examples. In Richmond, just to the north of here, the city has paid for high speed connectivity, for the city. The school district has used e-rate money to pay for building new fiber lines – to schools. Meanwhile, the public housing agency is trying to get grant money from the California Advanced Services Fund to build its own connections to middle mile capacity. Three agencies are trying to do the same thing in the same place, and no one is talking to anyone else. Funding agencies – federal and state – are only worried that the narrow requirements of their projects are met and no one is taking responsibility for ultimate results.

Finally, fiber middle mile projects should be given funding priority, with requirements for open access to dark fiber at a discount from market rates consistent with the subsidy. When it’s coordinated with last mile projects and customers, the results can be stunning. Digital 395 is a prime example. It is a 500 mile fiber backbone down the eastern side of the Sierra, built with money from the federal stimulus program and the California Advanced Services Fund. CASF has either funded or is in the process of funding several fiber to the home builds along the route. Suddenlink bought capacity to increase consumer bandwidth by a factor of ten. The CPUC is requiring Frontier to use the system, as a condition of approving the purchase of Verizon’s wireline systems. And Frontier has upgraded its existing systems along the route, in response to the CASF program. There are schools, hospitals, libraries, public safety agencies and other organisations that are buying service from Digital 395, using the subsidy money available to them. Inyo County, the second biggest in California, is looking at a county-wide fiber to the home initiative because of it.

Private capital works, middle mile works, intelligent coordination of existing public subsidies works.