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August 31, 2012

Google Fiber, Regulators Try to Strike a Tough Balance



By Gary Kim
Contributing Editor



It isn't easy for regulators to strike a balance between encouraging competitors to risk their own capital to create new broadband facilities and also encouraging "universal service." Google (News - Alert) Fiber in Kansas City, Kan. and Kansas City, Mo. provides one example. 

Some fear that, despite an offer by Google Fiber to give away some Internet service to customers, the areas lacking in online connections also appear the most likely to be left behind, the Columbia Missourian reports. That is an accurate enough observation, but not unusual in any way.

Since the end of monopoly regulation of telephone and video service, new competitors have had the freedom to pick the locations where they believe the risk of investment has some hope of payback. That is a simple effort to encourage investment under conditions where no new provider would invest under the old rules. 

Keep in mind that the regulatory framework in Kansas City, in both states, does not require that "overbuilders" provide universal connections, as Time Warner (News - Alert) Cable and AT&T once were required to do as part of their franchise agreements. 

The analogy is the difference between incumbent telco regulation and that of competitive local exchange carriers. An incumbent telco must legally provide universal service. A CLEC is allowed to build or operate only where it believes it can make a profit. 

So, yes, there is some danger or possibility that Google Fiber will not reach every potential household in Kansas City. And while it is legitimate to worry about the broader societal impact, it is a virtual certainty that no CLEC or fiber overbuilder would actually attempt to offer service if required to reach every single location as a condition of entering a market.

That's just a business reality. Google Fiber does not have unlimited freedom to build facilities where it believes it cannot earn a profit. The older video franchise awarded to Time Warner Cable was different, as at one time such franchises were monopolies. That no longer is the case. In addition to Time Warner Cable, both SureWest (News - Alert) (Consolidated Communications) and AT&T serve portions of the market.

But those efforts, like Google Fiber, are overbuilds, much as CLECs are, and are not required to invest in facilities "everywhere" in an area.

That's just part of the tension between encouraging facilities-based competition and investment, and universal service. 

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Edited by Brooke Neuman
 
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