Fwd: Should Fiber Infrastructure be a Public Regulated Facility?

[Gene Hastings <hastings@info-ren.org>]

Has anyone else heard his phrase "Irrevocable Right of Use" used elswhere?


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Date: Thu, 15 Jul 1999 11:50:42 -0400 (EDT)
Message-Id: <199907151550.LAA11093@tweetie.canarie.ca>
From: CAnet-3-NEWS@canarie.ca
Subject: Should Fiber Infrastructure be a Public Regulated Facility?

For more information on this item please visit the CANARIE CA*net 3 Optical
Internet program web site at http://www.canet3.net
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Should Fiber Infrastructure be a Public Regulated Facility?

The recent developments with Quebec school boards point to some interesting
new trends in optical networking and fiber deployment not only with respect
to the technology but also in terms of government policy and regulation.

If school boards can build fiber networks at a fraction of the cost of what
traditional service providers charge for a managed service then obviously
CLEC and ISPs will soon quickly follow and build similar networks for
commercial use.  A number of companies such as Metromedia are already moving
into this marketplace.  Utilities as well have started offering dark fiber
services.

So far there has not been a huge upswell in the demand for dark fiber
because these offerings have been exorbitantly priced  at many multiples to
the actual real cost of the deployment of the fiber.  As a result there
exists an abundance of unused fiber throughout most cities, while at the
same time school boards, universities and other organizations are being
forced to deploy their own fiber because they cannot enjoy the benefits of
the real cost of the existing installed fiber infrastructure.

In addition, cities and municipalities are becoming increasingly concerned
at the number of fiber cables already being strung on poles and the
proliferation of "street furniture" such as pedestals, splicing hubs, etc
that are required to support all these new fiber builds.

When telephone and electrical power systems were first deployed in our
cities at the turn of the century we had a similar situation where competing
companies built their own private networks with separate poles and wires.
Regulators and municipalities quickly recognized that this was an absurd
arrangement and mandated that utility poles and conduits be either privately
owned regulated facilities or publicly owned facilities accessible to any
licensed carrier.

We may be approaching that same decision point with dark fiber, particularly
as concepts like Gigabit Internet to the School and Home start to build
momentum.

It does not make sense for school boards to deploy their own fiber networks
particularly when then there already exits a huge over supply of privately
owned fiber along many of the same fiber routes.  School boards don't want
to be in the business of running and operating fiber networks, but they are
being forced into that position because regulators are not mandating the
sale of fiber at any kind of price related to its actual cost.

If the existing fiber infrastructure was mandated to be made available at a
reasonable cost to anyone then all users including carriers, cable companies
and CLEC would enjoy the benefits of significantly reduced costs.  For
example many carriers and cable companies deploy 48 or 120 strand fiber
cables of which they may actually use only 4 strands.  The total cost of the
fiber cable must be recovered by the traffic carried on just those 4
strands.  If, however, the additional strands were sold to other users at
cost (plus some small markup to cover the cost of money, administration,
etc) then all the users including the original carrier would benefit by
distributing the cost of the fiber over many users.

For example if it only costs a school $80 per month based on a 20 year
amortization to build its own dark fiber network, then that could cost could
easily be reduced further by having as many users as possible share the same
fiber bundle.

The biggest cost of fiber deployment is the not the cost of the fiber
itself, but its installation.  Fiber installation on poles runs anywhere from
$7 to $15 per meter.  Underground the costs range from $15 to $30 per meter,
but as much as $125 per meter in downtown cores of large cities.  The number
of strands in the fiber bundle only makes a minor difference to the overall
cost, that is why many cable companies and carriers are routinely installing
cables with 120 or more strands. If the cost of 120 strands were shared
amongst 10 different users than the cost per strand would be significant
less for each user then if the 10 users were required to build their own
fiber network.  In such an arrangement the 20 year amortization cost to a
school could be as little as $10 per month.

This type of condominium arrangement is already quite common on long haul
fiber infrastructures.  Competing carriers quite frequently share in the
cost of a long haul fiber build and have their own dedicated bundle of
strands within the common fiber bundle.  The carriers then go on to build
their own networks independently of each other by splicing together their
dedicated strands to their individual access markets in the various cities
along the fiber network.

By extending this same model to the metro area we can significantly reduce
the cost of dark fiber which in turn will accelerate the deployment of high
bandwidth applications and services to the home and school.  Incumbents, of
course, will probably be not be particularly interested in such an
arrangement as it will introduce more competition and put considerable
pressure on their existing high margin services.  This is a clear role for
government - to stimulate the marketplace and insure greater competition
such that society as a whole will benefit from lower prices and more rapid
introduction of newer services.  Carriers and cable companies should be
making money by competing against each other through the sale of advanced
services and applications and not through the monopolistic control of
infrastructure.

The following is one possible regulatory model for accelerating the
development of high bandwidth services to schools and homes.  This model is
not intended to be  comprehensive or definitive but a starting point which
will hopefully lead  to greater dialogue and discussion on how we should
proceed in accelerating the deployment of the information highway.

1.  Fiber should be treated as public infrastructure much the same way as
utility poles and conduits are currently regulated.

2.  All existing fiber that is installed on public regulated poles or
conduits should be made available at a regulated price to any organization
through the purchase of an "Irrevocable Right of Use" (IRU).
Currently poles and conduits are only open to licensed carriers.
There is no reason to have such a restriction on fiber
infrastructure.  However, the installation and ownership of the fiber
should continue to be restricted to licensed carriers.

3.  IRUs can be purchased or leased on a 1 year, 5 year, 10 year, 15 year or
20 year basis.  The carrier that installed the fiber maintains ownership and
liability for repair and maintenance.  These costs plus a reasonable amount
for administrative overhead, splicing, cost of money etc are part of the IRU
price.

3. Regulators should set fixed prices for IRUs on the public fiber based on
a section by section  basis and prorated by the number of users based on a
given utilization factor. The cost of installation of fiber can vary
dramatically on a section by section basis.  For example running fiber over
a bridge or across a railroad can be significantly more expensive than along
a country road.    As additional users are add the cost of the original
deployment will be prorated across all users and include the cost of money.
However, the first user should only be charged a prorated cost assuming a
50% utilization (i.e that 1/2 the strands have already been sold).  After
50% of the fibers are sold then the prorated cost remains fixed per user.
Other formulae are possible.

4.  The regulator should set fixed prices for maintenance and repair based
on a common standard used in the industry today.

5.  New fiber builds that are done on an open competitive basis will be used
to constantly readjust the regulated price of existing fiber structures so to
as to take advantage of cost reductions and efficiencies from new
technologies and ways of doing business.

One of the outstanding challenges is how to fairly regulate costs between
different types of fiber builds.  For example a telco or utility may insist
that all their fiber must be placed in steel conduit and covered with cement
which would be very expensive.  While a CLEC or school would be satisfied
with a much cheaper aerial deployment on poles.  Large fiber bundles tend to
mitigate these costs as the incremental cost per strand between the 2
approaches is very small.  Setting the pro-rated IRU charges based on a 50%
or greater utilization should also adjust the cost differences between the
two types of construction.  It would also serve as an incentive to the carrier
to sell as many IRUs as possible so as not to lose money and perhaps even
make a small profit.

The other outstanding issue is how to fairly assess costs when a fiber
bundle is sold out and a new fiber must be deployed , or the existing one
replaced.


Bill


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Bill St. Arnaud
Senior Director Network Projects
CANARIE
bill.st.arnaud@canarie.ca
+1 613 785-0426

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