BROADBAND BREAKFAST INSIGHT: A good, basic summary of what an open-access network is, and why cities can benefit through the open-access approach. The best part of this piece is the discussion about why open-access is necessary for Smart Cities. Left unsaid are some of the more innovative approaches to financing open-access networks. Some of these were discussed at the Broadband Communities event earlier this year.
Guest Blog, Isak Finer, COS Systems: Why I Believe Open Access is The Right Choice for Communities, from Next Century Cities:
An increasing number of US cities are considering a deployment of fiber networks to ensure job creation, economic development, and quality of life for their residents. Community leaders realize that the younger generations and businesses of the future will not accept inadequate broadband access. What they also realize is that the incumbent providers will prioritize their investments to the bigger markets or the densest urban areas where the business case is the most favorable. It’s simply how the market dynamics work. For the US to reach its national broadband target and to stay competitive in an increasingly connected world, cities need to build networks. The right model for community networks is Open Access and this blog post will explain why.
What is an Open Access Network?
First, we need to agree on what the Open Access business model is, since there are more interpretations of the term than one could count. Some people consider a model where a network owner builds a fiber ring in the community and allows multiple providers to tap on to that fiber and build their own last mile network to the actual houses, as Open Access. We don’t encourage that approach since it won’t create enough choice for the end user, which is the very definition of Open Access.
The Open Access model described here is a 2 or 3-layer model where there are subscribers, service providers, an operations company, and a network owner. In the 2-layer model the network owner is also the operator managing their own network, while in the 3-layer model the network owner has contracted an external operations company to manage the day-to-day operations of the network.
The network owner will build the actual fiber infrastructure and maintain it. This is the ideal role for the city or community to be in, and often in mature open access markets this is a utility company since they are used to deploying cables or pipes in the ground. The most important thing to remember is to document the network properly so that it will be easy to locate e.g. a fiber cut in the future or how to do construction work without the risk of cutting the optical cables.
The operations company would manage and often supply the active layer equipment in the network. This means the routers and switches that control the actual internet traffic and keep track of which ports should be open or not, among other similar things. When a subscriber orders a service, it’s the operations company that will make sure that service is properly activated with the service delivered by the service provider that was chosen by the subscriber. Large operators often have systems that could automate this, so that the subscriber could get the service activated instantly.
The service providers are generally private companies who specialize in delivery of IP based services such as Internet access, VOIP (Voice over IP, replacing the traditional phone line), IPTV (replacing traditional TV) and other services getting more common today, such as home security, cloud storage, elderly care services, etc.
The very important difference in the Open Access network compared to traditional networks built by a service provider is that the subscriber has a choice. Since the Network Owner (the city) has built the network all the way to the house, they open the market to any service provider to sell services to the subscriber. If you’re not happy with your current provider you can just switch to another one. It’s even possible to buy Internet from one, TV from a second and VOIP from a third provider.
What about the money?
In the Open Access model the subscriber will buy the services from service providers, most commonly from a marketplace provided by the operations company where all the providers and services are published for subscribers to easily compare and choose what suits them best. Just like an Appstore, where all apps are easily available to the smartphone user. Subscribers would pay service providers directly and receive technical support from them as well. The service provider would in turn pay the operations company a fee for being allowed to deliver services over the network, normally a monthly fee per service. Then, if the network owner is a separate entity than the operations company, there is an arrangement between those two, that normally goes two ways. The network owner is paying the operations company money for operating their network, while the network owner is sharing the revenue from the service providers based on how much utilization (customers) there is on the network.
A pothole some network owners and/or operations companies have come across has been sending bills to the subscriber, for example a monthly fee that’s supposed to cover costs for maintaining the fiber infrastructure. This setup is very costly for numerous reasons. One is the cost for the handling of all those invoices, but the major issue is that it creates uncertainty for the subscriber about whom to contact when they have a problem. Because they get invoiced from multiple entities for their broadband related services, they might contact the network owner or the operations company with issues that should be handled by the service provider, and vice versa. This confusion will cause a lot of unnecessary communication between the different parties, perhaps sending the customer back and forth.
