| Local governments across the country are launching their own broadband services for consumers and businesses. In the near term, these municipal networks don't appear to pose much of a threat to commercial providers. But if cities achieve even modest success in delivering broadband, it could make Wall Street nervous about the long-term prospects for incumbent providers. This in-depth report examines the muni-broadband movement, including current deployments and initiatives, policy issues, and the potential impact that various muni-broadband models could have on commercial providers' revenues. The analysis includes 15 tables and charts.
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THE MUNICIPAL BROADBAND DEBATE
INTRODUCTION
A Different "Business Model"
A Threat to Incumbents?
The Policy Debate
JUSTIFICATION & ECONOMIC VIABILITY
Dueling Reports
A Mixed Record as Businesses
Customer Savings vs. Profits
The Market Failure Argument
Benefits to Municipal Utilities
Benefits to Government Agencies
More Research Needed
Economic Impacts
Local Case Studies
Demand for a "Neutral" Network
Not Just Another Business
MUNICIPAL BROADBAND MODELS
AN EVOLVING MIX OF MODELS
Early Utility Deployments
Municipal Fiber Models
Reducing Muni-Fiber Risks
Non-Profit Dark Fiber
Customer-Owned Fiber
Transit Exchanges
Mandating Fiber & In-Home Standards
SPREADING SUCCESSFUL MODELS
SEATTLE'S MUNI-FIBER RFI
ILECS AS MUNI-FIBER ALLIES?
MUNICIPAL WIRELESS MODELS
A Range of Models
The Franchise & Subscription Model
Free Service Funded by Cost Savings
Ad-Supported Free Service
Annapolis Wireless & Nortel
Other Notable Projects
BUILDING BIGGER AND BETTER NETWORKS
Wi-Fi's Evolution
Backhaul Options
MIMO
More and Better Spectrum?
COMPETITIVE RESPONSE & IMPACTS
INCUMBENTS' RESPONSE
Market and Technology Initiatives
The Role of IMS
Cable's Alliance with Sprint Nextel
Cable-friendly Muni-wireless Nets?
STATE LEGISLATION
FEDERAL LEGISLATION
POTENTIAL MARKET IMPACTS
IMPACT ON INCUMBENT REVENUES
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Municipal broadband will pose growing threat to for-profit operators
Silver Spring, MD, July 5—Cable operators, DSL providers and other incumbent broadband service providers could eventually see their revenues fall by as much as 48% due to competition from city-run broadband networks, Pike & Fischer’s Broadband Advisory Services posits in a newly published research paper.
In the report, Pike & Fischer, a BNA company based in Silver Spring, MD, notes that the
competitive threat from municipal networks (muni nets) is unknown given that they are only now beginning to emerge. But the report presents a simple model that provides a rough sense of the impact muni-broadband projects could eventually have on incumbents’ market share and revenue.
The analysis concludes that muni nets—depending on the type of broadband technologies used—could grab up to 35% of the market share for video, fixed voice and high-speed Internet services, and up to 20% of the mobile-services market.
“The competitive impacts of municipal broadband will be especially threatening to incumbents to the extent that muni nets can be cost-justified by increased efficiencies, cost-savings and other ‘internal’ or ‘social’ benefits captured by local governments, schools, and other public institutions,” the report states.
The report also details the various business and technical models being employed by cities around the country.
In conclusion, the report says that even though muni nets, and their impact on incumbent
service providers, “remain largely speculative, there is a real possibility that even a modest realization of [their potential] could add significantly to Wall Street concerns regarding the financial prospects” of those providers.
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Mitchell Shapiro
Mitchell Shapiro, a Senior Consultant for BAS, has been analyzing media and telecom markets for more than 17 years. He has authored numerous in-depth reports for Pike & Fischer on competitive dynamics, vendor shares and market growth in the broadband industry, including studies on the high-speed Internet pricing, the market for municipal broadband services and strategies for deploying fiber-optic networks. He also regularly tracks the financial performance and broadband initiatives of the regional Bell operating companies.
Mitch previously served as senior vice president at Probe Research, where he was responsible for the company's tracking and forecasts of broadband network, service and CPE markets. He has also served as a senior consultant with Pangrac & Associates, a broadband engineering and strategic consulting firm, and as an analyst with Paul Kagan Associates, where he tracked technology trends and equipment markets in the cable and cellular industries. He holds a B.A. in Economics from the University of Michigan and an M.A. in Telecommunications from Michigan State University.
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