Implementing Public Fiber-to-the-Home Network Projects: Risks, Challenges, Remediation

Introduction

One of the short definitions of eGovernment is the use by government agencies of information technologies (World Bank, 2011). Cole et al. point out that since information technologies are used to gather, analyze, and distribute information, it sometimes makes sense to divide eGovernment into categories based on the party that a given agency is working with. An agency working with itself or another government agency is deemed “internal eGovernment;” an agency working with a non-government entity is deemed external (Cole et al., 2009). Cole et al. continue to point out that while most large non-government entities usually have access to the two-way, high-speed computer connectivity often called “broadband,” smaller entities, including small firms and individual households, often do not. Since two-way high-speed computer connectivity facilitates the provision of government services such as health care and education and the transfer of complex forms such as tax filings and building permits, many external eGovernment initiatives would benefit if the external parties had such connectivity. The work continues to discuss many of the ways local governments have tried to stimulate broadband deployment to smaller entities (Cole et al., 2009). One of the ways some governments stimulate broadband to small entities is by government itself conducting a project to deploy broadband to small entities within its jurisdiction. Those direct government projects we deem an extended form of eGovernment, and they are the focus of this chapter.

Access to affordable, reliable, robust residential broadband, especially fiber-to-the-home (FTTH), is a common predictor for successful community economic development. The underlying rationale is that high speed access, whether fiber or not, enhances quality of life, enriches home-based learning experiences, and enables entrepreneurial activities, both economic and social. The authors of this chapter presented a summary of this literature in a previous work. (Cole, Kurtz, & Cole, 2009, pp. 589-590) A number of authors whose works are referenced in the Cole work have also tracked how these benefits were, in fact, realized in the public projects they studied. The most frequently updated reference work is Broadband Properties Magazine. It tracks the progress and results of all types of FTTH networks (Broadband Properties Magazine, Municipal Broadband, 2010; Baller-Herbst, Community Broadband, 2010). An updated survey of the benefits of broadband was published as recently as September 2010 (Successful.com, 2010).

In spite of the documented economic development benefits of residential high speed access, many emerging private providers of FTTH and “near FTTH”—notably the incumbent telephone (voice) service and cable video providers—have deemed inadequate the business case for extending residential service into small communities with low population density. These private sector service providers predict a delayed break-even point or insufficient Return on Investment (ROI) for deployment of FTTH. ROI for these projects is usually projected by multiplying the estimated number of actual subscribers (a function of estimated take-rate, or the percentage of potential end-users, multiplied by the subscriber population pool) by the average estimated revenue per subscribed user to arrive at the expected gain. The projected cost of the investment is then subtracted from the expected gain to arrive at the net gain. The net gain is divided by the cost of the investment to calculate the ROI (Atkinson & Ou, 2010). Even if a given project is “profitable,” it may not be “profitable enough” when compared to other opportunities in which the private entity could invest the equivalent amount of money.