The customer should get one single bill from the service provider and all inquiries should go through the service provider. The operations company will need much less staff and focus on the more technical issues the service providers cannot handle.
Who will connect the farmer?
Everyone can agree that the farmers are quite important, since they provide the food we eat. But the farmers are as affected by the new digital era as everyone else. They collect their orders online, they pay their bills online, and have many high tech devices like milking machines that expect network access. Their kids also need to be able to do their homework which is has moved online. But the costs of building to these areas of low population density make a return on investment challenging. Private companies must make money to survive and in all honesty, would you be happy to see your retirement fund investing in companies who wasn’t trying to maximize their profit? No, many profit-maximizing firms will not build to rural areas. But the community has a different agenda. Communities recognize the importance of investments that create indirect benefits as well as direct benefits.
The above scenario also explains why the “dark fiber middle mile” version of Open Access won’t work. Even with a fiber ring, the service providers would only build where they are able to make a quick return, leaving farmers even worse off because cherry-picking off the middle mile would result in less overall revenue for a business model that would connect everyone. Having local government build an open access fiber network to everyone will avoid this problem.
Why Competition is key to success
As in all industries, competition will drive the price down and quality up and competition is only created if the end customer can actually make a choice between different providers. Research from my home country of Sweden, with the most mature open access approach anywhere, shows that there is a clear correlation between the number of service providers and the price of service. Especially when you go from one to two and three providers, but even the ninth and tenth provider will help to push the price down.
In the lowest cost community networks, a 100 Mbps symmetrical Internet service costs approximately $25. In Sweden the hundreds of Open Access community networks have been key to the vast build-out of high-speed broadband and especially fiber networks. Sweden has a population density of only 57 people per square mile (US has 90) but according to PTS (Sweden’s FCC) still 99.99% of the population has access to at least 10 Mbps broadband, 73% to 100 Mbps and 79% have access to fiber (within 45 yards of a fiber line). These numbers are for 2016 and increasing rapidly as both private and public network owners are now competing fiercely to reach the last customers with fiber first. So at a national level the build-out of strong community networks also pushes the private telecom giants to build more and faster and provide higher speed services at competitive prices, which benefits the country as a whole.
The Open Access model is also an enabler for the city to control the subscriber price on an aggregate level. If the city wants to subsidize Internet services to increase adoption they can simply lower the cost to the service providers to sell services on the network, which due to competition will drive the end customer price down and lead to higher utilization.
Why Open Access is necessary for Smart Cities
Today there is a big trend towards IoT (Internet of Things) where a lot of different devices and machines are connected. It could be everything from the heating system in your house being accessible to control and monitor via an app in your phone, to the utility placing smart meters in every home, or street lights that are connected to be able to allow much more sophisticated management of traffic, enabling free passage for emergency vehicles. All these smart services that will benefit the community and residents will be easy to implement if the city owns a citywide fiber network, but consider what happens when the entire network, or big parts of the network (in the case where the city only builds the fiber ring) is owned by private providers.
Let’s say you have five different profit-driven providers owning the infrastructure. This means you need to negotiate five different agreements to be able to deploy the services and still you might not be able to do a city wide roll-out, since the private providers will only have built their network in areas where they reach their ROI targets. As a city you might be forced to build those “worst” areas just to be able to deliver those smart services to all who need them and thereby force you into being a network operator anyway. With an open access network reaching every desirable end-point you’re ready for any smart service application the future may hold.
Yes, the private service providers will be able to make money
There is a fear that open access would lead to great service for subscribers but push the prices so low that ISPs will not have enough margin to profit. The answer is yes and no. No, those companies who don’t adapt to the competitive nature of the Open Access networks won’t make money. If you don’t deliver capacity and speeds as promised and don’t have excellent customer service (things not as important if you own the infrastructure and the customers have no other provider to turn to) you probably won’t be very successful in the long run. Also trying to lock customers in with long contracts or using data caps will be a hard sell in a competitive environment.
