Saturday, September 17, 2005

Businesses eyeing New Orleans telecom infrastructre

People are beginning to think about the potential for rebuilding better that the president and others have alluded to. One, surely, is in the realm of telecommunications. Putting in an advanced system, especially an advanced fiber-optic system is very expensive--but that expense would be easy to absorb in a huge reconstruction project and would actually cost less if done in that context. For instance, New Orleans has been under a federal order to rebuild its sewerage system. It was considering, running fiber-optics along with the new sewerage system as a way of both getting the service into its urban area and generating income to help pay for the build and other city services. If it made even marginal sense then, it would make even better sense now. Certainly the opportunity to give a rebuilding, almost certainly smaller New Orleans a competitive edge should be explored.

Bits from the article:
...some executives, academics and analysts are urging a more ambitious approach: Make New Orleans and the surrounding areas super-connected communities, with advanced services that surpass what is available anywhere in the country, if not the world....experts see the perfect opportunity to deploy new systems that otherwise might be too expensive or disruptive to build.

The result, they say, could be a bonanza of higher technology at lower prices for businesses and consumers, more robust emergency-responder systems and an ability to provide high-speed Internet access to poorer segments of the population often left off the information highway.

Suggestively, Landrieu (or a staffer) seems to be thinking about digital divide issues in this context. (I'd love to know more.)

And a broad hurricane-relief bill being drafted by Sen. Mary Landrieu, D-La., would earmark money to help low- and middle-income residents and businesses buy or lease computers and get access to high-speed Internet access at affordable prices.
Others, noticeably those in the business, suggest WiFi or WiMax though sensibly only for voice and data. (The combination of bandwidth demands and density of population in a city make a full fiber system manditory for the provision of video as has been pointed out in these pages previously.)

Still others, also in a business that might benefit, suggest building a wholesale network.

[Vonage CEO] Citron said the city could dig the trenches and make them available, for suitable fees to help cover construction costs, to any carrier that wanted to lay cables to provide services - including voice, digital television and Internet access.

With more companies potentially competing, Citron said, prices would come down.

Not all businesses agree....Let's guess who...

Bill Smith, chief technology officer for BellSouth Corp., the Gulf Coast's primary phone carrier, paused for several seconds when presented with this idea.

''I would say that might not make sense for us'' if too many competitors meant the percentage of the pie for each was too low, he said.

Too low for what? Without huge capital and maintenance costs very small profit shares could be quite profitable. Smith's reasoning only makes sense when you are talking about "overbuilding"--providing essentially the same services over separate, privately owned wires. Too many competitors means nobody makes a profit. --When only two competitors makes it unprofitable for both you've got a natural monopoly situation. Smith reacting with concern for too many competitors making his situation untenable reveals that he wasn't taking seriously the suggestion that BellSouth "rent" city lines. Instead he was going directly to the effect on his operation if they do as they intend and rebuild BellSouth's network. While he'll never talk about it in public he knows his company is in what is essentially a natural monopoly business and when going up against a municipal network in New Orleans would reveal that--the situation would be one in which one of two builds will ultimately prove uneconomic. Rest assured, BellSouth will oppose any such municipal plan as vehemetly as they opposed Lafayette's. Notice that recent laws designed to make such builds difficult to start and to raise the price that must be charged to consumers apply equally to municipally-owned networks whether or not the network is wholesale or retail.

What none of the privately-connected sources who talked to this reporter suggested was the obvious one for a cash-strapped city looking at long period of recovery with a tax base that will likely be much-reduced from an already completely inadequate level: the Lafayette solution: a municipal network, offering retail services. Such a network would capture and recirculate money inside the city, building wealth, and would provide a real, steady revenue stream to the local government to offset the decline in tax base. It could offer state-of-the-art connectivity to individuals and business at well below market rates (if certain laws were repealed) and still help fund the treasury of the city via its user-fees.

New Orleans could use a municipal elecom utility and there is no rational reason why the current monopoly providers should be allowed to stand in the way of such a self-help decision.

1 comment:

Erick Erickson said...

Upgrading the system to fiberoptics would be a great idea. NOLA needs it as part of its business structure anyway.