p2pnet news view Freedom | P2P:- Just as the CRTC announces it’s effectively giving the green light to Bell Canada to continue shackling the accounts of its customers, Tim Wu, a Canadian who’s now a Columbia Law School professor, and Google policy analyst Derek Slater, suggest home owners might one day buy their own fiber connections which would not only have universal applications, but would also be faster.

Much faster.

Users would be able to, “connect to a variety of service providers, including today’s Internet, television, and telephone services, as well as ultra-bandwidth intensive services of the future,” they say in their paper, Homes with Tails.

They’d also, “benefit from greater competition and lower prices in the retail service market”.

Key facets would include »»»

1. A ‘condominium’ model for fiber ownership, in which individual strands of fiber are sold to consumers, while maintenance and other collective needs are managed jointly.

2. Private firms and municipalities could consider selling fiber connections based on this model; and

3. Governments could consider using various mechanisms to support consumer purchases, including a tax credit to homeowners or renters who purchase a broadband connection.

Nor is this mere speculation.

Currently, a 400-home customer owned network is being tested in downtown Ottawa, Canada, say Wu and Slater, going on »»»

Trunk fiber and splice points for the distribution of strands down individual streets have already been deployed.

The experiment is spearheaded by Bill St. Arnaud, Chief Research Officer at CANARIE, which is a nonprofit group devoted to advanced network research in Canada. He has been promoting the customer-owned network model for over a decade and is now attempting to demonstrate the general business case for it.

To accomplish this task St. Arnaud came up with an inventive idea: selling fiber as part of a joint partnership between a specialized construction company named P2P Fiber and electricity resellers.

In Canada, electricity resellers purchase power from wholesale providers and sell directly to customers. To differentiate themselves, they offer packages that might, for example, put together electricity with cheap long distance telephone service.

St. Arnaud’s idea was to sell cheap electricity and fiber together. The electric company sells the fiber connection along with its electricity contract, and collects payments over five years for it, through electricity charges of around two cents/kwh. St. Arnaud calls this approach ‘green
broadband’ because the surcharge also creates an incentive to reduce energy usage.

In order to test out this concept, St. Arnaud picked a neighborhood that makes deployment especially cost-effective. P2P Fiber estimates that 50 percent take-up will generate a percustomer cost of around $1100. If only 10 percent sign up, a conservative estimate of the percustomer cost is $2700.

In a survey of 100 homes, CANARIE found that 30 percent of customers were willing to sign up for this service. Interestingly, 10 percent said they would be more interested in purchasing fiber outright. The business plan is based on a 10 percent minimum homeowner take-up rate; that is, before they run fiber down a particular street, they need 10 percent of homes to sign up for the green broadband plan.

What can we learn from the Ottawa experiment? Obviously, the success or failure of it is not a good predictor of what consumers would do at different price points. However, it can help indicate whether consumers can understand and are interested in committing to pay for fiber. It can also indicate the usefulness of this bundling approach.

Interestingly, the biggest challenge so far has not been getting consumers to sign up, but rather getting service providers on board. Like the United States, the independent ISP market in Canada has drastically shrunk over the last half-decade. Despite an “open access” regime that allows independent ISPs to use incumbents’ existing wires to provide broadband, the incumbent telephone and cable companies have the lion’s share of the consumer market.

Due to stringent regulatory hurdles, independent ISPs in Canada have been largely unable to offer their consumers cable television, thus putting them at a competitive disadvantage vis-a-vis bundled services. Incumbents, on the other hand, sell cable TV bundled with Internet access, and it can be more expensive for a consumer to purchase these separately from different service providers. Finally, the incumbents enjoy the twin advantages of recognized branding and large marketing budgets.

However, the authors of Homes with Tails admit their might be two particular flies in the ointment.

“One objection might be that the fiber purchases we have described will primarily have meaning for the wealthy — homeowners for whom buying a last-mile connection is nothing compared to the price of high quality patio furniture,” they say.

On the other hand, though, their plan wouldn’t be merely an, “exclusive means of encouraging broadband deployment”.  It could also be, “combined with programs that are specifically targeted to poor or underserved groups”.

Their second, “very reasonable,” objection is,  “the industry simply would not sell, or that consumers will not buy, last-mile broadband connections” because, “the model is simply too strange”.

They might be right in the first part, but it’s more likely they’d be having to beat off potential customers than having to taklk them into buy their own home connections

“At the same time, we do contend that there is no fundamental reason that last-mile broadband cannot be sold to customers,” Wu and Slater state.

“There are many industries that have gone from service only industries to selling a product only, or a combined product and service. “Homes with Tails” might seem strange now, but tomorrow may bring unforeseen changes.”

Meanwhile, “In time, independent ISPs may begin to fill the market,” says the paper, adding:

“Fiber’s higher speeds may become a great enough incentive unto itself for customers to sign up despite the lack of cable TV, especially as online video services grow to be viewed as a substitute for traditional TV service. In addition, the market may be especially appealing to large, established incumbents from other areas of Canada that do not currently have a presence in Ottawa. For the moment though, this remains a substantial impediment to widespread adoption.”

(Thanks, Kevin)

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Homes with Tails - November , 2008

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This entry was posted on Monday, December 1st, 2008 at 5:52 pm and is filed under Freedom, P2P. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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