The future of the Internet depends on its ability to deliver experiences. Things like “stamping out traffic management” or “promoting Net neutrality” are abstract issues that just poke at symptoms of the real problem, which is a lack of access bandwidth and quality of service (QOS). The only solution to that real problem is to get fiber to the home (FTTH) in every industrial nation on the planet. And the best way for that to happen is to get the governments involved.
Japan and Korea have far better Internet service than the U.S. The reason is because a mile of fiber passes a lot more demand dollars there. Korea and Japan have nine and twelve times the U.S. average of “demand density.” Some parts of the U.S. are nine to twelve times as dense as other parts. (Verizon has the best demand density, so it’s no surprise that it’s the only Regional Bell operating company [RBOC] committing to FTTH.) You can’t change demand density; no corporation with a profit motive (that’s every public company by definition) will deploy FTTH at a loss; and no abstract Net neutrality legislation is going to fix the problem.
What will fix it? Make the telcos into public utilities again? Aside from the fact that deregulation has never been successfully rolled back anywhere, there’s no assurance the “utility” will even deploy fiber, or that it will be affordable. Use the Universal Service Fund (USF) or its equivalent in other countries to subsidize FTTH? A USF subsidy hurts the middle class and poor because everyone pays USF charges. So, what’s left?
The only way to get universal FTTH is to make the bold decision to offer a 100 percent investment tax credit to all those who are willing to deploy FTTH. A tax credit of 100 percent means that any FTTH deployment cost could be simply written off against federal tax, dollar-for-dollar.
In effect, the government would be paying for the deployment of FTTH out of tax revenues, which means we’re paying for it out of our income taxes. Income tax is a progressive tax where the burden falls most on the wealthier taxpayers. And that’s where you’ll find high-tech employment -- the group that’s benefiting most from the boom the Internet has already created.
State and local governments can also get into the action by permitting FTTH infrastructure to be financed with tax-free bonds. All of this would turn FTTH from a huge cost to a huge benefit to businesses that deployed it, and FTTH would expand radically.
In fact, the issue might be keeping FTTH deployment from becoming too good a business. Therefore, we would need fast and objective standards to be set for minimum deployment features. That should be done through an independent industry group with representatives from the Internet community and the access providers, charged with quickly setting the standards for the FTTH infrastructure to be deployed. The second step is to require that all FTTH deployed under the tax credits be perpetually open to competitive access under technically viable requirements, and at a fair and present rate.
Access providers already deploying fiber benefit by having their costs reduced. For providers such as Comcast Corp. (Nasdaq: CMCSA, CMCSK) that say they must manage traffic to ensure the user experience, this offers a way of expanding the user experience instead. Public utilities that have been looking at low-capacity broadband over power lines could exploit their poles and rights of way with fiber to the home.
Any of these choices will expand the capacity and power of the Internet, all without destroying the business models of public companies like the RBOCs that have already invested in infrastructure. It would also help the economy by restoring the innovative drive that became a casualty of the tech bubble, but also gave us the best decade in modern history.
There is no question that the Internet is already a powerful public service, and one we can’t assume will be optimized if the disjointed forces of the free market have to somehow carve out profitable niches for all of the players involved. Access is the key to everything, but it’s hard to make it truly flexible and expandable enough to meet present and future needs. A tax-credit subsidy has worked for R&D in general, so let’s expand it to create the Internet of the future.
— Tom Nolle, software engineer and founder of CIMI Corp.