Open access broadband networks in the US get a lift from Gigapower

AT&T’s formation of Gigapower, the joint venture (JV) it is in the process of creating with asset management firm BlackRock, is drawing more attention to the open access broadband model. Open access networks, where multiple ISPs and service providers share space on the same fiber infrastructure, are more common outside the U.S. than inside the U.S. because large telcos and cable operators have historically wanted exclusive access to their broadband networks.

However, that trend is changing as broadband companies realize they may be able to get a faster return on their fiber investment by selling wholesale capacity to others.

Rupert Wood, research director at Analysys Mason, described AT&T’s Gigapower as a “reasonably large and potentially scalable experiment in open access” and said that one of the benefits of open access networks is that they have plenty of room to adjust their wholesale pricing because there’s a big gap between broadband price plans (which are high in the U.S. compared to the rest of the world) and the actual cost of fiber connectivity.

Gigapower will initially target 1.5 million customer locations across the U.S. and AT&T will be the anchor tenant on the network. AT&T plans to leverage its existing nationwide sales teams to sell fiber to customers in the new Gigapower markets.

John Stankey, CEO of AT&T, told investors during the company’s Q4 earnings call that because the Gigapower wholesale model is different from AT&T’s traditional fiber model the company is only initially building fiber to 1.5 million locations. “This is different and something new,” Stankey said, adding that Gigapower plans to enter the market very quickly once the deal with BlackRock closes. If the Gigapower JV is a success, Stankey said that AT&T may decide to build fiber to more locations outside its footprint.

Wood predicts that AT&T will use Gigapower to help it understand the pros and cons of the open access model outside its 21-state territory, and it may also may prompt the telco to try using the open access model inside its ILEC footprint.

Ting plays anchor tenant

While AT&T may be the biggest name to enter the open access arena, it isn’t alone. Ting Internet, which is owned by Tucows, a publicly traded company best known for being a domain provider, provides fiber service in more than a dozen cities and is in the process of expanding to more markets. Last August Ting received $200 million in financing from Generate Capital to accelerate its fiber deployment to more cities.

Ting is slated to be the anchor tenant on an open access broadband network that is currently being built in Colorado Springs by the local utility company, Colorado Springs Utilities. According to Amol Naik, senior vice president of public policy and community engagement at Ting Internet, Ting plans to start selling fiber service to residents in parts of Colorado Springs sometime this spring.  

Naik said that AT&T’s recent announcement about Gigapower is a positive for the fiber industry because it calls attention to the different innovative models that are available for bringing fiber access to more people. “We are encouraged by this investment,” he added, noting that there is a lot of interest in the open access model.

Naik said that Ting doesn’t have any concerns about not owning the underlying infrastructure in Colorado Springs. “There are lots of efficiencies that a utility can bring to building a fiber network,” he said. “They already know the community and have significant infrastructure in the ground. We have no concerns.”

So far Ting is the only tenant on the Colorado Springs Utilities network and Naik said that the company is currently not involved in any open access networks where there are multiple tenants.

Ting has three different business models for offering its fiber service. In the open access model, such as how Ting is working with Colorado Springs Utilities, Ting is an anchor tenant on a fiber network that is built, owned and operated by another company.  

In the second model, Ting leases capacity on a fiber backbone network that is owned by a city and then extends that fiber network to residential customers and shares the revenue with the city.  This is the model Ting is using in Centennial, Colorado; Sand Point, Idaho; and Culver City, California.

In the third model, Ting builds, owns and operates the entire fiber network. The company is currently using this model in Alexandria, Virginia.

More open access ahead?

Analysys Mason’s Wood said that he believes the wholesale model will be an increasingly attractive option for companies, particularly mobile network operators that want to get into the fiber game, like T-Mobile.

T-Mobile CEO Mike Sievert recently told investors on the company’s Q4 earnings call that if T-Mobile should want to offer some sort of converged wireless/wireline offering it would do so by finding a partner. "It would just be smart to do it with partners vs. by ourselves,” he said.