For those providers who focus on delivering high quality of both service and support at a reasonable price, there is the chance to also be very profitable. By focusing on service delivery, customer care and billing and not having to spend resources on capital intensive construction and maintenance of the physical infrastructure, they can build a highly specialized organization.
It’s also easy for new entrants, since there are no large investments as would have been the case if you are to build your own infrastructure. In Sweden there are numerous nationwide service providers who started with just a few guys in a basement, today creating jobs for hundreds of young, service-minded people. Even though the price for broadband in Sweden is lower than in the US, the profit margin among Service Providers on Open Access networks in Sweden is looked upon with envy by companies in other industries.
Open access is the right choice for cities who consider building their own network infrastructure. It’s important that the network is built all the way to the subscribers’ property. This way the digital future of the city is in their own hands. They can decide which providers are allowed to sell services on their network and adopt smart city services as they please. It will also give more power to the subscriber since there is competition at the subscriber level. This will make sure services are delivered with quality and at reasonable prices. The affordable prices will increase adoption and subsequently create the benefits the new broadband enabled services will bring to the community as a whole.
Broadband Breakfast on October 27, 2021 — When ‘Greenfield’ Fiber Meets ‘Brownfield’ Multiple Dwelling Units
What options do owners of, operators in, and tenants within MDUs have for better-quality broadband?
Our Broadband Breakfast Live Online events take place on Wednesday at 12 Noon ET. You can watch the October 27, 2021, event on this page. You can also PARTICIPATE in the current Broadband Breakfast Live Online event. REGISTER HERE.
Wednesday, October 27, 2021, 12 Noon ET — “When Greenfield Fiber Meets Brownfield Multiple Dwelling Units”
Bringing fiber to the premises is sometimes only half the battle. For example, bringing fiber to an MDU may not mean that every tenant will get better-quality broadband. In the case of multiple dwelling units or multi-tenant housing, it isn’t easy to completely rewire an existing building with fiber-to-the-unit. Further, the Biden Administration and the Federal Communications Commission are pushing real estate owners to eliminate or minimize exclusive MDU broadband contacts. What options do the owners of, operators in, and tenants within MDUs have to enjoy both competitive and better-quality broadband?
- Kevin Donnelly, Vice President, Government Affairs, Technology and Strategic Initiatives, National Multifamily Housing Council
- Jenna Leventoff, Senior Policy Counsel, Public Knowledge
- Pierre Trudeau, President and Chief Technology Officer, Positron Access
- Other Guests have been invited
- Drew Clark (moderator), Editor and Publisher of Broadband Breakfast
Kevin Donnelly is Vice President for Government Affairs, Technology and Strategic Initiatives at the National Multifamily Housing Council (NMHC) and represents the interests of the multifamily industry before the federal government focusing on technology, connectivity, risk management and their intersection with housing policy. Kevin is a part of NMHC’s Innovation and Technology team and leads its Intelligent Buildings and Connectivity Committee. Kevin has spent over 15 years in the public policy arena at leading real estate trade associations and on Capitol Hill. Kevin received his BA from Rutgers University and his Masters in Public Management from Johns Hopkins University.
Jenna Leventoff is a Senior Policy Counsel at Public Knowledge, where she focuses on broadband deployment and adoption. Prior to joining Public Knowledge, Jenna served as a Senior Policy Analyst for the Workforce Data Quality Campaign (WDQC) at the National Skills Coalition, where she led WDQC’s state policy advocacy and technical assistance efforts on state data system development and use. She also served as an Associate at Upturn, where she analyzed the civil rights implications of new technologies, and as Manager and Legal Counsel of the International Intellectual Property Institute, where she led the organization’s efforts to utilize intellectual property for international economic development. Jenna received her J.D, cum laude, and B.A from Case Western Reserve University.
Pierre Trudeau is President and Chief Technology Officer, Positron Access.
