Saturday, November 22, 2008

Solving the last mile problem - Privately owned Fiber

Tim Wu from Columbia and Derek Slater from Google just published a working paper about Internet deployment in the New America Foundation, a think tank aiming at providing ideas for America’s future that has in the board people like Eric Smith, etc..

The idea is simple and straightforward. The last mile has been always the problem for Internet development. It has been said that is too costly, that not enough incentives exist for telcos to build a fiber infrastructure, etc… So --- let’s shift the ownership of this last mile to the customer (broadly speaking, the authors present a model where municipalities, condos, cities, etc… could have the ownership).

The paper revises the situation in Asia, where governments heavily invested in the infrastructure and in Europe where an increasing separation between the ownership of the fiber and Internet services is actively pursued by policy makers.

The authors state that this will finally solve the last mile problem and bring the dawn of fiber and with it really advanced applications (e.g. holography is discussed).

This model is not that different from the one being proposed by muni or free wifi communities where diversity of ownership in the last mile is also proposed. Obviously this will spur the development of fiber because there are enough communities in the world that already not only can afford it but that are eager to have it.

It also will spur innovation allowing new applications, services to be deployed and a new market segment to emerge.

However, there is an effect that is not discussed in the paper and I would like to comment. The core argument is the high cost of the deployment. Let’s for the sake of the example compare it with the history of the PC. Wasn’t this also the core argument against the deployment of the personal computer? What happened? The PC brought a new industry with new economies effectively reducing its costs because of scale and competition acting together. Now PCs are taking on supercomputers, the last niche (see the new offer from Dell).  

Exactly the same can happen in the telecommunications market if regulators agree on opening it!!  

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