Why We Need Fiber For All

& a chicken in every pot.

As usual, Daily is long on benefits and very short on costs. In fact, Daily says 3 things about costs:

1. pulling fiber costs the same as pulling copper, so pull fiber. (That could well be true on new estates, and probably explains why fiber is typically deployed there, but it is not true if you compare the cost of retrofitting fiber to the original cost of installing the existing copper.)
2. fiber is cheaper to maintain and upgrade.
3. fiber delivers more. (No schtick).

But Daily wants fiber for all now, so the real question is whether the benefits of immediately upgrading *existing* copper networks to fiber exceed the costs. This is far from clear for three reasons. First, while it is probable that the future will involve fiber to most homes, wireless technologies could make that bet look silly. Second, there is some, perhaps small probability, that even without substitution to wireless, demand for fiber broadband services may never allow cost recovery.* Third, it is likely that the costs of broadband upgrades will continue to fall significantly over time. Consequently, proceeding incrementally has great option value. It allows one to hedge against adverse outcomes or against spending too much now, when waiting would have been cheaper.

The result is that the efficient upgrade path is not the one Daily would take us down. The efficient path forward involves piecemeal upgrades of different forms, often using existing copper networks (see AT&T's U-verse). This would be implemented over the next decade, with different customers having different take-up rates. Moreover, efficiency demands that these upgrades be largely provided by private sector initiatives. That will ensure our tax dollars are not wasted and upgrades occur when demand is most likely capable of paying for the upgrade (so as to ensure that the benefit of the upgrade exceeds its costs and hence that upgrading is economically efficient).

That being said, private sector supply may not be forthcoming in poorer neighborhoods or in rural areas, because supply may not be economically efficient, or more improbably, because the market may be incapable of internalizing some externality. If solid analysis demonstrates that the market on its own would be unlikely to provide broadband to certain customers and that provision would indeed meet public policy objectives, then let us also hope that government intervention is done sensibly, eg, through carefully targeted subsidies.

*The risk that demand would not cover the present costs of fiber is real as present demand clearly cannot sustain the costs of fiber to most homes. The cost of upgrading to fiber generally greatly exceeds $20-$40 per month, yet the bulk of Americans right now will not spend that much extra to purchase premium broadband products. Instead, they prefer lower speeds or no broadband. If that was not to significantly change going forward, then pulling a fiber to every home would be very wasteful. That, of course, is not to say demand is presently insufficient to justify fiber supply in all cases. Eg, private sector deployment on new estates and in those locations where fiber overbuild is already being undertaken implies that the investing firms believe they will recover their costs over the long haul.

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