Drew Clark, Editor and Publisher of Broadband Breakfast, also serves as Of Counsel to The CommLaw Group. He has helped fiber-based and fixed wireless providers negotiate telecom leases and fiber IRUs, litigate to operate in the public right of way, and argue regulatory classifications before federal and state authorities. He has also worked with cities on structuring Public-Private Partnerships for better broadband access for their communities. Drew brings experts and practitioners together to advance the benefits provided by broadband. He is also the President of the Rural Telecommunications Congress.
As with all Broadband Breakfast Live Online events, the FREE webcasts will take place at 12 Noon ET on Wednesday.
National Non-Profit to Launch Joint Initiative to Close Broadband Affordability and Homework Gap
EducationSuperHighway is signing up partners and will launch November 4.
WASHINGTON, October 18, 2021 – National non-profit Education Super Highway is set to launch a campaign next month that will work with internet service providers to identify students without broadband and expand programs that will help connect the unconnected.
On November 4, the No Home Left Offline initiative will launch to close the digital divide for 18 million American households that “have access to the Internet but can’t afford to connect,” according to a Monday press release.
The campaign will publish a detailed report with “crucial data insights into the broadband affordability gap and the opportunities that exist to close it,” use data to identify unconnected households and students, and launch broadband adoption and free apartment Wi-Fi programs in Washington D.C.
The non-profit and ISPs will share information confidentially to identify students without broadband at home and “enable states and school districts to purchase Internet service for families through sponsored service agreements,” the website said.
The initiative will run on five principles: identify student need, have ISPs create sponsored service offerings for school districts or other entities, set eligibility standards, minimize the amount of information necessary to sign up families, and protect privacy.
The non-profit said 82 percent of Washington D.C.’s total unconnected households – a total of just over 100,000 people – have access to the internet but can’t afford to connect.
“This ‘broadband affordability gap’ keeps 47 million Americans offline, is present in every state, and disproportionately impacts low-income, Black, and Latinx communities,” the release said. “Without high-speed Internet access at home, families in Washington DC can’t send their children to school, work remotely, or access healthcare, job training, the social safety net, or critical government services.”
Over 120 regional and national carriers have signed up for the initiative.
The initiative is another in a national effort to close the “homework gap.” The Federal Communications Commission is connected schools, libraries and students using money from the Emergency Connectivity Fund, which is subsidizing devices and connections. It has received $5 billion in requested funds in just round one.
Steve Lacoff: A New Standard for the ‘Cloudification’ of Communications Services
The cloudification of communications services makes it easy to include voice, data, SMS, and video within any existing service.
The line of demarcation between what has traditionally been considered a telecommunications service was once very clear. It was tangible – there were wires, end points, towers, switches, facilities. Essentially, there was infrastructure required to relay voice or data from point A to point B.
Today that line is fuzzy, if not invisible. The legacy infrastructure remains, but an industry of cloud-based services that don’t require the physical connections has exploded. Voice, data, SMS, and video conferencing can now be conveniently delivered OTT. Enabled by simple API integrations, businesses can embed just one of these services or a complete communications platform-as-a-service (CPaaS) into an app, service, or product.
Cloudification is a game changer
This “cloudification” of communications services makes it easy to include voice, data, SMS, and video within any existing application, product, or service. These are essential components for many business models.
Consider these services we have come to rely on in our daily lives: food or grocery delivery, ride services, and business and personal communications. These require multiple methods of communication with shoppers, drivers, co-workers, watch party groups, and external business partners.
The exciting news is there is no end in sight. Use cases will continue to evolve and growth will continue to skyrocket. The scale cloud delivery accommodates is massive. These untethered, easy to embed communications services are a critical differentiator for both business-to-business and business-to-consumer buyers, and the lifeblood of the businesses providing both the end user subscriptions and the APIs.
In fact, one industry juggernaut saw H1 YoY video application service demand grow nearly 600% in 2020.
Not surprisingly, as business demand for these services increases smaller CPaaS players continue to enter the market to quickly snag market share. According to a recent IDC study, “the global market revenue for CPaaS reached $5.9bn in 2020, up from $4.26bn in 2019, and is expected to reach $17.71bn by 2024.”
