June 1, 2008

Possible boondoggle in broadband build-out?

There's something possibly important but important to check in the Educause podcast of a May 8 speech by John Windhausen, who runs the Telepoly website. To put his argument briefly, he is convinced that the U.S. will run out of broadband capacity, and he argues for a "national broadband policy" to expand the broadband infrastructure, specifically a $100 billion investment in getting broadband to every single home in the U.S.

I don't know about his factual predictions based on an exponential model of broadband usage growth, but I do know that he is right that the private market is not enough: the basic economics here don't make sense unless you say upfront that federal and state governments are going to pay for the majority of every single inch of conduit for this expanded broadband capacity. If I remember correctly, what happened the last time that there was network expansion (and this was not at the "last-mile-to-the-consumer" issue that Windhausen discusses) was that it was built on wildly inaccurate assumptions about the profitability of networks, with fairly highly leveraged capacity construction. Once built, the price that anyone could charge for access to the network (or, more importantly, anything above a local ISP) dropped. I forget who was left holding the bag the last time that network capacity increased dramatically, but if we're going to have more broadband, I don't want to have public financing through the back door of company bankruptcies from another highly-leveraged build-out.

Having said that, I'm still skeptical that the best use of the next $100 billion in federal resources is to put broadband in every home.

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Posted in Random comments on June 1, 2008 12:11 AM |