CenturyLink (NYSE: CTL), Frontier Communications and TDS are amongst a growing group of service providers that are considering partnering with local communities to build out and upgrade their networks to support higher speed residential and business services.
Jennifer M. Fritzsche, senior analyst for Telecommunication Services - Wireless/Wireline at Wells Fargo, said that while CenturyLink, Frontier and TDS are looking at working with local communities, the one remaining barrier is who will oversee and operate these networks.
Traditional telcos, which have over a century of experience in building and operating networks, prefer to take charge of any network deployment in the communities where they offer services.
"We listened to representatives from incumbent operators CTL, FTR and TDS, who acknowledged they are more seriously exploring partnership opportunities with local governments to upgrade their networks," Fritzsche said in a research note. "The biggest obstacle for these partnerships to overcome is the issue of network control -- the incumbents almost always want to own and maintain their network given the operational and financial efficiencies of owner economics."
Regardless of the challenges service providers face, the idea of a private service provider partnering with a community creates benefits for the service provider potentially creating new revenue opportunities while giving users higher speeds.
"Competition among high-speed broadband providers is increasing, whether it's from private companies, local governments or public-private partnerships," Fritzsche said. "The incumbents that adapt to this evolving ecosystem will be the best positioned for longer-term success. And ultimately the biggest beneficiary will be the broadband consumer -- particularly the 34MM Americans who lack access to 25 Mbps speeds."
While these service providers are still mulling their options, a number of communities such as Huntsville, Ala., and Westminster, Md., have already established their own public and private service provider partnerships.
After issuing a request for information (RFI) in 2015, Huntsville enticed AT&T (NYSE: T), Comcast (NASDAQ: CMCSA), Google Fiber (NASDAQ: GOOG) and Southern Light to build out fiber in their city.
Under the terms of a proposed agreement with Google Fiber, local utility company Huntsville Utilities, which will own the planned dark fiber network, will lease it to Google Fiber, which in turn will connect customers to a FTTH Internet service.
Meanwhile, AT&T cited Huntsville as one of the 38 cities where it plans to build its 1 Gbps FTTH service next, while Comcast Business announced it was building out a fiber network that would be able to deliver up to 10 Gbps speeds to local businesses in Huntsville.
No less compelling is Westminster, Md., which has built a municipal fiber network. The city will lease the network to Ting to operate. Following an initial exclusive provider period, Westminster will sell wholesale "open access" fiber service that other service providers can purchase to provide services to businesses and consumers.
Westminster began the buildout of its open access fiber project in October 2015, which is set to reach 9,000 homes and 500 businesses.
These developments come at a time when Tennessee and South Carolina are fighting efforts by the FCC to overturn laws that ban municipal providers from expanding their FTTH footprints.
Ting to take 1 Gig service to Westminster, Md.
Google Fiber joins AT&T, Comcast in Huntsville, Ala.'s 1 Gbps party
Southern Light to build 1,650 mile dark fiber network
AT&T to light 38 new metro markets with 1 Gig service