Merger and acquisition activity is aligned with this hockey stick growth forecast. Large telcos, SaaS providers, and even other CPaaS providers are all on the hunt. Whether they want to add additional features to punch up their products or eliminate the competition in a very tight, nuanced market, the end game is clear – as the market expands, the players will ultimately contract leaving only the most competitive offerings.
Don’t let communications tax take you by surprise
One of the least understood risks when adding cloud-based voice, data, SMS, or video conferencing to an existing product or service is new eligibility for and exposure to the complex world of communications taxation. Making mistakes can get costly very quickly.
Here are some of the key pitfalls to keep an eye on:
- Expanded nexus: Understanding communications tax nexus is different – and exceptionally more complicated – than sales tax. There are approximately 60,000 federal, state, local, and special taxing jurisdictions, each with uniquely complex rules that tend to change at their own pace. Rules are very different for each service.
- More complex calculations: The more communications services you provide via API, the more complicated communications taxes will be. Each feature can be taxed at different rates in each individual jurisdiction, or the whole bundle can be taxed at one rate. It’s critical to monitor monthly to avoid audit issues.
- Maintaining overall compliance: Just as tax rates and rules need to be maintained, so must tax and regulatory filing forms in each jurisdiction. Some of these are very long and require significant detail. They must be filed in a timely, accurate cadence to avoid additional audit risk.
Bottom line: Don’t assume, be prepared! As these communications services become more pervasive a larger swath of technology providers will find themselves liable for communications tax. The more your business falls behind, the more it can cost you.
It pays to be proactive and prepared. Tax and legal advisory experts can help determine your level of risk, and tax and compliance software providers can help you keep up with changing rules and regulations. Don’t underestimate the ongoing value of networking with peers who are either struggling to answer the same questions or have already overcome the hurdles you’re facing today.
Steve Lacoff is General Manager of Avalara for Communications. With a focus on data, VoIP, and video streaming, Steve has spent 15 years in various product and marketing leadership roles in communications and technology industries, including Disney’s streaming services and Comcast technology solutions. Steve now drives business strategy on today’s changing industry landscape and associated tax impacts. This piece is exclusive to Broadband Breakfast.
Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to firstname.lastname@example.org. The views expressed in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.
- Federal Trade Commission Will Likely Not Be Able to Implement Competition Rules, Panelists Say
- House Passes Ban on Chinese Equipment, 3.45 GHz Auction Reaches Reserve Price, Against a ‘Wi-Fi Tax’
- LEO Satellite Technology Should Be in All Schools, Gigabit Libraries Network Says
- Housing, Public Interest Groups Oppose Multitenant Exclusivity Agreements
- Broadband Breakfast on October 27, 2021 — When ‘Greenfield’ Fiber Meets ‘Brownfield’ Multiple Dwelling Units
- Federal Communications Commission Dispenses $544 Million in Rural Broadband Funds
Signup for Broadband Breakfast
Antitrust4 months ago
Experts Disagree Over Need, Feasibility of Global Standards for Antitrust Rules
Broadband Roundup2 months ago
Senators Intro App Bill, Groups Drop TracFone Buy Complaint, States Want Shorter Robocall Deadline
Infrastructure3 months ago
Lumen Responds to Allegations it Underbuilds While Collecting Public Funds
Broadband Roundup2 months ago
Mapping Comment Deadline Extended, AT&T Gets Federal Contract, 5G and LTE Drive Microwave Demand
Antitrust4 months ago
House Judiciary Committee Clears Six Antitrust Bills Targeting Big Tech Companies
Antitrust3 months ago
Daniel Hanley: Federal Communications Commission Must Block Verizon’s Acquisition of TracFone
#broadbandlive2 months ago
Broadband Breakfast on September 1, 2021 — What’s Next for Broadband Infrastructure Legislation?
Section 2303 months ago
Facebook, Google, Twitter Register to Lobby Congress on Section 230